23rd Parliament · 1st Session
Mr. SPEAKER (Hon. John McLeay) took the chair at 10.30 a.m., and read prayers.
Mr. DALY presented a petition from certain electors of the Commonwealth praying that pensioners and unemployed workers be granted social service benefits to the extent of at least two-thirds of the basic wage.
Petition received and read.
– Has the Minister for Labour and National Service any further information about the number of persons registered for employment and the number of those in receipt of unemployment benefit? Are any more figures available?
– The figures are now being collected, or collated, and will be issued shortly. I am sure that the right honorable gentleman will be glad to know that there has been a reduction in the number of those registered for employment of something like 5,000 over the last month.
– I direct to the Minister for Trade a question which relates to the trade mission to North America. In view of the extreme amount of publicity given to this mission, and the importance attached to it, can the Minister inform the House of the progress of this Governmentsponsored trade mission?
– The honorable member for Fawkner, as the secretary of the Government Members’ Trade Committee, has been maintaining a close interest in the various trade missions that have been organized, and 1 am glad to inform him and the House that the present trade mission of businessmen to the west coast of North America has got off to a very good start, indeed. In Honolulu, a very substantial interest was displayed in a wide variety of Australian foodstuffs, and it is believed that useful business will flow. In San Francisco, there were very big conferences between the mission and a great number of
San Francisco businessmen. These conferences were arranged by our Trade Commissioner, Mr. McKernan, and it is believed that, notwithstanding that this is a pretty difficult market to break into, useful business will be gained as a result of the mission. The mission has now gone to Los Angeles and in cables which I have received from him, Mr. May, the leader of the mission, displays optimism and reports to me that there is really a very wide interest among members of the American business community in the objects of the mission. I have no doubt that business will follow, and I have no doubt that there will be an increased awareness among businessmen in America of the opportunities that Australia offers for American investment, in partnership with Australian capital, in industry in Australia.
– I ask the Prime Minister whether the tax reimbursement to the States by the Commonwealth Government is in keeping with a known and established formula. Further, do the amounts proposed to be distributed represent the absolute limit of tax reimbursements and supplementary grants from all available sources, even if the formula is varied? Finally, will the Prime Minister say whether a secret fund exists to finance the fanciful election promises of leaders of the Liberal party seeking election to government?
– The answer to the third part of the question is, “ No “. But as to the other, less electioneering parts of the question, perhaps I should say this: The tax reimbursement for the current year, that is, the year now partly gone, is based on a formula amount calculated under a formula established back in 1946. the distribution under which has changed internally over a period of ten years until it has become a distribution on the basis of adjusted population. But the actual amount of the tax reimbursement grant, the formula amount, is calculated on a statutory formula for this year. Whether it is to be calculated on the same formula for the future, we do not yet know, because the discussion of the tax reimbursement for 1959-60 will occur next time we meet the Premiers. This was not fully discussed on this last occasion. To the formula amount, my own Government has, for a variety of reasons, year by year, added a supplementary reimbursement, quite frankly because we thought the formula grant was inadequate for the purpose for which it was designed. So the supplementary amount has varied from year to year. It has gone up and it has gone down a little, but year by year it has been, as the honorable member knows, quite substantial. What we are now hoping to get cleaned up in our next discussion is, first, the question whether the basis for the formula which determines the amount is a good one, or whether it should be revised, perhaps starting from a new base; and, secondly, whether the formula for distribution on adjusted population is satisfactory. There seems to be no doubt whatever that, as it works at present and has worked for years past, that formula is unfair to the State of Victoria and, of course, the real problem is to devise a formula which will be fair to the State of Victoria without being unfair to the other States. That, as the honorable member will see, is a very intricate problem.
– I direct a question to the Prime Minister. Certain reports of a statement by the right honorable gentleman at the recent Premiers’ conference, in reply to a proposal by the Premier of Western Australia, suggested that the Prime Minister would look favorably on a plan to set up a Commonwealth committee of inquiry into primary, secondary and technical education. Can the right honorable gentleman indicate whether the appointment of such a Commonwealth body to investigate deficiencies in State education is being considered by the Commonwealth?
– I was surprised to see one or two of the reports or headlines on that matter, because what I said was exactly the opposite - that I was unfavorably disposed, and so was the Government, to such an inquiry, because of its far-reaching and entirely unknown budgetary implications. I went on to add reasons, which I need not traverse here because I have stated them before, as to why we came into the field of universities. The whole discussion in the Premiers’ conference occupied about four minutes. I said in fact that as I had stated reasons from time to time in answer to various correspondence, I thought the best thing to do was to send a full statement of our views, and the reasons for them, to each State Premier. That statement is in course of preparation.
– I direct a question to the Prime Minister. Has any arrangement been made by the Government to allocate more loan money for housing commission purposes to New South Wales, in the event of the Leader of. the Opposition in the New South Wales Parliament, Mr. Morton, winning the election on 21st March?
– No, Sir. The allocations of loan money for housing for 1959-60 have yet to be made. The Loan Council will meet normally, I assume,, in late May or early June. It will then consider the loan programme brought up by each State and determine what it thinks the proper total programme is, and engage in the allocation. Nobody has any commitment of any kind at this stage in respect of that matter.
– Can the Minister for Territories inform me whether the Department of Works in the Northern Territory is still controlled from Canberra? Has the Administrator any power or authority over this department when it is doing work in the Territory?
– I assume that the honorable member is referring to the Commonwealth Department of Works. The Commonwealth Department of Works has a regional director for the Northern Territory stationed at Darwin, who has responsibilities and authorities similar to those held by other regional directors elsewhere in the Commonwealth. Subject to whatever authorities the regional director can exercise in Darwin, the main control over the branches of the Commonwealth Department of Works stems from the head-quarters of the department. The relationship of the Department of Territories with the Department of Works is very much the same as that of any other client department of the Commonwealth Government, which, having obtained the funds and requested certain works, either for design or execution, places those works in the hands of the Commonwealth Department of Works for such design or execution.
– My question is directed to the Minister for Trade. Has the right honorable gentleman’s attention been directed to a statement made yesterday by the agricultural adviser to the Bank of New South Wales in the course of his address to a conference on the economic development of the north coast of New South Wales, held at Grafton? That gentleman stated that the department’s action in paying a subsidy of £13,500,000 a year to enable half the dairy farmers of Australia to carry on in unsuitable country was folly. He also stated that as a result of this folly, taxpayers were being forced to send good money after bad, and consumers were being forced to pay high prices for butter and cheese.
– I think that any such statement by any adviser is a grave reflection on this Parliament, for what is being done is the result of moneys being voted by this Parliament - a procedure of which the honorable member’s party has been a supporter on all occasions.
– I should like to address a question to the Minister for Trade. Consequent upon the announcement of the objectives of the Commonwealth countries as a result of the conference in Montreal in October, 1958, what international agreements on commodities have been reached since that time, and what commodities are under study?
– Since the Montreal conference agreed that it was a desirable objective that there should be international study, commodity by commodity, of the possibility of stabilizing world prices, a new international sugar agreement has been successfully negotiated. I reported to the House yesterday that agreement had been reached at conference level on a new international wheat agreement, and a aeries of international study groups on lead and zinc, on coffee, and on rubber, is proceeding or impending. The United Nations Food and Agricultural Organization is studying what can be done to stabilize the price levels of grains and rice, of coco-nuts and coco-nut products, of dairy produce, and of cocoa. So I think it can be said that, for a general policy which was decided at Montreal so recently as last October, within the Commonwealth countries alone, and which has since had endorsement at the conference of the General Agreement on Tariffs and Trade and in formal conferences in the United Nations, very gratifying progress has been made.
– 1 direct a question to the Minister for Trade. Will the right honorable gentleman inform the House how the Department of Trade differentiates in the issuing of new import licences which come under what is known as the quota system? Why is it that a privileged few are issued with these new licences while the general reply to applicants is that these licences cannot be granted to people who did not possess licences before restrictions were imposed? Does the Minister approve of the practice which allows certain firms to hold quotas which are in excess of their own requirements and which they will readily make available, at a premium, to people who do not possess licences for imports from Japan and other places?
– I do not want to avoid the question, but the first part of it is too general for me to make a reply on the spot. I undertake to reply to the honorable member either directly, or at question time on an appropriate occasion, in order to explain in what circumstances new quota licences have been or may be issued. In respect of the latter part of the question, it is not permissible to sell - I think that was the term the honorable member used - a quota, and, indeed, there are penalties-
– They advertise in the press. Why do you not read?
– It is not permissible to sell a quota, and there are penalties, including cancellation of the quota, if that is done.
– Well, why do you not take some action in the matter?
– But, of course, quotas are held by people whose business is to trade, and people who have a right to trade by holding a quota are fully entitled to trade in any manner that they choose.
– Order! The honorable member for East Sydney will refrain from infringing the Standing Orders.
– There is, of course, no objection to the holder of a quota advertising that he holds a quota and is prepared to exercise it by importing to suit the requirements of some Australian user or person who needs the item in respect of which the quota is held. That is quite normal in business transactions.
– My question is addressed to the Minister for Territories. I refer to a recent report by Colonel Rose. late of the Northern Territory Administration, which pointed out the excellent opportunities for the export of live cattle from this country to the Philippines, particularly the more indifferent beasts in which the area he administers, I believe, abounds. Will the Minister say what has happened to this report? Will he give the House an assurance thai everything is being done to exploit the premising opportunities for increasing our export income which the report reveals?
– Of recent years, a trade in live cattle to the Philippines has developed from Darwin and from one or two other points in northern Australia. Colonel Rose, while Director of Animal Industry in the Northern Territory, had a large part in building up that trade and in supervising the conditions under which it was conducted. Recently, he was given an appointment by the Administrator of the Northern Territory to make a special inquiry, in both the Philippines and Hong Kong, into the prospects of developing this trade. A very detailed and highly useful report resulted, and certain action was immediately taken. The main recommendations of the report have been referred to my department, the Department of Trade and the Department of Primary Industry so that, in conjunction with one another, they may ensure that Australia takes full advantage of the opportunities offering in the Far East for a trade in live cattle. As the honorable member indicated, one of the peculiarities of this trade is that the demand is for a lean beast rather than for the fat beast that is exported in other directions. This suits the production of cattle that is carried on in the extreme north of the Northern Territory at the present stage and provides for the export on the hoof of these rather lean and scraggy beasts.
– I direct a question to the Prime Minister. In view of the alarm which I am sure is felt by the Government at the number of unemployed persons in the community, what action does the Government propose to take to make available additional funds to create employment for unemployed persons to-day?
– The honorable member, of course, is aware that quite recently the permissible capacity of local governing authorities to borrow money was very substantially increased by arrangement between the Commonwealth and the State governments. We do not have in contemplation at present any particular additional monetary provision. The whole of the financial arrangements for next year will, as I pointed out earlier, be shortly under consideration.
– My question, which is directed to the Prime Minister, is supplementary to the question asked last Tuesday by the honorable member for Kingston, concerning the proposed dismissal of partially disabled ex-servicemen from various sections of the Repatriation Department. Will the Prime Minister ascertain on whose authority the dismissals are being made and advise me whether these persons are to be replaced and, if so, by whom? In view of the important principle involved, will the Prime Minister undertake to have this matter investigated as expeditiously as possible?
– If, as I gather, this question relates to the Repatriation Department, it is a matter that will have to be dealt with by the Minister representing the Minister for Repatriation. However, it is tied up with the earlier question that was asked yesterday. I am perfectly willing to ascertain all the relevant facts and to put them quite frankly before the House.
– I desire to ask the Prime Minister a question. By way of explanation, I direct attention to the fact that in the Governor-General’s Speech reference was made to the establishment of a committee to inquire into dairy farming. In view of the statement attributed to a certain officer speaking on the north coast of New South Wales on the subject of the subsidy for dairy farming, I ask the Prime Minister whether it is a fact that the major part of the difficulty arises on the north coast of New South Wales and in the southern part of Queensland. If and when the committee is appointed, will the right honorable gentleman have the most searching inquiry made, first, into the impact of the increase in freights by the New South Wales Government on the industry; secondly, whether insecurity of tenure is a factor; and thirdly, whether difficulties associated with finance and related questions affecting transport and all sociological and economic factors, enter into the question of the success of the industry? Finally, I ask whether it is a fact that, in the earlier part of the granting of the subsidy, it was a subsidy to the consumer to keep down the cost of living.
– That is a question that only a bachelor of science could answer.
– I will endeavour to answer the question as an honorary doctor of science. As to the last part of the question, I have always understood the position to be that the purpose of the subsidy was as stated by the honorable member. As to the earlier parts, I cannot anticipate what the terms of reference to the proposed committee will be. They have not yet been finally determined, but I can well imagine that all the various factors mentioned by the honorable member, together with scores of others, will have to be taken into account by any competent investigator.
– I direct a question to the Minister for the Interior. In view of the realistic representation last night of the beginnings of Canberra in 1913, as part of the celebrations of Canberra Day, and in view of the Minister’s recognition of the vital role that Mr. King O’Malley played in bringing Canberra into being, will Ihethe Minister be prepared to honour this early statesman by naming a new suburb of Canberra after him? Is the Minister aware that, as yet, Mr. King O’Malley has not been honoured or recognized in any way within the City of Canberra which he did so much to establish?
– I would be quite happy to give consideration to the request that has been made by the honorable member for Wilmot, but there are certain difficulties in the way. The city district of Canberra is divided into 22 sub-districts, and the Memorials Ordinance at present provides that those sub-districts shall be named after the original place name or persons associated with the founding of federation. The whole of those 22 names have been allotted. Very few of those suburbs are actually built on and there does not seem to be a requirement for further suburban subdivision beyond the existing 22 subdistricts. So, the honorable member will realize that there is not, as it were, a vacancy at the moment.
– I ask the Minister for Trade whether any survey has been made by his department or by the Department of Primary Industry of the operation in New Zealand and South Africa of the floor price support scheme for wool. Can it yet be said whether this scheme has influenced in any way the price of wool in those countries?
– I do not think it can be said that a survey has been made by my department of the operation of the floor scheme in New Zealand and South Africa. I am, frankly, not quite sure whether this matter would be within the purview of my department or the Department of Primary Industry. However, I will undertake to ascertain whether a survey has been made and, in any case, what knowledge there is of the operation of the scheme, and I will pass the information on to the honorable member.
– I ask the Prime Minister whether it is a fact that the Governor of the Commonwealth Bank has been invited to appear at the Bar of the House to be questioned in relation to the Australian banking system. Is it also a fact that the Governor has refused the invitation because, first, he does not approve of the Government’s proposals, and, secondly, because the Government will not give an assurance that he will not receive the same treatment as the last persons who appeared at the Bar?
– In my long friendship with the honorable member for Grayndler, I have frequently known him to be half right or a quarter right, but his luck is out this morning. He has not got one fact right.
– I ask the Minister for Health whether any progress has been made with proposals for introducing medical benefits schedules that will provide adequate insurance in respect of specialists’ fees.
– As the system operates in this country, medical benefits insurance is not insurance against the fees charged by any special group of people. Under the National Health Act, insurance is provided for services in accordance with a schedule. In America there is a system of insurance against what are called major medical or major surgical procedures. Some thought has been given to instituting a similar procedure by benefits organizations in this country, and superimposing it on the schedules already operating. The honorable gentleman will, I am sure, understand that this would require considerably higher premiums than are paid for the items in the present schedule. So far none of the benefit organizations has worked out a system which would be acceptable to a sufficient number of contributors to enable it to launch such a scheme.
– I address a question to the Minister for Territories. In view of the success that has attended the appoint ment of natives to the Legislative Council of Papua and New Guinea, and the satisfactory results that have followed the establishment of native councils in that Territory, has the Minister considered the appointment of a person of aboriginal race to represent the wards of the Northern Territory on the reconstructed Legislative Council there, if it ever is reconstructed?
– I think the honorable member for Wills has made a very interesting suggestion. He will, of course, appreciate that our policy in the Northern Territory is, as far as opportunity offers, to encourage and assist the assimilation of the aboriginal people, so that they may attain citizenship. Having attained citizenship, of course, they will take their places with all other electors in the Territory, and, of course, there is no statutory, constitutional or other bar to the election of an aboriginal as a member of the Legislative Council for the Northern Territory. At present this council consists only of official members and elected members. Within that system, unless it happened that an aboriginal rose to an official position which entitled him to membership of the Legislative Council, his only hope at present of appointment to the council would be following his election by the people of the Northern Territory. It would require the introduction of some system involving nominated members, as in the Territory of Papua and New Guinea, to give effect to the very interesting suggestion that the honorable member has made.
– I desire to know whether it is a fact that the Minister for Immigration confirmed a departmental decision to grant an entry permit to a migrant named Dalderup who was born in Holland, served as a volunteer in the German army in World War II., and who later became a naturalized Irishman. Is it a fact that the Minister claims to have carefully examined this man’s record and background before making his decision? Will he state whether his examination included the reading of a book entitled “The Other Side” of which Dalderup is the author? If he did so, I ask him whether he remembers a passage in which Dalderup, when being interrogated by British officers, following his capture, upon his lack of patriotism in joining the German forces against the wishes of his parents, stated -
Patriotism is all sentimental rubbish used by the politicians as a catch cry to delude the people.
If so, does the Minister regard such a
Statement and his own words declaring that he was satisfied that Dalderup had qualities which should make him a successful and acceptable citizen, to be in any way inconsistent?
– What the honorable gentleman has said is perfectly right. Mr. Dalderup was given permission to enter Australia. It is perfectly true, also, that he came here because he had the legal status of an Irish citizen. The House may be interested to know that Dalderup, when nothing more than a youth - he was aged only 16 - joined the German forces during the German invasion of Holland. But, subsequently, he served in the Royal Air Force for quite a prolonged period and received from it an honorable discharge. Dalderup married an Irish girl. Presumably, the honorable member for East Sydney would have no objection to that. He also had two children by her, likewise Irish. Again, I invite the honorable gentleman’s assent to that very healthy practice. I think it rather a pity, at this late stage, to try to stir up again the case of this man who is a naturalized Irish subject and who has come here with his Irish wife and children. Some people may say that there should be objection on account of the great mistakes that he made in his adolescence, when he was only 16. But I ask the honorable member for East Sydney, whether, when he looks back on his own life, he is really satisfied with everything that he has done, especially when he was at the age of Dalderup during the war.
– I ask the PostmasterGeneral whether he has seen the documentary films that have been produced by the Snowy Mountains Authority which describes in detail the work of the authority. Will the honorable gentleman give some thought to the educational value of the films and compare their quality with that of some of the cheap American trash which is shown from time to time on television pro- grammes in Melbourne and Sydney? I suggest that those films could be televised on educational and cultural programmes to provide members of the Australian public with an opportunity of seeing how some of their money is being spent on a project that might well be described as the Colossus of Australian engineering achievement?
– I shall be very glad to direct the attention of the Australian Broadcasting Commission to the suggestions made by the honorable member for Shortland. I feel sure that if that body feels that an educational advantage to Australia can be gained from the television programmes it wil] be only too glad to do something about it.
– The day before yesterday the honorable member for Kingston asked the Prime Minister a question about certain dismissals which are taking place in the Public Service, particularly of third and fourth grade clerks from the Repatriation Department, some of whom are ex-servicemen. I ask the Prime Minister, who undertook to investigate this matter, whether he will ask the Public Service Board to withhold any further dismissals until he himself is satisfied that any dismissal is justified.
– It might be rather difficult to go quite as far as the honorable member asks, because it would mean that I would have to substitute my judgment about justification for that of the appropriate authority. I fully appreciate what the honorable member has in his mind, and at the earliest moment I will have a talk with the Public Service Board about it.
– I ask the PostmasterGeneral: On what basis does the Postal Department decide which telephone services are to be converted to duplex services? Have subscribers the right to object to such conversions? In view of complaints I have received, will the Minister ensure that prior notice will always be given to subscribers of the department’s intention to make conversions before workmen actually arrive to carry out the work?
– The honorable member for Barton asks for some information regarding the basis on which telephone services are converted to duplex services. The basis is that no duplex service is installed in a case where there is a calling rate which averages more than about two calls a day. The first factor to determine the installation of a duplex service is that there is a demand from intending subscribers for this service which cannot be met on the exclusive service basis because of a shortage of equipment for the time being.
The second condition is that no service will be converted to a duplex if the calling rate is above what, the honorable member will agree, is a very low one. If a person is using his telephone only once or twice a day, it is obvious that the expenditure involved justifies action whereby other telephones can use the same cable pairs from the exchange to the area.
The honorable member asked also whether subscribers have the right to object to such conversions. Under the regulations the department has the right to install a duplex service if it considers the need for such an installation exists. But it does not act in any harsh manner. It gives notification to the existing subscriber of its intention, and in those cases it is able to assure the subscriber that the installation of a duplex service will not in any way affect the efficiency or adequacy of the service which he is already receiving. As to prior notice, before the mechanics go in to make the installation, I should think that this is given. However, if the honorable member knows of any cases in which it has not been done, I shall be glad to hear of them, investigate them and, if necessary, rectify the position.
– I ask the Minister for Immigration whether it is true that the Government of New Zealand has recently agreed to take into that dominion some people who would normally be unable to pass tests for entry into that country and who are described generally as hard core cases, that is, people who have been in immigration and refugee camps in Europe for over a decade. If this is a fact, has the Australian Government given consideration to following this lead? If it has not, will the Minister give sympathetic thought to it?
– I do not think the honorable member is quite correct in imply ing, by his question, that the New Zealand Government, splendid as it is, is ahead of Australia in this direction. Some time ago, I announced that in a really genuine effort to contribute towards the solving of this, perhaps one of the most difficult of all migration problems, the Australian Government had agreed to admit 60 of these hard core cases, rather in the nature of an experiment. This will be carried out during the course of the year. I think my honorable friend will realize, after reexamining the position, that Australia is, in fact, doing more towards the relief of hardcore cases than is our sister dominion across the Tasman.
– Yesterday I promised honorable members that at the earliest moment I would have circulated that part of the transcript of the recent Premiers’ conference which dealt with taxation. That has been prepared, and will be circulated to all honorable members in the course of to-day.
Consideration resumed from 11th March (vide page 484), on motion by Mr. McEwen -
That the bill be now read a second time.
Debate (on motion by Mr. Harold Holt) adjourned.
Debate resumed from 11th March (vide page 540), on motion by Mr. Harold Holt -
That the bill be now read a second time.
.- It gives me great personal satisfaction to be again in a position to give further support to the banking legislation which has been re-introduced by the Government. Unfortunately, it also grieves me that this debate should be used, as it was last night by the honorable member for Hindmarsh (Mr. Clyde Cameron), to launch vicious attacks upon a private citizen. I think that slanderous imputations against a member of the board of the Commonwealth Bank, made under the cowardly protection of Parliamentary privilege, do nothing else but tend to lower the standards of this place. All those who know Mr. Grimwade can appreciate his ability, probity and complete independence of judgment, and I think that to malign a man who is so prominent in Australian undertakings, and who has placed his vast commercial and industrial experience at the service of the Commonwealth Bank, is to descend to a lower level than I believed even the honorable member for Hindmarsh could descend to.
I say again, Mr. Speaker, that these banking measures will be a milestone in the economic and material development of Australia. This legislation, by removing the threat of call-up of such a large proportion of the funds of private trading banks, under the special account provisions, should decrease the liquidity margins of the private trading banks and make available from those sources more credit than was hitherto available. I say that because, in my opinion, the threat of call-up of as much as 75 per cent, of the increase in private trading bank deposits since the new base year, which began in September, 1952, has compelled the private trading banks to impose on themselves a margin of liquidity higher than was the normal practice. For instance, in accepting a deposit of, say, £1,000 at an interest rate of 3i per cent., a private trading bank has to make some concession to the possibility of the call-up of part of that amount. It therefore may be compelled to retain some of this amount against a call-up, with the result that only part of that £1,000 is available for lending. Under the new provisions of the statutory reserve deposit system this procedure will be rationalized, and a limit will be placed on the amount of call-up, thus enabling the private banks to lend with greater freedom than hitherto.
The establishment of the Development Bank, incorporating the Industrial Finance Department and the Mortgage Bank Department of the Commonwealth Trading Bank, will be one of the greatest instruments for providing credit to people not so well endowed with material assets, who will thus be enabled to play an immediate and everincreasing part in the development of our nation in respect of both rural and industrial undertakings.
The Government has been accused, as have been many of the private members on the Government side, of being unduly influenced by the private trading banks. In fact, many members of the Opposition have gone a great deal further than that in their utterances in this chamber. Speaking for myself, whilst I admit to having been employed for some twenty years by a private trading bank, I may say now that, apart from my overdraft, the only interest t have in private trading banks is to see that the banking structure is maintained. The private banking system has been associated, from the early days of colonization, with the development of Australia. My one idea is to see that this structure is preserved, as expressed in the present legislation, “ for the economic prosperity and welfare of the people of Australia “.
It would be as well to pause here and consider the evolution of the central banking functions of the Commonwealth Bank. From early colonization days up to 1910 the whole banking structure of Australia rested mainly on the private trading banks. It was not until 1910, for instance, that the note issue was taken over by the Commonwealth Treasury. In 1911, the Commonwealth Bank was established by the government of the day as a trading bank, and was also given savings bank functions. In 1913 the Commonwealth Bank first became banker for the Commonwealth Government, and although under war-time regulations it did assume and exercise the powers of a central bank from 1914 to 1919 in order to carry out the Government’s financial policy, it did not otherwise have any authority to exercise these functions.
The note issue was not transferred by the Treasury to the Commonwealth Bank until 1 920, and even then this function was under the control of a special board. Tn fact, it was not until 1924 that full control of the note issue, and authority to handle the exchange settlement accounts of the trading banks, was vested in the Commonwealth Bank. Gradually, the control of gold transactions and overseas exchange devolved upon it, and it grew in stature as a central bank, particularly in 1929 and 1930, during the economic depression. It was not until then, barely 30 years ago, that the Commonwealth Bank began to be recognized by the private trading banks as a central bank. Again, it was not until the introduction of the National Security (War Time Banking Control) Regulations of 1939-45 that the Commonwealth Bank obtained its present wide control over interest rates, bank credit and foreign exchange.
The points I wish to make are these: The central bank functions of the Commonwealth Bank developed, bit by bit, over a period of years, through the exigencies of two world wars and a depression. During this period, when additional functions were gradually grafted on to the central bank, the Commonwealth Bank still carried on the business of a savings bank and a trading bank as provided by its original charter. Until the introduction of this legislation there was never any real facing up to the establishment of a true reserve bank with truly central banking functions.
None of the functions of the Commonwealth Bank are to be lessened in any way by the bills before the House. It is on that point that I challenge the Opposition’s allegations that the Commonwealth is weakening the Commonwealth Bank’s structure. The fanciful phrases used by the Leader of the Opposition, which included the words “ dismemberment “, “ fragmentation “ and “ shattering “, were quite indicative of the Opposition’s complete lack of any fundamental grounds for objection. It would appear that on this occasion the only real objection of honorable members opposite is based on sentimentality over the change in name from Commonwealth Bank to Reserve Bank of Australia.
Certain criticisms of a constructive nature have arisen from several quarters, including the Commonwealth Bank itself, the private trading banks, and certain members of the Government parties, particularly in respect of the operations of the Development Bank. Most of those by private members were originally made in this House during the two previous second-reading debates. Some of those matters have received attention and certain amendments have been made. Others have since been covered and some still remain unsettled.
The general tenor of the criticisms was a desire to make sure that, once having removed the danger of indiscriminate use of the call-up provisions under the special account system, a similar avenue would not exist in over-capitalization of the Development Bank, which could have the effect of wrecking the present banking structure. How to effect this without limiting the legitimate demands on and operations of the Commonwealth Development Bank has been the main consideration of all concerned.
In the original bills, there were, in my opinion, three main loopholes, apart from the possibility that a private trading bank which was not selected as an agent by the Development Bank for acceptance of applications, might lose clients who, without reference to the private bank, approached the Development Bank which, on finding that normal banking business was involved, could channel applicants to the Commonwealth Trading Bank or, in the case of housing finance, to the Commonwealth Savings Bank. The private trading bank would thus lose contact with, and in fact lose its customers. The three main loopholes in the original bills were, first, the ability of the Treasurer, as trustee of superannuation and/ or other moneys, to invest some of these funds by placing them on deposit with the Development Bank; secondly, under clause 84 of the Commonwealth Banks Bill the Development Bank could borrow £2,000,000 from the Reserve Bank without the consent of the Treasurer and, by implication, an unlimited amount with his consent, without qualification as to its being long-term or temporary accommodation; thirdly, the Development Bank was not to be subject to the same or some alternative restriction in respect of the quantum of moneys which could be advanced to it by the Commonwealth Savings Bank.
There are undoubtedly other aspects which have already been brought to notice, or which will later be raised by some of my colleagues, but personally I consider that these three points that I have mentioned were the most vital deficiencies in the previous measures. The Government has seen fit to incorporate in the bills now before the House amendments which cover the agency aspect and the first of the points that I have raised. The revised clause 83 of the Commonwealth Banks Bill will enable applications to the Development Bank to be made at the head office or agencies of any trading bank, as is the case with applications under the existing legislation to the Mortgage Bank and the Industrial Finance Department.
Further, the addition of the words “ or deposit with “ to clause 85 is intended to prevent any trust funds under the trusteeship of the Treasurer, within the meaning of the Audit Act 1901-1950, from being invested by deposit with the Development Bank, without the approval of Parliament. As this matter was raised personally by me during the second-reading debate on the bills presented in 1957, and the Prime Minister (Mr. Menzies) promised to give full consideration to it, I should like to take this opportunity of thanking both him and the Treasurer (Mr. Harold Holt) for meeting my request. Personally, I would have preferred a total prevention, by removing the Development Bank from the operation of clause 126 of the Commonwealth Banks Bill, believing, as I do, that the raising in status to a “ trustee investment “ of a bank engaged in business of speculative risk, although guaranteed by the Commonwealth under clause 117, is not justified in accordance with the definition of that term. However, I am quite satisfied that the revised clause 85 will avoid the possibility of many millions of pounds of trust moneys being used to bolster up the capital of the Development Bank to the detriment of the present banking structure without the knowledge and approval of Parliament and the people.
That brings me to the two remaining loopholes, which are as yet unplugged. The first, in clause 84, would require only the simple addition of a few words to limit advances under this clause to those of a temporary nature for the purpose of overcoming liquidity .difficulties. The second is also wide open, as it appears that banking practice alone is to be relied on to avoid an undue proportion of Commonwealth Savings Bank funds being made available to the Development Bank. Clause 37 (2) (a) of the Banking Bill provides that - . . a savings bank shall not at any time have on deposit in Australia with trading banks an amount or amounts that exceed in the aggregate the sum of Two million pounds and a sum equal to two and one-half per centum of the amount on deposit … in Australia with that Savings Bank.
You will notice that these restrictions apply to trading banks only. This has the effect of exempting the Development Bank from the provisions of this section. It is true that there will be a great demand on the resources of the Development Bank. It is true that, on establishment, its capital will be of the order of £20,000,000, made up of the capital and reserves of the Mortgage Bank Department and the Industrial Finance Department, which total approximately £15,000,000, a grant from the reserves of the central bank, which will be £5,000,000, and to this will be added the retention of profits. The new bank will have adequate borrowing powers, including the power to borrow unlimited amounts with the approval of this Parliament. That is one point that my colleague, the honorable member for Richmond (Mr. Anthony), missed when he spoke yesterday about the operations of the bank being limited by its capital more particularly than by its borrowing powers.
