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Senate
30 July 1924

9^th Parliament · 2^nd Session

QUESTION
- COMMONWEALTH SHIPPING LINE
QUESTION
- CANBERRA CITY LEASES
QUESTION
- PENSION APPLICATION
PUBLIC SERVICE BILL.
PAPERS
QUESTION
- PUBLIC SERVICE: TEMPORARY OFFICERS
QUESTION
- TERMINAL CABLE RATE
COMMONWEALTH BANK BILL
ASSENT TO BILLS
ADJOURNMENT
- Progress of Business - Pensions to Retched Military Officers

The Deputy President (Senator Newland) took the chair at 3 p.m., and read prayers.

page 2547

QUESTION

COMMONWEALTH SHIPPING LINE

Cost of STEAMERS

Senator KINGSMILL:
WESTERN AUSTRALIA

– I desire, Mr. Deputy President, through you, to ask Senator Needham, in his capacity as member of the Public Accounts Committee, whether he will, at the earliest possible opportunity, lay before that committee the necessity for reporting upon the system of writing down the value of vessels taken over by the Commonwealth Shipping Line, so that honorable senators may be in a position to deal fully and accurately with the budget when it comes before us for consideration ?

The DEPUTY PRESIDENT. - The honorable senator is at liberty to ask that question.

Senator NEEDHAM:
WESTERN AUSTRALIA

– As, a member of the Public Accounts Committee, I can only inform the honorable senator that the matter cannot be referred to the committee in the way he suggests, but I would point out to him-

The DEPUTY PRESIDENT.- The honorable senator is not in order in going beyond a reply to the question submitted to him.

Senator NEEDHAM:

– I simply wish to quote the provisions of the Committee of Public Accounts Act 1913, which govern the matter.

The DEPUTY PRESIDENT. - The honorable senator must merely reply yes or no. The Standing Orders do .not permit him to proceed any further.

Senator NEEDHAM:

– -My reply to Senator Kingsmill is that the matter may be referred to tho Public Accounts Committee by either branch of the legislature, and I refer him to section 3, paragraphs c and d, of the Committee of Public Accounts Act 1913 for guidance as to the steps he should take: to have the subject brought before the committee.

page 2547

QUESTION

CANBERRA CITY LEASES

Senator GRANT:
NEW SOUTH WALES · ALP

– Is it a fact, as .reported in the press, that the Government have decided to postpone the first sale of building leases at Canberra to the 25th October, and, if so, who arrived ‘ at that decision, when was it made, and why did the Minister for Home and Territories inform the Senate on tho 17th July that it had not been decided to postpone the sale of these leases?

Senator PEARCE:
Minister of Home and Territories · WESTERN AUSTRALIA · NAT

– Because, on the date referred to, it had not been decided to postpone the sale. The decision to postpone the sale was arrived at at a. Cabinet meeting held subsequently.

SenatorGRANT. - Is it not a fact that it was announced on the16th July inthe Victorian press that it had been decided to postpone the sale of these leases? When was the decision arrived at to postpone the sale?

Senator PEARCE:

– I ask the honorable senator to give notice of that question.

page 2548

QUESTION

PENSION APPLICATION

Senator GREENE:
NEW SOUTH WALES · NAT

– Has the Minister the information for which I asked a few days ago in reference to the application of P. J. Farrell for a pension?

Senator PEARCE:
NAT

– The information is not yet to hand.

page 2548

PUBLIC SERVICE BILL.

Senator GARDINER:
NEW SOUTH WALES

– Can the Leader of the Senate say when the Public Service Bill will be again considered, and if it is the intention of the Government to complete the Commonwealth Bank Bill before other business is taken?

Senator PEARCE:
NAT

– The Government propose to complete the Commonwealth Bank Bill before proceeding to the next item on the notice-paper.

page 2548

PAPERS

The following papers were presented : -

International Convention relating to the Simplification of Customs Formalities and Protocol of Signature, signed at Geneva, 3rd November, 1923.

Iron and Steel Products Bounty Act- Statement by the Minister for Trade and Customs of reasons for allowing the use of certain imported articles in manufactures (tractors) on which bounty is payable.

League of Nations -

General Conference on Freedom of Communications and Transit, held at Barcelona, 10th March to 20th April, 1921 - Official Instruments approved by the Conference.

Second General Conference on Communications and Transit, held at Geneva, 15th November to9th December, 1923 -

Records and Texts relating to-

Convention relating to the Development of Hydraulic Power affecting more than one State.

Convention and Statute on the International Regime of Railways.

Convention and Statute on Maritime Ports.

Convention relating to the Transmission in Transit of Electric Power.

General Discussions of the Conference.

Quarantine Act - Regulations amended -

Statutory Rules 1924, No. OS.

page 2548

QUESTION

PUBLIC SERVICE: TEMPORARY OFFICERS

Senator NEEDHAM:

asked the Leader of the Government in the Senate, upon notice -

If a temporary officer has been engaged for a number of years, on special and important work, cannot this officer be appointed to the permanent staff?

Senator PEARCE:
NAT

– The appointment of a temporary employee to the permanent staff is dependent upon the circumstances of the particular case and upon eligibility under thePublic Service Act. Returned soldiers are accorded preference.

page 2548

QUESTION

TERMINAL CABLE RATE

Senator DUNCAN:
NEW SOUTH WALES

asked the Minister representing the Postmaster-General, upon notice -

Is it a fact that the Commonwealth terminal cable rate is independent of the charges made by the cable administration, being purely a Government charge, and that such rate is five times the rate charged in the United Kingdom and in New Zealand?
If so, will the Government make provision for the reduction of the rate from 5d. per word to1d. per word in accordance with the strong representations made by the British Postmaster-General at the Imperial Economic Conference of 1923, and in order to meet the oft-expressed desires of the Australian mercantile community?
What was the total sum received by the Commonwealth from this source for the year 1923-24?

Senator CRAWFORD:
Honorary Minister · QUEENSLAND · NAT

– The answers to the honorable senator’s questions are as follow: -

In respect of the ordinary traffic, which represents approximately 40 per cent. of the total, the Commonwealth terminal charge is additional to the apportionment of the tariff retained by the cable administrations, and is 5d. per word,as compared with 15 gold centimes (roughly lid.) in the United Kingdom, and1d. in New Zealand.
Negotiations are proceeding with a view to securing a modification of the tariff, but it is impossible at this juncture to foresee what may be decided between the parties concerned.
£141,300 was thesum received by the Commonwealth during 1923-24 in respect of the terminal charges on ordinary traffic, and a gross sum of £195,500 was received in respect of all classes of traffic transacted over the cable systems during that year.

page 2549

COMMONWEALTH BANK BILL

In Committee (Consideration resumed from 25th July, vide page 2517), of amendment by Senator McDougall:

That the following new clause be inserted: - 4a. Section 7 of the principal Act is amended -

Senator NEEDHAM:
Western Australia

– In discussing this amendment last Friday, Senator Lynch said that the Labour party had not been of any assistance to the fanners of Western Australia, and he asked for my opinion of his statement. I shall give it in definite terms. The Labour party, whether in power or in opposition, in this Parliament, or in any State Parliament, has always aimed at assisting the farmers and the men on the land generally. I remind Senator Lynch that during the trying times of 1911-12, when Western Australia was passing through a period of drought, the Labour Government that was then in power did everything that it could do to alleviate the distress of the people in the country. Numerous water trains were sent to every dry part of the state.

The TEMPORARY CHAIRMAN (Senator Kingsmill:
WESTERN AUSTRALIA

– I ask the honorable senator to connect his remarks with the matter now before the committee.

Senator NEEDHAM:

– I submit, sir, that I am only doing as Senator Lynch did on our last day of sitting. You were not then in the chair, but you may recollect that he discussed this very matter, and asserted that the Labour party had done nothing to help the farmers.

Senator Lynch:

– If the honorable senator does not keep quiet, I shall give him some more of the .same kind of medicine.

Senator NEEDHAM:

– I am not afraid of Senator . Lynch’s threats. I submit that this amendment is proposed for the purpose of assisting the men ou the land by the establishment of a rural credits system, and I suggest, sir, that by no stretch of the imagination can it be said that, in replying to the strictures on Labour made by Senator Lynch, I am not discussing the matter before the Chair. I remind that honorable senator also that the Industries Assistance Board of Western Australia does a work which may well be compared with that which would fall to the lot of an administrative body in charge of a rural credits system. The object of the amendment is -to enable the Commonwealth Bank to assist farmers. Honorable senators opposite have contended that the Commonwealth Bank already has the power to do so. It was chiefly because such help was not forthcoming that the Western Australian Labour Government came to the assistance of the men on the land through the instrumentality of the Industries Assistance Board. But there is another reason why the amendment should be accepted. The Treasurer (Dr. Earle Page), as Leader of the Country party, stumped Australia during the election campaign of 1922 and promised that a rural credits system on the lines proposed in the amendment should be provided. Why, then, should provision for it not be made in this bill?

Senator Findley:

– Too many promissory notes are lying around. It ie time some of them were redeemed.

Senator NEEDHAM:

– I also consider that it is time that some of the election promises made by honorable senators who support the Government were fulfilled. I said during the election campaign that the provision of a rural credits system was part of the policy of the Labour party, and I desire to provide it through the Commonwealth Bank. If Dr. Earle Page and those who follow him do not desire to fulfil their election promises, I- assure them that I desire to fulfil mine. The Labour party at all times, whether on the Treasury bench or in opposition, doe9 everything it can to prove that it ie, and will always remain, the friend of the man on the land.