The ability to borrow without material restriction from the Commonwealth Savings Bank would appear to be unwarranted, particularly in view of the undertaking given by the Treasurer, in his second-reading speech on the Commonwealth Banks Bill 1959, in these terms -
The Government will, however, watch the position closely from the viewpoint of the possible need for a further increase in the bank’s capital later in the light of the bank’s operating experience.
Surely, after making allowances for the funds already advanced by the Commonwealth Savings Bank to the Mortgage Bank Department and the Industrial Finance Department - which I understand approximate £17,000,000, and which pass over on the transfer of these departments to the Commonwealth Development Bank - the inclusion of a final safeguard against political manipulation will in no measure limit the operations of this highly important instrument in the development of our rural and industrial undertakings.
Although many of my colleagues are looking to the Development Bank to fill the credit gap now inherent in rural undertakings, I would remind them and the House that my chief concern is, not that there will be any lack of capital for the Development Bank, but that this deficiency may well arise in respect of the Commonwealth Trading Bank. I think all honorable members will agree that the main demands on credit during the past few years have been, and at present are, for housing” as well as rural development. I think it would be criminal if an undue proportion of the Savings Bank funds were channelled into the Development Bank, preventing an increase by regulation in the minimum amounts prescribed by clause 37 (2.) (a) of the Banking Bill 1959 if the Commonwealth Trading Bank should have exhausted its borrowing powers under this ceiling limit in that clause. I have been advised that any regulations made under these measures would require the assent of both Houses of the Parliament, and that would in effect be some brake on any undue commitment of Savings Bank funds to the Development Bank. However, as I have already pointed out, the Development Bank, not being a trading bank within the meaning of the legislation, is not referred to in clause 37, and it is by implication completely outside the operations of this clause.
As I have said before, there appear to be adequate funds, in both capital and borrowings, to fulfil the Government’s undertaking to see that the Development Bank will have adequate finance to carry out its important functions, without leaving an open tunnel into the vaults of the Savings Bank. I do not mean that the Development Bank should be restricted to the same degree as the trading banks in this field of borrowing, but certainly a sub-paragraph should be added to clause 37 (2.) to give effect to a definite limitation of whatever magnitude may be decided specifically in regard to the Development Bank, while holding the £17,000,000 already advanced by the Savings Bank to the Mortgage Bank Department and the Industrial Finance Department completely outside the provisions of this new sub-paragraph.
Let us now look at the whole matter in a realistic manner, Mr. Deputy Speaker. The measures that are before the House have been initiated mainly to remove anomalies in the existing legislation which the Government considered would allow the nationalization of banking to be effected, particularly by the discriminatory use of the call-up provisions of the special accounts system. In addition, these measures establish a new home for the Mortgage Bank
Department and the Industrial Finance Department in the proposed Commonwealth Development Bank, which will be given additional powers to fill the credit gap in rural and industrial undertakings. However, owing to difficulties of drafting and interpretation we find that, although we have closed the front door, the draft has perhaps blown open the back door and a couple of windows. Surely the intention, as indicated by clause 85 of the Commonwealth Banks Bill 1959, is that the capital and funds of the Development Bank shall be controlled by the Parliament. Any avenues left open to a Treasurer to use without the consent of the Parliament will be in direct contradiction to this expressed intention.
Let us consider the main avenue - that of Commonwealth Savings Bank funds, which, as I have already indicated, total some £680,000,000. It is true that of this amount, some 80 per cent, is probably now invested in government bonds and securities, and that the annual gain in deposits will probably not average more than £30,000,000. However, the regulations covering the licensing of a private savings bank require only 70 per cent, of deposits to be invested in government securities. I have no doubt that, shortly, the same regulation will be applied to the Commonwealth Savings Bank. This could leave it open to a Commonwealth Treasurer to convert 10 per cent, of the total funds - in round figures, £68,000,000 - for injection into the funds of the Development Bank without worrying about using the 30 per cent, of the annual increase in deposits. Surely, Mr. Deputy Speaker, this would be a most powerful weapon in the hands of a socialist Treasurer. Therefore, I say to all honorable members: Let us see that the Development Bank has adequate funds at all times by the consent of the Parliament and not by backdoor methods which, if they remain open, will never be used by this Government to swell the funds of the Development Bank. This Government will use legitimate methods under the aegis of the Parliament - a factor which some of my colleagues lose sight of when they express the opinion that a ceiling limit on moneys borrowed from the Commonwealth Savings Bank will restrict the operations of the Development Bank.
On the question of bringing matters before the Parliament, we already have an example of this in relation to the Export Payments Insurance Corporation, which was established with a capital of £500,000 and a Treasury guarantee limit of £25,000,000. That corporation has been successful, and has written a lot of business. We now have before us a bill to double the capital by increasing it from £500,000 to £1,000,000 and to double the guarantee by raising it from £25,000,000 to £50,000,000. That is the kind of legislation that we may see later as the Development Bank requires more funds.
As I have said on previous occasions, these measures mark one of the great advances in the development of this country. We have at the present time - or will have, when these measures become law - a strong and respected central bank. We will have government and private trading banks in fair competition on a mutual basis, and we will have a Development Bank which will be charged with the duty of assisting those people whose vision and efforts will undoubtedly give an impetus to further development, which, otherwise, under the existing banking system, would be frustrated and would lie dormant for very many years.
May I, in conclusion, Mr. Deputy Speaker, pay a tribute to the Treasurer for the magnificent manner in which he has carried the baton from the hand of his predecessor, the Right Honorable Sir Arthur Fadden. It will be to both of these gentlemen as a team that the credit for the Government’s victory in enacting this weighty legislation will ultimately be due.
– Mr. Deputy Speaker, I listened intently to the honorable member for Maribyrnong (Mr. Stokes) in the hope that he would perhaps get away from the approach that other Government supporters seem to have adopted towards these bills. I think that it is time we began to analyse the possible effects of the legislation that we are now discussing. The honorable member said that this country has never really faced up to the issue of the need for a reserve bank. On the contrary, that issue was faced long before either he or I entered this Parliament. If the honorable member had studied the history of banking in Australia, he would not have been so easy this morning in his condemnation of a very, very esteemed old gentleman on his own side of the House who takes unto himself credit for being the man who initiated reserve banking in Australia.
After listening to the honorable member for Maribyrnong closely, I have come to the conclusion that he failed to consider some of the things that were said at the time when ‘reserve banking was adopted as a matter of national principle in Australia. Had he done so, he would have found that, quite contrary to his assertion that Labour’s only objection to these bills is for reasons of sentimentality, our objections are not so much on the grounds of sentimentality as on the grounds of reality. That is why Opposition members are so opposed to the things that the honorable member has propounded this morning. It seemed to me that the honorable member for Maribyrnong was repeating the arguments of other Government supporters when he spoke about the indiscriminate call-up of reserves under the present system. At this stage, when we are at least half way through the debate - perhaps it is even drawing to a close - it is pertinent to ask whether under the present system anything has operated detrimentally to the private banking system.
In the course of my remarks I hope to show the honorable member for Maribyrnong, and other honorable members who support him, that the reverse is the position. The chief purpose of the measures now before the House is to establish a central bank as an institution that will not be directly associated with the conduct of banking business in competition with private banks. 1 am not sure that the legislation will have that effect, and I propose to show why before I finish my remarks. The present central bank of the Commonwealth Bank is to be re-named the Reserve Bank of Australia. The mere re-naming of an institution does not change its character or function, and most of the matters of general principle that are at present covered by the Commonwealth Banking Act will not be changed by this new legislation.
The Reserve Bank will carry on the central banking functions now carried on by the Commonwealth Bank, and its powers for so doing are contained within the framework of the legislation before the House.
That important change provides, of course, for the creation of the Commonwealth Development Bank.
I particularly wish to refer to the establishment of the Commonwealth Banking Corporation and the provision for the conduct of the business of the Commonwealth Trading Bank of Australia, the Commonwealth Savings Bank of Australia, and the Commonwealth Development Bank of Australia. This legislation will, in fact, dismember the people’s bank, and in this regard I cannot agree with the remarks expressed by the honorable member for Maribyrnong. The legislation will divide the functions of the Commonwealth Bank and will create a separate relationship between the Commonwealth Bank and what in future is to be known as the Reserve Bank of Australia. The Government states that its reason for doing this is to prevent the possibility of unfair competition between the Commonwealth Trading Bank and the private banking institutions.
The Opposition takes a firm stand against the Government’s proposals in this regard, and the main questions that arise fall into very clearly defined categories. I pose this question for future speakers from the Government parties. Are there any grounds for suggesting that the Commonwealth Bank, as now constituted, has taken any action at any time which gave any semblance of preference to the Commonwealth Trading Bank in any matter or on any level compared with the treatment meted out to the private trading banks in Australia? If, as they must, honorable members opposite answer that question in the negative, where is the ground for this division of the bank’s functions?
I also ask this question: Has the Commonwealth Bank, in conjunction with the Commonwealth Trading Bank, proved to be a successful national venture, operating only in the interests of Australia and the people? Honorable members opposite, if they are honest, must, in the interests of Australia and the people’s real requirements, answer that the Commonwealth Bank up till now has discharged all the functions that could be required of it as an Australian instrument for honest banking. The third question that I pose is: Why was the Commonwealth Bank constituted in its present form? This is where the honorable member for Maribyrnong falls down in his argument.. He failed to look at the reasons for the creation of the Commonwealth Bank in its present form. In case some of the new members on the Government side of the House have not had the time or the interest to study the background of the Commonwealth Bank, may I say that the principles on which the bank now operates were not formulated by the Labour party, although our party established the bank. I challenge any honorable member on the Government side of the House to say that the principles on which the bank was established, and which have been tested over the years and never found wanting, were not in the interests of this nation. Otherwise, why were those principles retained in the Banking Act of 1945?
In not one single instance can it be said that the Commonwealth Bank has acted in a way showing preference towards its own organization as against the private banks. In fact, quite the reverse is the case. It is on record, as has been pointed out in this debate and not refuted by one Government supporter, that in recent years only three banks have observed to the letter the principles laid down by the central bank division of the Commonwealth Bank, and in fact five out of seven private banks have defaulted. The private banks themselves have enjoyed preferential treatment at the hands of the Commonwealth Bank, which is quite the reverse to the mythical cases that have been submitted during this debate by honorable members opposite. Not one worthwhile argument has been submitted against the present functioning of the Commonwealth Bank.
At this point, because it is so very important, let us examine the general powers of this Reserve Bank of Australia. In listening to some of the honorable members opposite, I felt that they had not even taken the trouble to analyse the powers and functions of the authority being set up. I want to examine the general powers of the Reserve Bank, compared with the powers that will remain with the Commonwealth Trading Bank. Part II. of the Reserve Bank Bill deals with the constitution, policy and management of the Reserve Bank. Clause 8 of the bill provides -
The Bank has such powers as are necessary for the purposes of this Act and, in particular, and in addition to any other powers conferred on it by this Act, has power -
Commonwealth and other securities;
If we look at the Commonwealth Banks Bill, we find exactly the same code laid down in clause 29, even to the use of the same language. Might we not be excused for asking at this stage whether the Government is sincere in its approach to this problem? lt is dividing an authority that is now functioning in the best interests of the nation, and of the people, into two authorities with two separate boards, two separate organizations, occupying two separate banking premises and creating two sets of costs to carry out the same general principles, apart from the reserve bank provisions. When honorable members opposite support the Government, they support a dual control of banking in Australia and a dual authority to cover the same principles. In the long run they may find that this will prove to be a boomerang, which will strike them from another direction. We are asked to agree to the setting up of a physically separate banking institution, so that we will have two separate banking authorities with the expenses of two separate boards and two sets of overhead costs - two authorities with, in the main, identical powers provided by two separate bills.
– To do one job.
– As the honorable member for Yarra pertinently puts it, to do one job. We are asked in these measures to destroy the main purpose for which the Commonwealth Bank, the people’s bank, was created. We are asked, in point of fact, to set the hands of financial security back for many years to the time when the private banking system was tried in Australia and found wanting. Before turning to what I want to say on that point, I issue a warning to those who clamour for the passage of this legislation. I have referred to the preferential treatment received by five of the seven private banks in recent years. It is quite patent to me that one section of the private banking system - the five banks that I have mentioned - has been allowed to do as it wished so long as it kept within a certain scope that was not recognized as being nationally dangerous by the authority within the Commonwealth Bank. The Commonwealth Bank authority took particular care never to set an example that could be regarded by those who supported the private banking institutions as detrimental to them or unfair in any way.
The warning I issue is this: In the future, the Reserve Bank Board, as a separate entity, may not be so willing to close its eyes to private banks which default in carrying out policy directions. I say quite emphatically that the wealth of the people in savings belongs to the people. The profits, if any, that accrue from the savings of the people should be used for the benefit of the nation and the people, and I further believe that the powers conferred upon the Treasurer by clause 11 of the Reserve Bank Bill will give an incoming Labour government the power to enforce this policy in the interests of the nation and its people.
Now let me examine the real principles of the 1945 act. I pose this question to those who are so anxious to take up the cause of the private banks: Did the 1945 legislation do more than confirm the original intentions of the founders of the Commonwealth Bank? I challenge any member on the Government side of the House to analyse the 1945 legislation and to deny my proposition. In case honorable members opposite have either not taken the trouble to get clearly in their minds the principles of the 1945 legislation or have been too careless in preparing their speeches, let me indicate what the Chifley Government had intended within the framework of the 1945 act. I then propose to show that all that this act did was to confirm the original intention of the government responsible for the establishment in Australia of a bank that would take care of the needs of the nation and of the community. The 1945 act laid down five clear principles. They were -
With the second principle thus enunciated, the people no longer would be faced with a situation such as that which occurred
When the workers lost their savings because of the default of a bank. These principles Were clearly prescribed in the 1945 legislation.
– But they destroyed lt in 1947.
– He has just come to life!
– No; it has hurt him because it is the truth. Honorable members supporting the Government in this legislation must find that their conscience is now pricking them for what they are doing. They are destroying in this year the very principles that have brought banking in this nation to the high standard where it is recognized by financiers throughout the world.
Let me return to a consideration, in proper perspective, of the original intention when the existing banking structure was created. The central bank provisions were decided upon after a bitter experience during World War I., when the private banks, for reasons that are doubtful - they are not my words - received three notes for each sovereign. Any one who has made a study of this matter knows that the private banking system made great profits out of that transaction at the expense of the boys who went to the 1914-18 war. I come now to the year 1924, and if I may I shall read three quotations to give the background of the origination of reserve banking in Australia. I quote from a speech delivered in June, 1924, and recorded in “ Hansard “ at page 1264, volume 106. This statement was made -
When the question of a Commonwealth Bank was first mooted it was generally expected that a truly national bank would be established - a bank of deposit, issue, discount, exchange and reserve. When the Bill was introduced, however, expectations were not realized, and when the bank began to function, it became perfectly clear that a national bank had not been established, but merely a Governmental institution in competition with the private banks. The Bill the Government now brings forward is designed to carry out the original expectation.
The measure now before the House is setting back the clock and putting the Commonwealth Bank in exactly the position that was so aptly described in the debate of 1924. As the speaker of that day said -
It became perfectly clear that a national bank had not been established, but merely a Governmental institution in competition with the private banks.
That is just what the Government is doing now. The Commonwealth Bank will not be a government bank any longer. It will be an institution within the category that was so aptly described in 1924. I turn now to page 1265, of the same report, where this statement-
– Whose statement was it?
– The honorable member will readily recognize the speaker. These are the words of a Treasurer but not a Treasurer who supported the monopoly of the private banking institutions in Australia at that time. He said -
In troubles such as these, one would naturally look to banking authorities to find a way out or at least to advise as to the remedies to be applied. But in fact there is no banking body which can be considered representative. Instead, we have a number of banks which, though loosely associated for some purposes, scarcely can express a corporate opinion. Chiefly mindful of their own interests, which is but natural, they can have no such regard for the public welfare as is undoubtedly required.
I emphasize for the benefit of honorable members those words - - can have no such regard for the public welfare as is undoubtedly required.
Let me now proceed to the fundamental principle that has underlined banking in Australia coupled with national progress which has not been equalled anywhere else in the world until this Government came along to destroy the very principles which are so vital to national development. Let me read a final quotation from the debates of 1924-
The excellent banking material which we have already should be strengthened and co-ordinated in order that Australia shall have a symmetrical and well-balanced system of central banking. To this end, the Government proposes that the Commonwealth Bank of Australia shall become the pivot of Australian banking - a bank of issue, deposit, discount, exchange, and reserve.
Stripped of all politics and the influence of the private banks and of privilege, the present right honorable member for Cowper (Sir Earle Page) rose in his place and uttered those words in 1924. Some might have thought them to be the words of the late Ben Chifley, but it so happens that treasurers, stripped of political bias and influence from outside, at least have a realization of what is necessary in the development of a young nation.
This Government should not think that the mere creation of a development bank is going to help Australia along the high road we have to travel. A development bank should be helpful, but when you find the private banks coming in as agents of such a bank to make profits out of national development, will anybody suggest that that is a proper arrangement? If this nation means anything to us, national development should be something simple within itself. Only an organization stripped of the profit motive is capable of providing the finance necessary for real development within a growing nation like Australia. As the right honorable member for Cowper suggested in 1924, the private banking system’s main incentive is self-interest. The private banks will come into this new banking corporation only to the extent that they can make profits out of it. We have the task of developing a young nation on the fringe of the Asiatic hordes. Whether we need money to spend on railways, secondary industries or any other branch of development, we should hang our heads in shame at the thought that any financial organization would be prepared to provide finance for such developments only on the basis of profits.
Honorable members in the Australian Country party corner should get it out of their heads that Australia can land on its feet and remain there simply through the sale of wool and wheat. The Prime Minister (Mr. Menzies) announced with pride this week that Australia’s population had reached 10,000,000. We will go beyond that figure if we are prepared to develop secondary industries and make available finance for development without thought of profits. We should plan an Australian organization which will give Australians and future Australians everything that money can provide for the development of Australia. That was the original purpose of the Commonwealth Bank. If the present plans of this Government are put into effect, it will put into the hands of those, who only consider profits, the lives of many Australians who will follow us.
.- Many honorable members who support the Australian Labour party have spoken of the destruction of the Commonwealth Bank. The Leader of the Opposition (Dr. Evatt) said, however, that there has been tremendous progress by the Commonwealth Bank in the past few years. He cited figures to show that whereas the advances by the private banks rose by 21 per cent., advances by the Commonwealth Bank increased by 81 per cent. He said that the Commonwealth Bank had more agencies, branches and customers than the private banks had, and that it had more money on deposit. That gives the lie to the general story of the Labour party that something has been done to injure the Commonwealth Bank. If what is being said by the rank and file of the Australian Labour party is true, what the Leader of the Opposition has said is untrue. However, I believe he got his figures from either Dr. Arndt, Dr. Coombs or somebody like that, and they are available to honorable members from the bulletins of the Commonwealth Statistician.
The honorable member for Reid (Mr. Uren) addressed himself to these matters and, judging by the smile on his face, I think he agrees with me that the Commonwealth Bank has done well under a sound, Liberal government. Contrast that with what happened to the State savings bank in New South Wales under the Lang Labour Government. Public confidence in that bank was destroyed by the Labour government. Some depositors committed suicide and others liquidated their funds in the bank at reduced rates, as the honorable member for KingsfordSmith (Mr. Curtin) said last night. In other words banking, whether government or private, will be successful if the administration is sound. If there is any threat against any bank, the bank of last resort- the central bank - will stand by it. I think we should lay forever the ghost of any suggestion that there is any threat to the Commonwealth Bank. There is no threat it, despite what Labour members are Saying.
The- Leader of the Opposition said that the Commonwealth Bank has done well. That is different from statements which he made in some other speeches on banking when he said that certain actions were aimed at destroying the Commonwealth Bank. In fact, the legislation that was then under discussion strengthened the Commonwealth Bank and made it even more successful than it had been previously. The Commonwealth Bank has been successful under the Menzies Government, so the charges of the Australian Labour party are untrue.
Another untrue statement was made by many honorable members of the Opposition, and I say this now in a form of a personal explanation. I think the honorable member for Hindmarsh (Mr. Clyde Cameron) and the honorable member for Grayndler (Mr. Daly) said last night that I and other members of the Liberal party are assisted by the private banks with our election funds. That is untrue. As a matter of fact the honorable member for Mitchell (Mr. Wheeler), who has had very difficult election fights, which many people will remember, was assisted by me with some funds that I happened to have. I paid some money in to help him. The banks have not assisted the members of this party. I am a member of the Liberal party executive in New South Wales, and after twelve years’ membership of that executive I am unaware of any occasion on which the banks have paid anything into our funds. It is untrue, therefore, to say that they have assisted us.
It is not untrue, on the other hand, to say that the Communist party has assisted the Labour party, because we have it on the word of the former honorable member for Fawkner, Mr. Bill Bourke, that £10,000 was paid to a member of another place. He apparently had been used to getting much more from the Communist party, because he felt the cold breath from the trade unions who were not weighing in with their funds, and he said that this £10,000 was “chicken-feed”. Of course, the Leninist, Marxist, socialist, Communist idea of seizing the banks will be the policy of the Australian Labour party because the Communist party calls the tune. The Communist party pays into the Labour party’s election funds. The Communist party will, therefore, have its policy of seizing the banks followed. The first thing to do, said Lenin, is to seize the banks, because then you get the sinews of finance and commerce in the hands of the dictators. I say, therefore, that Opposition supporters should remember, when they are charging us with accepting the support of the private banks, that they themselves are openly and avowedly supported by funds from the Communist party, and that they pay back the Communist party by carrying out its policy.
It is obvious, therefore, that this controversy on banking resolves itself into astruggle between the forces of private and free enterprise, on the one hand, and those of socialism and communism on the other, and one of the questions we have to consider is whether Labour can gain power and take over the banking system. I have been privileged on several occasions in this House, once by advocating an amendment and on another occasion by moving a motion, to ask for the creation of an aloof and proper central bank. This is now being achieved by the legislation before us, which legislation will surely be passed. This Government received a mandate from the people in 1958, because the Prime Minister (Mr. Menzies) clearly stated in his policy speech that the banking bills would be presented again, and the people know what the main principles of the legislation would be. We have a mandate for it and we will pass it.
However, I want to deal with this question: How will Labour carry out its policy when it takes over? I am not the slightest bit concerned about the administration of the proposed banking system while this Government is in power. I believe that the Development Bank will be administered in a proper way, and that there will be sufficient safeguards while this Government remains in office. But what will Labour do about it?
– If and when it gets the chance!
– Yes, if and when it gets a chance. I hope that when the people see the possible dangers connected with this legislation, Labour will never be elected to power again, and that the strength, vigour and power of this Government will carry Australia through in its exciting and exhilarating movement forward under private enterprise, and will prove a sufficient bar to the socialist idea of nationalizing banks, insurance institutions and other things. This, of course, is the policy of the Australian Labour party, as was so clearly re-affirmed last night by the honorable member for Grayndler (Mr. Daly). I almost think that the honorable member was deliberately trying to embarrass his old friend Joe Cahill when he made his speech last night, because nothing could be more dangerous to Mr. Cahill in the difficult election fight that he is waging than to have members of his party re-affirming the policy of nationalization of banking, which policy has been rejected not only by nearly all the people of Australia, but even by the mass of the competent trade unionists who are enjoying good conditions and have good jobs under private enterprise. The members of the trade unions are laughing at their shop stewards, and the trade unions are having difficulty in finding sufficient funds to support Labour party election candidates. Of course this is not the first occasion on which the honorable member for Grayndler has embarrassed Labour party leaders in this way. He once greatly embarrassed the late Mr. Chifley, a leader to whom he was devoted, by having changes made in the previously stated attitude of the federal executive of the Labour party towards the legislation on communism that was then before this Parliament.
What we are concerned about now is what we will leave on the statute-book for a future Labour government to take over. The first barrier is this: A Labour government could not nationalize banking by an act of Parliament, because this would be declared invalid by the High Court under section 92 of the Constitution. Members of a Labour government could not, therefore, achieve that aim by legislation. They would then look to the Reserve Bank and the Reserve Bank Board. The Reserve Bank has a board the members of which are appointed for five years. I should like to point out that there are two vacancies on the Commonwealth Bank Board, and let me say that those two vacancies should not have been left open before the last election. I am surprised to know that these vacancies were left open, because if a Labour government had come to power it could have appointed two of its own supporters to the board. The present members of the board include Professor Hytten, who is 69 years of age and whose term of office will expire in August of this year. Then there is Mr. Osborne, who is 55, and whose term will expire in 1961. The other members include Mr. Symons, who is 68 and whose appointment will terminate in 1961. Mr. Gunn is younger, being 45, and his term is due to expire in 1962. Mr. Grimwade is 56, and his term of office will not expire until 1963.
We could not, in normal circumstances, have a Labour government in this Parliament until 1961, three years after the recent election, and even if the two vacancies continued to exist, the Labour government, if it came to power, would be faced with the task of filling those two vacancies on the Reserve Bank Board and replacing the other members as their periods of office expired. It would take a number of years for such a Labour government to control the Reserve Bank Board. I hope I am correct in what I am now putting, because this is a highly technical matter. When the Reserve Bank Board came under the control of a Labour government, what could the board do, by stealth, and without legislation being passed through this Parliament, to weaken the private banks? In the first place, the Reserve Bank Board has control of interest.
I am glad that the honorable member for East Sydney (Mr. Ward) is listening so attentively, because he probably knows these things better than I do. I think the honorable member for Melbourne (Mr. Calwell) has also recently proclaimed his support of a nationalization policy. I think he said during a television interview that Labour would nationalize the banks. I believe he conceded that they would not go so far as to nationalize lolly shops. A Labour-dominated Reserve Bank Board could make a call-up of the private banks’ funds in the statutory reserve deposits. Under this legislation an immediate call-up can be made of 25 per cent, of the deposits of the private trading banks. If that were done to-day, the result would be immediate dislocation of industry and commerce and widespread unemployment, because the banks would be flat broke. Then the board could, after 45 days, call up another 25 per cent, of these deposits. I am advised by my colleagues that it could call up even more than 25 per cent., and that in fact its powers to call up deposits would then be unlimited. The private trading banks would then be finished, because all their deposits would be gone. In fact, under this legislation a Commonwealth Labour government could prevent a private trading bank from continuing to operate. It would be deprived of the ability to continue in business.
I know that this legislation provides that the Development Bank will make funds available only when those funds cannot be obtained from other sources, but one could get around that provision, because the act says, “ If in the opinion of the Development Bank “ the money is not available from other sources. Of course it would not be available from other sources if the private trading banks had gone or if they were forced to charge very high interest rates on advances or if they had no moneys to lend. In any of those cases, it would not be available from any other source so the Development Bank would be the only bank operating in Australia. That would be the end of our private banking system. That would also be the end of private enterprise in Australia. Men such as the honorable member for East Sydney (Mr. Ward), the honorable member for Melbourne (Mr. Calwell) and the right honorable member for Hunter (Dr. Evatt), who have said that they favour the nationalization of banking, credit and insurance would control Australia.
Of course, this would remove competitive banking. But one of the great difficulties would be this: The Government would control all money, which is a measure of all commercial activity. In other words, instead of having the drive, the tremendous vigour and power of private enterprise which has brought Australia to this exciting pass in its history, we would have the dull, government stroke. We would have a situation similar to that which existed when work on such important undertakings as the Warragamba dam, or the Glenbawn dam stopped, and construction of the
Eildon dam languished until it was taken over by private enterprise. That would be the end of vigour. That would be the end of Australia’s advancement. That would be the end of the overseas capita] which Joe Cahill went away to try to get. Thus we see the dangers that would exist in this country if a Labour government took power.
The plan at least of some members on this side of the House, for which they received a mandate in 1949. has been to prevent the nationalization of banking. We had a mandate to put forward an amendment to the Constitution which would prevent socialization for ever. In other words, we were committed to prevent socialization. We were elected on that pledge. Unfortunately, it was found that an amendment resisting socialization could not be so worded as to give effect to our pledge. Consequently, we were not able to make dead certain that there would be no socialization of banking in Australia. But the gradual changes that we have proposed in the banking legislation have been aimed at preventing nationalization in that vital field. We do not wish to have it on our conscience that we left an act on the statute-book which would provide means for nationalization by stealth.
If the Labour party were elected on a pledge of nationalization with a majority in both Houses and, consequently, introduced nationalization by legislation I would have no quarrel with it. That would be the end of it. I could not do anything about that. But the Chifley Government had no mandate for nationalization when its leader announced that intention in those few words uttered on a Saturday morning in a moment of pique. I think that Mr. Chifley had become a dictator when he did it. The Melbourne City Council had defied him by refusing to put its funds into a government bank. Mr. Chifley ordered legislation to be prepared for nationalization without a mandate. The people had not been told that the government would do that.
The honorable member for East Sydney did not have to worry about this but, in the swing seats such as the division of EdenMonaro. Labour members went around watering down socialization. They informed their electors that what the honorable member for East Sydney had been saying about nationalization did not apply to farms. They said that the Labour government would only nationalize a few things which might be oppressive. In other words, the Labour party, in a general election campaign, is not game to say, straight out, “We are pledged to nationalize the banks immediately we get control of both Houses “. It is of no effect for Labour members from industrial seats to deny that because they would not know what happens in the swing seats. Labour has never had a mandate for nationalization. When the Labour government tried to implement that policy it destroyed itself. It will stay out of office until that policy is discarded. People who think know that Labour cannot win while it goes to the elections on a policy of socialization.
Apparently something has happened in the back rooms in the last few days. The whips are cracking. Even before the State elections in Western Australia and New South Wales, Labour members are coming out again with this nationalization programme. They are going to move further left. Of course, if they lose all the State governments - and Labour has not held office in the federal sphere for ten years - there will be a shake-up in the party. The people of Australia, the trade unionists themselves, the men who have good jobs, the men whose families are enjoying the fruits of Australian factories, such as motor cars, washing machines, television sets and refrigerators, the men who are learning new automation techniques in magnificently equipped factories, and are enjoying very high salaries, will never have nationalization of banking because in this exciting state of our development free enterprise is the only system which can do any good. The Labour party will have to realize that.
Last night, the honorable member for Grayndler (Mr. Daly) made a very interesting statement. He said that he thought that the Governor of the Commonwealth Bank should be brought to the bar of the House to discuss this legislation. The Governor of the Commonwealth Bank made a comment on this legislation a few weeks ago. He knew that the legislation was before the House and that it was a hot, controversial issue. I know that the Governor of the
Commonwealth Bank, although an avowed socialist, has tried, as- a public servant, to carry out the policy of this Government. I honour him for that and I also want to thank him for his courtesy to me whenever I have asked to see him and sought his opinion. I think he is a good Australian. But the statement that is alleged to have been made by him in a speech on rural credit in which he discussed the Development Bank was very close to being sub judice because the matter is before the Parliament. I think that he should be asked to come here to be questioned on the Development Bank.
He said that the Development Bank would be a difficult bank to administer. I think that one ought to discuss that for a moment. I believe, with all other members, that in a very quickly developing economy, particularly when the private banks have been stripped of some of their deposits by this special-account mechanism, there ought to be credit available for new men who are starting, either in primary production or in secondary industry. I think that the principle is correct. I agree with that. I think that it will work under this Administration, even though there may be difficulties, but I do not think it will work under a Labour administration. Such an administration would break it.
Already, the Labour party has made enough irresponsible promises to do the Development Bank a great deal of damage. The forerunners of the Development Bank, that is, the Industrial Finance Department and the Mortgage Bank Department, have a capital of less than £20,000,000. The Mortgage Bank Department, which was established under the Chifley legislation, is permitted to lend up to 70 per cent, of the bank’s valuation of a property. I think that the limit was raised from £5,000 to £10,000. 1 forget by which government. Deliberately, the bank held its valuations at 1947 levels so that if a man wanted to buy a property through the Mortgage Bank Department he was loaned 70 per cent, of the 1947 valuation and he was required, each six months, to pay back the instalment and the interest. Of course, that would be impossible because the value of properties has gone up many times since 1947. He would be borrowing 70 per cent, on about half the value of the property and, therefore, he could not use the Mortgage Bank Department. But that department will be merged in the Development Bank and it will be under new management.
Some members of Parliament during the election campaign may have said that with the establishment of the Development Bank all the troubles of people requiring finance would be over, that they would not need to approach the private banks owing to the fact that the Development Bank would have plenty of money to lend. I think the honorable member for Wide Bay (Mr. Bandidt) made a very sensible observation on that point. Honorable members will recall that the Western Australian development bank crashed because it was a little too free with its lending. Some care will need to be taken if an impression is created that the Development Bank can give unlimited credit. The honorable member for Wide Bay pointed out that whilst beangrowers in his electorate this year produced nearly double the crop of the preceding year their cash returns represented only 70 per cent, of what they received last year. In other words, although they produced twice as much their cheque was not much more than half the amount they received last year. This year they produced 25,000 tons of pineapples, more than they grew a year or two ago, but their returns were 14 per cent, lower than when they produced a similar quantity.
I link circumstances of that kind with the Development Bank. If this bank lends a lot of money to primary producers the result will be an increase in production. But an attempt will have to be made to sell those products. When there is an abundance of any rural commodity which is being sold on the world market the price comes down. Consequently, higher production would mean lower returns. That would not be good for the farmers or for the Development Bank. Even Khrushchev would not have that, because he has too much sense to allow such a development.
I believe that the Development Bank should aim at certain objectives. The first should be to increase efficiency and lower costs of production. It will not need to aim at increasing production because we have caught up with production needs.
After the war Australia was faced with the problem of shortages of materials for primary production, such as fertilizers, fencing materials and so on; but the production problem in Australia is now solved and we are producing enough with the exception, perhaps, of meat. We are facing a situation in which we might have to see that further development is controlled by the Development Bank. The proposal is to have a committee of three together with the general manager of this hank and it will be charged with a very important duty to see that loans are made first of all to meat producers, because meat is in short supply in the world and has a ready market. This bank should lend also in cases where a man is suffering because his property is under-capitalized. His machinery may not be good enough, and he may need help to reduce his costs.
This is a very delicate problem indeed, and I agree with the Governor of the Commonwealth Bank that the Development Bank will be a very difficult organization to .administer. The Mortgage Bank Department did not have to face problems such as will confront the Development Bank because it had only a few customers and did not lend much money. Even if the Mortgage Bank Department wanted to make advances to all applicants it was prevented from doing so by the overall policy of lending on valuations which were kept down to the 1947 level. That was not realistic, and it was a deliberate move by the Commonwealth Bank to prevent the widespread use of the Mortgage Bank Department.
My desire, and perhaps that of some other honorable members, is that there should not be an easy means available to enable any future government to nationalize the banks under legislation already on the statutebook. Whilst a government of the political persuasion of this Government is in office there will be no danger of the banks being nationalized, but immediately a Labour government comes into office a move to do this will be made. I am convinced of that fact and I believe that many members of the Opposition are already deliberately working towards that end. When these fourteen bills become law they will provide a barrier to the nationalization of banking, but not for more than five years - perhaps for not more than three years.
If a Labour government were elected to office it would begin to nationalize the banks in the first years of its life. The first step would be to replace elderly officers of the bank upon their retirement with appointees who favoured bank nationalization. It is therefore important that when these measures pass into law the Government should see to it that they are filled by appointed to control these new banks which are to be created. There are two vacancies on the Reserve Bank Board and the Government should see to it that they are filled by young men. The Commonwealth Banking Corporation should also be administered by young men, and their appointments should be for long periods. Care should be taken to ensure that these men will remain in their offices for a long time, because the Labour party would seek to carry out its policy of bank nationalization by appointing persons of Labour persuasion to these boards.
If Labour cannot do it that way it will be done by giving the Development Bank unlimited capital whereas, at the same time, the private banks would have difficulty in getting comparable capital, particularly bearing in mind the amounts which they are obliged to pay into special account. In other words, the Development Bank would have unhindered access to the whole of the financial resources of the Commonwealth Bank funds. Despite any limitation which it is now proposed to place on the capital of the Development Bank, that bank will have full access to the whole of the funds of the Commonwealth Bank, which are estimated to aggregate £734,000,000.
A Treasurer so disposed could, by various means, persuade the bank board to carry out his wishes. For example, he could advise the Governor-General as to the salary to be paid to members of the board, and that would give the government of the day a hold over them. Another point is that the Development Bank will have full access to the trust funds which I am told now stand at £500,000,000. The Development Bank will be able to offer attractive rates of interest on its advances, and under a Labour government it would be able to gain many customers. The provisions of this legislation as a whole could be used by a resolute and ruthless Treasurer as a vehicle to nationalize the private banks. A Labour government with a majority in this
House, regardless of the Senate, would thus be able to nationalize the banks. The people of Australia ought not to forget that possibility.
Sitting suspended from 12.43 to 2.15 p.m.
.- The honorable member for Macarthur (Mr. Jeff Bate), who preceded me in this debate, proved to me by his speech that he is a pro-capitalistic monopolist of the highest order. In relation to the fourteen measures before the House, which are known as the banking legislation, he has the jitters, because he fears that they are not drastic enough to destroy the Commonwealth Bank totally.
The purpose of the present measure is, of course, to hinder the Commonwealth Bank. The private banks are very jealous of the great prosperity and progress of our Commonwealth Bank, and they wish to cripple it as far as they can do so. However, we must remind honorable members opposite, and the private banks, that whatever this Government can do to the banking system the Labour party can undo some day. As sure as night follows day the Labour party will come to office, and one of the things it will do in office will be to rectify the damage that this Government is doing now to our great Commonwealth Bank.
I shall speak now of the greatness of the Commonwealth Bank. The bank was established by a people’s government - a Labour government - in 1911. It was established, of course, for the benefit of the people. This great bank should not be interfered with for the sole purpose of swelling the profits of the associated private banks, which form the greatest monopolistic and capitalist association in Australia. The bank, established by the Labour party, had a very humble and simple begining. It was not established as a project in the same way as many other of our projects were established, because it was not established on borrowed money. It was provided legislatively, by the Labour government which established it, with sufficient money to begin its operation. We know how fast the Commonwealth Bank grew. To-day it is the greatest national project in Australia. Tt has assets of its own, not belonging to the depositors, of £1,000,000,000. Those assets, of course, belong to all the people, and not to merely a few of the people.
We know the great service that the bank has given the people since its establishment. It financed the Australian war effort in two great wars. After its establishment, while it was sympathetically administered by a Labour government, for the first time in the history of Australia the national needs were financed without the assistance of overseas borrowing. That would still be the case if the Labour party had remained in office to administer this great institution sympathetically. Indeed, from time to time this Government borrows money overseas. It is floating a loan overseas now, I think. Periodically the Government breaks away from the policy established by the Labour government and borrows overseas.
The honorable member for Melbourne Ports (Mr. Crean) has already referred to the objects of the Commonwealth Bank as set out in the Labour government’s legislation, but these bear repeating now. The preamble to the act now being repealed provided 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
These objects are not mentioned in the present measure. As to stability, when the Commonwealth Bank was administered by a Labour government we had real stability in our currency for the first time in Australia. The Labour government was able to achieve that stability because it had full powers to do so. during the war, under the national security regulations. We were able to administer the Commonwealth Bank in such a way that, for the first time in its history, this country had currency stability. At that time the Australian £1 was respected all over the world, and was the most valuable currency to be found anywhere in the world. It reached that position for two reasons - because the Commonwealth Bank was working for the pur pose for which it was established by a Labour government, and because it was being sympathetically administered by a Labour government.
Now I come to the second objective set out in the preamble to the act - the maintenance of full employment. During the war, because we had such great powers under the National Security Act and its regulations, we were able to direct the finances of the Commonwealth Bank in the best direction so that, for the first time in Australian history, this country had full employment. But that state of affairs has been lost to-day because, as we all know, for a considerable time in this country there has been an army of unemployed. The figures provided by the Minister for Labour and National Service (Mr. McMahon) indicate that there are at least 80,000 unemployed in Australia, but we know that the position is even worse than the figures disclose. Unemployment has been rife in this country for four or five years because the Commonwealth Bank, misadministered by this Government, has not been able to perform the functions for which it was originally established.
Now let us look at the third objective stated in the preamble to the act - the economic prosperity and welfare of the people of Australia. There are many people in Australia to-day who are not enjoying the prosperity that was aimed at by the originators of the Commonwealth Bank. We have only to think of the position of social service pensioners at the present moment in order to realize that that is so. There are 600,000 pensioners in this country who are asked to sustain themselves on the miserly amount of £4 7s. 6d. a week, and they enjoy very little prosperity and very little welfare. Then there are the thousands upon thousands of people who are seeking homes. One of the purposes for which the Commonwealth Bank was established wes the provision of money at a low rate of interest to people who wanted to build homes and people who wanted to establish themselves in industry. Up to a point, that purpose was achieved under the administration of the Labour party, but when it went out of office, these great objectives of the Commonwealth Bank and the Labour party ceased to be pursued.
One of the purposes for which the Commonwealth Bank was established was the making available of credit to those who needed it in the various ways I have mentioned, while reducing the interest rats being charged for money used in all ways in the development of Australia. The history of the bank, which was founded by the Labour party, shows that we succeeded in attaining this very important objective of providing cheap money for homes, industry, and other purposes. When treasury-bill finance was first used in 1927, the interest applicable was 4 per cent. Under antiLabour governments, it rose to 5i per cent. In 1941, the Labour government then in office reduced the rate to li per cent. That trend towards reduction has been continuing, and now the interest on this kind of finance is 1 per cent., and it should not be any more.
The Rural Credits Department was established to assist rural industry. In 1925, when this kind of finance was first made available by the Commonwealth Bank, the interest charged was 6i per cent. It remained at that level until we had a Labour government for a brief period in 1929-31. when it was reduced to 51 per cent. That trend continued for quite a number of years until, when a Labour government came into office in 1941, the rate was reduced to 3+ per cent. When Labour went out of office in 1949, the rate was 3i per cent., but under the Menzies administration it has risen to 4i per cent.
In 1943 when finance from the Mortgage Bank Department was made available by the Commonwealth Bank, the interest charged was 4i per cent. In 1956, this Government allowed it to rise to 5 per cent. Interest on overdrafts from private banks, at the time when the Commonwealth Bank was established, averaged 8 per cent. The first obligation of every man who had a business was to meet this very high interest charge from his income. When we established the Commonwealth Bank, an attack was made on that position, and the rate of interest was lowered to 6 per cent. The rate was gradually reduced until, when a Labour government was in office for a short period, it reached 4i per cent. It remained at that level during the war, but this Government, which believes in high interest charges on money used for the building of homes, has allowed it to rise to 6 per cent.
While the Labour party was in office, its efforts and those of the Commonwealth Bank in the fight against high interest charges succeeded. The rates charged on loans to local government authorities tell the same story. While the Labour party was in office, the rate was low, but under anti-Labour governments it has been as high as 6i per cent. During the war, the Labour party reduced the rate and in 1949 it was 3t per cent. We find now that local government and semi-governmental authorities like water boards, which do so much to develop the nation, pay 5% per cent, and up to 6 per cent.
The Commonwealth Bank’s fight against high interest charges, which have a crippling influence upon our development, had great success while Labour was in power. Had we remained in power, I believe that we would have accomplished our original objectives. We succeeded, for the first time, in developing this country without the aid of overseas loans. The Commonwealth Bank was responsible for financing our efforts in the defence of this country in two world wars. But this Government resumed the bad practice of borrowing money from overseas. During the war the Labour government was able to borrow all the money required at a rate of 2i per cent. We expended about £1,500,000,000 which was obtained in that way. Those loans are falling due for redemption, but the money now being used to repay money borrowed at 2± per cent, is subject to an interest rate of 5 per cent, or more.
One can imagine the terrible effect of this kind of finance upon the economy. I think the national debt, which includes our war expenditure, stands at about £4,000,000,000. The effect of a rise of i per cent, on the money required to repay that debt is that we become liable for another £20,000,000. One can appreciate the additional interest charges that will be incurred in repaying the £1,500,000,000 borrowed by the Labour party at 1 per cent. To-day, because of this Government’s practice of encouraging high interest charges, we have the terrible situation that the annual interest bill on the national debt is £150,000,000. That is a complete loss to the nation.
– Where does it go?
– I know where it goes. Much of it does not go to the people of Australia, but to overseas bond-holders, and from it we have no chance of getting any benefit. I believe that the finance required during the war to defend Australia should not have been subject to any interest charges at all. Finance should have been found in the same way as money was found to develop the Commonwealth Bank itself. The bank would not be the institution that it is to-day if it had been required to pay interest on the captial used to develop it. Any other national development that was achieved in the same way has not an interest debt hanging over its head. The Commonwealth railways have developed from our national credit to a degree where, instead of being a loss to the economy, they make a profit of over £1,000,000 a year. It is a small undertaking compared to the railways of the States. The State railways are losing money, whereas the Commonwealth Railways is making profits because it does not have to pay this interest charge imposed by the private banking system - a charge that is crippling the State railways increasingly year by year.
Another great undertaking that is affected by this financial system is the Snowy Mountains hydro-electric scheme. This great national project should cost the people £450,000,000 by the time it is completed. But it is to be financed by the private banking system, and this means that we shall pay interest on the money. It will take 45 years to make the repayments on this great national project, which should cost £450,000,000. But because high interest charges are imposed by the private banking system, the scheme will have cost the people of Australia £1,200,000,000 by the time the final payment is made. We find that this ridiculous imposition by the private banking system of an interest charge on all the capital that is required to develop this country is having that effect in many fields. The net result with respect to the Snowy Mountains scheme is that instead of it costing us £450,000,000- and that is all it should cost - it will cost more than twice as much because of misuse of the national credit.
I turn now to another aspect of the measures now before the House. It is ridiculous that they should impose on the
Commonwealth Trading Bank an obligation to pay income tax. Could anything be more ridiculous than to impose such a charge on a national undertaking? After all, it does not matter whether a charge is paid in tax or how it is paid. The people of Australia will pay it all in the long run. Last year, I asked the Prime Minister (Mr. Menzies), who, at the time, was acting Treasurer -
What is the total amount of profit made by the Commonwealth Bank of Australia from its inception to the 30th June, 1958?
The right honorable gentleman replied -
The total amount of profit made by the Commonwealth Bank of Australia, the Commonwealth Trading Bank of Australia and the Commonwealth Savings Bank of Australia from inception of the various Banks to 30th June, 1958, as published in the banks’ annual reports, amounted to £209,272,677.
That is a very handsome profit, which belongs to the people. The Prime Minister’s answer continued -
This figure includes profit of £107,569,471 made by the Note Issue Department of the Commonwealth Bank.
This shows how stupid it is that the Commonwealth Bank should be called on to pay income tax. Let us see how those profits were disposed of. An amount of £101,905,317 of the total profits of £209,272,677 was paid straight into Consolidated Revenue, as is provided for in the Commonwealth Bank Act, which provides that half the profits of the Commonwealth Bank must be paid into Consolidated Revenue. Of the remainder, £39,617,490 was paid into the National Debt Sinking Fund. A gift of £1,216,700 was contributed towards the rural development of this country. A total of £54,947,123 was paid into the capital and reserve funds of the bank, and £11,586,047 was handed back to various States with savings banks in partnership with the Commonwealth Savings Bank. That is how the total profits made by the Commonwealth Bank since 1911, when it was established by the Australian Labour party, have been distributed.
– The bank has also made substantial grants to municipalities.
– Yes, it does that sort of thing. It makes substantial grants to various bodies. We see that, unfortunately, the profits of the Commonwealth Bank already go into Consolidated Revenue, and a clause in the Commonwealth
Banks Bill 1959 requiring the bank to pay income tax will not make any difference. It will only mean that a certain portion will be paid into Consolidated Revenue in the form of tax, and the balance of the profit then left also will be paid into Consolidated Revenue. I notice no indication in this legislation that the private banks are to be required to pay into Consolidated Revenue what is left of their profits after the payment of tax. And we know that they make very substantial profits. We do not see all the profits that they make. The balance-sheets that we see do not disclose all the watering down that is done. If it is right that the Commonwealth Bank should pay tax and then pay into Consolidated Revenue what is left of its profits, why should not the private banks do the same?
Another matter that I want to mention is hire-purchase. We know that, by means of amendments to the Banking Act from time to time, this Government has eased the special accounts provisions and freed some of the funds of the private banks. We can see what is happening as a result. These funds are not being used to enable local governing bodies to maintain roads; nor are they being used to finance housing and the like. As was indicated by the statistics that the honorable member for Bendigo (Mr. Clarey) gave the House in a speech several weeks ago - statistics provided by the Minister for National Development (Senator Spooner) - fewer houses are being built at present than at any other time since 1948. So the money that has been released from the special accounts of the private banks is not being used as the central bank intended when these funds were freed. It is obvious to everybody where this money is going. Naturally, it is going into hirepurchase. The dominant feature of hirepurchase to-day is the participation of every private bank. One can understand why the banks are entering this kind of business. Instead of getting a return of 6 per cent, from banking business, they get up to 19 per cent, from hire-purchase business. This sort of activity is beyond the scope of what banking was intended for. The private banks should be prohibited from entering this field.
The Australian Labour party is not opposed to a hire-purchase or time-payment system. Our complaint is that the interest rates charged for this kind of finance are too high. A rate of 19 per cent, is far too high. No country could stand that for any length of time. Australia must be a great country or it would not have been able to stand the kind of onslaught on the people that this Government permits from time to time by allowing that kind of thing. There is not a word in these measures about hire purchase. In 1955, Sir Arthur Fadden, who was Treasurer at the time, was thoroughly alarmed about the amount of money going into hire purchase. His alarm resulted from the high interest charges, which made the hire-purchase field of investment so attractive to people with excess money to lend that money could not be borrowed for essential purposes. The Government said it was going to do something about it, but it has done nothing because it upholds the private banking system that permits this fleecing of the people of their absolute rights. The national credit belongs to all the people, and the Government should not allow it to be monopolized and used in the way that this legislation will permit the private banking system to use it.
We find that these measures do not alter any legislation affecting the private banks. They relate throughout to the Commonwealth Bank. As I have said, their purpose is to hamstring and, if possible, cripple the Commonwealth Bank. If the honorable member for Mitchell (Mr. Wheeler) and the honorable member for Macarthur had the final say, they would cripple the Commonwealth Bank and prevent it from assisting the people and the progress of this nation. Those honorable members would completely destroy the Commonwealth Bank. I know that the former Treasurer, who piloted the Government’s banking legislation through this House on a previous occasion, told us in confidence that he did not want some of it, and that he cried-
Order! The honorable member’s time has expired.
– I shall not attempt to answer the arguments of the honorable member for Banks (Mr. Costa). I wish to preface my own remarks by impressing on the House that I am not a doctor of finance. I am not even, as the Prime Minister (Mr. Menzies) suggested, a doctor of science, and I should hate for some kindly intentioned honorable member, such as the honorable member for Shortland (Mr. Griffiths), some day quite unconsciously to misrepresent the position by saying that the Prime Minister had designated me a doctor of science.
– You have not even got a bodgie degree.
– As it happens, I have an honorary degree, but I do not flaunt it in the House. I merely refer to this matter because I had to put the record straight. Otherwise, the situation could give rise to misrepresentation, and whilst I know that there , may be a very obvious response to my statement that I am not a doctor of finance, I propose to run that risk in dealing with the measures before the House.
I shall outline, briefly, some of the reasons why I support this legislation. First, I am opposed to monopolies, particularly a public monopoly of finance. I refer my friends on the other side of the House to the teachings of the late lamented Lenin, who said that you could never effectively enforce communism until you had complete control of the financial apparatus of any country. I want my friends opposite to ponder where Labour’s policy would lead if it were carried to its logical conclusion. Lenin, who was a very studious and able man, knew perfectly well that if you could get one authority absolutely in control of the finances of any country, then you could control every other activity, including the functions of government, because you would have everything in your final grip. I support this legislation because I think that it tries to hold the balance fairly between what is required in the public interest by having a Commonwealth banking institution and what is required to maintain the maximum amount of free enterprise associated with banking.
Last night, the honorable member for Grayndler (Mr. Daly) made a declaration of Labour’s policy with regard to banking and other activities. He quoted from the official Labour document. I must say that I am completely confused by the differing voices that arise from honorable members opposite with regard to this matter. Was the honorable member interpreting, as he appeared to be, the simple meaning of the words of that document? If he was, then I can see a good deal of sense in the objections raised by Labour’s offspring, the Australian Democratic Labour party, in saying that it will have nothing to do with socialism or communism. Honorable members on this side of the House, particularly supporters of the party that 1 represent, clearly understand that liberal government means just what it says - the preservation of those reasonable activities that serve the community on the one hand and to give, as far as is humanly possible, the freest run to those activities that will bring private enterprise and initiative to the service of this country. If I might strike a personal note, I say that the view expressed by the honorable member for Grayndler with regard to banking is almost antediluvian. It is completely out of date. I do not believe that the foremost thinkers of the Labour party, or of any party, to-day believe in the shibboleths of communism or socialism or capitalism.
We are passing through one of those stages of human evolution where the community, by changing its nature in many respects, is forced to a synthesis between the best in capitalism on the one hand and the best in socialism on the other. People who put forward a doctrine of socialism, which leads to communism in the final analysis, as the salvation of the human race, in the face of the downright suppression of the human liberties that has followed the logical application of that doctrine are, in my opinion, just as out of date as those who follow the extreme right philosophy and say, “ Here we stand, and we will move no further”. Nature is not like that. As I pointed out quite recently when speaking on defence, after gunpowder was invented it took almost a century to get rid of iron armour and to realize that the world had entered upon a new age and had devised new and better ways to kill and maim people. With regard to finance, we shall not be realistic if we do not face the implications and the changes that are taking place and the dangers of having a monopoly of state finance or a monopoly of private finance. Human nature is such that good government requires that a proper balance be held, so that men of goodwill on all sides of any society may have an opportunity to preserve the best in that society.
I believe that this legislation will go part of the way towards achieving that goal. Dealing with this legislation, it is not practicable for me, nor do 1 think it desirable, to traverse ground that has already been covered by other honorable members, but I point out that the legislation proposes certain things. First of all, it creates the Reserve Bank or the central bank as a separate institution. That bank will be separated from the Commonwealth Bank except in this respect, that it will still control the Rural Credits Department, and that, 1 think, is inescapable and very desirable. The Reserve Bank will still control the note issue. It will still control internal credit - or it should. I shall say more about that later. The bank will still control overseas exchange, and it will also control bank interest rates. These powers are designed to safeguard the national solvency. That is the purpose of any central bank. Without that 1 do not believe that any modern nation can withstand the impact and the onslaught of an economic war, a cold war, or a hot war. Unfortunately, to-day we live in a world widely divided, and the weapons that can be used to bring a country to its knees are such that we must be effectively mobilized through our central banking institution to withstand the impact of policies overseas that might affect the employment, happiness and prosperity of our people. To the extent that the legislation now before the House enables this to be done, avoiding inflation and deflation as far as is humanly possible and safeguarding stable employment, I think it deserves well from the members of this House and from the community.
I referred to control of the bank interest rates, which is one of the powers I have mentioned. Opposition members have criticized hire purchase and the limitations placed on the Commonwealth Bank - which, by the way. has done quite a lot of hire-purchase business - but they are responsible for one of the most dangerous trends, as I see it, against financial stability as represented by the control of a reserve bank. Let me explain: The Chifley Government and its predecessor fixed the interest rates for deposits at so low a figure that depositors were driven away . from the private banks. That may have been intentional. If it was, I think it was a most short-sighted policy. I believe that the emergence of private banking into organic association with the great hirepurchase companies is a deliberate recoil from a policy which was short-sighted, unjust and did irreparable damage to our banking structure. The Government to which 1 give support did much to improve the position, but the evil had been done. If my information is correct, to-day about twothirds of what is in effect banking is outside the control of the Reserve Bank of Australia, as it will be. Great financial and commercial corporations are accepting money on deposit, and day by day we see the growth, alongside legitimate banking, of other great financial organizations which are in effect carrying on the business of banking.
I ask honorable members whether it is common sense to permit the growth to continue. Either we believe in central banking and in its capacity to control interest rates and the financial stability of the country or this legislation is largely a farce. I put that proposition to every honorable member, on my side of the House and on the Opposition side. If we search, we will find that the reason why this Government has not tackled the problem is because it has not the constitutional power to do so. The report of the Constitution Review Committee shows that it is beyond the power of this Parliament to legislate because the Constitution does not enable it to do so. In the interests of financial stability and to make the position of the Reserve Bank worthwhile, the community must consider whether it will wait to plunge into the financial abyss which could come because of the lack of effective control or whether it will hasten the day when it will approve an amendment to the Constitution to enable effective control to be established. Upon what grounds can a trading bank be told, “ Your rate of interest shall be so much “, when vast financial corporations can do as they please? Is that the practice of common sense? I suggest that it is not even in the interests of banking, private or Government, that that situation should continue. I shall not say anything further on that point.
I propose now to refer to the Commonwealth Banking Corporation, and I shall speak about the Development Bank and the Savings Bank. I have listened to the views of Opposition members, but, as I say, they completely confuse me because one honorable member will say that we are strangling the Commonwealth Bank, while his colleague will say and give figures to prove that the Commonwealth Bank is a magnificent, lusty and well-developed institution. Look at the Commonwealth Trading Bank to-day! For 1957-58, its assets were £281,200,000. The Mortgage Bank Department had assets of £6,900,000, and the Industrial Finance Department had assets of £30,400,000. The total assets of the Mortgage Bank Department and the Industrial Finance Department were £37,000,000. I am giving round figures. The assets of the Savings Bank were £763,200,000. The assets of the central bank fluctuated a little, but the figure was £574,400,000. The total assets of the Commonwealth Bank were £1,656,100,000.
Apart from the fact that those figures, in my opinion, dispel the argument that the bank has been strangled, they are large enough to establish what I have said on a previous occasion, namely, that when an institution becomes so big as to be unwieldy it should be divided. If it is a company it is split into sub-companies. They operate under the control of an overall board, which determines policy for either a subsidiary board or a general manager and managing director. This enables the company to operate without being damaged because it has become top-heavy and amorphous.
Apart from the merits or demerits of the Government’s proposal, there is supreme merit in the separation, we will say, of the Savings Bank from the other banks. To-day its assets are £763,200,000; in a few years they may be £1,000,000,000. Take the central bank, with its assets; unless it is separated, how will it be able to control financial affairs with the present rate of Australia’s expansion? The Trading Bank is also expanding, despite the view of some people. Therefore, I say that the development now taking place is legitimate.
I have something to say about the Development Bank. I looked up the position in Canada and I found that there is a very interesting parallel between Canada and Australia. According to the 1957-58 Canadian Year Book, Canada has an Indus trial Development Bank which is a subsidiary of the Bank of Canada. It was incorporated in 1944 to promote the economic welfare of Canada, and it promotes almost everything except agricultural operations, for which provision is made elsewhere. Other purposes of the Canadian bank are to ensure the availability of credit to industrial enterprises and to supplement the credit of other lenders with particular attention to financing small enterprises. That is precisely what this legislation proposes to do. The lending powers are restricted in that case, as they are to be in our industrial department which has something like £30,000,000 in assets.
In Canada, they lend money or guarantee loans. They enter into underwriting agreements in connexion with the issue of stock and so on. That is very important. The Industrial Development Bank is intended to supplement the activities of other agencies in Canada and is not intended to compete with them. Much as I admire the legislation that is now before this House, 1 suggest that it would be elementary justice to do what perhaps has been foreshadowed by the Minister and as is done in Canada where the private banking systems are agents for the work of the Development Bank. I do not believe in monopolies. Therefore, I do not believe that everybody should be forced into the maw of the Commonwealth Bank. If private sources are prepared to supplement public funds, why should they be debarred from doing so? They have seen the wisdom of this in Canada and I suggest it would be wise to make a similar provision in this legislation. I look forward with interest to an amendment which will make that possible.
Another point of interest in connexion with Canadian banking is that the Industrial Development Bank extends credit only when the board of directors is of the opinion that similar credit would not be available elsewhere on similar terms and conditions. I believe that that is implicit in our own legislation. I would say to those who claim the Commonwealth Bank should be able to provide easy money outside ordinary banking conditions that I do not think they fully appreciate why the agencies such as the Rural Credits Branch were brought into existence. Branches have been set up to rehabilitate settlers in every State. They were designed to give the sort of assistance that cannot be mixed with ordinary banking such as the assistance which will be provided under this legislation. However, there is this difference between what is proposed here and agencies such as the Rural Credits Branch. The latter is used to rescue the perishing on the land. This project that is now before us is specifically designed to rescue the promising and help them, whether the client is in industry, on the land or engaged in some other activity.
I am indebted to a certain extent for information that has been given to me by Professor J. N. Lewis, Professor in the Faculty of Agricultural Economics in the University of New England. He prepared a most brilliant paper, which was purely objective and which covered certain aspects of this matter. He said -
In Canada the- supply of development credit for agriculture- has been increased by the Farm Improvement Farms Act under which chartered banks, are guaranteed against loss up to 10 per cent, of the aggregate numbers of loans made by each bank. One advantage of guaranteed credit is that it encourages private enterprise to make- loans to farmers without undue recourse to public funds.
When this address is printed, I should like every honorable member to study it because it is not a case for private banking or public banking. It is a purely objective and professional examination of all the factors involved. So, I say that so far as the Development Bank is concerned, I believe that when it takes over the functions of the Industrial Finance Department and the Mortgage Bank Department, plus certain other work given to it, it can and will render help to the type of person I have known throughout my experience who have character and know-how but insufficient capital to enable them always to use those things to the best advantage. Of those who cavil at this Development Bank, let me ask again: On what logical grounds can objection to this bank be raised when exactly the same principles have been operating for at least fifteen or 25 years in relation to secondary industries and industrial enterprises generally? Why is it possible for that kind of help to be given to secondary industry and yet become a menace the day it is introduced to assist primary industry, the home builder and the professional man? Frankly, I believe there is no logical or commonsense answer. Con sequently, if it is provided that the private banking institutions can act if they so desire on application as agents for the Development Bank and with a guarantee of a certain amount of their liability, the greater part of the objection to this legislation vanishes into the blue.
My time is reaching its limit and I cannot profitably continue my remarks much longer. I have endeavoured in the brief time at my disposal to show honorable members that this legislation is sound and maintains the integrity of the Commonwealth Bank on the one hand, and maintains a balance with private institutions on the other. Secondly, I believe it does provide more effective machinery for the Reserve Bank. Thirdly, I believe that unless we have an amendment to the Constitution, which will enable the gigantic financial corporations which are growing up and others which are really doing banking business to operate on equal terms, those banks and corporations and we ourselves can very well go down into the abyss of financial and economic chaos. That is something for the future. So far as it has been able to go, the Government has done a great job. By severing the Commonwealth Savings Bank and returning it to its real function, which is to borrow money from small borrowers at a low rate of interest and to lend it substantially to the same kind of person at low rates of interest, it will fulfil the real purpose and intention of a savings bank which, I am afraid, has not been the case since the last Labour government amended the act.