Question - That the proposed new clause be added - put. The committee divided.

AYES: 9

NOES: 16

Majority

AYES

NOES

Question so resolved in the negative.

Proposed new clause negatived.

Senator GRANT:
NEW SOUTH WALES · ALP

– Before moving my amendment, which is in print, I desire your direction, Mr. Temporary Chairman, as to whether I shall be in order in moving the first portion, and, if that is carried, subsequently moving the proviso.

The TEMPORARY CHAIRMAN (Senator Kingsmill:

– I suggest that the honorable senator move the new clause as a whole, and then ask the Chair to put it in sections.

Senator GRANT:
NEW SOUTH WALES · ALP

– I shall do so. I move -

That after clause 4 the following new clause be inserted: - “ 4a. Section seven of the principal. Act is amended -

by inserting after paragraph (h) thereof the following new paragraph : - ’ (hh) to establish and conduct a Homes Building Department;*, and (6) by inserting at the end of the section the following proviso : - ‘ Provided that when the Bank as mortgagee takes possession of any land, it shall be sold by public auction within two years of the date of the taking of possession.’ “

– Senator Grant may he induced to withdraw his amendment when I inform -him that the Government realizes the necessity of giving consideration to the functions of the savings bank branch of the Commonwealth Bank. As has been pointed OUt, it holds a large sum of money, the savings of the people. I have already indicated that the Government contemplates the utilization of a portion of those saving’s in connexion with rural credits, and it is proposed to set up the necessary ‘ machinery to deal with that matter. Home building is another matter which must be considered by the Government. So far, however, the Government has not made up its mind as to the best means to adopt. Two courses are open to it. One is that the Commonwealth Bank itself should establish- a homebuilding department; and the other is to utilize the machinery now operating in the different states. The experience gained in the erection of war service homes showed that it was more .economical, both for the Government and for the soldiers to utilize the state machinery. Whilst agreeing that a certain amount of the money deposited in the savings bank branch of the” Commonwealth Bank should be devoted to the erection, of homes, .the Government may conclude that the wiser course is to make advances to the state organizations. The; different aspects of the matter are being- explored, but I cannot give a definite assurance regarding the course that iff likely to- be adopted. The Government recognizes that the matter in list he thoroughly investigated, and a well-considered proposal brought before Parliament at a later date.

Senator GRANT:
NEW SOUTH WALES · ALP

– Senator Pearce may be right in his contention that new machinery would have to be set up to give effect to this proposal. That prospect, however, does not possess amy terrors for me. What I want to see inserted in. the bill is a direct instruction to the management to engage in this class of business. Senator Pearce is doubtful whether it would be wiser to make advances to the states, or to set up a new department, something on the’ line*: of the Repatriation Department. Evidently he- realizes that action is necessary to deal with the present unsatisfactory position. I have no objection to Senator

Findley’s suggestion that the Commonwealth Bank should establish a home building department, and erect houses en masse. I believe that that method would lead to the erection of cheaper and more satisfactory houses. What I had in mind, however, was that the Commonwealth Bank should advance money to those who are prepared to erect their own homes. I am not an enthusiastic admirer of the work that is being done by the War Service Homes Department.

Senator Pearce:

– The Commonwealth Bank at present has the power to make advances in the way suggested by the honorable senator.

Senator GRANT:
NEW SOUTH WALES · ALP

– The Commonwealth Bank has been established for twelve years, but it has never exercised that power.

Senator Pearce:

– Yes, it has.

Senator GRANT:
NEW SOUTH WALES · ALP

– Does the honorable senator say that the Commonwealth Bank has advanced money to people to enable them to erect their own homes?

Senator Pearce:

– Yes.

Senator GRANT:
NEW SOUTH WALES · ALP

– My information on the point leads me to think differently. An examination of its last balance-sheet, I contend, would not disclose an asset in that direction. If such advances have been made the total is so small that a microscope would need to be used to discover it in the accounts of the bank. I am not prepared to deny the accuracy of the Minister’s statement, but if it is a fact, what objection can there be to inserting in the bill a clause directing the management to conduct this class of business? Senator Lynch contended that the insertion of such a provision in the bill would lead to a duplication of work that is now being done by the .state savings banks. Duplication exists at present in the receipt of deposits.

Senator Foll:

– Manly, New South Wales, is full of empty houses.