– Order! The honorable member’s time has expired.
.- I have sat here listening to honorable members on the other side of the House saying that they are all in favour of a very strong Commonwealth Bank. They do not want it weakened in any way. They are very solicitous for its welfare.
– Quite right!
– “ Quite right”, says my friend. I would like to see every honorable member on the other side of the chamber produce his cheque book and place it on the table of this House. Some honorable members are obligingly producing their cheque books right now. I recognize one book from the Bank of New South Wales. However, I would be amazed to find more than a very few Commonwealth Bank cheque books in the pockets of honorable members opposite. They are, of course, all supporters of the private banking institutions. They want to destroy the Commonwealth Bank. After all, why was this legislation introduced? Was it because the Government thought that the 1945 Commonwealth Bank Act was not adequate to cover this nation’s banking requirements? Not at all! It was because representatives of the private banks came here, did some lobbying and negotiated with members of the Government in order to secure certain legislation. Of course they have not got all they want. The honorable member for Mitchell (Mr. Wheeler) and the honorable member for Macarthur (Mr. Jeff Bate) both pointed out that these banking institutions desire something more before they will be satisfied. They want quite a lot of things that are not included in the legislation now before us. Ultimately, probably, they will get what they want. They realize that this is a step in the right direction.
– What do the people want?
– What do the people want? Well, let us have a look at the issue. Who are these bankers? What are these banking institutions? Are these bankers benevolent old grey-haired gentlemen who, by the sweat of their brows, have been able to accumulate fortunes that they desire to lend out to other Australians in order to promote the welfare of the people and the development of the nation? Or are they, as some others have said, merely social cormorants in the period of our prosperity living luxuriously upon the results of the industry of others, while in the hours of adversity and depression adding to the misery and suffering of the community? It has been pointed out that those who control these banking institutions are similar to pawn-brokers.
– Oh, no!
– “Oh, no”, says the honorable member for Capricornia. But, after all, what does a pawn-broker do?
– You ought to know!
– Of course I know. 1 know because during the period of the depression I lived in a district in which, because of the financial operations of the private banking institutions, 12,000 peoplewere on the dole. Of course I know what pawn-broking institutions are. They are places where people who have assets can secure advances on those assets at high rates of interest. But a pawn-broker lends his own money. The banking institution does not lend the money of the banker or of the shareholders of the institution. It lends the money of other persons in the community at high rates of interest. But not only does it lend the money of other members of the community; it also lends more money than the shareholders of the institution and the depositors have put into it. It lends vast sums of money more than it possesses, and by using the assets and the credits of the people it levies a toll upon industry, primary and secondary. That is what private banking does, and we in this community, of course, have to carry out the behest of the private banking institutions. We must bring down legislation that will frustrate and destroy a competitor that was brought into being by a Labour government, a competitor which, in the hours of war, served this country well, and has been of great benefit to it in other times of trial and tribulation. But this institution has to go. Little by little it has got to go, in the interests of the private banks. Their edict has been issued. But the Labour movement says, “ No; we are going to fight against that proposition “.
Look at the history of the banks. What have they done for the development of this country? We can deal with the matter only briefly in the time at our disposal, but I may remind honorable members that in the 1890’s the private banks created a boom and they created a depression - the boom first, the depression afterwards. Unemployment and destitution followed. Thousands of people were unable to secure the money that they had deposited with the banks. The banks closed their doors and would not pay the members of the community what they owed them. They caused trouble, trial and tribulation. They impeded the progress of the development of the nation.
– How long ago was this?
– That was in the 1890’s. It took years, decades, to recover. The Labour government established the Commonwealth Bank in 1910 in order to meet the exigencies of the time, so that the new bank could compete with private financial institutions and help the development of the country. Then the Labour government was thrust out of office, and the Bruce Nationalist Government came to power. It put the Commonwealth Bank in handcuffs. Whereas the bank had been controlled by Governor Miller, the new government placed it under the control of a bank board, which could not be controlled by the government of the day.
Trouble then arose. We were unable to sell our products overseas at the prices previously prevailing. There was danger of a shrinkage in the value of all kinds of property. Agricultural activity declined because the prices received for agricultural products overseas had fallen. The private banks realized the position and they immediately said, “ There will be no more loans to primary industry, and no more loans to secondary industry. We have to cai] in our loans from people who have previously secured them for purposes of primary and secondary industry.” They called in millions and millions of pounds. They destroyed the confidence of the community. They intensified the depression, at a time when money should have been allowed to circulate in order to create employment and in order to prevent the destruction of the home market. The banking policy of the government of the day destroyed the home market in the 1930’s and caused an immense amount of suffering. Hundreds of thousands of people were unemployed in this country. There were evictions, malnutrition and disaster in those years.
The Labour party decided that the position would have to be rectified. Labour was in office although it did not have a majority in the Senate. The Labour government announced that it would stimulate industry. It said that it would give £12,000,000 to the primary producers in order to stimulate primary production. It said it would give another £6,000,000 to the workless. By providing employment and so increasing purchasing power, the Labour party proposed to ease, to some extent, the depressed condition which had been brought about by the private financial institutions. But what happened? The Labour government was refused permission to carry out its policy by the then head of the Commonwealth Bank, Sir Robert Gibson, acting in the interests and at the behest of private financial institutions. No one will deny that had the policy of Labour been adopted in those days - had the private institutions permitted the policy of Labour to be adopted - we would have come out of the depression much earlier than we did.
– Labour was in office. Why did it not implement its policy?
– Labour was frustrated by your representatives in the Senate. The Labour government introduced the necessary legislation but the Senate failed to approve it. Then a general election was held, and united against the Labour party was every banking institution, pouring its money out in order to consolidate its power to frustrate the development of the country and to prevent the people from being raised out of the depth of unemployment and destitution. That is what happened in the 1930’s. Private banking institutions were responsible for the difficulties of those days as they had been for the difficulties of the 1890’s.
But what happened yesterday, what happened in 1899, or what happened in 1930 does not matter. The important thing is what is happening to-day. The private financial institutions are pursuing exactly the same tactics as they pursued in 1899 - the creation of a boom which will inevitably be followed by a depression. Out of the inflation created by the private banking institutions and out of the deflation that they then create, those institutions make much profit, but the vast majority of the people suffer considerably. To-day the “ Sydney Morning Herald “ published an advertisement which has appeared in every big newspaper in every capital of the Commonwealth. This is what it says -
Guaranteed 20 per cent, yearly return on your investments with absolute security.
Twenty percent return paid for every year of your investment.
Guaranteed returns paid every month.
Holdings can be transferred at any- time.
And here is the jest -
No work or operating by the investor.
– Give me that after, will you?
– There is no need for me to give it to you. It is in every newspaper. There are also other offers. A return of 10 per cent, is offered by the Sydney Guarantee Corporation and other organizations guarantee returns of up to 20 per cent.
– Do they say, “ No work “?
– They say, “ No work “. Of course, investors do not work. When did they ever work? When did those who are represented by honorable members opposite and who have invested their money in commercial enterprises such as Myer’s or in financial institutions, do any operating or working? Never! All the operating that they do is to walk to the office when the dividend cheques are being distributed and collect them.
Who is to blame for the state of affairs disclosed in this advertisement? How is it that companies can guarantee 20 per cent, profit and investors can receive their dividends annually without any work? How is it that the bigger organizations which are subsidized by private banking institutions can guarantee 10 per cent., 15 per cent, and more? The banking institutions, through the organizations that are operating in hire purchase, are making 33 per cent, and more. Some people may ask, “ Is not it a good sign that those vast amounts of money can be paid by the community to people for doing nothing? “ I say that it is not a good sign. It was not good in the days prior to the crash of the 1890’s. It was not good in the days prior to the depression of the 1930’s. When depressions occur, these institutions have to withdraw credit, and they will have to withdraw it again. Credit cannot be continually expanded without limit. There comes a time when some people want their money back and when some of these organizations - probably the least secure - are unable to meet the requirements of those who want their money back.
Then, of course, trouble occurs, because confidence is destroyed in all types of organizations and in all types of investment.
People rush the banks to secure money which the banks cannot possibly pay to them because no private bank in this country can meet its indebtedness without being buttressed and subsidized by the Commonwealth Bank - buttressed and subsidized by the security and the credit of the nation. A position results similar to that which occurred in the first world war when the Bank of England had to take a holiday for four days because runs were being made on it and Lloyd George had to bring into being “ Bradburys “ in order to meet the requirements of the people.
To-day, the banking institutions of this country are being given power over our economic life which inevitably will lead to disaster. At the beginning of his speech, the honorable member for New England (Mr. Drummond) quoted some comments in connexion with the power of those who control and manipulate the finance of the nation. He said he agreed that the persons who controlled the financial and the banking institutions, controlled the nation. He is right. If I were told that I could be Prime Minister of this nation, with no right whatever to dictate in any way to the banking institutions, or that I could have sole and absolute control of a banking institution so that I would be able, if I wished, to help the development and progress of this country, I would choose the latter position. I would leave the Prime Minister to continue in his present post. After all, it is money that matters and this Government by the legislation that is now before the House is seeking to vest more and more control over the financial resources and the credit of this community in the private banking institutions.
We remember that when this legislation was first mooted, the ex-Treasurer of this nation, Sir Arthur Fadden, said, in effect, “They will only get this legislation over my dead body “. Why did he say that? Sir Arthur Fadden, like all good Australian Country party politicians, has his ear - or both ears, probably - to the ground. He knew that the primary producers of this country, through all their organizations, over the last eighteen months had been continually passing resolutions and making declarations that they could not secure finance from the Commonwealth Bank or from any other banking institution at reasonable rates of interest in order to buy new equipment, manures or other necessary commodities to carry on their farming operations. They had been saying this continually. They had been having deputations to various) Ministers; they had been demanding that public inquiries should be held into the methods by which the finances of this country were being administered by private banking institutions. They wanted to know why the private banks were able to advance unlimited sums for the promotion of hire purchase but were not willing to lend farmers, or others with great assets in this country, money on overdraft, to purchase agricultural or other equipment. The primary producers were demanding these things, and Sir Arthur Fadden said to the Government, “ You shall not have this legislation, except over my dead body “.
But he is to be the governor - or will he be the governor-general - of one of these new banking institutions. Government members profess not to know, but I assure them, on advice I have received from the honorable member for Richmond (Mr. Anthony), that Sir Arthur Fadden is going to be the High Panjandrum of the new Development Bank. That fact probably altered his opinion of, and his attitude to, this legislation. But members of the Labour party are very definite. We say that the Commonwealth Bank was created by the Labour party, that it has operated in the interests of the people and that it should not be destroyed or frustrated in any way. In fact, its operations should be greatly extended. Why should these private institutions which add no wealth at all to the community be allowed to control the finances of the country? They do not grow one potato, or make a pair of boots, or a suit of clothes, or anything which adds to the community wealth. Yet, they gang together and manipulate the capital and the funds of the community and convert them into a currency which they use for their own aggrandizement.
What happens when a person obtains a loan from a private banking institution? If I go to the Bank of New South Wales, or any of the private banks with which members on the Government side do business, and ask for a loan, what happens? If I want £5,000 and I have security to the value of £10,000, the banks will agree to lend me £5,000 at as high a rate of interest as they can extract from me. But they do not give it to me in the form of £1 notes or in shillings and pence; they give me a cheque book. They create a cheque currency. In this community cheque currency is greater than any other form of currency. The number of cheque transactions in Australia is immensely greater than those carried out by the exchange of bank notes or coins of the realm.
Here, let me remind honorable members that it was a Labour government which took away from the banking institutions of this country the power to issue bank notes. They aU created their own currency. I recall seeing bank notes issued by the Bank of New South Wales and also by the Bank of Adelaide. They were of varying values and of different colours, and they were all mediums through which these banking institutions exploited the people and used the national credit for the aggrandizement of the few. To-day, however, they are no longer able to issue bank notes. That power was taken from them by a Commonwealth Labour government, to the vast advantage of this nation. A Labour government also established the Commonwealth Bank with authority to issue its own cheque currency, and by competition to destroy the effectiveness of the cheque currency of the private banking institutions. But that is no longer to be the case. This Government is seeking to destroy the Commonwealth Bank and its power to issue cheque currency in order that the financial operations of this country shall be carried out more or less exclusively by the private banking institutions.
I have two minutes left, and in that time I want to show with all the emphasis that I can possibly command my repugnance of the humbug and hypocrisy of members in this Parliament who say they want to establish a strong Commonwealth Bank and help it to compete with the private banks, whereas in reality they did everything possible to prevent the birth of the bank when a Labour government brought it into existence. If they were honest they would get up in their places and admit that at the behest of the private banking institutions they are seeking the total destruction of the Commonwealth Bank. That is what the Government and every one of its supporters wants; and that is what every private banking institution in this country wants. They want to destroy this competitor which is acting in the interests of the development of this nation and the welfare of its people.
.- The honorable member who has just sat down illustrates one of the principal reasons why his party remains in opposition. He went back to 1899 and 1912 and to the great depression and poured out all the hatred and venom that has been generated over that long period and manifested in class war and in other ways. It seems that there is some unhappy element in human nature which requires something or somebody to hate, just, as I suppose, most people require something or somebody to love. It appears that there must be a scapegoat, a whipping boy - somebody to take the blame for some wrong that has been done. Hitler had to find the Jews. If they had not existed he would probably have had to invent them. Communism, of course, turns to the capitalist. Those who have read “ Animal Farm “ will remember the cry of the sheep, “ Four legs good, two legs bad “. This seems to be an element of human nature and is being perpetuated by the kind of speech just made by the honorable member for Scullin (Mr. Peters), and it gets us nowhere. He devoted no attention to the bill. He has simply poured out the hatred that has been built up over the years. The myth about banking that has been built up by the Labour party lives on, though the amount of credence it gains is diminishing fast.
Now, Mr. Deputy Speaker, what do the bills before us seek to do? Let us examine them and then examine the real arguments advanced by various members of the Opposition during this debate. I think that what the bills seek to do can be summed up briefly in three sentences. First, they seek to complete the separation of the central bank from the Commonwealth Trading Bank and the Commonwealth Savings Bank; secondly, they seek to substitute a system of statutory deposits for the special account system; thirdly, they seek to transfer the Mortgage Bank Department and the Industrial Finance Department of the Commonwealth Trading Bank to the new Develop ment Bank, a greatly strengthened bank with certain features which I shall examine at some length later in my speech.
Why is it necessary for these things to be done? I shall later deal with whether or not the legislation will weaken the central bank or the competitive power of the Commonwealth Trading Bank, but I now repeat my question: Why is it necessary for these things to be done? In a single sentence, the reason is that the private trading banks distrust the leadership of a central bank, or reserve bank, when that bank has, closely associated or integrated with it, a wing that is a trading bank in keen competition with the private trading banks. That, in a single sentence, is why the separation becomes necessary.
The trading banks have feared in the past that, with the close association between the central bank and the Commonwealth Trading Bank, there would be discrimination in favour of the Commonwealth Trading Bank to the disadvantage - perhaps even leading to the disappearance - of the private trading banks, as a result of unfair competition. I think that everybody who has studied central banking is aware that although a central bank must have certain coercive powers it also, if it is to exercise proper leadership, has to have the trust of the other banking institutions so that they will follow its leadership without the need for the use of authority, although there must be times when that is necessary, too. Have the private banks any reason to fear the conferring of unfair trade advantages by a Labour government on the Commonwealth Trading Bank?
– A member of the Opposition says, “ No “. That is quite a fantastic answer, in line with the extravaganzas we have heard from various members of the Opposition during this debate. Is there anybody who has forgotten the attempt of the Labour party, without a word having been said about it in the Labour policy speech delivered a year or two before, to nationalize the private banks in 1947? There was not one word about that in the Labour policy speech at the preceding election, but the Labour government set out to nationalize the private banks at the drop of a hat. Is there any reason, therefore, for the private trading banks to have any suspicion about the intentions of the Labour party, in the light of that happening alone? At the subsequent general election in 1949 the Labour party was driven from office as a result of its action. There could be no question whatever about what were the wishes of the people in regard to the continuance in business of the private banks. But this nationalization proposal is still written into the platform of the Australian Labour party. The honorable member for Grayndler (Mr. Daly) last night was good enough to read out the very words from the Labour party’s platform.
– That is correct.
– The honorable member says that I am correct. The speeches from the other side of the House during this debate, and the “ Hear, hears! “ that have accompanied them, show that there can be no doubt that nationalization is still very dear to the hearts of the Opposition.
– It will come some day.
– There you are! We have had speech after speech from honorable members opposite in denunciation of the private banks. We had one from the honorable member for Scullin, we had one from the honorable member for Hindmarsh (Mr. Clyde Cameron), and one from the honorable member for Grayndler last night and, I think it would be true to say, we have had such a speech from every member of the Opposition who has spoken in this debate. Very well! I will repeat the question that I asked before. Have the private banks any reason to be suspicious of the attitude of a Labour government as expressed through unfair trading advantages conferred on the Commonwealth Bank? Of course they have every reason for that suspicion, as has been proved out of the mouth of every honorable member opposite who has spoken in this debate.
Let us have a look at the history of central banking in this country. I believe that the present position springs from a muddled conception of the Commonwealth Bank when it was first established by Mr. King O’Malley and his friends. At that time, central banking was very little understood, and there were very few central banks anywhere in the world. The founders of the bank did not very clearly distinguish between what are now believed to be the true functions of a central bank and what has been the practice of commercial banking over the years. So the Commonwealth Bank was a kind of hybrid institution, partly central bank, partly ordinary commercial bank. A muddled institution from the start, and our troubles to-day stem from the continuance of that muddled state of mind.
Should the private banks be protected as far as possible against any disadvantages that might arise from this position? Of course, they might not be completely protected if the Labour party had a majority in both Houses of this Parliament and could pass whatever legislation it chose; but so far as they can be safeguarded in the event of the Labour party’s not controlling the Senate, they should be protected. Why? I have said that the Australian people clearly wish the private banks to remain in business. They do not want to see a banking monopoly in the hands of the Government. The reason is perfectly obvious. 1 believe that Lord Acton’s statement that “ absolute power corrupts absolutely “ is perfectly true. For that reason I think that all members on this side of the House are opposed, to a banking .monopoly in the hands of the Government or anybody else.
By the way, this might be the appropriate point at which to answer some of the imputations and aspersions cast on all members of this side of the House last night. It was suggested that members on this side of the House have been lobbied by the bankers if they have not, indeed, received graft for supporting the measures now before us.
– We have all been lobbied by the bankers.
– The honorable member says we have all been lobbied by the bankers. My own experience is this: I happen to have as constituents the general managers of two of the biggest private banks in this country. I have met each of them socially at various times, but I have never discussed with them the matters contained in these bills. I have not been approached by any of their officers, and not one penny has been paid by them, or anybody else on their behalf, into any election fund in my electorate. I believe that my credit in this House is such that that statement will receive complete credence. I make it because these charges have been thrown about. My support of these measures springs entirely from the fact that I am opposed to tyranny wherever I may find it. I am opposed to monopoly in banking. I am opposed to any government or banking system which helps monopoly through the enormous power which, of course, the banking system possesses, lt can cause a man to thrive or to perish in his business, and it is not right that that power should be concentrated in the hands of one institution. Anybody looking to what has happened in thorough-going socialist countries like Russia must look with dread upon this centralization of power, and so it is for these reasons, without any lobbying but upon principles that are fundamental to me and, I believe, to all members on this side of the House, that I wholeheartedly support the purposes of these measures.
But something profoundly true was said on the other side of the House - 1 think it was by the honorable member for Melbourne Ports (Mr. Crean). It was that, because the banking system, whether private or public, exercises such enormous powers over the people, their work and their destiny, it holds a great trust. Banks cannot regard themselves purely as any ordinary commercial enterprise whose sole business it is to make a profit. They are in a position of trust. They have a function to perform in the interests of the community that goes beyond the mere making of profits. That is profoundly true. Unless those who control the private banks are aware of that duty, they will, I have no doubt, disappear from the scene. They must understand that they have broad public duties as well as a duty to their shareholders. Sometimes I fear that they have not always shown statesmanship or, perhaps, a complete understanding of that duty, but I hope that the new set-up in banking will result in their more fully appreciating the fact that they must act as members of a team led by the Reserve Bank. I myself have never had any doubt that the Reserve Bank should have absolute and complete power over the volume and general direction of credit or money in the community.
Will this legislation weaken the banking system as it has existed up to this time? I suggest that by removing the distrust that has, no doubt for very good reason, existed between the central bank and the private banks, because of the close association of the central bank with the Commonwealth Trading Bank, the banking structure will be strengthened. There are academic views that can be put forward with regard to the question of whether the existence of a trading bank, closely associated with or in connexion with the central bank, is a desirable or essential weapon in the hands of a central bank in the exercise of the control that it needs over the whole monetary system.
One academic view is that because the associated trading bank is one that must meticulously carry out all the directions of the central bank and because it can be called upon to take more positive action, particularly in a time of business recession, to ensure as far as possible that money is lent and put to work in bringing men into employment, it is a very valuable, indeed essential, weapon in the hands of a central bank. On the other hand, of course, there is the argument that nowhere else in the world do we find a trading bank associated, as in Australia, with a central bank. It is not true of the Bank of England, it is not true of the reserve banking system in America, and it is not true of the banking system of any other advanced country. So the other view is put forward, again in academic circles, that the central bank should be completely dissociated from trading activities. Here are two academic points of view put forward by people who have studied and written upon this subject. But in Australia we must consider these things not as remaining in the cloisters but as coming out into the market place. In Australia we must look to the political situation and the attitudes of mind of the Australian people, and when we consider the attempt to nationalize banking, and the various other aspects of the history of banking in this country, I think we must conclusively come to the opinion that it is better that the two institutions be separated.
It has been suggested on the other side of the House that the new set-up will immeasurably weaken the Commonwealth Trading Bank. The honorable member for Hindmarsh (Mr. Clyde Cameron) last night told us how the directors of the Commonwealth Trading Bank sat side by side on other directorates, or it may be at their clubs, with directors of the private banks. Of course, if the directorate is drawn from men knowledgeable in the various fields of industry, whether primary or secondary, if they are men of ability, substance and experience, naturally they will meet other men who are also in control of great enterprises of this country, and it is highly desirable that the Commonwealth Trading Bank should have the advice and assistance of men so widely experienced. But there is not one scintilla of evidence to suggest that the Commonwalth Trading Bank has suffered by reason of any clog that the directorate has sought to impose upon the management in extending the business activities of that bank. On the contrary, as has been said on several occasions in the course of the debate, the advances of the Commonwealth Trading Bank have increased far more than the advances of the private trading banks, so there is not a scintilla of evidence to suggest that there will be any unfavorable result from the new set-up upon the activities of the Commonwealth Trading Bank. Furthermore, the capital structure of the Commonweath Trading Bank will be strengthened. It will have conferred upon it by this legislation an additional £2,000,000 from the reserve bank and will be able to plough back 50 per cent, of its profits into the business. That is, of course, far more than any private bank can possibly do, on account of the obligations that a private bank has to its shareholders.
Still dealing with the question of the alleged weakening of the banking structure in Australia - the statutory reserve deposits that can be called up by the reserve bank will be far greater than those under the old special account system. Indeed, it will be able to call up 25 per cent, of the deposits of all private trading banks and the Commonwealth Trading Bank at any time, and, on very short notice, it will be able to call up 100 per cent., so the control of the reserve bank is to be immensely strengthened.
Now, Sir, I come to the Development Bank. This is a new feature that I do not think was ever contemplated until these bills saw the light of day. The Development Bank, so the Treasurer said, is designed to plug a gap in the existing financial set-up, that is, the gap that exists by reason of the fact that many small businesses and men on the land who may have prospects are not sufficiently established to be able to borrow from trading banks or to get capital from other sources. So the Development Bank, it is said, is to be set up to plug the gap. It is a gap that no doubt exists. It existed in England and was plugged in much the same way, following a report by the Macmillan committee in that country. I have no cavil at that, but I see a great short-term danger in it. The short-term danger is that money poured into the development bank and pushed out to various borrowers may well have an inflationary effect on the economy.
I see a greater long-term danger in the existence of the Development Bank in that it will be freed from all the shackles that are on the trading banks. Let me detail what they are and what is the distinction between the Development Bank and the trading banks. First, the Development Bank will not be subject to the provisions with regard to statutory reserve deposits. Secondly, it will not pay tax as the Commonwealth Trading Bank does. Thirdly, it will have full banking powers not restricted in any way to the particular purposes that are said to be the object of establishing it. It will have full banking powers under clause 74 of the Commonwealth Banks Bill 1959. As was pointed out by the honorable member for Blaxland (Mr. E. James Harrison), I think, its powers will be identical, to all intents and purposes, with the powers of the Commonwealth Trading Bank. I understand that the powers are being made identical partly for constitutional reasons. The Commonwealth has power over banking, and therefore, if it establishes an institution of this kind, it must be made a banking institution in the plain meaning of the word “ banking “; though it may not have been necessary to go quite as far as the Government has seen fit to go.
Fourthly, the Development Bank will have exceptionally wide access to funds. Its original capital will consist of the capital of the Mortgage Bank Department and the Industrial Finance Department of the old Commonwealth Bank. In addition to that, it will be given £5,000,000 by the Reserve Bank of Australia. This capital structure is set out in clauses 75 and 76 of the Commonwealth Banks Bill. The Development Bank will also receive appropriations of money from the Parliament - and those may be very considerable. Appropriations of money from the Parliament mean, of course, that the Parliament taxes the people and then hands tax money to the Development Bank to be lent out to people who are struggling for finance. It is a very simple process, as honorable members will see.
In addition, the funds of the Commonwealth Savings Bank will be at the disposal of the Development Bank in a way in which they are not available to the Trading Bank. The funds of the Savings Bank now amount, as has been mentioned in the course of this debate, to more than £670,000,000. Assuming that, under regulations, 70 per cent. of those funds is channelled into government securities, we know that that still leaves 30 per cent. available for housing loans or for channelling into the Development Bank. Let us suppose that a certain amount is made available for housing. Even, suppose that only 10 per cent. of these funds is channelled into the Development Bank. Ten per cent. of £670,000,000 is a pretty sizable sum; £67,000,000 is very sizable indeed. It will be said, of course, that these are the whole of the assets of the Commonwealth Savings Bank and that what we are really concerned with is merely the funds available from year to year, on which there are many competing claims. So the amount that can be channelled into the Development Bank may be very small indeed. However, it is always possible for securities in the portfolio of the Savings Bank to be liquidated. In circumstances in which a Labour government may wish by stealth to strengthen the Development Bank so that it may compete on more than favorable terms with the private trading banks, this could happen.
You also have the channelling of trust funds into the Development Bank, and there may be a number of trust funds over which the Treasurer could exercise some influence. I do not mean the £500,000,000 of trust funds that are in the Treasury now. But there may be superannuation funds and others over which some influence can be exercised by a Treasurer or on which some pressure might be brought to bear. It could be that the Development Bank will be able to offer such excellent terms that private trustees will find this investment more desirable than others. Another source is the recourse of the Development Bank to the Reserve Bank. And a final source of funds for the Development Bank, of course, is the deposits of the public. Under clause 74 of the Commonwealth Banks Bill, the Development Bank will be empowered to receive moneys on deposit and, of course, may pay interest upon them.
It may well be, Sir, that I am raising a mare’s-nest. It may well be that the charter of the Development Bank will safeguard the position completely. What is that charter? Clause 72 of the Commonwealth Banks Bill provides -
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;
The central bank, using its power to call up reserve deposits and its power over interest rates, might so squeeze the trading banks that very many people could not get finance from them and would have to turn to the Development Bank, and the executive committee of that bank could, quite rightly and properly, say it was satisfied that finance would not otherwise be available on reasonable and suitable terms and conditions. So it is entirely practicable to use the Development Bank as a means of destroying the trading banks if a Labour Treasurer should wish to do so.
It is possible also, Sir, for political pressure to be put upon the Development Bank. The constituents of my friend, the honorable member for Richmond (Mr. Anthony), for instance, might press the Development Bank for more and more advances, and it might be very popular for a Labour government to say, “ We will enlarge the scope of the Development Bank “. You have only to knock out clause 72, which I have mentioned, to establish a bank that has every possible advantage over the trading banks. If you knock away that chock you launch into the financial ocean a ship ready-made by the Liberal party and Australian Country party Government that outguns every other ship in that ocean. It might be a popular move for the Australian Labour party to say. “ We will extend the operations of the Development Bank. We have only to repeal one section of the act, and there is the perfect instrument with which to destroy the private banking system.”
Mr. Deputy Speaker, for the reasons which I have stated, I support the general purport of the legislation, but I have grave fears that the Commonwealth Development Bank could be twisted right away from its purposes and used to destroy an institution - I refer to private banking - that I think more than any other preserves the liberties of the people of this country.
– Mr. Deputy Speaker, it has been rather interesting for me to listen to Government speakers in this debate, and I wish to refer particularly to two or three of the speeches that we have heard from them to-day. First of all, I shall mention that of the honorable member for New England (Mr. Drummond). I thought that it was well worth listening to. I cannot agree with all that he said, but it was a solid speech. I think that the honorable member for Macarthur (Mr. Jeff Bate) gave the whole show away. The honorable member for Bradfield (Mr. Turner) has just told us that these measures are necessary because the Commonwealth Bank of Australia has grown into such a huge institution that it should be divided into sections. He said that that was really the practical reason for the introduction of this legislation. But the honorable member for Macarthur said that the reason was to cripple a Labour government when it comes into office. I think that that is a fair statement of his argument.
– No, it is not. I said that the purpose was to prevent nationalization.
– Well, to prevent Labour banking legislation. The honorable member said that these measures would tie up Labour for from three to five vears if it came into office. He bemoaned the fact that the Government had not filled two vacancies on the board of the Commonwealth Bank. He pointed out that if Labour had been returned to power at the last election, it would have had an opportunity immediately to fill those vacancies with men of a different outlook. Then he said that the Government wanted to tie up banking. That came from a man who claims to be a democrat, and who says that he believes in democratic rule. But if at some future date the people vote Labour back to power, the honorable member wants the dead hand of the board that was appointed by this Government to prevent the Labour government from giving effect to its policy. This Government was returned to power at the last election, and is entitled to give effect to its policies. But the honorable member for Macarthur wants to deny that right to future Labour governments. During the speech earlier this afternoon by an honorable member from this side of the House, in which he was referring to the Scullin Government, an honorable member opposite interjected and wanted to know why the Scullin Government did not give effect to its policies. It was not able to give effect to its policies for the same reason that the Menzies Government was thwarted in its attempt to change the banking legislation last year. Last year, the Government could not give effect to its policy on banking because it did not have a majority in the Senate, and that is the same reason why a Labour government could not give effect to its policy in 1930 and 1931.
– That, too, was the central bank.
– That was the central bank also, and if the government in 1930 and 1931 had been able to control the Commonwealth Bank in the manner that the present Government controls it, Labour would not have gone out of office.