Senator GRANT:
NEW SOUTH WALES · ALP

– I contest the accuracy of that statement. Senator Lynch admitted that there was unlimited scope for house building. The state savings banks and the private institutions combined are not meeting the de- - mand The time is opportune, therefore, for the Commonwealth Bank to fill the breach. Does any honorable senator contend that the owner of a vacant block of land, similar to that referred to by Senator Reid, within easy distance of

Adelaide, can obtain an advance from the Commonwealth Bank to enable him to build a home on that block 1 I do not think the Commonwealth Bank will make an advance to the owner of a vacant block of land. A great deal has been said regarding the work of the War Service Homes Department. That department at present advances up to £800 for the erection of a home. It takes a purchaser 37 years to complete his repayments at the rate of £1 per week, and the amount paid by him in that period is £1,924. That is what a returned soldier is required to pay to-day for the services rendered to him by the War Service Homes Department, and, in my opinion, it is too large a sum. Senator Greene was doubtful if the amendment would have the effect I anticipate. He said that if he could be sure it would, he would vote for it. T suggest that at least he might give it a trial. I disagree with his contention that a comprehensive measure is necessary to enable the Commonwealth Bank to lend money to a person who owns a ( vacant block of land on- ‘which he is willing to erect a home. The machinery is in existence if the bank will put it into operation. That is what the bank will not do. Unless the directors are told pointedly and plainly that they will have to make way for others if they do not, in my opinion they will not advance money for the erection of homes. I do not mind whether the funds of the savings bank branch only are used, or whether those of the general bank also are drawn upon. On 1st December, 1923, the general bank had funds totalling £29,560,115, while deposits in the savings bank amounted to £40,330,455, a total of £69,890,570. So far as I know, practically none of that money has been lent for this purpose. The time is long overdue for informing the management that they must engage in this class of business, whether it be in competition with the state banks or with private institutions. I do not suggest that the whole of the £69,890,570 should be used for this purpose.

Senator Crawford:

– The whole of that money is already invested.

Senator GRANT:
NEW SOUTH WALES · ALP

– The bank should set aside £2,000,000 a year to assist in relieving the housing shortage. I can- not agree to withdraw the amendment. I hope the committee will insert it in the bill.

Question - That paragraph a of proposed new clause 4a be agreed to (Sena- . tor Grant/s amendment) - put. The committee divided.

AYES: 9

NOES: 15

Majority

AYES

NOES

Question so resolved in the negative.

Paragraph a negatived.

Senator GRANT:
NEW SOUTH WALES · ALP

– The object of paragraph b of the new clause proposed by me, which is now before the committee, is to prevent the bank from being a land-owner longer than is absolutely necessary. I saw a return furnished not long ago of the condition of affairs in New South Wales.There are in that state the western, central, and eastern divisions. The eastern division is the most thickly populated. The central division is populated to a less extent. In the far west the population is sparse, and consists chiefly of leaseholds. The return showed conclusively that very many of the leases were in the hands of large financial institutions, including certain banks. I have the impression that the banking authorities do not fully utilize land that comes into their possession by foreclosure on their victims, and in asking the committee to insert this proviso my desire is to limit the term for which the bank may hold properties. I am not- submitting the amendment with a view to preventing the bank from lending money. If the security is good enough banks will advance money against any property, but a bank should not lend money merely on the off chance that a drought will force the holder of a leasehold to surrender, and that at some future date the bank will be able to recoup itself for the advance and interest charges.

Senator GREENE:
NEW SOUTH WALES · NAT

– The honorable senator’s amendment also includes house property ?

Senator GRANT:
NEW SOUTH WALES · ALP

– Certainly it does. It is absolutely wrong, in my opinion, that a bank should be permitted by any act of Parliament to hold on to land as mortgagee in possession for an indefinite number of years. It may be the opinion of certain honorable senators that my amendment will prevent a bank from lending money as freely as it has in the past. That may be quite true, and perhaps it would be as well if a bank did not lend money so freely to its customers. If the bank is satisfied as to its security, and if it has money available, I do not for a moment imagine it will be prevented from lending money even when confronted with this provision. As, in my opinion, a bank does not make the fullest possible use of pastoral, farming, and other properties that fall into its possession, the amendment would have a salutary effect. It would compel the bank to dispose of a property as soon as possible, and enable the land to be held by the real owner, who would make the best use of it.

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

– I hope the committee will not accept the amendment. I am rather astonished that Senator Grant should have moved’ it. I was always under the impression that the honorable senator was a believer in the nationalization of land. The Commonwealth Bank is a Government institution. If it became the owner of any land, that land would virtually be the property of the Commonwealth Government, through the instrumentality of the Commonwealth Bank. The honorable senator’s amendment insists that land which comes into the hands of the bank shall be re-sold within two years, and pass again into private ownership. What is the reason for this sudden conversion on the part of the honorable senator to the principle of private ‘ ownership in land ? I am astonished that, as an advocate of land nationalization, he should refuse to allow the state to remain in possession of land for more than two years. I suggest that he again read Progress and Poverty, or consult with his friend, Mr. Huie, and get back to the right track. Apart from the honorable senator’s strange falling from his high ideals, the amendment is a very serious one, and, if carried, would seriously damage the business of the Commonwealth Bank. If the bank were required, within two years of land coming into its possession, to re-sell the land at public auction, whether the market was good or bad, its business in the making of advances would be seriously interfered with.