Honorable members opposite have asked in what way does controls by the bank board interfere with the advancement of this country. To find an answer one need only go back to the 1930’s. The private banks would not lend money. The antiLabour parties, which held a majority in the Senate at the time, decided to bring the Governor of the Commonwealth Bank, Sir Robert Gibson, before the bar of the Senate. Why? To see whether it was desirable for Mr. Theodore, the Treasurer, to bring in a fiduciary issue of something less than £20,000,000. The governor of the bank advised against that. The government of that time, which had been elected by a majority of the people after the ignominious defeat of the Bruce-Page Government, was prevented from giving effect to its policy by a Senate that had been elected years before. The government was, in fact, prevented from giving effect to its policy by the dead hand of the past. Honorable members opposite can say that the same thing happened in the last Parliament. By virtue of a majority in the Senate, elected years before, Labour was able to defeat this legislation in the last Parliament, thus preventing the Government, which had a huge majority, giving effect to the policies that had been approved by a majority of the people. It is circumstances such as these that cause me to object strongly to the way in which the Senate is elected at present.
The honorable member for Bradfield spoke of 1912 and 1930, but he did say that what should concern honorable members is the present. We on this side of the House are concerned with the present position, but at the same time we can profit from what has happened in the past. We can learn from our past mistakes. The honorable member for Bradfield said that if a Labour government was returned to office it could alter this legislation. But do not let us blame a Labour government. The people of the country are responsible for electing governments. No government can be put into power unless a majortiy of electorates vote for it and the policy that it espouses. Yet several honorable members on the other side of the House have said that this legislation should be drafted in such a way that it could not be interfered with by future Labour governments.
– Labour does not say anything about socialism at election time.
– I am not talking about socialism. I like to talk about things that matter, such as this bill. I am not discussing socialism, and the honorable member for Mallee cannot draw me away from the bill by mentioning socialism. I do not know what he has in the platform that he puts before the people at election time. He seems to know Labour’s platform pretty well. Instead of talking about Labour’s platform the honorable member would be better employed, when he is addressing the House, if he outlined the policy of the Australian Country party and what it would do for the country. We never hear that.
– You hear it every weeK.
– All that the honorable member does is to discuss Labour’s policy and talk about socialism, which he does not understand, except when the Australian Country party wants a better price for butter. What do members of his party do then? They hug socialism with both arms.
Let us look at some of the arguments that have been raised in the course of this debate. Before the Commonwealth Bank came into being country people depended entirely on the private banks for finance. In conjunction with the private banks were certain large buying firms, such as John Darling and Son Proprietary Limited, and they engaged in providing finance. The honorable member for Mallee knows that before the Commonwealth Bank came into the picture, growers depended on the private banks for advances against their wheat crop. If one goes back to the thirties at the time of the great depression one will remember how the man on the land suffered, not to mention workers generally. Honorable members will remember the Debt Adjustment Court that was set up in South Australia with Judge Paine as Administrator. Yet honorable members talk about a monopoly! They talk about wanting to do what they like with their own produce. Let them remember what happened in the thirties. The court decided what preference would be given to business people in the distribution of funds. I remember the fight I put up at that time for the country storekeeper. Preference was given to the man who supplied the oil or the superphosphate. Preference was given to those who had the finance behind them; but the little country storekeeper was well down on the list.
I should say that some honorable members would like to see the private banks controlling the financial structure of the country, as they did many years ago. But the Commonwealth Bank is the bulwark of the country. The honorable member for Mitchell (Mr. Wheeler) said that he wondered whether the Development Bank would cause inflation. He suggested that the Development Bank might advance too much money and bring about inflation, although the money was advanced for farming, housing and other necessary purposes. Yet honorable members opposite support the action of the private banks in entering the hire-purchase field! What causes inflation more readily than money made available under the hire-purchase system for the purchase of goods? We are told that inflation arises when more money than goods is available, and this causes the price of goods to rise. That situation is created by the system of hire purchase.
As was suggested by an honorable member opposite, the Government should do everything possible to bring the hirepurchase companies under the control of the central bank in the way that the banks are under its control. If that were done, the interest rates of hire-purchase companies would be limited. But big business houses are also adding to inflationary trends by extending credit to their customers. What has been the latest development of Myers Emporium Ltd. in Melbourne, John Martin & Co. Ltd. in Adelaide and big stores in other capital cities? They now urge their customers to open a budget account and to pay off 1/- a week on every pound borrowed. Instead of being asked whether they are buying more than they can afford, people are being urged to open a budget account. In this way purchasing power is given to people who otherwise would not have the money to spend. Sales figures are maintained and the price of goods is kept up.
Honorable members on this side of the House have been accused of wanting to destroy the private banks. If the private banks act in the interests of the people, I do not want to destroy them. We have heard a lot about nationalization. Honorable members know that nothing can be nationalized except with the assent of the people at a referendum. I ask honorable members opposite who say they believe in democracy and the decision of the majority, whether they would still say that the banks should not be nationalized even if the people at a referendum decided that they should be nationalized.
– That is not the point at all.
– The honorable member says that that is not the point.
The point is that the banks cannot be nationalized without a referendum being held.
– Labour does not include the nationalization of banks in its policy!
– The honorable member should forget about policy and look at the facts. At one time, a point in our policy was that we would nationalize the banks. An act to achieve that purpose was passed by the Parliament, but the Privy Council held that we did not have the power to nationalize the banks in that way. Now, the only way that banks can be nationalized is for the people to approve at a referendum of an alteration to the Constitution to permit that to be done. That is the fact. It does not matter what a piece of paper says; anything can be printed.
We have heard about promises that were made. The honorable member for Macarthur said that in 1949 his party undertook to devise means of so altering the Constitution that further socialization would be impossible, but unfortunately it was found that this could not be done. The promise was made, but could not be given effect. Many things that we would like to do cannot be done because we have not the power.
I do not support Russia. I do not think that any one is more opposed to communism than I am. As a Christian man, I am totally opposed to communistic doctrines. But it has been suggested that in a state-controlled financial system, it is possible to devote large sums of money to various projects. In that way perhaps Russia was able to put the first Sputnik into space. Why could that not be done in England? Why did America take so long to do it? Simply because the large sums of money necessary were not available. We have atom bombs, hydrogen bombs and other destructive means of warfare. However, within the last few days, President Eisenhower has said that America would not fight for East Germany; that it would be of no use to send six divisions there when Russia had 150 divisions. Russia, perhaps has used its resources substantially to expand its military power but it has also greatly improved the lot of its people, as any one who can compare the conditions of 40 years ago with those of to-day will admit. But 1 do not want to talk about Russia. I may be called a Communist because of what I have said, but I want to face the facts if I can.
I say to honorable members opposite that they cannot get rid of the Commonwealth Bank, no matter how sore they feel about it. The Government may try by act of Parliament to prevent a subsequent government from acting in a certain way in regard to the banks, but under our Constitution any government can repeal the legislation of its predecessors. No measure can be made permanent. The Deputy Leader of the Opposition (Mr. Calwell) is reported to have said on one occasion that a Labour government had so scrambled things that nothing could unscramble them. I think that this Government has endeavoured to do that with the Commonwealth Bank in this set of bills. It is trying to scramble the Commonwealth Bank in such a way that Labour will not be able to unscramble it.
But I ask honorable members opposite to remember that the wheel turns surely, though sometimes slowly. Sometimes when we are on the crest of a wave we go down into the trough when we least expect it. In 1929, the Bruce-Page Government, against the wishes of the people, wanted to eliminate federal arbitration. That is much the same sort of thing as this Government is trying to do with the Commonwealth Bank. In 1929, the government of the day decided that the State arbitration courts could do all the arbitration work. To-day, some honorable members suggest that the private banks could do all that is required. But what was the fate of the government that tried to wipe out federal arbitration? The then Prime Minister, Mr. Bruce, was defeated in the rosy seat that he held and Mr. Holloway took his place. Mr. Holloway defeated him by a tremendous majority simply because the government of the day was flying in the face of public opinion. The honorable members for Mitchell and Macarthur have no hope in life of getting the leaders of their party to accept the propositions that they have put up, because the leaders know that the people would not agree to such things, and that if the propositions were adopted against the will of the people, it would mean the downfall of the Government.
Years ago, Sir, when I was asked what my strongest impression of the parliamentary system was, I said it was that you cannot legislate away from public opinion, and that if you do, retribution will fall upon upon you. The knowledge that that is so is of comfort to me as a member of the Opposition. When Labour did certain things in the past, it was pulled to pieces. Take, for instance, the Commonwealth note issue. We find that the Commonwealth has made a profit of more than £100,000,000 from note issues. Yet 1 remember reading away back in 1910 or 1911, that “in six months’ time you will be able to buy a dray load of Fisher’s flimsies for ten bob “. That is what was said then, but 50 years later, far from being able to buy a dray load for ten bob, the notes have made a profit of more than £100,000,000 for the people of this country.
When sound reforms are introduced, they cannot very well be thrown out. Many of the things that this Government is doing to-day, whether in respect of banking or anything else, are the result of what Labour governments did, or of what we forced anti-Labour governments to do. Much as this Government may dislike doing some of the things it has to do, it finds that there is so much merit in them that it must continue to do them. In fact, the Government sometimes tells us that it has improved on measures that were introduced by Labour governments. For instance, Government supporters will say, “ In 1948-49 you only spent so much on such-and-such an activity, whereas we have spent more “. Why, Mr. Deputy Speaker, if it had not been for Labour policy, I do not know where the Government would be to-day!
In the short time at my disposal, I want to say something about the proposed Development Bank. The honorable member for Bradfield said that it might be possible to obtain funds for the bank from trust funds, although, he said, money should not be taken from the Commonwealth Superannuation Fund. Money cannot be taken from the trust funds that the insurance companies have established, or from trust funds devoted to ex-servicemen, but there is one fund on which the Government might be able to draw and which it in fact preys upon. That is the National Welfare Fund of roughly £200,000,000. When I considered this matter of trust funds, I found that the money in the Superannuation Fund was invested in government bonds at 3i per cent., 4£ per cent., or some other percentage. I found that some of the trust funds of insurance companies were invested in municipal loans and government loans, but that there was only one big amount invested at 1 per cent., and that was the £200,000,000, or thereabouts, of the National Welfare Fund. No doubt, if the Government could get hold of that money it would be very helpful. However, there is not much hope of getting it at the moment, because the National Welfare Fund, which was built up in the interests of social services in this community, is invested in Commonwealth short-dated treasury-bonds at 1 per cent.
I do not propose to argue the merits of this matter at the moment, but I say, Sir, that my view is that a private bank must work in accordance with sound banking practices. If the Commonwealth Bank or a private bank has deposits amounting to £100,000,000, it is permitted to advance only a certain proportion of that figure. Before the control exercised by the central bank became effective, some of the trading banks lent all their funds at low rates of interest. Then, if a bit of a depression came along and people who had money on fixed deposit withdrew that money, and the level of the bank’s ordinary deposits began to fall, it was in trouble. Banks used to work on the principle of having only sufficient money in hand to meet day-to-day needs, and that would permit them to advance, say, £90,000,000 of deposits totalling £100,000,000. These private banks were controlled by businessmen who, we were told, understood the position. As soon as their deposits began to fall to the £90,000,000 mark they went to Bill Jones, the storekeeper, and Tom Smith, the farmer, and said, “ You will have to reduce your overdraft “, and those men had no option but to do so. In many cases storekeepers and farmers in that position went into liquidation and lost all that they had put into their businesses. That happened under what was termed sound banking practice.
I remember saying something to this effect when we had before us a bill dealing with the proposed nationalization of banking. The Commonwealth Bank, unlike the trading banks, in the circumstances to which I have just referred, would be able to say to farmers who were experiencing a bad season and had nothing to sell, “ We have the resources of the country behind us “. If necessary, it could then make increased advances to farmers to keep them on the land. Every honorable member knows of instances in which men have lost all that they had put into properties, after years of hard work, because they could not reduce their overdrafts and keep going. So, Sir, we on this side of the House say that the Commonwealth Bank is a good institution. We do not want the Government to mess about with it in such a way that when we take over the administration of the country we shall find it very difficult to administer the finances of the bank. We are opposing the bill before us. My main concern is that the government of the day - the Parliament of the day - shall be the directors of finance in this country instead of an outside body of men.
.- It is with some interest that I follow my friend, the honorable member for Port Adelaide (Mr. Thompson), because I have had the pleasure of knowing him for some years in another capacity. I know him to be a very keen student of these matters and a man who devotes to them considerable work and research, but my high regard for him personally, which is as great as my difference of opinion from him politically, does not do other than emphasize the point that I want to make. Those of us who have listened to the honorable gentleman for the last half hour will, I think, agree that he did not have a great deal to say about the bills that we are debating. His main point, in reference to which he referred to the remarks of the honorable member for Bradfield (Mr. Turner), was that the will of the people is observed in this House and that therefore, if at some future time, the Labour party were returned to power and desired to nationalize the banks and a referendum were carried, in accordance with the Constitution, by a majority of the people and a majority of the States, this Parliament would have no objection. Of course, that is all perfectly true, but as I understand it, the fear that resides in the minds of the majority of the people still has a sound basis. When the late Mr. Chifley first took his dramatic steps to nationalize the banking system, his reply to the charge that he had made no reference to that proposal in his policy speech was, “ It is in our policy “. My friend the honorable member for Mallee (Mr. Turnbull) who interjected while the honorable member for Port Adelaide was speaking wanted to emphasize that point because it seems to be the only point at issue on this fairly narrow aspect.
For members of the Opposition to ignore that feeling which is in the minds of the people and in the minds of members on this side of the House is to ignore the realities of the political situation in the Australia of to-day and to-morrow. Indeed, that sort of thinking has been influenced by remarks we have heard during the course of this debate. The honorable member for Eden-Monaro (Mr. Allan Fraser), who speaks with authority on these subjects as a senior member of the Australian Labour party, said only a few days ago that that was the intention of the Labour party if it was returned to office. My distinguished friend the honorable member for Kingsford-Smith (Mr. Curtin), whose speech last night so closely followed that of his leader, said precisely the same thing. The honorable member for East Sydney (Mr. Ward) who was at the table and interjected earlier in this debate agreed with them and added the words “ with just compensation “. Anybody who knows the honorable gentleman from East Sydney would like to have some definition of “ just compensation “ if that matter were left in his hands.
The point cannot be over-emphasized that this is not an attempt by honorable members on the Government side to introduce legislation which another Government could not alter if it had a mandate from the people to do so. One of the minor features of this legislation is that it cannot prevent a Labour government from altering it. Certainly a rapid move by the Australian Labour party to nationalize the banks, in fact if not in name, could be delayed by the operation of one or more clauses of the bill, until public opinion had a chance to assert itself. That states that aspect of these measures fairly clearly and, 1 hope, with some precision.
The debate has not been without interest. It is customary in this chamber and in another place, where people thrive on political issues, to define the area of the conflict and concentrate on that. That is the basis of negotiation, as I understand it. But in this case, the area of conflict is extremely difficult to define. It is not in the stated purposes of this bill because they are precisely the stated purposes of the 1945 act and other measures that this Government has introduced. They are also the purposes of the Leader of the Opposition (Dr. Evatt) as expressed in his opening remarks on this bill. So that is not the area of conflict. The Leader of the Opposition moved on to the question of the separation of the central banking activities from the trading bank activities. He brought a very strange and odd collection of quotations to his aid. He quoted the Prime Minister (Mr. Menzies), Dr. Coombs and, I think, Professor Arndt, but as so frequently happens, his quotations were only small extracts from larger statements and even then the inference he drew from those quotations cannot be accepted as accurate. He quoted a statement by the Prime Minister in which the right honorable gentleman said broadly that the association of the Commonwealth Trading Bank with the Commonwealth central bank provided very useful information. The Leader of the Opposition quoted Dr. Coombs in much the same way. Dr. Coombs had said that they provided a very useful link. I do not recall the quotation that the Leader of the Opposition drew from Professor Arndt, but it is not important.
If those quotations were indicative of one of the real areas of disagreement, let us look at them. If it is a matter of information, as stated by the Prime Minister, or a link as stated by Dr. Coombs, where is the difference between the act which this bill will supplement and the powers to be conferred under these bills? As I understand it, the information that the Reserve Bank has the power to call from all other members of the banking system, is adequate. If it is not, the Leader of the Opposition certainly did not say so. If the link that exists between the Commonwealth
Trading Bank and the Commonwealth central bank is inadequate under the bill as between the Reserve Bank and the Trading Bank, again the right honorable gentleman did not say so. He has that peculiar form of reasoning which states a proposition, jumps two or three steps up the ladder of logic and moves to an assumption which has, in this case, very little logical background.
Those who have a particular knowledge of these bills and the situation generally will agree that the information that the Reserve Bank must seek from the banks, the powers which are left with the Reserve Bank to obtain information and the penalties that the Reserve Bank can impose if the information is not forthcoming, suit all reasonable requirements of what we know in a general sense as a banking system based on a central or reserve bank. If we are to draw any inference from the remarks of the Leader of the Opposition it is that more information is passing to-day from the Commonwealth Trading Bank to the central bank than is required under the existing legislation or under the bills which are before the House. That is an inference I am not prepared to accept because it would reflect, very gravely indeed, on the management of both the Trading Bank and the central bank. That is the sort of assumption that runs through the right honorable gentleman’s remarks.
I remind the House that the Leader of the Opposition went on again to quote Dr. Coombs. I am not familiar with the quotation myself, but I accept the right honorable gentleman’s word that the sense of the quotation was that, because the private trading banks had increased their advances in 1953-54 and 1954-55, an inflationary situation had developed, and that that was the fault of the advances policy of the private trading banks. In “ Hansard “, from which, I understand, I am not allowed to quote-
– The honorable member will be in order in doing so.
– I was not trying to tell the Chair the position, Sir. In general terms, which occupied two pages of “ Hansard “, the right honorable gentleman compared the remarkable advances that have been made by the Commonwealth Trading Bank since this legislation was introduced by this Government in 1953 with the advances by the trading banks. He said that, while the advances of the trading banks had increased by 21 per cent., the advances of the Commonwealth Trading Bank had increased by 81 per cent. Now, if the advances made by the trading banks were inflationary, then the fourfold increase of advances by the Commonwealth Trading Bank was four times as inflationary as were the advances made by the trading banks. I know that the right honorable gentleman from Hunter frequently has it both ways, but he cannot have it three or four ways.
It seems to me, following my original approach to the matters put forward by the honorable member for Port Adelaide (Mr. Thompson), that this sort of argument illustrates a lack of real argument. In this House, we have heard many cases advanced by the Opposition with which we may have disagreed, but there has been no question of the substance of those cases. But the arguments that have been offered in this instance are not in themselves substantial or capable of being established. I remind the House that I am referring to the period’; 1953-54 and 1954-55. Nobody in this place will disagree with me when I say that every speech on budgets that was made during those periods by the Leader of the Opposition and the Deputy Leader of the Opposition (Mr. Calwell) urged that far more money should be spent in this Commonwealth. In other words, if the private trading banks advances were inflationary, then the policy that would have been put into effect by the Labour party if it had been in government would have been, to that extent, far more inflationary. Those are the practicalities of politics which nobody can deny. There is this sort of pattern throughout.
I listened to the honorable member for Melbourne Ports (Mr. Crean) with the attention that I think every member of the House accords to him and the respect that honorable members pay to him, and I decided to check his comments with the comments that were made by his leader. This is a fairly interesting point, and I commend it to honorable members. The Leader of the Opposition said, in general terms, that the private trading banks expanded their holdings of government securities by more than 100 per cent, over the period we are talking about and, in effect, that meant less money for private finance. The right honorable gentleman went on to speak about the injustices that all sorts of private businesses had suffered in consequence of this narrow and selfish policy of the private trading banks. The honorable member for Melbourne Ports, whose arguments were supported by more facts, if I may say so, started this sort of argument and again I do not think we would dispute it. He said that we have too few schools, that there is a shortage of hospital accommodation, that road works are essential for the development of the country, and that we are short of power and many other things. He then went on to say - in order to carry out all public investment it is necessary to restrict to a certain extent the activities of private banking institutions.
So the honorable member for Melbourne Ports, who certainly knows what he is talking about, says, in effect, that it has been necessary to restrict the activities of the private banking institutions so that some contributions can be made to the public sector of the economy, and his leader, with more adroitness if less scruple, says that the banks have denied to the private sector of the economy the financial support they should have given and have transferred to the safety of government investment. That is the comment that was put before this House on this very important bill. My friend, the honorable member for Kingsford-Smith (Mr. Curtin) spoke last night with some fluency and great volume. My friend, the honorable member for Corangamite (Mr. Mackinnon) is more refined and more sensitive.
– He probably regards himself as such.
– He probably does. But as I was saying, my friend from KingsfordSmith, speaking fluently and forcefully last night, spent the best part of half an hour on this sort of argument. He said that the private banks are wrong and that they are this and they are that. The honorable member for Hindmarsh (Mr. Clyde Cameron) who, again, certainly does not lack the capacity or the ability to put before this House a well-informed and a well- prepared statement on most matters of policy, followed that same line pf personal attack. And member after member of the Opposition has followed this line - not every one, of course. What do you argue from that? You argue, Sir - and I think this is a logical inference; it is one that I have submitted to the House before - that there is nothing else the members of the Opposition can say. Even if the facts were as presented by the honorable member for Scullin (Mr. Peters), even if 60 years ago or 30 years ago the private banking institutions had been incompetent and had been greedy for profits at the expense of the goodwill of the community, what relation has that matter to the bills which we are supposed to be debating?
Then, Sir, there was a suggestion implicit in the remarks of the honorable member for Port Adelaide that this House should have the power to control the banking and financial structure of the nation, but that, under this legislation, it would not have that power. My friend from Port Adelaide, who is a truthful man, did not say that, but those who listened carefully to his speech know that that was implicit in everything he said. The answer is this: Right through the banking structure which the bill proposes to set up, from the Reserve Bank to the three units which will make up the Banking Corporation, there is a condition that, in the event of dispute with the Treasurer, they must submit their views to this House where, ultimately, the decision will be made. The decision will be made, I think, if not with a full knowledge of all the facts, at least with such knowledge of the facts as can be pained from a statement by the Treasurer of the day and from the bank or banks concerned. I suppose that in the years to come we will have a sort of mixed economy - a mixture of control and freedom. The ultimate responsibility may not rest with us or those who follow us, and it should be a condition of that responsibility that as much information on all sides of the question as is available shall be supplied to the House. I think the legislation is sound, and I have heard, in fact, no worth-while criticism of it.
There is one other matter which seems to me of cardinal importance. I do not wish to weary the House with repetition of things that have been said during the past year.
It is sufficient for my purpose, I think, to recall that on Tuesday last our population passed the 10,000,000 mark. In another 5, 10 or 15 years we will have 15,000,000 or more people in this country. In other words, we have an economy that is in the process of expansion and development. It is impossible, I think, for even the wisest of us to foresee with any degree of certainty the stresses and strains that may develop in the next few years.
The legislation before us proposes the establishment of a Development Bank, and I have heard the purpose of this bank described in many ways by various speakers. One said that it was to help the lame dog. I do not see the purpose of the Development Bank in this way at all. In the sort of economy that we will probably have in the near future, a developing economy in which demand will increase as well as supply, there will be a marginal or shadow area surrounding what may be considered a reasonably assured market, industrial or agricultural, but it is doubtful whether that marginal area will expand in any regular fashion. It may well be that we will, as a nation, wish to increase our production of foodstuffs beyond what would appear to be necessary according to present market requirements. I mention this only as an illustration, and to show that one purpose of the Development Bank is to assist primary production. Those who are interested in this marginal area of production would need something more than the financial backing that they can obtain under the existing system. The Development Bank may be called on to give assistance to secondary industries in similar circumstances. We just do not know what precise assistance the Development Bank will be called upon to give, but I think we may be reasonably assured that it will be called upon to cope with circumstances that cannot at the moment be foreseen. It will play an essential part in the development that will take place in this country.
This Development Bank, as was suggested by my friends, the honorable member for Bradfield (Mr. Turner) and the honorable member for Mitchell (Mr. Wheeler), is, at any rate in our eyes, partially a new conception. It is a movement into relatively new realms. I believe, therefore, that it will require the closest supervision that we can arrange. It may well be that the dangers inherent in the legislation, as referred to by the honorable member for Bradfield and the honorable member for Mitchell, are real ones, but at the moment I would not support any suggestion of limiting the activities of this bank because of the possibility of that kind of danger. On the other hand, I would not support any suggestion that its scope should be rapidly widened. I believe that we have a responsibility to watch the progress of this bank with particular care during the first few years of its operation. I think, too, that we should study the particular clauses of the bill relating to this bank very closely when it reaches the committee stage.
I believe that this legislation makes a substantial contribution to our legislative financial structure. I think it deals with fairness and judgment with a problem that must be dealt with, and that ultimately it will be seen to represent a major step forward.
.- The banking bills that we have before us are another link in the long chain of legislation which the Treasurer (Mr. Harold Holt) set out for us in a summarized history that accompanied his speech. It would be true, I think, to say that banking has an even longer history as a radio serial now than “ Blue Hills “, though it is not accompanied by such attractive music.
I would first like to make two comments on the legislation before us. The first is that these bills admit a principle which was certainly not admitted by non-Labour thought up to 1945, and was not admitted by non-Labour thought during the debate on the 1945 banking bills. This legislation admits the principle that the last authority on banking should be the Federal Treasurer. My second comment is that it admits a principle which was resisted in the 1945 debate. That is the principle that the Commonwealth Bank should actively engage in competitive activities in business and agriculture. The Commonwealth Bank officers who gave evidence before the Royal Commission on Banking had to state that it was their policy to direct clients to seek accommodation from the private banks. All of the speakers on the Government side have discussed the Development Bank as a bank which, they say, will actively engage in industry and agriculture. That is a principle of the Labour party which was resisted for at least 30 years, and which is now enshrined in Government legislation. It is one of many instances of the non-Labour parties moving on to principles advocated by the Labour party almost from the beginning.
The Treasurer had one or two comments to make in his speech on this Development Bank. He did not speak at great length, because he contended that Sir Arthur Fadden had, during the debate in the previous Parliament, outlined the nature and purpose of the legislation. He did say this, however -
The Commonwealth Development Bank will comprise basically an amalgamation of the present Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank, with some increase in resources, and with a new charter for assisting the development of worthwhile enterprises in the field of both primary and secondary industry which would otherwise be unable to obtain the necessary finance on reasonable and suitable terms and conditions.
With that remark the Treasurer completely destroyed two attacks that have been made on the Labour party in this debate. The first is the charge that by delaying the establishment of a Development Bank we somehow or other deprived industry and agriculture of the credit reserves of the Commonwealth Bank. The Treasurer points out that basically this is a mere amalgamation of the Mortgage Bank and Industrial Finance Departments. No honorable member on the Government side could contend seriously that the Industrial Finance Department could not already assist clients to purchase machinery and producer goods. But the Government says this arrangement is a new achievement. The most astonishing aspect of the Treasurer’s statement to which I invite the attention of honorable members is that while the set-up is the same as that under the old Mortgage Bank Department and the Industrial Finance Department, the Development Bank will have a new charter with an increase in resources to assist the development of worth-while enterprises in both primary and secondary industries which otherwise would be unable to obtain the necessary finance on reasonable and suitable terms and conditions.
Does the Treasurer mean that there are worth-while enterprises in this country which cannot obtain the necessary financial assistance on reasonable terms and conditions? He must mean that, otherwise the need to set up a special Mortgage Bank Department for that purpose does not exist. If it is true that worth-while enterprises cannot be accommodated on reasonable terms and conditions, the Treasurer’s statement contains an indictment of the whole banking structure both private, as controlled by free enterprise, and Commonwealth, as directed by this Government for the past ten years. Apparently, according to the Treasurer, the banks are not accommodating applicants for assistance on reasonable terms and conditions.
The second statement of the Treasurer to which I direct the attention of honorable members is contained on page 380 of “ Hansard “. He spoke at some length about the responsibilities of the Development Bank, and he said -
Thirdly, the Development Bank will be prohibited from providing finance for the purchase of goods otherwise than for use in the course of the borrower’s business, and all of its resources will thereby be devoted to productive purposes.
In all the debates that have taken place on this proposed legislation, both in the last Parliament and in the present Parliament, that is the only attempt made by the Government to explain in anything that can be regarded as economic terms this strange prohibition on the Commonwealth Bank against entering the field of hire purchase for consumer goods. Can the Government present to us one valid reason why the Commonwealth Bank should be excluded from hire purchase on consumer goods, other than the desire to leave the private banks free in this most lucrative field? Not one speaker on the Government side has even attempted to justify this prohibition on the Commonwealth Bank.
The Treasurer, on behalf of the Government, has said that by confining the activities of the Commonwealth Bank to assisting manufacturers and others to obtain credit for producer goods - the machinery used in factories, the tractors used on farms, and so on - the Government will be able to confine the bank’s activities to productive purposes. If that means anything, it means that the entire structure of hire purchase, as built up to-day by the private banks to a figure of about £328,000,000, is not directed towards productive purposes at all. But, of course, such an implication is nonsense. He should have said that the Government wanted to set up a bank which, in its opinion, would get on with the job of the basic development of Australia at a time when so much of the physical and financial resources of the community are being devoted to things that do not matter.
We live in a community to-day in which there are very serious aspects of competition. We are confronted with militarized economies, such as the economy of the Soviet Union, which devote their entire resources towards obtaining military power in the world. I refer to the development of rockets that have travelled beyond the moon, to the development of an economy which can stand the shock of conflict, and to the development of an economy which can bid for men’s minds with gifts. Honorable members are aware that the Soviet Union has presented to Indonesia a complete sugar factory in an effort to win the goodwill of that country. By introducing legislation of the kind now before us, Australia, as a member of the Western bloc, is attempting to answer the Soviet action with what is basically a froth economy, joined with the froth economy of Great Britain and the United States of America.
The honorable member for Deakin (Mr. Davis), who preceded me in this debate, referred to the anticipated increase of our population from 10,000,000 to 15,000,000. He said that the Development Bank will have to carry out the basic development necessarily associated with migration. If that is so, the diversion of our resources to hire purchase for non-essential goods, which will take place because the interest rates and the returns are far more attractive than in other fields, merely makes more difficult the work of the Commonwealth Bank. In a sense, there is no non-productive issue of credit at all. If credit is released for the purchase of television receivers, what happens? The necessary labour and materials are drawn from other electronic industries to make those television receivers. The issue of credit is simply a mobilization of physical resources which are waiting to be used. The Government’s decision to allow the private banks to have an open field in hire purchase without any competition from the Commonwealth Bank, in an endeavour to force down interest rates as a means of diverting money to some more important avenues, means that developmental works will have to compete for labour and materials with the industries that are necessary to sustain our froth economy based on television receivers and the other items so easy to obtain under hire purchase.
The cost of the basic development of this country will rise because basic items will be competing with non-essential items for the resources available. Under the proposed structure of banking the duty of underwriting essential production will be left to the Commonwealth Bank, but in the field of non-essential production hire purchase will be allowed a free rein.
The interest rates charged on goods obtained under hire purchase will show a downward trend as more money is drawn into the field. Hire purchase, like any other form of credit, sustains employment. A member of the Labour party in the Western Australian Parliament described hire purchase as the poor man’s overdraft, but it bears a higher rate of interest than a bank overdraft because of the greater insecurity of the transaction. If money is advanced to develop a factory or a farm, the bank has a better security than it has for money advanced on a refrigerator or a motor car because from the moment such an article becomes second-hand, depreciation is rapid. To counter that factor, a higher rate of interest is charged upon the less secure advance.
The Premiers of the States, irrespective of political party, have shown a handtomouth conception of hire purchase. Many of them have indicated an opposition to the idea of any Commonwealth intervention in the field of hire purchase. They say, quite correctly - ‘but it is short term thinking - that hire purchase is sustaining employment at the present time. Obviously, more money will go to the purchase of goods if those goods are cheaper. Hire purchase with low interest rates will result in a greater volume of sales than hire purchase with high interest rates. So the Premiers’ argument that hire purchase sustains employment would be reinforced if they said more clearly that they wanted the interest rates on. hire purchase to be lowered.