Senator McDOUGALL (New South Wales) 5.3]. - The Minister’s grim joke at Senator Grant’s expense is entirely out of place. I take it that Senator Grant’s desire is to make the Commonwealth Bank stable. The Minister is not so old as I am, and probably has not had the painful experience of having been robbed by the private banks. 1 say, advisedly, that one of the reasons for the reconstruction of the banks many years ago was because they had advanced the full value against certain properties. They had no right to do that. If banking institutions were obliged, within two years of foreclosure, to dispose of the land in respect of which an advance had been made, they would not overload properties.

Senator Pearce:

– This amendment will not affect the private banks at all.

Senator McDOUGALL:

Proposed new clause, by leave, withdrawn.

Clause 5 -

Section nine of the principal act is repealed and the following sections inserted in its stead : - “9.- (1) The capital of the bank shall be Twenty million pounds, consisting of the following : -

Such sum not exceeding Six million pounds as is lent to the bank by the Commonwealth from moneys borrowed by the Commonwealth in pursuance of this act; and

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

[5.18J.- I move-

That the word “ lent,” sub-section 1, paragraph (b), be left out with a view to insert in lieu thereof the .word “ granted “.

AYES: 18

NOES: -9

Majority

– I have risen chiefly because of the amusement with which Senator Grant’s proposal to issue notes was received by honorable senators opposite. There was a time in the life of this Senate when honorable senators opposite could afford to laugh at a suggestion to issue notes, but that time has now passed, because they have expressed their willingness to accede to a proposal to issue notes on security held outside Australia. The wildest “wild cat” in the Labour movement would never dream of making such an absurd proposition. I think we could well issue notes to the value of £6,000,000, or even £12,000,000/ A simple method of doing so is provided by the Commonwealth Bank Act, and that is to issue £3 in notes for every £1 held in gold. I would buy up every ounce of gold produced in Australia, and thus provide for the continual expansion of our credit. If £1,000,000 worth of gold were produced annually in Australia, by buying it up we could increase our credit to the extent of £3,000,000, at the same time retaining a solid gold backing for the notes that were issued. I realize that the Commonwealth Bank, as the Labour party established it, was provided with a better basis than that of gold. Some people who imagine they know everything about banking overlook a most important feature of the issue of notes. The credit of private banking institutions is limited, and they must, therefore, have gold as a basis for their notes. There is no limit to Australia’s credit except that of the last shilling in the hands of the last taxpayer. The credit of Australia is so great, and is developing so rapidly, that it cannot have a limit placed upon it.

At the same time I want it to be clearly understood that we on this side do not favour the unlimited issue of notes. At present we stand for a gold basis. We would purchase gold for the sake of security. The mining industry could thus be materially assisted, because it would pay the Commonwealth to give for the gold one shilling per ounce more than was offered by other prospective ‘ buyers. Having announced that a provision is to be inserted in the bill to enable notes to be issued against foreign securities held by private banks in London, thereby departing from the principle of maintaining absolute security and ensuring public confidence, the Government and its supporters cannot afford to laugh at any proposition made by honorable senators on this side with regard to a note issue, because they have lost every sense of responsibility that they may once’ have possessed.

Senator McDOUGALL:
New South Wales

– Has the Minister (Senator Pearce) any idea of the amount of gold held by the private banks, which to-day are seeking the assistance of the Commonwealth Bank? I am given to understand that the bank of New South Wales has locked up in its vaults £9,000,000 in gold, and that the other banks are similarly situated. If that is so, why should it be necessary for these institutions to be strengthened by the establishment of a central bank? The chairman of directors of the Commercial Banking Company of Sydney, which last year made a profit of £400,000, has distinctly stated that that institution has not sought the assistance of the Government, and does not require it. ‘ He has made statements,, which are not complimentary to the framers of this measure, regarding the manner in which it has been placed before Parliament.

Senator Pearce:

– The private banks hold approximately £20,000,000 in gold.

Senator Thompson:

– I think the figure is nearly £21,000,000.

Senator McDOUGALL:

– What is the reason for the locking up of that sum ?

Senator Findley:

– A house must hare a foundation. A bank must have a basis on which to start operations.

Senator McDOUGALL:

– The private banking institutions want the Government to provide that basis; they want the taxpayers of Australia to be responsible for an expenditure of £500,000 per annum, to pay for the foundation of a “ house that Jack built.” I am not satisfied with the proposal of the Government.

Senator GREENE:
NEW SOUTH WALES · NAT

– Apparently Senator Gardiner objects to this provision, because he says that the Government is setting out to do something that has never before been contemplated - to issue notes against other than Australian securities. Why did Senator Gardiner support the government that passed the original Australian Notes Act? That act clearly contemplated, the issue of Australian notes against other than Australian securities. Section 8 of the Australian Note3 Act of 1910 provides: -

Part of the moneys standing to the credit of the Australian Notes Account shall be held by the Treasurer in gold coin for the purposes of the reserve provided for in Section 9 of this Act, and the Treasurer may invest the remainder or any part thereof -
1. On deposit in any bank, or
2. In securities of the United Kingdom, or of the Commonwealth, .or of a state

Senator Gardiner:

– The honorable senator has just proved that what I said was right.

Senator GREENE:
NEW SOUTH WALES · NAT

– I have not.

Senator Gardiner:

– Will the honorable senator be fair enough to say whether it was the notes, or whether it was the profits earned from the notes issue, that were to be so invested?

Senator GREENE:
NEW SOUTH WALES · NAT

– It refers to part of the money standing to the credit of the Australian Notes Act. Inasmuch as the Australian banks hold surplus funds in English securities, such as short-dated Treasury-bills, &c, in London, the Government is providing that the Commonwealth Bank shall have power to issue notes against those securities, which will be handed over to the custody of the notes issue department of the Commonwealth Bank.

The TEMPORARY CHAIRMAN (Senator Kingsmill:

– The honorable senator is not in order in discussing those matters.

Senator GREENE:
NEW SOUTH WALES · NAT

– I am simply replying to what Senator Gardiner said. This power is an elaboration of a provision already incorporated in the Australian Notes Act.

Senator GARDINER (New South Wales [6.10]. - I can promise, Mr. Chairman, that I shall not be any more out of order than was the honorable senator who has just resumed his seat. Senator Greene, having hurriedly glanced at section 8 of the Australian Notes Act, endeavoured to make the committee believe that the act authorized the issue of notes against foreign credits. The act provides for the issue of notes on a gold basis, and that the profits earned on the notes issued shall be invested in the way described by Senator Greene. There is all the difference in the world between issuing notes against foreign securties, and investing the profits earned by the notes in such securities. I do not approve of these high banking authorities trying to mislead the committee.

Amendment agreed to.

Question - That the clause, as amended, be agreed to - put. The Committee divided.

AYES: 15

NOES: 8

Majority … … 7

AYES

NOES

Question so resolved in the affirmative.

Clause, as amended, agreed to.

Clause 6 -

Section 10 of the principal act is repealed, and the following section inserted in its stead: - “10. -(1.) The Treasurer may, from time to time .. . borrow moneys not exceeding in the whole the amount which it is necessary to borrow in order to lend to the bank the sum of£6,000,000. “ (3.) There may be issued and applied out of the proceeds of any loan raised under the. authority of this section the sum of Six million pounds for the purpose of a loan to the bank. “ (4.) The bank shall pay to the Treasurer, half-yearly, interest on the amount due by the bank to the Commonwealth in respect of loans made in pursuance of this section. “ (5.) The rate of interest payable by the bank shall be the rate equivalent to the effective rate of interest payable by the Commonwealth on the loan raised for the purpose. “ (6. ) For the purposes of the last preceding sub-section, the effective rate of interest payable by the Commonwealth on any loan raised for the purpose of this section shall be such rate as is certified in writing by the AuditorGeneralas being the effective rate of interest payable by the Commonwealth on that loan.”

Amendment (by Senator Pearce) proposed -

That the word “ lend,” sub-section (1 ) , be left out with a view to insert in lieu thereof the word “ grant”.

Senator GARDINER:
New South Wales

– I do not intend to delay the committee, but I should like to know what is wrong with the clause as it stands, and the reason for the proposed amendment.

Senator Pearce:

– Because the bank is under no obligation to repay a grant.

Senator GARDINER:

– That strengthens the position I take up. I do not want the people’s money to be lavished upon the Commonwealth Bank in such a way that it will be under no obligation to repay it, although I know that in the long-run what belongs to the bank belongs to the people. The will of Parliament must be supreme. This Parliament may authorize certain provisions, and another Parliament, fortunately still the supreme authority, may pass other provisions. The Ministerwould be well advised to allow the clause to stand. I do not believe this measure has been reasonably discussed by the Government. Evidently Ministers have changed their minds. I want to emphasize that fact. What harm could be done to the bank if we allowed the clause to pass? On the other hand, what harm may be done if it is amended? There will then be no claim for the return of the money granted to the bank, although a careless board of directors may be responsible for serious losses. It is because I believe that the people’s interests will be safeguarded by passing the clause as it stands that I intend to Vote against the amendment.