At the same time, if the present Government intends to maintain a policy of high immigration, which means a policy of high development, it ought to discourage the diversion of credit from the production of non-essentials to the basic developmental work that we have to get on with in this country if we are to absorb a large population. Let us consider some of the projects which the Commonwealth has indicated are very necessary. The Commonwealth has said that it will spend £280,000,00.) on roads. That sounds like a large s-‘.m. but some road experts have suggested that it should be £500,000,000.
All the credit that is issued in this community, in a sense, is competitive. Demands for finance for machinery for manufactures compete with demands for finance for machinery for road development. It may be necessary to import some machinery for road construction and I believe that a good deal of it will represent a call on dollar resources. If money is directed into television, the equipment purchased for that industry will also be a call on dollar resources. This will result in competition with developmental works for dollar funds.
I do not think that the level of £328,000,000 which has now been reached in hire-purchase finance should be left to pass without scrutiny. It represents a tremendous diversion of credit. The Commonwealth and the State governments can scarcely expect repeatedly to float successful loans for their developmental programmes when there are inducements for investment at higher rates of interest in non-essentials. The question arises concerning th; presence of the banks in the field of hire purchase at all. It is illogical, of course, to argue that the Commonwealth Bank ought to be in the field of hire purchase, and then to argue that banks ought not to be in the field of hire purchase. I think that much is to be gained from banks entering the field of hire purchase with their experience of thi safe limits of credit and with the special experience that they have obtained in general credit operations within Australia. To say that private financial institutions not so experienced should be the only ones to enter the field of hire-purchase finance seems to me to be an unwise argument.
The case for the Commonwealth Bank being allowed to enter the field of hire purchase is simply that it is, in the last resort, directed by the Treasurer with a social purpose. If one decides, as many people have already decided, that the interest rates charged on hire purchase at the present time are undesirable, and if the Government has no direct constitutional power to curb those rates, its only power being an indirect one to direct the government bank so to compete that it will force down those interest rates, to put into legislation a direction that the Commonwealth Bank shall only enter the field of producers’ goods hire purchase, not consumers’ goods hire purchase, is to deprive the Government of an important weapon of control.
The exclusion of the Commonwealth Bank from this field of hire purchase seems to me to be utterly unwarranted. Hire purchase is the most significant and problematical development in banking since World War II. The Commonwealth Bank should be in it, obtaining experience in that field. Even if it is contended that the private banks should be left to compete with the Commonwealth Bank, as I think Government supporters have contended in every banking debate I have heard, surely the competition of the Commonwealth Bank in this important new field should also be accepted.
Down to 1951, the Commonwealth Bank did enter, in a limited way, into the field of hire purchase - the hire purchase of cars. The Government has made an important confession in this legislation of the need for a bank which has not basically a profit motive. The Treasurer said, in the course of his second-reading speech, as reported at page 380 of “ Hansard “-
Thirdly, the Development Bank will be prohibited from providing finance for the purchase of goods otherwise than for use in the course of the borrower’s business, and all of its resources will thereby be devoted to productive purposes.
That is an admission of the need for a new direction of credit into productive purposes - into basic development.
There will be a strange development in this country as a result of the existing practice of the private banks in relation to hire purchase, the exclusion of the Commonwealth Bank from consumers’ hire purchase, and its .admission to producers’ hire purchase. For example, this will enable a shoe manufacturer to get credit from the Commonwealth Bank to buy shoemanufacturing machinery; but the same man will not be able to get credit, ultimately from the Commonwealth Bank, through some hirepurchase company, to buy a refrigerator. Those interests which the Liberal party and the Australian Country party specifically set out to protect - and it is no indictment of them that they do - the manufacturing interests and the farming interests, are to be protected by the existence of a Development Bank, subject to the direction of the Treasurer. The Development Bank will compete with the private banks in giving them credit. So, for the producers’ goods concerned, the tendency will be for interest rates to fall. Those manufacturing and farming interests are to be given protection which is not enjoyed by the general public which buys the goods of the froth economy that I have mentioned at very high interest rates.
Surely we should recognize that hire purchase has many undesirable features, especially as it now exists, when we consider that banks, which are respectable and experienced financial institutions, have entered this field. There are all sorts of forms of hire purchase to-day. For instance, one can go to a shop selling mercery and get a credit of £20 which is paid back at what is said to be 5 per cent, interest over 20 weeks. Of course, 5 per cent, interest for 20 weeks, as far as that institution is concerned, over 52 weeks, is a rate of 13 per cent, or more. Let us work it out by simple arithmetic. There are two lots of 20 weeks in the 52 weeks of the year, and then another twelve weeks. If, after advancing £20 at 5 per cent, interest, the institution gets that money back after 20 weeks and advances it to somebody else and so on over the whole 52 weeks of the year, it is making, for the year, about 13 per cent. But more; when one borrows from the Commonwealth Bank or from any private bank, as the capital is paid off. the interest charged upon it is charged on a reducing amount. If T nay £100 off a £3.000 debt, the interest thereafter is calculated on £2,900, and, if another £100 is paid, the interest is calculated on £2,800. In hire purchase, however, the interest is predetermined by the price you are being charged. For instance, if the price of a refrigerator is £200, the interest is calculated on that £200 to the end of your indebtedness. In the mercery store example I have quoted, in which the customer pays back £1 a week, when he pays the last £1, he is still paying what is supposed to be 5 per cent, over the full £20.
If the banks are going into that field, they are clearly going into a field where the return on capital in this sort of investment is higher than the overdraft rate which the Treasurer considers desirable from time to time. We have had alongside the overdraft system, in which the community is deeply interested, and where there is government control of the interest rates, a new and uncontrolled form of credit entering the competitive sector with much higher rates of interest. While, no doubt, there are some exaggerations and jokes about the matter, it is still true that people have experienced rejections by the banks of personal loans at our responsible overdraft rates of interest and have been directed to the other end of the counter where hirepurchase agreements could be made at much higher rates of interest. If, from time to time, the Treasurer, with all his responsibility, has considered it necessary to fix overdraft rates for credit in the community in the interests of the community, then clearly the evasion of those overdraft rates through hire purchase in many ways constitutes both a danger and a case for the Commonwealth Bank being in it.
I agree with those members of the Liberal party who suggest that at a certain stage this Development Bank will become dominant. If it is operating with a social purpose and is giving credit to people who are trying to establish the solid, basic developmental industries, it will get a great deal of goodwill, and if it is directed by the Treasurer in the interests of the farmers, then interest rates will be low. If it is directed in the interests of the manufacturers, interest rates will be low. It will therefore be a powerful bank at the time when the evils of this hire purchase that we are allowing to run up in the community now will begin to tell on those who have thrown a good deal of their money into that particular form of banking. A developmental bank, directed by a Labour Treasurer, will inevitably be a very powerful weapon; it will undoubtedly be a very creative thing; and I think it will establish for any government, if it is allowed to operate as the Government has indicated, a great deal of goodwill in the community.
But the other argument, to the effect that you must have a bank with a social purpose to protect the man who produces, is an argument also for the existence of a bank with a social purpose to protect the consumers, and it is the Government’s exclusion of the Commonwealth Bank from consumer’s credit which is the indefensible part of this legislation and, in two successive Parliaments no spokesman on the Government side has attempted to defend that exclusion.
.- The honorable member for Fremantle (Mr. Beazley) as usual, is eloquent and highly plausible, and, on this occasion, grossly mistaken. Nevertheless, his speech was in very pleasing contrast to many of the others delivered by his colleagues which were full of personal abuse, some of it directed against particular individuals.
The honorable member for Fremantle complained - I think rightly - that there is not enough credit available on reasonable terms and conditions for all the worthwhile projects in Australia. Knowing the number of projects there are in the field which would be good and useful if we had sufficient resources to carry out all of them, I think it is obvious that if we attempted to carry out all of them we would suffer gross inflation. Like so many speakers on the Opposition side, the honorable member for Fremantle has tended to draw this debate away from the subject of banking which is before the House and direct it to the field of hire purchase, over which the Commonwealth has no effective power.
As to the effect of hire purchase on the froth economy, it should be recognized that at least it has had the virtue of directing much of the spending which would otherwise be of a very wasteful and temporary character into buying things which are of worthwhile family use over a long period. I think it is even true to say that the public houses have felt a diminution in trade due to the amount of hire purchase being undertaken, so that, far from the froth economy being increased, it has in fact been going back.
Probably one of the reasons why the banks have decided to move into the hirepurchase field is the rigid conditions governing overdraft interest rates which have been applied to the banking system in the name of social objectives dear to the heart of the Labour party. There was a stage at which some of the private banks started a personal loans department which covered the kind of requirements now being met by hire purchase. Unfortunately, personal loans, small advances and many of the things for which hire purchase is used, involve large numbers of small transactions so that costs cannot be kept within what is ordinarily regarded as the reasonable overdraft rate.
But it is this constant tendency to try to force the banking system into particular lines for social reasons, especially that of keeping interest rates down, which has led ultimately to so many of the undesirable developments to which reference has been made. The fact that the government bond rate was kept so low for so long led not only to inflation but also to the transferring of a great deal of personal resources from government uses to those of hire purchase and the other uses which have now become so widespread and are, in most cases, quite beyond the control of the Commonwealth Government.
This legislation, of course, does run to the very root of our basic differences with the Labour party. It largely explains why this Government has been in office for almost a decade while the Labour party has been in opposition for all that time. The control over money and banking is the key, the strategic point in socialism. A nationalized banking system would confer upon the controlling authority power to supervise in detail almost every aspect of the nation’s economic life. Very little of the commercial, business or farming world can move far without a debit or credit to some banking account and, with a nationalized system, the whole process would be at the mercy of the political bosses of the day. Armed with such power, the Government would have the rest of the system at its mercy. It is no wonder, therefore, that the socialist intellectuals who drafted the aims, ideals and platform of the Labour party have always laid such stress on gaining this key strategic point. Before they can attain this point, as a means towards it they are doing everything possible to discredit and weaken the power and importance of the free enterprise banks.
However, the threat to economic liberty involved in the nationalization of banking is at present, fortunately, appreciated by a good many. Until yesterday this particular issue seemed to have been locked up in the cupboard by the Labour leaders with the idea of bringing it out after, but certainly not before, an election. However, the honorable member for Grayndler (Mr. Daly) performed a very valuable service in reminding us once more of the Labour party’s platform and principles of action which include, very prominently, the nationalization of banking, credit and insurance. “ Insurance “ is worth noting. The nationalization of insurance is a sobering thought for those many thousands of people throughout Australia who now have life assurance policies with private companies. However, the threat has been very well and truly removed by our great master, the electorate, in no uncertain terms for the time being. But the people’s memory is apt to be short and from time to time it will be our duty to remind them of these particular facts.
– That is why we remind the people about the 1930’s.
– One may go back to the 1930’s, but unfortunately the ideas of the Labour party go back long before that, and they have not changed much since. For the time being the effort of the Labour party is engaged in softening up and discrediting the banking system and the personalities which at present control and govern it.
Sitting suspended from 5.48 to 8 p.m.
– Before the suspension of the sitting we were discussing the Australian Labour party’s aim, which, we were reminded by the honorable member for Grayndler (Mr. Daly), is the nationalizing of banking, credit and insurance. The real point of protecting the free enterprise banks from the inroads of government controlled institutions is not because of any virtue, or lack of it on their part, but because the separate existence of these free enterprise banks is essential to splitting up and decentralizing the key power of granting and withholding credit and of enabling private persons, firms, farmers and the community generally, to conduct their business affairs beyond the sight and reach of government control. Decentralized banking is a vital part of the free enterprise system, just as a unified banking structure under rigid central control is needed to regiment society along socialist lines, as in the Soviet. In a socialist society individuals must never be permitted to wriggle, or exercise business initiative, or they upset the master plan. Freedom, in a centralized socialist society, is confined to the small dictatorial clique at the top who exercise their despotic powers in the blessed name of the people.
The main effect of the bills now before the House will be, on the one hand, to bring the Australian banking structure into line with modern practice in the rest of the world by creating, for the first time, a specialist central bank and, on the other, to unleash a giant new government banking corporation free from the inhibiting effects of living under a top management and board which, for some years past, has been concerned not so much with everyday banking as with the economic forces affecting the country at large. The present Commonwealth Bank was established long before modern thinking on the functions of a central bank crystallized - mainly for the purpose of conducting ordinary business in competition with the free enterprise banks. The gradual grafting of central bank functions on to the corpus of the Commonwealth Bank has, over the years, rendered its position increasingly anomalous.
While it possessed only a small trading wing, and the local money market was at a rudimentary stage of development, there was much to be said for leaving things as they were, as a royal commission report of a bygone generation pointed out over 30 years ago. Ever since modern legislation, particularly that of 1945, imposed upon the Commonwealth Bank the legal requirement of competing actively with the free enterprise banks for business, the Commonwealth Bank has become both judge and party principal in all operations affecting the banks - with a grave loss of confidence on the part of the rest of the system concerning the objectivity at times of its central bank action.
Central banking is a highly specialist function calling for a particular knowledge and training which is possessed by very few people. It is probably true to say that the present Governor of the Commonwealth Bank is the first incumbent of that office who has understood the implications of central banking, as such. His predecessors were all chosen for their ability and knowledge of other fields and in the vital central banking field were dependent upon advisors.
There is no doubt that the exercise of central banking functions has. in the past, been badly inhibited - from a staff point of view - by attachment to business operations of a totally different character. In fact, the transfer of the central bank section of the Commonwealth Bank staff will involve relatively few people and will leave the main structure of the Commonwealth Bank intact. The present possibility of differential treatment in relation to the special accounts will have been removed, but the new statutory reserve deposits provisions in Division 3 of the bill are very much tighter than the existing procedure and have the advantage - lacking at present - of having to be applied equally to all trading banks.
The new reserve bank when freed from its present entanglements will, it is to be hoped, be able to foster better than it has in the past the new local money market. Of course the new practice of the Commonwealth Bank acting in certain circumstances as a lender to the four firms forming the new money market, has been greatly criticized from the Opposition benches, although that has been a common practice among central banks in all the most advanced countries for many years. Honorable members opposite seem to have a peculiar kink which leads them to expect the Government to look into every nook and cranny and bring before this Parliament the everyday affairs of the market-place, upon which the Parliament is very ill-equipped to pronounce.
The duality of function within the Commonwealth Bank has also acted as a brake upon its trading activities. The central banker and the trading banker are two entirely different types of individual and in the post-war inflationary period undoubtedly the central banking folk within the Commonwealth Bank have, for very good reasons, and very rightly, acted as a brake upon the trading bank folk. No one will be more delighted with the new arrangement than those who are concerned with the management and development of the Commonwealth Trading Bank. This legislation will open up for them a fresh vista of financial empire. The projected Commonwealth Banking Corporation, with its trading, savings and development wings, promises in due course to dwarf the rest of the banking system. It seems probable that the private enterprise banks greatly over-estimate their capacity to compete with this new monster, which is likely to enjoy first-class management and all the manifold advantages of government contact and sponsorship.
Since the Menzies Government came into power the share of total banking business transacted by the Commonwealth Trading Bank has increased considerably. Between June, 1959, and June, 1958, its deposits increased by 216 per cent., while those of the seven private banks increased by only 64 per cent. Under the new dispensation the relative growth of Government banking is almost bound to be expedited.
The curious thing, when one considers the enhanced central banking power, and the implicit greater potential growth of Government banking, is that so many pundits of the Australian Labour party should appear to be so opposed to this legislation. It is perhaps part of the explanation for their dragging in so frequently the great red herring of hire purchase. All this sentimental twaddle about cutting up the people’s bank may, of course, appeal to some of the simple-minded and unknowing, but there is very little doubt that it plays a small part in the thinking of people like the honorable member for Melbourne Ports (Mr. Crean), the honorable member for Werriwa (Mr. Whitlam) and the honorable member for Yarra (Mr. Cairns). They, and those with whom they are in contact, must by now have sifted the bills closely. They ought to be impressed by now by one or two of the opportunities which this legislation may offer them to pursue their known desires. Clause 84 (a) of the Commonwealth Banks Bill would enable unlimited funds to be pumped into the Development Bank by the Reserve Bank, to expand the latter’s operations. Naturally, the Government has in view only loans of a short-term character by the Reserve Bank to tide the Development Bank over temporary difficulties, but there is nothing in the legislation to make this clear. Clause 26 of the Reserve Bank Bill provides that the Reserve Bank shall carry on business as a central bank, but not otherwise. In fact, the central banks of the United Kingdom, Canada, South Africa and India have all made substantially large investments in, and advances to, institutions very similar in character to our projected Development Bank. There is, therefore, little in the way of precedent against any proposal for the Reserve Bank to pump funds into the Development Bank and its powers of credit creation are virtually unlimited.
Another very large potential source of funds for the Development Bank is the Commonwealth Savings Bank. Although clause 37 of the Banking Bill will closely limit the amount which savings banks can lend to trading banks, no such limit, other than what may be ultimately written into the regulations made under proposed section 37, will apply to the funds which the Commonwealth Savings Bank may place with the Development Bank. This, of course, would be a peculiar and unorthodox use of the people’s savings in the Commonwealth Savings Bank, and naturally the present Government envisages the use of savings bank funds only on a relatively limited scale as fresh savings become available. But there are no limits in the bill, and there are hundreds of millions of pounds in the Commonwealth Savings Bank portfolio.
To reap the full harvest from those two major lines of approach would require the judicious use of the provisional powers in Division 3 of the Banking Bill, which in another context would be very proper. This would enable the Reserve Bank to prevent any further expansion of credit by the trading banks, and, if desired, could be used to enforce a gradual contraction. In those circumstances, any one wishing to borrow for the very extensive range of purposes covered by clauses 72 and 73 of the Commonwealth Banks Bill could be readily obliged to seek accommodation from the Development Bank, and be eligible for it. The extensive branch network of the Commonwealth Banking Corporation would be available to handle the business. In rural districts, a Labour Treasurer with an expanding Development
Bank behind him, could, in a short space of time, make himself an extraordinarily good fellow. So, before honorable members opposite dismiss this legislation too lightly, they should seriously ponder its possibilities.
– You paint a very cheerful picture.
– I am painting a very cheerful picture, rather more cheerful than the honorable member for Grayndler is. The greatest disservice any one could do to what is potentially a very useful and valuable development is to raise unjustified hopes about the amount of credit which the new development bank will be able to extend. Any bank which is forced into large-scale loans as a result of political pressure will run eventually into disaster. We have had many examples of that, not the least being that of the Western Australian Agricultural Bank, which was wound up with a loss of between £5,000,000 and £10,000,000.
The Development Bank would not be doing any one a service if it made bad loans, or made loans to people who had not sufficiently good prospects of repaying them. Rash lending that involves putting individuals into heavy debt which they cannot effectively handle brings disaster both to the bank and the individuals concerned. To those who are interested in this subject, on which the honorable member for Wannon (Mr. Malcolm Fraser), who has studied it a great deal, made some very wise comments yesterday, I commend a study of the address by the Governor of the Commonwealth Bank in January to the Agricultural Economic Society’s 1959 annual conference in Melbourne. He dealt with rural credit developments in Australia. The talk was given by some one who is basically favorable to this idea. It points out the pitfalls and also the possibilities. The talk is based on knowledge and experience gained, and deals with the very interesting pilot experiments made by the Commonwealth Trading Bank in the New England area.
I hope that the Development Bank will also be available as a medium for funds from the International Bank. The International Bank is precluded by its charter from lending to any one without its getting a government guarantee; but through the medium of developmental institutions, which it has taken the initiative of setting up in a number of countries, it has extended loans to large numbers of industrial and agricultural undertakings, and I hope that in due course this possibility will be pursued by the Development Bank.
To sum up, this legislation provides what is basically a sound structure for the future of Australian banking, given good administration. It does leave some loopholes and. in fact, the only way to guarantee the future of the private enterprise system, which depends, in the short term, on the system of free enterprise banking, is to maintain the present Government in power.
.- The honorable member for Wentworth (Mr. Bury), who has just given us a dissertation upon banking, seems to be opposed to nationalized banking in Australia, but is all for internationalized banking throughout the world. If he had his way, he would hand us over to the international money power to which we have always been opposed and against which we have always lodged vigorous protests. The honorable gentleman was employed by the International Bank, and to-night he has put forward a plea on behalf of that bank. Let me remind him and the other friends of the private banks that people of the international financial world have come to this country to study the Australian Banking Act of 1 945, because it is a model of banking legislation if by banking one means a financial system that will enable the government of the day to regulate the credit of the nation and prevent private entrepreneurs from growing rich by manipulating the financial machine.
The Minister for Labour and National Service (Mr. McMahon) presented what seemed to us to be an extraordinary line of argument. He said that the bills were designed not merely to separate the central bank completely from the Commonwealth Trading Bank so as to allay the suspicions engendered by the allegedly privileged position which the Commonwealth Trading Bank possesses by virtue of the nexus, but also to implement the Government’s real and earnest desire to strengthen the Com monwealth Trading Bank as a competitor of the private trading banks. He said this, despite the Government’s admission, and the boasts of many speakers on the Government back benches, that the private banks had requested the introduction of the legislation.
Honorable members have only to cast their minds back over the last few years to the time when the bankers were wearing out the carpet from the front door of the Parliament to the Prime Minister’s suite in making their requests for the introduction of this legislation. Is it conceivable that the private trading banks asked the Government to introduce legislation that would strengthen the Commonwealth Trading Bank, which was already doing very well under the 1945 legislation of the Chifley Government, in active competition with its private-enterprise rivals? Such a situation could be contemplated only on the supposition that the Government had double-crossed the directors of the private trading banks; but such an assumption would be false, because the banks are keen on this legislation and are not complaining that it does not suit their interests. Neither the Parliament nor the nation will be deluded by the type of reasoning with which the Minister for Labour and National Service has so successfully deluded himself. Or has he? Because the same honorable gentleman made a speech on 13th November, 1957, when the bills were first introduced - we have blocked them for two years - in which he said that the private trading banks would be given a new lease of life, free from the fear that the Commonwealth Trading Bank could become so big that it would drive them out of business.
So, the Commonwealth Bank is bound to lose, anyhow. We must not nationalize the private banks and so give the Commonwealth Bank a monopoly. We must allow fair competition; but if by fair competition the Commonwealth Bank may take over the private banking field, it has to be restrained. It has to be restrained in advance. It cannot be allowed to grow too big. The Commonwealth Bank has always been a bugbear to the private banking interests. They fought the introduction of the Commonwealth Bank legislation in 1911. They predicted gloom. The honorable member for Port Adelaide (Mr.
Thompson) recited, this afternoon, some of the silly nonsense they talked in those days.
The Commonwealth Bank has lasted a long time, despite many tribulations and many attempts to destroy it. “ They went about as fur as they could go “ in trying to destroy the Commonwealth Bank, but they never succeeded. From 1911 to 1958, the Commonwealth Bank made a profit of £209,000,000, every penny of which went to the Commonwealth Government through one department or another. If there had been no Commonwealth Bank, all of that huge sum of £209,000,000 would have gone in added profits to the private banking system. If the Commonwealth Bank had been allowed to compete honorably, decently and fairly with the private banks from the time of its inception, its profit would have been double or treble that sum.
The contributions made by other honor.orable members opposite have been at variance with the stated arguments of the Minister for Labour and National Service. That honorable gentleman does know something about banking. He is not one of the dumb driven cattle that are going to vote for this bill, knowing nothing about anything concerning banking. Other Government supporters have shown by their contributions that they take different views from those that the Minister expressed. They ranged from statements of the alleged inadequacy of these measures to protect the private banking system, to support of the legislation in the seeming belief that it represents a reasonable compromise. The latter attitude was shown in the contribution of the honorable member for Wentworth (Mr. Bury) a few minutes ago.
The honorable member for Mitchell (Mr. Wheeler), who has been very active and very vocal in the interests of the private banking institutions, and whose speech I also listened to with great attention, argued his case well from the extremist viewpoint, which is shared by some of his friends, that the private banking system needs much more Government support than the legislation intends if it is to survive in fair competition with the Commonwealth Trading Bank. So, honorable members opposite create a paradoxical situation, as I indicated earlier. They say that they want fair com petition between the private banks and the Commonwealth Bank; and when they get fair competition they say it is too fair, because the private banks cannot exist under it.
– Do they say that?
– Yes, they do.
– The honorable member has not listened to them. He was out reading up the reports that he used to send from the International Bank, in order to refresh his memory on Australian conditions, so he did not have time to listen to his colleagues. The honorable member for Mitchell sees great dangers in the Development Bank. He said that he would take it out of this legislation entirely and make it the subject of a separate bill. He does not want a development bank, not subject to the control of the central bank, paying no income tax, and with a capital of £20,000,000, because he thinks that this bank, under a Labour administration, could completely ruin the private banks without any attempt being made to nationalize them. The honorable member, for Wentworth shakes his head - I hope there is something in it - but I do not know whether he indicates approval or disapproval.
We thus see how far apart honorable members opposite are in their views, and some of the views must be wrong if some of the others are right. For that reason alone, our worst suspicions in regard to the legislation are justified. The Labour party view, as advanced by our leader on Tuesday night, and as supported by the honorable member for Melbourne Ports (Mr. Crean) and the honorable member for Grayndler (Mr. Daly) is that the legislation is unnecessary, that it is dangerous, that it is inspired by malice, that there is no electoral support for it-
– That is not true.
– And that it flies in the face of the recommendations of the royal commission appointed by the anti-Labour government led by Prime Minister Lyons in 1935, which were the basis of the 1945 legislation passed by the Chifley Labour Government. The Minister without an army has done me the honour of telling me that it is not true to say that the Government has no electoral support for these measures. Let me give him the figures from the last election to prove my case.
– You were thrown out because you tried to nationalize the banks.
– You will be thrown out for what you are trying to do by this legislation to the Commonwealth Bank. Let me deal with the first interjection. The figures for the last Senate election showed that the combined Liberal party-Country party vote was 45.19 per cent- That was not a majority of the Australian people voting affirmatively. The Australian Labour party polled 42.78 per cent. The D.L.P. and the Q.L.P., both of which stated their opposition to this legislation, and whose representatives, I say parenthetically, voted against its passage in the Senate and helped the Labour party to block it, polled 8.42 per cent. So as a result of the elections, the combined vote against this legislation was 51.20 per cent, and the vote in favour of it was 45.19 per cent. If the Government thinks that it has a majority of the people behind it, let it have a referendum on the question and see how far it will get. The question the Leader of the Opposition asked in his speech has never been answered. It is simply this: Does the Government propose to administer the banking power under this legislation in accordance with the principles of the 1945 act - principles which I state broadly as being the maintenance of full employment, the maintenance of the stability of the currency and the promotion of the economic welfare of the people of Australia? Alternatively, Sir, is this Government engaged in its third attempt to further weaken the Commonwealth Bank in order to benefit the private trading banks? From what I have indicated, it is evident that the Government is really out to do what its money masters have told it to do. The private banks are the masters of this Government. They have requested this legislation in their own menacing way, and the Government has capitulated. It is not therefore intended by this Government that either full employment or the stability of the currency shall be maintained or that the economic wellbeing of the nation shall be promoted and encouraged. These great worthwhile objectives of the 1945 act are to be the sacrificial offerings the Government is prepared to make to the private banks on the altar of private greed.
We have said that the banks financed this Government to defeat the Labour party in 1949, and we say that the banks are still financing the Government to keep the Labour party out of office. The late Mr. Chifley, on 5th October, 1950, said-
The establishment of the proposed Commonwealth Bank Board-
Under the nefarious legislation of that period - will fall far short of the expectations held by the bankers, who subscribed hundreds of thousands of pounds to assist the anti-Labour parties to defeat us at the last election. It is idle for honorable members opposite to deny that huge funds were made available to them, because I can produce evidence to show the source of the funds, the amount subscribed and the purpose of the subscriptions.
Honorable members opposite have never had the courage to deny the accuracy of that statement. Mr. Chifley never produced his evidence, but the evidence exists.
– Why do you not produce it?
– That is just what I am about to do. I was waiting for someone to ask me that question. This is the evidence. In the head office of the Bank of New South Wales in Sydney there was from 1948 to 1956 an account known as the B.D.C. account. It was known officially in the bank as the “ Bank’s Defence Committee” account but it was always referred to in the bank as the “ Bank’s Defeating Chifley “ account. Seventy-two deposits made up a total contribution of £176,000 to this account between 1948 and 1956. Over the same period of eight years to 1956, there were 32 withdrawals. Honorable members opposite will see that I am well informed on this matter. I used to be the Minister for Information. On Tuesday, 18th November. 1956, the account was closed, when the balance of £34,000 was drawn out. I ask honorable members opposite to laugh that one off.
– Do you think anybody will believe you?
– I have made the charge. The Minister for the Army can ask the Bank of New South Wales whether the story is true or not. We say that it is true.
– They are a bunch of crooks.
Mr. SPEAKER (Hon. John McLeay).Order!I ask the honorable member for Hindmarsh: To whom was that remark addressed?
– It was directed against the directors of the Bank of New South Wales.
– After that slight interruption, all I want to say by way of contribution is that the Pirates of Penzance were only pikers alongside the pirates of finance.
We have always been worried about the private banks because we who belong to the people know how the people have suffered. We belong to the families of people who suffered when the banks collapsed in 1893. Twenty-two banks were operating and some closed, never to open their doors again. That left a trail of misery, ruin and destitution, the bitter memories of which are still fresh in the minds of many Australian people even though the events occurred nearly 70 years ago. Out of the bank crashes of the ‘nineties came a demand for banking reform. A person who went before the banking commission that inquired into the collapse of the banks in 1895 - Mr. Gilmour Brown - said -
They are a financial absolutism. They levy direct taxes on the enterprise, industry and production of the community. They control our reserves, our rate of interest, our credit, and possess more absolute jurisdiction over our livelihood, our savings, our monetary future, than the Government.
It was to the credit of the Fisher Government in 1911, bearing in mind the activities of the banks during the crashes of the nineties, that it instituted the Commonwealth Bank, which, if it had been allowed to function, would have saved this country from the worst evils of the depression; but it was not allowed to function. It was not allowed to function because it was dominated by the Commonwealth Bank Board, and the chairman of that Bank Board, as the honorable member for Grayndler (Mr. Daly) said the other night, was a bedstead manufacturer. That is all he knew about banking. He made a lot of hard beds for a lot of decent Australians to lie on in the depression years. There are honorable members on this side of the House who suffered during the depression period. There were Labour members elected in the 1932 elections from off the unemployed list. They knew, we all knew. Let us never forget that Mr. Theodore and the Scullin Government tried to help the people in that awful period. Mr. Theodore received the following letter from Sir Robert Gibson -
I am requested by my board to convey to you a resolution of the board as set forth hereunder - Subject to adequate and equitable reductions in all wages, salaries and allowances, pensions, social benefits of all kinds, interest and other factors which affect the cost of living, the Commonwealth Bank Board will actively co-operate with the trading banks and the Governments of Australia in sustaining industry and restoring employment.