Question - That the word proposed to be left out, be left out - put. The committee divided.

AYES: 0

NOES: 8

Majority . . . 6

AYES

NOES

Question so resolved in the affirmative.

Amendment agreed to.

Amendment (by Senator Pearce) proposed -

That the word “ loans “, sub-section 4, be left out with a view to insert in lieu thereof the word “ grants “.

Senator GREENE:
NEW SOUTH WALES · NAT

– According to sub-section 4 -

The bank shall pay to the Treasurer halfyearly interest on the amount due by the bank to the Commonwealth in respect of loans made in pursuance of this section.

I submit that the words “ due by” are wrongly used if the word “ grants “ is to carry the significance ordinarily associated with it. If £6,000,000 be granted to the Commonwealth Bank it surely is not due by the bank to the Commonwealth. The section was originally drafted when the idea was that this money was to be regarded as a loan to the Commonwealth Bank, but now that the Government have chosen to regard it as a grant the sub-section should read -

The bank shall pay to the Treasurer halfyearly interest on the amount granted to the bank by the Commonwealth in respect of grants made in pursuance of this section.

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

– The point raised by Senator Greene is a good one, and I ask leave to withdraw my amendment with a view to the submission of a prior amendment.

Amendment, by leave, withdrawn.

Amendment (by Senator Pearce) proposed -

That the words “ due by “, sub-section 4, be left out with a view to insert in lieu thereof the words “ granted to “.

Senator GARDINER:
New South Wales

– Is the Minister assured that his amendment will not provide that all the moneys granted to the Commonwealth Bank must bear interest 1 The bank may not call up the whole of the £6,000,000.

Senator Pearce:

– The sub-section applies only to the amount actually granted.

Senator GARDINER:

– I hope that during the adjournment the Minister will make sure that his amendment will cover the position effectively. I am not sorry at what has been proposed, and I think that the amendment will protect the interests of the people of the Commonwealth; but I want to be quite sure that, in rushing in to do so, the Minister is not malting the position of the bank more difficult by calling upon it to pay interest, not upon the amount actually called up out of the grant, but upon the full amount of the grant itself.

Sitting suspended from 6.30 to 8 p.m.

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

– I ask leave to withdraw the amendment before the committee. I have had an opportunity to consult with the draftsmen, and the danger of moving amendments on the spur of the moment has once more been proved. If the committee consents to the withdrawal of the amendment, I shall move to make subclause 4 of the clause read as follows : -

The bank shall pay to the Treasurer halfyearly interest on the grants made in pursuance of this section.

Amendment, by leave, withdrawn.

Amendment (by Senator Pearce) agreed to -

That the words “ amount due by the bank to the Commonwealth in respect of loans “ be left out, with a view to insert in lieu thereof the’ word “ grants “.

Senator GREENE:
NEW SOUTH WALES · NAT

– Some little time ago . I suggested that it might be desirable in certain circumstances for the directors of the bank to be permitted to pay to the Government a rate of interest less than equivalent to the effective rate of interest payable by the Commonwealth on the loan raised for the purpose of making the grant to the bank. In the case of an ordinary financial institution, shareholders are at times paid less than the ordinary rate of interest on their investments, and circumstances may arise - although it is not likely that they will - in which the directors of the Commonwealth Bank may consider it to be advisable, for the time being, to pay less than the full rate of interest payable to the Commonwealth Government for money which may be granted, under the provisions of this clause. I ask the Minister, therefore, whether he would be prepared to accept an amendment which would make sub-clause 5 of the clause read as follows: -

The rate of interest payable by the bank shall be a rate not in excess of the rate equivalent to the effective .rate of interest payable by the Commonwealth on the loan raised for the purpose.

– My only object in suggesting this amendment is to prevent any possible confusion. I think there is virtue in my proposal. I must say that the proposition of the Government to change the word “ lent “ to “ granted “ did not appear to me to rest upon any very solid ground. However, I do not press the matter.

Senator PAYNE:
Tasmania

.- The position is now perfectly clear. The bank will only pay interest on the amount actually granted to it. The early part of the clause provides that the Treasurer may issue inscribed stock or debentures to the bank for the purpose of providing it with capital, and the latter part of the clause makes it clear that interest will be payable only on such money as may be so granted.