Subject to the will of the Bank Board and the private banks, the people of Australia could live instead of exist, governments could be financed, and development could proceed. It was because of the things that happened in that period that the present Minister for Trade (Mr. McEwen), then the honorable member for Indi, a private member, moved a resolution in this Parliament in 1934. He was sitting somewhere near where the honorable member for Mallee (Mr. Turnbull) is sitting to-day. He moved -
That this House is of the opinion that it is desirable to appoint a Royal Commission to take evidence in public and report upon -
The operation of the Australian banking and monetary systems, with particular reference as to whether the Commonwealth Bank is operating in its ordinary trading activities upon as fully competitive a basis as is compatible with sound financial practice; and
Whether it would be desirable to amend the Commonwealth Bank Act to direct that the Commonwealth Bank Board, when determining the exchange rate of Australian currency with respect to sterling, should confer with the Treasurer and give consideration to the need for maintaining Australia’s essential export industries.
In the course of his argument he said -
Many trained thinkers claim that our banking system is either wholly or partly responsible for our present condition.
This was said by the present Minister for Trade, the Deputy Prime Minister in the Government that has brought down this legislation, which is designed to maul, hinder, and hamper the Commonwealth Bank, the people’s bank. He went on to say -
The increasing strength of radical thought has placed vested interests so much upon the defensive that they have been utterly stagnant in relation to any endeavour to improve the system. The inert power of resistance of nervous or selfish vested interests, and the mediums of propaganda which they control, have prevented a mandate from being received by those who have sufficient enterprise to act.
After sponsoring that motion, the former honorable member for Indi was admitted to the Lyons Ministry. In 1935, a royal commission was appointed to inquire into banking. It consisted of six members. They were all estimable and competent men, but only one was a Labour man - the late Mr. J. B. Chifley. That commission recommended a series of changes, but neither the Lyons Government, nor the Menzies Government, nor the Fadden Government up to the time the latter went out of office after they had so greatly endangered Australia’s war effort, did anything to implement the report of the royal commission. But in 1945 Labour put into effect all the recommendations contained in that report. I challenge honorable members opposite to find in the report of the royal commission any justification for the separation of the central bank from the trading bank. There is none. Honorable members opposite have yielded to the pressure exercised by such well-known democrats as the chairman of the National Bank of Australasia, Mr. H. D. Giddy, who told the Government on 27th November, 1958, that it had to get on with this legislatiton and put it into effect. The president of the Bank of New South Wales, Sir Leslie Morshead - another very distinguished gentleman - told the Government the same thing. In the Melbourne “ Sun “ of 27th November, 1958, Mr. Giddy said -
But problems could easily emerge by 1959-60 when some of the economic and monetary policies that we have developed might come under real test.
These adverse developments-
About which he also spoke - subjected Australia to the risk that activity in the primary and secondary industries would not be high enough to employ the working population.
That is evidence that this Government is not committed to a policy of full employment. It is evidence that the Government is trying to edge the Commonwealth Bank out of competition with the private banks. From 1911 to 1922, the Commonwealth Bank was an active competitor with the private banks. Then the right honorable member for Cowper (Sir Earle Page), who was Treasurer, mutilated the Commonwealth Bank and set up the board that did such disastrous things to the farmers of Australia and the people from 1929 onwards.
– The tragic Treasurer!
– He was the tragic Treasurer! The failures of the Bruce-Page Government and the criminality of the bankers produced the depression, which had such terrible consequences on so many thousands of people in this country. Thirty per cent, of Australians were out of work. Things were so bad that in 1938 the former honorable member for Richmond said in this House -
Out of 12,275 dairy-farmers in Queensland, only 99 had taxable incomes last year in excess of £250.
When the honorable member was asked for the source of his information, he said that he had got the figures from the Queensland Taxation Commissioner. Those figures should be good enough for even the dullest intellect on the Government side of the House to comprehend.
In South Australia in the depression period the private banks made 3,000 primary producers insolvent, and the same story could be told of every other State. Do we think that to-day we are living in a land of plenty with an assured future? The price that we are obtaining for our wool is falling disastrously. Wool is being sold for 46d. a lb., but it costs 60d. a lb. to produce it. Sir John Teasdale, chairman of the Australian Wheat Board, is reported in to-day’s press to have said that we cannot sell our surplus wheat. And the dairying industry is in such a horrible mess that dairy-farmers will be leaving their farms in thousands before very long. These conditions, which are almost identical with what was happening before 1929, are described by Ministers as of no real consequence. They are described by Government supporters, too, as of no real consequence to the people of Australia to-day.
– Why do you not burst into tears?
– I should like to appeal to your intelligence if you had any. I am concerned with dealing with the situation that exists and with the situation that is developing. I believe that the proposals that this Government is putting forward have been dictated by people whose only concern is for profits. The concern of honorable members on this side of the House is different, it is to save the Commonwealth Bank, and we appeal to members of the Australian Country party not to be fobbed off with this fraud disguised as the Commonwealth Development Bank. That is the carrot - a very expensive carrot - that the Liberal party is dangling under the nose of the Australian Country party in order to get it to support this legislation. But let the honorable member for Mitchell (Mr. Wheeler) have his say to-day; he will not have any further say. He hopes that £20,000,000 will be the maximum capital of that bank. He does not want the capital of the bank to be increased to £40,000,000 or £60,000,000. If conditions in this country develop as they have developed in America and elsewhere, £40,000,000 or even £100,000,000 will not be sufficient to help the primary producers.
– The Parliament will vote sufficient funds.
– The Parliament might, but the honorable member for Maribyrnong will not be in the next Parliament to cast his vote.
This legislation is almost identical with legislation that was introduced in 1957 and in 1958. The Labour party is opposed to all such legislation. We are opposed to any interference with the Commonwealth Bank. When Labour becomes the government, the Commonwealth Bank will be restored to the position it held under the 1945 legislation. From now on our slogan will be, as it has always been: Hands off the Commonwealth Bank! Hands off the people’s bank!
– Mr. Deputy Speaker, the honorable member for Melbourne (Mr. Calwell) has given evidence of a degree of confusion which would perhaps be remarkable in any other speaker. He has appealed to ancient history and omitted the one fact of banking history that is really relevant, namely, the surreptitious attempt of the last Labour government - I think it really will prove to be the last Labour government in the history of Australia - to nationalize the Australian banking system without reference to the people and in defiance of the people’s will. That is a salient fact of history which the honorable member omitted to mention. He said that this legislation would benefit the private banks, but he did not say how it would benefit them. All that the honorable member did was mis-state the position. For example, he spoke of what was done by the Commonwealth Bank, not the trading banks, in, I think, 1932. He did not say that clause 1 1 of the Reserve Bank Bill, which has been copied from previous legislation, will enable such a conflict to be resolved and will prevent the occurrence of the kind of thing that the honorable member now deplores. The honorable member condemned the private banks for trying to defend their own existence when a murderous attack was made on them by the Labour party. I am reminded of the French naturalist who said of an animal: “ This is a very vicious animal. When attacked it defends itself”.
There are two main strands in the legislation before the House. The first is the protection of the banking system against socialization without mandate. The second is the improvement of the banking system so that it will be a better instrument for the service of the people of Australia. Let me deal with those two things separately, although they are to some extent interdependent. It is a regrettable fact that, some twelve years ago, the Labour government which was then in power made a surreptitious attempt to murder the private banking system. It is important that we should remember that this was done without any mandate from the people. In point of fact, when the people next had a chance to express their opinion about it by a vote, they voted against the Labour government. They threw it out, and Labour has never looked like getting back since. But there are other points to remember about this. The first one is that it is in some way inherent in the Labour party’s platform. Labour says, “We served notice on the people. It was in the platform.” I take it that that notice is still served. It is still the objective of the Australian Labour party to destroy the private banking system. The existence of the banks, in itself, is not the real point at issue. The real point at issue is whether there is to be freedom or socialism in this country, because, once you take away the private banking system and make everybody centralize his affairs in the one government-controlled bank, you place a yoke on the neck of every Australian.
It is here, I think, that the confusion in the ranks of the Labour party shows itself. Some of the members of that party, in a way, are retreating from socialism. The party is divided - it is split as never before - because some people in it now see that socialism means this kind of slavery, and that there is no way in which you can draw back from communism. Lenin said that one of the first steps to communism is to get hold of the banking system, and that once you can do that you have the people bound hand and foot. The Labour party - some part of it - I believe, is honest in this and does not want to go that way. Some part of the Labour party does want to go that way. The party, is therefore split. There is a schizophrenia running right through the Labour party, and that, of course, is one of the prime reasons why it has been kept out of office and will never regain office. This is a split-personality party. It is’ split on this issue, and the split is not just in this House. A number of people who used to vote for Labour now know that they can never vote for Labour again, because they now see what socialism means and entails. Many socialists were well in-
– I rise to order, Mr. Deputy Speaker. Will you kindly suggest to the honorable member that he get back to banking.
– Order! There is no point of order involved.
– I am endeavouring, Mr. Deputy Speaker, to explain the Labour party’s attitude to this bill and its extraordinary doctrinaire approach to it as shown particularly by the Deputy Leader of the Opposition, who is himself schizophrenic politically. He does not quite know which way he is going. I think that I could perhaps apply to him a phrase which was used recently by a State Labour member and say that he is a lovable old man. But he does not quite understand which way he is going, and he is therefore very unhappy and very confused.
Now, the Labour party is split on this issue. Some people in the party - and I am not speaking only of the parliamentary party - are anxious to go ahead with their left-wing objectives at all costs. Other people in the party realize that if you press on with the socialization of banking it will be very difficult to draw back from the ultimate step of the socialization of everything, and from the identification of our system with the Communist system by means of the mechanism which Lenin himself postulated.
Let me leave the Australian Labour party there, if I may, Sir, except for one thing. You will remember that, when the Labour party endeavoured to socialize the banking system in 1947 without a mandate, all that saved private enterprise in this country, and all that saved us from complete socialism in its worst and most totalitarian form, was, in point of fact, a constitutional point. When judgment on the issue was given by the courts, certain Labour party members, including people who are now in the Parliament, said, “ There will be another way to do this. We are ingenious men” - I remember that phrase being used at Goulburn by a senior member of the party - “ and we will be able to find a way round this if we get back into power.” Now this problem seems to have receded into the background, because from that day forward the Labour party, as it happens, has not been in power. But if that party ever were to come into power again - as I have said, I do not believe that it will, and I think that we have seen the last Labour government in Australia - then this problem would once again come right into the forefront of practical politics. In a way, then, the assertion of this doctrinaire attitude is to some extent an expression of a guilty conscience, because many Labour men are really disturbed about this, and they endeavour to gloss over their disturbance by putting on a brave front. This kind of thing can be safeguarded against in the long run only by keeping Labour out of office. I believe that the Labour party itself is doing that for us and for the country. At any rate, the country has voted to keep it out of office just recently in quite decisive terms.
So the Australian Labour party would like now, if it could - since it has been prevented by this constitutional impediment from doing it openly - to socialize the banking system by indirect means and bring about the same totalitarian result in other ways. I am afraid that these bills, although they give some protection, will not give very much protection against that if Labour gets into power - and by “ power “ I mean power in both Houses of the Parliament. I think it is quite clear that if the people give a mandate for something - if they know what they are voting for - there can be no complaint in this House, and the Parliament can carry the people’s wishes into effect. But what is obnoxious to democracy is what was done by the last Labour government, which got in without a mandate for what it intended to do, and1 then tried to do things which would have been irreversible. If I may quote the Deputy Leader of the Opposition, the Labour Government said, “We will pluck the fowl, and nobody will be able to put the feathers back “. Labour meant, without telling the people about it, and without getting a mandate for it, to do something that could not be reversed. It set out to destroy the private banking system. This is important, not for the existence of the private banks, but because the destruction of the private banking system means virtually the socialist enslavement of the Australian people.
Let me turn to the second thing that the legislation seeks to do - that is, to create a better banking system. It does that in a number of ways. The first is the separation of the central bank from the Commonwealth Trading Bank. That is fully in accord with world practice. There is not elsewhere in the whole world a central bank which takes on itself trading functions; indeed, it could not do so with efficiency. The nature of central banking is such that there should be confidence between the central bank and the constituent members of the banking system. If the central bank is a competitor of the trading banks, how can that confidence exist? Therefore, throughout the world - this has occurred since the war in par ticular, because it is only since the war that the realization of these things has been forced on us - it has been found advisable to divorce the central bank from the trading functions. The bill seeks to do that.
The confusion that has existed in the past between the two personalities of the Commonwealth Bank, that is the Trading Bank and the central bank, has been very awkward. There has been confusion as to their profits, as to the shuffling of advances between one and the other, and as to the ownership of their premises. In this case, it is quite unjustifiable confusion because there is no real reason why a central bank should own any but central premises. The extension of central bank ownership into branch banking has, I am afraid, been somewhat misused, even during the term of office of this Government. There has been growing therefrom a good deal of suspicion between the trading banks and the central bank which has impeded the efficient working of the whole system.
If I were to look at the bill quickly, I would say that it completes the act of separation; but I direct particular attention to clause 26, which reads -
The Reserve Bank -
subject to this Act and to the Banking Act 1959, shall not carry on business otherwise than as a central bank.
I should like to have seen the act of separation more accurately defined in the bill, and furthermore to have seen some mechanism whereby it could be better enforced. In a moment, I shall suggest some such methods.
Undoubtedly, this act of separation is of advantage to the central bank, to the Trading Bank, and to the Australian banking system as a whole. It does not carry with it one of the objections which seem to have been raised in some nebulous and fantastic form by the honorable member for Melbourne. There is no disadvantage to the Trading Bank in this separation, unless, indeed, it is preparing to use the central bank in an underhand way. All that the bill provides is some degree of sanction for what every honorable member believes the law to be and what it should be, namely, that the Trading Bank should not be using the powers of the central bank in ordinary business competition.
The bill improves the special account legislation in one particular way - namely, it provides for uniformity as between the various trading banks. That is of considerable importance. Possession of the power to discriminate or to give favours is one of the ways in which the bureaucrats, whether they are Treasury bureaucrats or central bank bureaucrats, can edge their influence into the trading bank system. It can readily be realized that, if they have in their power the grant of favours to this bank or that bank, or the imposition of penalties on one bank or another bank, there will be a degree of subservience which in some respects is undesirable. Every one wants the central bank to have proper control over its trading components, but it is surely undesirable that it should be able to edge its influence forward in these rather underhand ways. So, I would think that the provision in the bill which makes these account procedures uniform as between the banks is an excellent and desirable change.
This new legislation also sets up a Development Bank. It is called a bank, although I think that, in strict terms, it is not a bank. Its essence is that of a development corporation rather than that of a development bank. However, because the Commonwealth’s constitutional powers are limited, it has been necessary to put it forward in the form of a bank. I am one of those persons who feel that in the Australian economy there has been a lack of speculation. I would say that in a growing and developing country like ours there are numbers of ventures which should be undertaken but which are not undertaken because the outcome is doubtful. It may be that they would fail; it may be that they would bring great profit to the country. Some risk should be taken in a developing economy, because unless there is a degree of risktaking the economy will not go forward satisfactorily.
In the past, the trading banks have not done a great deal in this regard. Particularly since the war, their activities in this direction have been circumscribed by the fact that they have been chronically short of funds. But risk-taking is not, I think, primarily the responsibility of the banking system. It should be the responsibility of private investors in the first place. For that reason, I feel that the lack of adequate mechanism for risk-taking in Australia is the fault of the Australian investor rather than of the banking system. The fault is, perhaps, not in the stars but in ourselves. We need more venturesomeness in the system as a whole.
This bank or corporation - I repeat that it is really a corporation, even though it is called a bank - aims to fill that gap. It is an undesirable gap, but my feeling is that the filling of it by a government corporation is not the best solution. It may be argued that, as it is unfilled, it is better to have it filled by a government corporation than to leave it gaping open still longer. The Development Bank will perform a very useful function, therefore, in filling that gap in the Australian investment structure. But we should remember that for all funds taken by the bank for that purpose fewer funds will be available somewhere else. In a full employment economy such as ours is to-day, extra funds can be obtained only by diverting money from some other purpose. The Development Bank, I think, will be diverting funds from some other purpose to put them into ventures which are speculative and which cannot obtain finance from normal sources but which, because they have the chance of great profit, are desirable ventures from the stand-point of the Australian economy as a whole. This is a useful function and it is important that the banks’ funds should be directed to it and not be used in other directions.
There is, however, one point to which the House might pay particular attention. The savings banks can lend unlimited amounts to the Development Bank. The bill is drawn in such a way that the savings banks are restricted from lending to the trading banks, but they can lend unlimited funds to the Development Bank. This means that if political pressure is applied for the Development Bank to be unduly expanded, the savings banks’ funds will not be available for other purposes. I am sure that honorable members will agree with me when I say that the funds of the savings banks should go primarily to two objectives - to the sustaining of government loans for public works and necessary services such as roads, drains and so on, which are essential for the little man, and to housing. These are the two prime purposes to which savings bank funds can be directed.
I do not say that these are the only purposes, but I do say that there is some danger in the legislation as it stands. The danger is that, under this bill, it is posible, because of political pressures which will occur from time to time, that the funds which should be kept for housing will be stripped away from the savings banks and will be put into the Development Bank. I do not think that, with the Treasury as it is, there is much danger of the funds being stripped away from the support of the bond and semi-government loan market. I think we can consider that that is reasonably protected, but we still must think of the protection that we can give to housing funds. I am a little disturbed that the bill does not give that protection to the small man who should have the first call on these funds for the building of houses, at any rate while the present housing shortage exists.
These may be dangers which do not have very much practical significance while the present Government is in office. That would be a reasonable view to take. But one is not drawing legislation which applies only to this Government or to this term of this Government. This legislation is meant to be permanent and I feel that it is desirable to incorporate in it some protection to ensure that the Development Bank will not strip away all the savings bank funds, some portion of which should be reserved for housing and particularly for smaller loans for cottages and for the small borrower. In that respect, I think there is room for improvement in the bill. I feel also that improvement could be made in minor matters of wording, but perhaps those matters are best left for the committee stage.
There is only one further point that I should like to bring to the notice of the House. In the past, information given to the House on banking matters has been woefully deficient and in some cases downright misleading. I feel that some better provision should be made to inform honorable members of the transactions of the government banks. I do not say that full details should be revealed, but more detail should be given to honorable members. I am not entirely unsympathetic to the suggestion of the honorable member for Grayndler (Mr. Daly) that the Governor of the Commonwealth Bank should occasionally attend on honorable members to inform them. Perhaps the formality of calling him to the bar of the House need not be used, but some less formal method should be adopted to obtain information from him. We should devise some machinery to do this.
I know that it is not possible for the central bank to reveal its current transactions. To do so only plays into the hands of undesirable speculation. I know that full information cannot always be given on what is happening, for example, in regard to overseas funds, the operations of the bond market or matters of that character. But I do think that there is a middle course that can be struck between that sort of undesirable revelation of information which should be kept confidential for public purposes and the veil of secrecy that has been drawn, even in retrospect, over the operations of our government-owned banks, so far as members of this House are concerned.
Sir, I support the bills. I have some reservations, as I have indicated, about particular matters.
– Order! The honorable member’s time has expired.
.- My recollection is that the first William Charles Wentworth was the first depositor with the Bank of New South Wales in 1817. The fortunes of his successors date from that day, and also their ideas. The honorable member for Mackellar (Mr. Wentworth) had not gone very far in his speech before he came to the subject of communism. He takes the attitude which was taken before the first Reform Bill, that participation by the whole adult population in guiding the economy or society in general would lead to anarchy and to communism. That well illustrates his real attitude to these bills. He distrusts any step towards central banking and he positively fears any participation in trading or savings banking by publiclyowned banks as distinct from privatelyowned banks.
The honorable member gave his first justification for the bills by making a plea for what he would regard as the classical attitude towards central banking. He said that nowhere in the world did we find the system that we have in Australia in which the central bank also conducts trading banking. One has only to go to the original and still the foremost central bank in the world, the Bank of England, to find that it always has and still does carry on private trading banking as well as central banking. Deposits by private persons with that bank approach £100,000,000.
The position in Australia has been commented upon by many writers in this field. I shall content myself with quoting from a book entitled “ Central Banking after Bagehot “, written by Professor Sayers, who is Sir Ernest Cassel Professor of Economics at the University of London and a member of the Ratcliffe committee appointed a year ago by the Tory government of Mr. Macmillan. The book was published in 1957 by the Oxford Press. On page 116, Professor Sayers states -
The banking business to be cultivated falls into three parts: the central bank can be a bank for the general public, it can be the government’s banker, and it can be the bankers’ bank. More than can be: the central bank in an undeveloped financial system should busy itself in all three directions. The experts of the nineteen-twenties used to say that the central bank should confine itself to the second and third fields - as banker to the government and to the commercial banks - and that the central bank should eschew the business of banking for the general public.
He continues -
Australia does have more pertinent lessons for us, but in this case also special circumstances, especially the fact of the Commonwealth Bank’s political origin as a trading bank, take the sting out of the evidence.
That is, Sir, any criticism which may be made of the continuation of central and trading bank functions in the Commonwealth Bank is suspect because it is made by political opponents of the bank itself and opponents of the Labour party which established the bank.
Let me come to the actual position in Australia. This question was considered by the royal commission appointed to inquire into the monetary and banking systems in 1936. Paragraph 577 of the commission’s report stated -
Although it is unusual for a central bank to carry on trading bank activities and to control a savings bank, we consider it desirable that the Commonwealth Bank should do both. Through its trading bank activities it possesses powers of competing with the trading banks which can be exercised as and when required. Similarly, its savings bank activities add to its ability to regulate the volume of credit and enable it to compete, if necessary, with the State savings banks. We are of opinion that the use of its trading bank activities as an adjunct to central banking policy is in keeping with its central bank functions and is to be approved.
I realize that that is a dangerous modern thought for people such as the honorable member for Mackellar. Let me go still further. I shall come up to 1953 when the Prime Minister, before he had been lobbied sufficiently by the back-benchers from New South Wales in his party, expressed this view when the Parliament last amended the banking legislation -
We believe that the Commonwealth Bank’s general trading activities have great merit because they act as a source of information to the central bank. They enable the central bank to have an instrument by which it may give leadership in banking policy.
Then, in 1954, Dr. Coombs, the Governor of the bank, in his E.S. & A. lecture entitled “ The Development of Monetary Policy in Australia “, stated -
It is important to realize that, by the direct influence which the Commonwealth Bank exercises over the family of banks of which it is the head, it is able, within limits imposed by their commercial (and, in the case of the Commonwealth Trading Bank, competitive) character, to influence their policy so that they contribute directly to the achievement of the objectives of central bank policy - the stability of the currency and the maintenance of full employment. There can be little doubt that this direct link gives to the Commonwealth Bank a source of strength which can be of particular value in times when the economy is threatened with declining activity and employment.
I have dealt in some detail, Mr. Deputy Speaker, with opinions expressed overseas and also expressed quite recently in this Parliament and by the Governor of the bank, who has the duty of advising us on these matters, because this was the only justification which the honorable member for Mackellar gave for the present legislation. It is true that one could make out an academic, logical case for separating a central bank from all other banking. If one looks at these things in isolation and assumes that Australia is already a fully developed country, and that the members of the Reserve Bank of Australia already have all the banking experience that will ever be required in Australia, then that might be an argument for it; but the significant thing is that Sir Arthur Fadden, when he introduced this legislation in 1957, and again when he introduced it in 1958, and the present Treasurer, when he introduced it a couple of weeks ago, did not rely on that argument at all. Their argument did not turn on the theory of the matter. It did not turn on any mischief which had occurred in the banking system as it already was. Although, during this debate, I have listened to honorable members on the Government side for as long as my patience would permit, I have not heard one instance quoted or alleged of improper or unethical practice by the Commonwealth Bank in its central bank functions and in its trading bank functions as a competitor with the private profit trading banks. That is, there is no suggestion by anybody who has introduced these bills that it is necessary, as a matter of economic theory, that this legislation should be implemented. There is no suggestion that because of malpractice it should be introduced. There is no suggestion that the public interest requires it.
The only argument that has been put on the three occasions when we have debated this legislation in this chamber in the last two years has been that the private banks fear what might otherwise happen. That is, the Government is yielding to their wishes, to their arguments which are put not publicly, or at the bar of the House to honorable members in general, but to only a few back bench members of the Liberal party in New South Wales. These gentlemen have, with the aid of this Banks Defence Committee Account with the Bank of New South Wales, which the honorable member for Melbourne quoted and detailed, prevailed on the Liberal party to implement this legislation - not because of its economic necessity or because of its public merit, but because of the private interests involved.
– Is the honorable member suggesting that this money in the Defence Committee fund went to the Liberal party?
– That is what is. alleged and nobody has denied it. I should have thought that the honorable member for Mackellar, being a shareholder in the bank, would have denied it if it could be denied.
The greatest weakness of these bills is that they comprise the first legislation since the amendment in 1953, and yet take no account of the trends in banking which have occurred in the meantime. The greatest alterations to the banking system in Australian history have occurred in the last five years. I refer in particular to the link between the private profit trading banks and the hire-purchase companies, and the participation of the private profit trading banks in savings banking. The legislation does not refer to these two matters which have been crying out for attention and with which, hitherto, the former Treasurer pleaded he could not deal because the Banking Act did not permit him to deal with them.
Let me trace the history of these matters. The Banking Act 1945 made it an offence for a company to carry on banking unless it had authority to do so under the act. On 9th February, 1953, the Treasurer exempted from those provisions the two largest hirepurchase companies in Australia, the Australian Guarantee Corporation Limited, which is now affiliated with the Bank of New South Wales, and the Industrial Acceptance Corporation Limited, which is now affiliated with the Australia and New Zealand Bank Limited, and seven other finance companies. They must have been exempted from the operations of the Banking Act because they thought, and the Treasurer thought, that they were carrying on the essentials of banking - accepting deposits and lending money.
The Banking Act 1945 had provided that the Commonwealth Bank could determine the advances and investments of the private trading banks.
On 29th April, the Banking Act 1953 came into force, by which the power of the Commonwealth Bank to decide the investments of private banks was cancelled. Thereafter, the Commonwealth Bank could only control their advances, not their investments. At the same time, the Commonwealth Bank, which was the first bank to come into the hire purchase field, was restricted in that regard. We find, from the Governor’s report for the year ended 30th June, 1953, that the Industrial Finance Department “ continued its activities within the limits of its available funds “ and lent £15,000,000 in that year.
For the following year the Governor reported that the transactions were down to £14,200,000 and the volume of business by the Industrial Finance Department was “ being kept approximately at present levels”. For 1955 he reported that “ as a matter of policy the Hire Purchase Section of the department was not expanded during the year “ and that transactions were down to £13,800,000. In every succeeding year, there has been a limit on the amount which the Industrial Finance Department of the Commonwealth Bank has been allowed to lend on hire purchase. In February, 1956, the department was forbidden to finance the retail sales of passenger cars, although such sales amount to two-thirds of the finance that is provided by hire-purchase companies as a whole.
While the operations of the Commonwealth Bank were being restricted in amount and in kind, all the private profit banks started to cut into this field of hire purchase. To illustrate the extent to which they have come into the field and how much they bulk in it now, I quote from the publication of the private banks, which lists all the hire-purchase companies owned by the banks, and from J. B. Were’s publication on hire purchase, which gives the amount of money outstanding to those subsidiary hire-purchase companies. It emerges that in the middle of last year, £182,600,000 was outstanding to the hire-purchase companies in which the private banks were the major shareholders. At that time, the total outstanding in Australia to hire-purchase companies was £296,000,000. Thus, we can see that two-thirds of the amount owing to hire-purchase companies in Australia is owing to those companies in which the private banks are the major shareholders.
To illustrate how this trade has grown in the past five years - those five years during which the private banks invested in hirepurchase companies - one has only to remember that the amount of money outstanding to hire-purchase companies as a whole has quadrupled in that time. It has increased by £250,000,000. That increase is more than the total amount by which overdrafts have increased with all the trading banks in Australia. Thus we have had during that time the creation of a completely parallel credit system and a system which is now outside the Commonwealth’s power to control under the Constitution, although, if it had been dealt with in time, it was within the Commonwealth constitutional power over banking.
The Minister for Labour and National Service (Mr. McMahon) said the other night that hire purchase was outside the Commonwealth’s powers. It may be now, but it was not outside the Commonwealth’s powers to deal with hire purchase when the private banks were first encouraged to go into it. Under the 1953 act, the central bank’s power to control the investments of the banks was abolished. That was the same year when the former Treasurer, Sir Arthur Fadden, exempted the largest hirepurchase companies from the operations of the Banking Act and when private banks started to invest in hire-purchase companies. At that time, under the Commonwealth Government’s banking power, it would have been possible for us to control the participation in hire purchase. Once the companies are established, and if we promote the idea that they are not carrying out banking, it may be too late. To give an indication of how this has been regarded as an excuse, I quote from a reply given on 16th October, 1957, by the former Treasurer to the honorable member for Cunningham (Mr. Kearney). The Minister said -
The central bank has arranged with the trading banks that they will not grant new or additional advances for the purpose of expanding hire-purchase or instalment selling. There are no powers under the Banking Act to prohibit banks from acquiring shareholdings in hirepurchase or other companies or to regulate the activities of such companies.
That is a good example of a question which tells the truth but not the whole truth. It is true that the Banking Act no longer gave the Commonwealth power to control investment by banks in hirepurchase or other companies, but the Constitution did not prevent the Commonwealth Parliament from again passing an act to control the investments of banks. It is significant that that question was answered in the middle of October 1957, a month after the last of the private banks completed its shareholding in a hirepurchase company.
What hire-purchase investments mean to the private banks can well be seen from the dividends they have received from their subsidiaries and comparing those figures with their net profits. Sir Arthur Fadden, who was then the Treasurer, answered a question by the honorable member for Yarra in November, 1957, which indicated that the Bank of New South Wales in 1956 had a net profit of £1,980,000. The J. B. Were publication shows that the subsidiary of the Bank of New South Wales - the Australian Guarantee Corporation - paid a dividend to the bank of £373,500. Next, it appears that the Australian and New Zealand Bank Limited had a net profit of £1,006,000 and its subsidiary - Industrial Acceptance - paid it a dividend of £186,000. The National Bank of Australasia Limited had a net profit of £951,000 and received from its subsidiary - Custom Credit Corporation -a dividend of £300,000. I will conclude by a reference to the first of the private banks to enter this field - the English, Scottish and Australian Bank Limited - which made a profit of £386,000 and derived a dividend of £100,000 and a management fee of an extra £160,000. Twothirds of the profits of the English, Scottish and Australian Bank Limited were derived from its wholly-owned hire-purchase subsidiary. All the other banks derived between one-third and one-sixth of their profits from their hire-purchase subsidiaries.
It is a complete distortion to say that we on this side of the House are against hire purchase. We are against the abuse of hire purchase. Hire purchase has been abused in the past five years in Australia first, because the experience, the premises and the personnel of the private banks have been put at the disposal of the hire-purchase companies and, secondly, because the people will now lend to hire-purchase companies knowing that they are a gilt-edged investment. No bank can afford to allow its hirepurchase company to become insolvent and the Commonwealth guarantees the solvency of every private trading bank. Therefore, if one lends money to a hire-purchase company at 7 per cent., 8 per cent, or a greater fixed percentage, one is in fact investing in a gilt-edged security which is guaranteed by the national government.
Because of the tie-up between banks and hire-purchase companies, it is more con- venient for borrowers to borrow and more profitable for lenders to lend, and the people of Australia are being exploited in the process. This Government is conniving at the by-passing of its powers over credit. It has created a completely parallel credit system - one which is highly profitable to those who have money to lend but very expensive to those who want money to borrow. It is expensive to everybody in the community because we all have to pay in taxation to the Commonwealth and in rates to electricity and water authorities for those public works which otherwise we would be able to finance from the loan market.
The other new departure in banking is in respect to the savings banks. I used the forms of the House in October, 1955, to initiate a discussion as a matter of urgency when the Bank of New South Wales announced the formation of a subsidiary savings bank. The Prime Minister (Mr. Menzies), no less, came in and put a stop to the debate. He said that if an opportunity presented itself the view of the Government would be presented to the House in due course. An election followed soon after, but no reference was made to the matter during the election campaign.
Immediately after the election in 1956, authorities were granted to the Australia and New Zealand Savings Bank Limited, the Bank of New South Wales Savings Bank Limited and the Commercial Banking Company of Sydney Savings Bank Limited to carry on banking under certain conditions. I think I can summarize the conditions by saying that not less than 70 per cent, of their deposits were to be maintained in investments in three categories - in Commonwealth, State and local government securities, in cash, ‘and in deposits with the Commonwealth Bank; and not more than 30 per cent, of their deposits were to be maintained in investments in three other categories, in loans to building societies, in loans for housing or on the security of land and in deposits with banks other than the Commonwealth Bank.
– They do not use it for that purpose.
– That is true. I have tried with some persistence, maybe, to find from successive Treasurers in what investments the deposits of these three private savings banks have been placed. I was told on 16th May, 1957, by Sir Arthur Fadden that “ information on the assets held by the private savings banks is provided regularly to the Treasurer and the central bank by arrangement”, and that “ the form in which information on this subject might be published was under consideration”. Apparently it is still under consideration.
I have had a question on the notice-paper addressed to the present Treasurer for several days asking for information on the investments specified in these authorities issued to the private savings banks. The Treasury has the information. The private savings banks can only carry on business in the terms of these authorities. lt is certainly only proper that elected persons in this place should be able to ascertain whether the law is being complied with.
Now we have to go to some belated or second-best information. In the last “ Year Book “, it appears that at the end of June, 1957, the three private savings banks had deposits of £130,822,000. They had in deposits with other banks £17,965,000, in other words, 14 per cent, of their deposits were with their parent banks. It is significant that the present legislation provides that not more than 2i per cent, of their deposits will be with their parent banks, but such is the solicitude of the Government for the existing private savings banks that they are exempted from that requirement. As I said, not more than 30 per cent, can be spent on housing and on deposits with the parent bank. We have never been told, and we can never ascertain by questions placed on the notice-paper, how much has been put into housing, but it is plain that not more than 16 per cent, could have been given for housing because 14 per cent, of the maximum 30 per cent, is already with the parents.
The great talking point of the private banks was that more money would be available for housing. So let us see whether it has happened. I note from the last annual report of the building societies of New South Wales that in 1957-58 they received £6.412,000 - a smaller amount than they received in any year since the end of the war.
I have referred to the savings banks, but I do not want to overlook the part played by the trading banks in the activities of building societies. I find that the Commonwealth Trading Bank lent the building societies in New South Wales in that year £600,000, the Commercial Bank of Australia lent them £150,000, and the Bank of New South Wales - the oldest and the largest of all the free enterprise banks in Australia, indeed, in the southern hemisphere - lent them £2,000.
In his second and remaining reference to the savings banks, the honorable member for Mackellar referred to clause 38 of the Banking Bill. It is true that it requires a savings bank “ at intervals of not more than three months, to notify the Reserve Bank of its policy in relation to loans and investments including, in particular, its policy in relation to loans for housing purposes “. No percentage is mentioned. Let us hope that we will be able to get that information in this place. Let us at least hope that we will be able to learn promptly and fully how far, if at all, the law as amended is being complied with by these creatures of the privately owned trading banks, by their subsidiaries, the hirepurchase companies, which provide two-thirds of the hire-purchase finance in Australia, and by their savings banks which so heavily subsidize their parent trading banks.
The interests of the public should be paramount in matters such as credit. The provision of credit is as essential as the provision of coinage, and we ought to see that neither is debased; but in the last five years this Government has been conniving, at the by-passing of its one form of credit control. A new form has been created, which has completely duplicated the banking system, which has attracted more money in that time than the banking system itself has been able to attract; but it has, from the point of view of people who have money to spare, particularly members of the Government parties, the very great charm of providing an assured and unprecedentedly large and rapid profit to themselves.
.- If any one were in doubt about the need again to bring this legislation before the House, his doubts would vanish after he had listened to the speeches that have come from members of the Opposition, because they have made it quite clear that their aim and object is to nationalize, amongst other things, the trading banks when they have the opportunity to do so
– Hear, hear!
– 1 am very glad to have some support for my remarks, because I direct attention not only to the speeches that have been delivered tonight by the Deputy Leader of the Opposition (Mr. Calwell), and by the honorable member for Werriwa (Mr. Whitlam)-
– He gave you a lesson!
– But also, I direct attention to the interjections that were made during the afternoon by the honorable member for Kingsford-Smith, who has just interjected again. He said that if and v/hen the Labour party gets back into power it will settle the matter for all time. That was his actual phrase. I made a note of it at the time.
I think that, at this stage of the debate, it is necessary for us to discuss the actual reason why this legislation is brought before the House. We have listened to a very interesting speech by the honorable member for Werriwa - he is always interesting - but, if I may say so, he did not come to the point as to why this legislation is before the House. The reason why the legislation is before the House is that the Leader of the Opposition (Dr. Evatt), the Deputy Leader of the Opposition, the honorable member for Hindmarsh (Mr. Clyde Cameron) and the honorable member for Werriwa himself have made it clear that their aim is to nationalize the trading banks. The honorable member for Werriwa said that certain members on this side of the House have been yielding to the pressure of the trading banks - that the trading “banks have put pressure on certain members of the Government. Sir, I see no reason at all why the several parts of a government, which consist of the Executive, the Cabinet and the private members of the Government should not be in agreement. We are in complete agreement on this matter. We are in agreement, not because of any yielding to an outside group, as honorable members opposite have yielded on a number of occasions, but because we believe - it is part of our F philosophy - that free enterprise is the best. system we have yet evolved upon which to base a progressive nation. Our natural resources can best be developed under a system of free enterprise.
The honorable member for Hindmarsh (Mr. Clyde Cameron) and several other honorable members opposite made reference to some fund. They know all about it; we do not. The only fund I know about is the £10,000 that the Communists handed to the honorable member for Hindmarsh and his friends to fight an election. We got this information from the honorable member’s own colleagues; yet he now thinks it is amusing.
Several times during the debate to-day a challenge has been issued by honorable members opposite for some one on this side of the House to say what is meant by free competition.
– Fair competition.
– Well, fair competition. I thank the honorable member for the correction. I would have thought that if they had been listening to the speeches made by my colleagues, honorable members opposite would know what we mean by fair competition. However, if they want it again I will be only too pleased to give it to them. Let me say to them that this Government believes it is necessary, for the full development of our nation, to have a free and competitive banking system. This involves the strong Commonwealth Trading Bank being made stronger, and ensuring that the trading banks are placed on an equal footing with it. There will then be free and energetic competition between all trading banks, between the joint stock trading banks and the Commonwealth Trading Bank on the one hand, and among the trading banks themselves on the other hand. While that is a short definition, I. suggest that it is a clear one, and I hope I have answered the challenge put forward on a number of occasions by honorable gentlemen opposite. 1 would next like to say something of the Government’s objectives in bringing down this legislation. The main objective is to put a block in front of the socialist Labour party so that if it ever comes to power it will be prevented from achieving its objective of nationalizing the trading banks. As has been made clear to us, once they get a hold on the banking system they will have a stranglehold on the nation. It does not matter how plausible are the Deputy Leader of the Opposition (Mr. Calwell) or the honorable member for Werriwa (Mr. Whitlam), the fact remains that every member of the Labour party - the official Labour party, as they now find it necessary to call it, so that we will know to which Labour party they belong - has signed what is known as the socialist pledge. They have pledged themselves to do all in their power to bring about the nationalization of the means of production, distribution and exchange, which includes banking.
– But nobody has ever denied that. What is wrong with you?
– That is exactly what I am saying. I am glad that the honorable member has started to listen, because I have been addressing quite a few of my remarks during the last five minutes to persons such as he. Let me continue and say to the honorable member for Hindmarsh, through you, Mr. Deputy Speaker, that in again introducing this legislation the Government has several objectives. The first one, I would say, is to establish a banking system which will be independent and would be a bulwark between any possible future socialist government, of which the honorable member for Hindmarsh would probably be a leading member, and the people who desire to select their own bank, the bank in which they wish to put their money and from which to obtain financial help. We remember that it is only a matter of a few years since the honorable member for East Sydney (Mr. Ward) and the honorable member for Hindmarsh made it quite clear, to use their own words, that they would not make the same mistake again of bringing down controversial legislation in this House, but that they would use the means available to them under the existing legislation to strangle the trading banks.
Our second objective is to create a banking system in which the public will have confidence, and to provide a safeguard against any action by a future socialist government to destroy the trading banks. Is there any comment from the honorable member for Hindmarsh on that one?
– Yes, we can repeal the bill.
– Exactly. The honorable member is supporting my argument. Our third objective is to provide a strong central bank able to control all trading banks and able to control the volume of credit, thus giving stability to the monetary system. Our fourth objective is to ensure strong and independent trading banks and a strong Commonwealth Trading Bank, banks that are administratively free but subject to direction from a Reserve Bank as to the type of advances to be made. [Quorum formed.]
I am reminded, Mr. Deputy Speaker, of the all-out attack that the Opposition threatened it would launch on the Government in respect of this legislation. I noticed that when the honorable member for Hindmarsh drew your attention to the state of the House there were only two members of the Opposition in the chamber. This shows the amount of interest they are taking in the matter and how sincere they were when they said they would launch an all-out attack. I know very well why the honorable member wished to interrupt me. He realized the truth of the statements that we have been making from this side of the House.
I was saying that our fourth objective is to ensure strong and independent trading banks, and a strong Commonwealth Trading Bank, banks that are administratively free, but subject to direction from a reserve bank as to the type of advances to be made. I express the hope that when this legislation is passed through its several stages in both Houses of the Parliament our banking system as a whole will be free from political interference and will not be subject to the unfair comments made by honorable members of the Opposition, so that it can get down to its normal business of assisting in Australia’s national development. It is essential that the bank should be allowed to function free of political control and political controversy.
Honorable members opposite have referred to the trading banks as monopolies and sometimes, loosely, as private trading banks. Those definitions are incorrect. Technically they are joint stock trading banks. It is incorrect to call them monopolies because honorable members opposite may be interested to know that the banks have over 100,000 shareholders, including many nominees for trustee organizations, employers’ organizations, pension funds and similar bodies. That means that there is a wide representation among those who own the joint stock trading banks.
The Deputy Leader of the Opposition concluded his speech in a well-remembered way by using the slogan, “ Hands off the Commonwealth Bank; hands off the people’s bank “. In no way does this proposed legislation detract from or weaken the Commonwealth Bank or the Commonwealth Trading Bank. Indeed, in many ways the bank is strengthened. During the period that this Government has been in office the Commonwealth Trading Bank has made great progress. That fact alone answers the criticisms of the Opposition. Our objective is to have a free and efficient banking system, and to achieve that objective it is necessary to have a strong Commonwealth Trading Bank competing with the joint stock trading banks which will be competing among themselves. This Government’s philosophy that free enterprise is the best foundation for our society and the best way to assist the national development of our country will be confirmed.
.- The honorable member for Robertson (Mr. Dean) has made one significant point - that the main purpose of the Government in introducing this legislation is to protect the trading banks against any action that the Labour party might take if, and when, it came to office. This piece of legislation is a mere act of Parliament and is not something in the nature of a provision in the Constitution which would bar the Labour party from action. Immediately upon coming to power the Labour party will repeal every line of this legislation, so that the Government’s argument that the measures will afford some protection for the trading banks falls completely to the ground.
– The Labour party will never come to office.
– If the honorable member thinks that the Labour party will never come to office the Government of which he is a supporter has no need to introduce this legislation. Most Australians, and certainly all supporters of the Labour movement, have believed confidently that inflation and unemployment can be prevented by public control of the banking system. It is now obvious that that belief is no longer tenable. Inflation and unemployment cannot be prevented by means of the existing banking system. Section 8 of the Banking Act 1945 expresses a principle dear to the Labour movement. The provisions of that section have been repeated by this Government, almost with reverence, in every amendment since that act became law. They now appear in clause 10 (2) of the Reserve Bank Bill which reads -
It is the duty of the Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank under this Act, the Banking Act 1959, and the regulations under that Act are exercised in such a manner as, in the opinion of the Board, will best contribute to -
the stability of the currency of Australia;
the maintenance of full employment in
the economic prosperity and welfare of the people of Australia.
This Government and the people of Australia, particularly supporters of the Labour movement, should realize that the objectives set out in that clause cannot now be achieved. The banking legislation cannot any longer be used to the greatest advantage of the people of Australia. It cannot be used to prevent inflation; it cannot be used to maintain full employment and, most importantly, it cannot be used to obtain an allocation of investment funds where they are most needed. The aims and objectives of the late Mr. Chifley and the Labour movement generally can no longer be attained for the reason, first, that the private banks and financiers have deliberately organized their activities to enable them to escape completely the application of the banking laws. Indeed, this Government has facilitated, made possible, assisted and devised that escape by the trading banks from the provisions of its own laws. Secondly, the Government, the board and the governor - I do not separate them - have not applied the provisions of the banking legislation where they should have been applied. In fact, the Government has altered and weakened its own laws.
If we desire to learn something about the nature and use of the banking legislation which is now before us we must first remember what has happened while these retrogressions 1 have mentioned have been occurring. We have only to ask ourselves, “ Has inflation been prevented? Has full employment been maintained? Has a proper balance of investment between essential and non-essential uses been maintained? “ The answers are obvious. Inflation has not been prevented. During the past ten years prices have risen by 75 per cent. The £1 of ten years ago is now worth little more than lis. Prices have never been stable and fluctuations from year to year have averaged 7i per cent, and have risen as high as 24 per cent. The Government and the board have controlled the destiny of the bank and the banking system over the most violent inflationary period in the twentieth century, if not in the whole history of Australia. So much for the achievement of the Government’s objectives in the banking legislation. Not only has the cost of living risen, but also land, housing and production costs have also risen. High production costs are reflected in the difficulty we are experiencing in finding overseas markets for our exports. Gross inflation of land values and of capital have not only delayed development but have also accentuated economic inequality. Unemployment has risen to a figure of over 100,000. Houses, hospitals, good roads and power are in short supply, and their cost has increased.
The Government has always been aware of this position. In 1950 the then Treasurer recognized that inflation “ would disperse and weaken the national effort at a time when it should be concentrated “. Inflation has dispersed and weakened our national effort. The Government has failed to carry out the obligations imposed upon it by its own banking legislation. The banking system has been responsible for the critical and dynamic stages of inflation that we have experienced. In 1954 the then Treasurer, Sir Arthur Fadden, said this in his Budget speech -
There has been a formidable upsurge of spending. It has been facilitated by a far too generous expansion of credit on the part of the banking system together with a rapid growth of hirepurchase finance.
The rapid growth of hire-purchase finance, to which I shall refer in a moment, took place as a result of the financing by the private trading banks of hire-purchase companies which could not have come into existence in any other way. This expansion of credit was the dynamic of inflation at this stage, and it was made possible by the private banks, against the policy and direction of the Commonwealth Bank. The Governor of the Commonwealth Bank, Dr. Coombs, is reported .as follows at page 31 of his R. C. Mills lecture: -
It is clear that perhaps £80,000,000 to £100,000,000 of the increase in advances over these two years was excessive, and also that it took place despite strong central bank pressure to restrain it.
Those were the words of the Governor of the Commonwealth Bank. What the trading banks did was done despite strong central bank pressure to restrain them. The private trading banks acted in this way, and sent a dynamic into inflation which weakened and dispersed the national effort, as the Treasurer said.
What did the Government do? What did the strong man, the Treasurer who has now retired, do? Did the Government back up the central bank? Obviously not. It said to the trading banks, in effect, “ We know you do not like strong pressure from the central bank. We believe you should have complete trust in the central bank, and that you should be completely pleased with what it does. So we shall change the central bank. We shall bring the special account procedure to an end and substitute an honour system as among public school boys - the 25 per cent, cash reserve ratio.”
Although the law required that the special account procedure should be applied, it was not applied. The central bank turned to the 25 per cent, ratio system which was not authorized by law. Who was responsible for this decision to set aside the law and adopt a method which was not authorized by law in any way? Before we look at what the Government did about the special account procedure, solely to please the private trading banks, let us see what happened under the 25 per cent, ratio system. The convention that the central bank tried to establish was 25 per cent. That is much greater than the banks’ need for ordinary purposes. Therefore, there was always a motive to get below it in order to lend more and make more profit.
At the end of 1954, Dr. Coombs wrote about this matter as follows: -
The first attempt to establish a firm liquidity convention was not successful.
Having successfully thrown off the special account procedure, the trading banks had now refused to apply the honour system. The public school boys had not got on too well together. Of course, when I refer to “ public schools “, I am using the Victorian term. I am referring to what are now regarded as private schools. At this point, the ratio of the Australia and New Zealand Bank Limited was 9.8 per cent., the National Bank of Australasia Limited 15.3 per cent., the Bank of New South Wales and the English, Scottish and Australian Bank Limited 17.3 per cent., the Commercial Bank of Australian Limited 19.4 per cent., and the Bank of Adelaide 19.5 per cent. Only two banks at that stage, the small Commercial Banking Company of Sydney Limited at 25.4 per cent. and the Commonwealth Trading Bank at 31.4 per cent., had complied with the convention.
Then the Governor of the central bank began a second round of pleading. After it,in April, 1958, he wrote in his R. C. Mills lecture -
The new convention has now been in operation for two years experience so far gives modest hope of continued effectiveness.
What are the facts, contrasted to modest hope? At the time, when the Governor decided that there was modest hope, that is to say in March, 1958, three of the private trading banks had a cash reserve ratio which was greater than 25 per cent. But since then their ratios have fallen until, according to figures made available to me by the Treasurer last week, in December, 1958, not one of the private trading banks had a ratio equal to or about 25 per cent. The actual ratios in December, 1958, were: - Commercial Bank of Australia Limited, 18.1 per cent.; National Bank of Australasia Limited, 19 per cent.; Commercial Banking Company of Sydney Limited, 19.3 per cent.; A.N.Z. Bank Limited, 21.6 per cent.; English Scottish and Australian Bank Limited, 22.6 per cent.; Bank of Adelaide, 22.9 per cent.; Bank of New South Wales, 24.2 per cent. The only one of the banks with a ratio greater than 25 per cent. again was the Commonwealth Trading Bank, the ratio of which was 32.7 per cent.
These ratio figures reveal, first, that the only bank that has obeserved the 25 per cent. ratio is the Commonwealth Trading Bank, which has been above that figure right through in every period since December, 1953. Secondly, in the years during which the Governor thought there was “ modest hope “, the Australia and New Zealand Bank, the English, Scottish and Australian Bank, the National Bank and the Commercial Bank of Australia, were never equal to or above the 25 per cent. ratio. In that time, the Bank of New South Wales equalled or exceeded 25 per cent. once, the Bank of Adelaide once, and the Commercial Banking Company of Sydney Limited twice. Those figures apply to the period right back to November, 1953. Yet the Governor of the Commonwealth Bank, that perennial optimist, felt that there was a modest hope of success in future!
The third significance of the ratio figures that I have cited is that if the Commonwealth Trading Bank now adjusted its ratio to 25 per cent., it could lend so as to raise its deposits by £72,000,000. If it was to adopt the same ratio as the National Bank, the Australia and New Zealand Bank, or the English, Scottish and Australian Bank, it could plan to raise its deposits by well over £100,000,000. Fourthly, the figures show that there has been no discrimination whatever at any stage in favour of the Commonwealth Trading Bank because that bank has always been 5 per cent., 6 per cent., 7 per cent., or 10 per cent. above the 25 per cent. ratio. Clearly, there has been no restriction whatever of the private trading banks. In practically every quarter those banks have been below the 25 per cent ratio, sometimes by as much as 6 per cent, or 9 per cent. In fact, the Commonwealth Trading Bank has been restricted although, as pointed out by the Leader of the Opposition (Dr. Evatt) and others, the Commonwealth Trading Bank has grown. The private trading banks, on the other hand, have been allowed to do almost what they liked with regard to their cash reserve ratio. Make no mistake about it; that is the truth of the situation. The private trading banks have dictated the terms and the whole structure of so-called public control has been pulled into shape by their activities.
Lastly, the ratio figures that I cited indicate that the argument of the honorable member for Mitchell (Mr. Wheeler) was totally untrue. The private trading banks were not forced to go into hire purchase by the restrictions of the central bank. They chose to go into hire purchase because there was more to be made out of hire-purchase interest rates than out of overdraft rates. During 1954 when the private trading banks moved into hire-purchase, their cash reserve ratios were at the lowest point on record. The ratio of the E. S. & A. Bank was less than 10 per cent., that of the A.N.Z. Bank was less than 12 per cent., and that of the National Bank was less than 15 per cent. In view of those figures, could the banks say that the ratio laid down was restricting their overdraft activity and that they had to go into hire purchase? They had the lowest reserve ratios since records had been kept, and the banks which had the highest ratios did not go into hire purchase. The banks with the lowest ratios went into hire purchase.
What of the future? That perennial optimist, Dr. Coombs, had this to say -
Whether or not we can deal effectively with major fluctuations … (is a question) about which our recent experience gives us little help.
Recent experience gives us little help in answering the question whether we can deal effectively with major fluctuations! Why are we in such a hopeless position? I think the reasons are first, that the powers given to the Government under the banking legislation have never really been used; and secondly, that the Government has changed and weakened those powers and is now giving legislative effect to the removal of the special account power which was, in fact, removed in 1954 without authority, and is splitting up the Commonwealth Bank into several pieces. Let us now examine the significance of the special account power. Some honorable members on the Government side, including the Minister for Primary Industry, disputed, by interjection, statements made by the honorable member for Werriwa-
– He was not here.
– I am sorry. I meant the Minister for Labour and National Service (Mr. McMahon). I associate him with growth in the country, but not here. The fact is that various honorable members opposite were questioning what the honorable member for Werriwa said when he quoted Profesor Sayers. They asked, “ What about 1947?” The statements that I pro pose to quote now were quoted by the honorable member for Werriwa, and I shall go through them briefly. In 1953, when speaking in this House on the Banking Bill of that year, the Prime Minister (Mr. Menzies) said -
No one seriously challenges the special accounts system … we must have the special accounts procedure. 1 invite the Minister for Labour and National Service to explain why, after his own Prime Minister said in 1953 that we must have the special accounts procedure,, his Government is talking this way to-day, 1 ask the Minister and the honorablemember for Corangamite (Mr. Mackinnon), who is interjecting, but who has not spoken yet - he will have the opportunity to give the House some valuable information - what has happened to the Prime Minister since then. Have the private trading banks got at him, by any chance? Within 12 months of the Prime Minister’s making that statement, the special account procedure not only had been challenged, but had been swept away without authority, and the 25 per cent, ratio honour system, which did not work, had been put in its place. What has the Prime Minister to say to-day?’
Lest the Prime Minister is not sufficient authority, I point out that in 1955 Dr. Coombs, speaking of the special account power, said -
Looking back over the history of the use of the special accounts, a student of credit policy can have little doubt that it is an instrument of great actual and potential value, especially in the Australian scene.
I emphasize that this was a statement by the Governor of the Commonwealth Bank, Dr. Coombs. To-day, just a few years after that, the Government is taking away something which Dr. Coombs said was of special value to the Australian scene.
This removal of the special account power takes away the only real power that there ever was in the banking legislation, and it does so because the trading banks have not submitted, and will not submit, to any real regulation in the public or any other interest. But the removal of the special account power, as was pointed out by the honorable member for Werriwa, is not the only way by which public banking power in this country is being weakened by this legislation. It is obvious - it must be obvious to all members of the Country party as well as others - that a unified Commonwealth Bank, able to co-ordinate its action in many fields in accordance with central bank policy, is a more powerful banking weapon than one cut up into sections. That this is obvious is shown by the frank and open admission of it in 1953 by the Prime Minister himself, who said -
We believe that the Commonwealth Bank’s general trading activities have great merit because they act as a source of information to the central bank. They enable the central bank to have an instrument by which it may give leadership in banking policy.
According to the Prime Minister in 1953, the trading activities and associations of the Commonwealth Bank were of great value. Even the honorable member for Mackellar (Mr. Wentworth), said that this has been proved in the past. Why has the Prime Minister changed completely the fundamental proposition he put to this House on the matter in 1953? I raised these issues during the debate on the banking legislation in this House last year. The Leader of the Opposition (Dr. Evatt), raised them last week, and the honorable member for Werriwa mentioned them again to-night, yet not one speaker on the Government side, at any stage has tried to deal with or explain this proposition.
– That is not so.
– Has the honorable member?
– The honorable member will have his opportunity, and I await it with interest. It is obvious that what the Prime Minister said in 1953 was true. It is equally true to-day. What has happened to account for this change in policy? If honorable members on the Government side are not satisfied with the validity of what their Prime Minister said, let me quote another statement by Dr. Coombs, the Governor of the Commonwealth Bank. When speaking on the question of the trading powers of the central bank, he said -
It is important u realize that by the direct influence which the Commonwealth Bank exercises over the family of banks of which it is the head it is able …. to influence their policy so that they contribute directly to the achievement of the objectives of central bank policy.
Of course that is so, yet the Government is taking that power away to-day. It is another way in which the Government is weakening the public banking structure.
It may well be that in the future the Commonwealth Trading Bank will grow more rapidly than any private trading bank, as it has done in rising from seventh place to third or fourth place among them. If it does so, it will be because of its excellent staff and because of the confidence the public has in it. But to say that the trading bank will grow is not inconsistent with or in any way contradictory to the other fundamental statements made from this side of the House that the Commonwealth Bank is being weakened by this legislation which splits it up into many parts instead of leaving it as a unified, co-ordinated whole, as is necessary if it is to exercise its maximum strength as an instrument of public policy.
To say that the Trading Bank will continue to grow is not inconsistent with the argument that the Government is weakening the bank completely as an instrument of public policy. And this is not the time to weaken the banking legislation. This is the time to strengthen and extend it. Even if the full powers of the 1945 banking legislation were restored, the Government would be unable to achieve the objectives of clause 10 of this bill. It would be unable to prevent inflation or unemployment or to encourage an allocation of investment funds to essential uses, even if the full strength of the 1945 act were restored.
The reason for this is that the bankers and financiers have chosen, for reasons of profit maximization, to develop a new banking system. They have developed hire purchase and other forms of lending and repayment of loans - essentially a banking feature - other than through the traditional banks. But this new form of banking, the hire-purchase aspect of banking, is as much part of the normal banking process as is the overdraft-deposit aspect. These are two aspects of exactly the same process, and they depend upon normal bank overdrafts, deposits and cash ratios.
The hire-purchase companies have legal and physical links with the trading banks, and they grow from and out of the trading banks. They could not have grown but for the trading banks. They depend upon the trading bank money creation process.
Dr. Coombs made the relation between these two aspects of banking clear in his 1958 R. C. Mills Lecture, when he said at page 35 -
Until 19S3-S4, hire-purchase companies had relied heavily on bank overdrafts as a source of finance. After this they borrowed directly from those who had . . . bank deposits.
In other words, hire-purchase finance came out of the trading bank process of credit creation, first directly from overdrafts and then from bank deposits. As the honorable member for Werriwa has pointed out, two-thirds of the amounts outstanding is owing to hire-purchase companies in which the trading banks have shares.
Hire-purchase financing consists of lending and repaying - overdrafts and deposits. The lending comes from funds which come from the trading banks directly, or through their customers, and the repayments go back to the banks in the form of deposits by the hire-purchase companies. It is all essentially part of the process which is recognized as the banking process. It is banking.
Instead of narrowing the banking legislation, as this Government is doing, the Government should be widening it, for, as Dr. Coombs put it in the lecture referred to at page 36-
To the extent that monetary policy relies upon action through the banking system- that is, banking in the old or narrow sense - it is operating in a steadily contracting field.
It can never achieve the objectives which this House unanimously agrees should be achieved in a banking system.
What is the answer to this? It has been said there is no relation between hire purchase and the law as it is at present. As was pointed out by the honorable member for Werriwa, when these hire-purchase companies were established in the first place, they applied to the Treasurer for exemption from the operations of section 6 of the Banking Act 1945 which says that they should have a licence if they were to carry on any banking business, and they were given an exemption from the provision of that section. The assumption was that they were banking activities, and the assumption is that they are carrying on to-day illegally because they do not have a licence under section 6 of that act. The fact that this has never been tested in the High Court is most significant. No one in the world could say that there is anything unconstitutional about this law.
If the Government has given up this purpose of banking, let it say so. It has given up the attempt to have banking serve the social purpose of preventing inflation, maintaining full employment and obtaining an allocation of investment funds so that essential needs will be met. This will mean for the people continuing increases in the cost of living, continuing increases in the cost of production, continued inflation of land values, home-building costs and rents. It will mean rising unemployment, insufficient hospitals, schools, houses, roads and power resources and, therefore, high costs of illness, housing, high fares and gas and electricity charges. If the Government has given up hope of building up social services through the banking system, let it say so. That it has given up that hope is obvious from the destruction of the social purposes of the financial system by this legislation.
Much as been said about the adverse aspects of this legislation, but some of its opponents have suggested that the Development Bank is a good aspect. The Development Bank will not be a bank at all. It will be nothing more than a fund drawn on mainly by the private trading banks. Its limitations will not be in its limitations of capital but in its capacity to lend directly to the people and to hold its own deposits,
– Order! The honorable member’s time has expired.
Debate (on motion by Mr. Pearce)’ adjourned.
Message received from the Senate intimating that it concurred in the resolution transmitted to the Senate by the House of Representatives with reference to the appointment of a joint committee ta examine and report on certain matters relating to the Australian Capital Territory and that the provisions of that resolution, so far as they are inconsistent with the Standing Orders, have effect notwithstanding anything contained in the Standing Orders.
House adjourned at 10.33 pun.
The following answers to questions were circulated: -
m asked the Minister representing the Minister for Shipping and Transport, upon notice -
When is it proposed to proclaim the Navigation Act 1953 and the Navigation Act 1958?
– The Minister for Shipping and Transport has furnished the following reply: -
To enable the unproclaimed sections of the Navigation Act 1953 to be proclaimed it is necessary to make at least fifteen sets of Regulations many of which involve complex technical requirements relating to the construction, survey and equipment of ships. Some of the regulations have been completed and the remainder are under final consideration by the parliamentary draftsman. It is expected that all regulations will be completed and ready for promulgation early in May. The unproclaimed sections of the Navigation Act 1953 and some 126 of 206 unproclaimed sections of the Navigation Act 1958 will then be proclaimed to come into operation. The remaining sections of the 1958 act will be proclaimed progressively as necessary Regulations are made.
m asked the Minister for the Interior, upon notice -
– The answers to the honorable member’s questions are as follows: -
n asked the Minister for the Interior, upon notice -
– The answer to the honorable member’s questions is as follows: - 1 and 2.-
Labour and National Service, 21,536 square feet- £14,458 15s. 9d.
Customs and Excise, 5,707 square feet - £3,582 10s.
Interior (Electoral Branch), 4,192 square feet -£2,873.
National Development (War Service Homes Division), 11,547 square feet- £7,930 16s.
Taxation, 550 square feet - £160.
Air, 190 square feet, £142 10s.
Cite as: Australia, House of Representatives, Debates, 12 March 1959, viewed 22 October 2017, <http://historichansard.net/hofreps/1959/19590312_reps_23_hor22/>.