Senator GARDINER:
New South Wales

.- The Minister (Senator Pearce) seems to think that my silence indicates that I am sleeping, and am satisfied that the money to bo advanced to the Commonwealth Bank is a loan and not a grant. I do not think that the amendment suggested by Senator Lynch is at all unnecessary. I do not know whether I would be quite in order in suggesting that the Minister’s “ offsiders “ do not appear to be too sure as to whether he is right or not. If, however, we devote too much time to the consideration of details little progress will be made. I am anxious to get on with the bill, but I am afraid the Minister doubts my sincerity.

Clause also consequentially amended, and, as amended, agreed to.

Senator LYNCH:
Western Australia

.- I move-

That the following new clause be inserted : - “6a. From and after the expiration of three years from the date of the passing of this Act the bank shall hold cash or securities of the Commonwealth or a state equal to 331/3 per centum of the amount of the bank’s liabilities :

Provided that the amount of cash so held shall notbe less than 20 per centum of the liabilities.”

This appears to be the only appropriate point at which to provide the manner in which the business of the “bank shall be conducted. It is quite clear that, apart from the appointment of the directors and the settlement of other subordinate matters, there is no expression in this bill as to how the business of the bank shall be conducted. The amendment I have submitted is an attempt to repair that omission. Our experience of banking has been of a varied nature, but happily examples of rash or careless banking in Australia have not been frequent. The public interest is so involved and so inextricably bound up with the question now under consideration that we should not lose an opportunity to Bee that what has happened in the past shall not occur again. I refer particularly to the happenings in this country in the early nineties, which are well within the memory of honorable senators. We can well remember that at that time about ten banks were carrying on’ business in Australia, and to all intents and purposes up to a particular year, and aye, up to a particular month, they were thought to be in a sound position. But experience taught us that all was not as we imagined. They had been carried on in a fashion that did not commend itself to any person experiencedin banking, or to any person capable and willing to express an independent opinion as to how a bank could be soundly and safely conducted. The result was that most of the banks failed. We know the main cause, and the purpose of the proposed new clause is to prevent a similar happening.

Senator Foll:

– It was overspeculation.

Senator LYNCH:

– That is another phrase to define the same thing. The main cause of the failure of the banks, which involved a loss of about £100,000,000, was as then stated in the Banking and Insurance Record. The catastrophe was of such dimensions that one would have to go back fairly far in English history to find its equal. The main cause of the collapse was the way in which the banks conducted their business of extending credit. Story upon story was erected upon slender foundations, until the natural thing happened and eight or nine banks failed. Tens of thousands of shareholders lost their money. I do not wish anything of that land to happen in connexion with the Commonwealth Bank, and for the information of honorable senators, I shall quote some of the evidence given before a commission appointed in 1893, when the debris was scattered all over the landscape, and when men who went to bed in the firm belief and conviction that they were men of substance and means awoke in the morning- to the dreadful experience of finding that they were ruined. It .is well within the- memory of honorable senators-

Senator Thompson:

– No one lost anything. It had only gone before.

Senator LYNCH:

– There are men in this country who lost a mighty lot, which they will never recover. I have been with some who were on the verge of lunacy as a result of the treatment the banks extended to them on that occasion. When that catastrophe happened a commission was appointed by the New South Wales Government, before which many witnesses were called to give evidence. Amongst them was Mr. Coghlan, the statistician at the time, and this is what he said -

I certainly think it is the essence of good banking that the liabilities should bear some fixed and definite proportion to the original capital and reserves of the bank, and what is more, the reserves should be kept as reserves and not put into the general pool of the business.

A Mr. Backhouse, a banker of experience at the time, was also called, and he stated -

If on English bank had a liability to the public of £6,000,000 it would not consider itself justified in advancing more than £4,000,000. That is, it would keep 33 J per cent, of - its liabilities in cash or liquid securities. I cannot help feeling that too much importance is attached to the proportion of gold to the total liabilities, insufficient importance being given to the proportion of the reserve to liabilities from which circumstances I consider come the whole of the recent failure. We have about two million in coin and securities, but make ten million a year less out of them than we ought to make owing to careful banking.

If we are to be guided it should be by the lamp of experience, which, as Patrick Henry said, is the only one which lights the feet of men to progress through life. We should be guided by experience and avoid such a catastrophe as that which happened in the early nineties. I am quite aware” that in opposition to this proposal it will be said that it will mean locking up the reserves of the

Commonwealth Bank to an unnecessary degree, but if the locking up of these reserves means a positive insurance against what happened in the period I have stated, our action will be fully warranted. I therefore ask the committee to agree to the proposed new clause, so that it can be said that this is a bank conducted on such sound principles that it keeps in reserve, in cash or in a liquid form, one third of its liabilities to the public. It will be said, of course, that the Commonwealth Bank is a national bank, owned and controlled in the interests of the people, and cannot be pressed into liquidation. In reply to the argument which may be raised against the locking up of reserves, I would point out that even in regard to public credits, to which I attach the greatest importance - because public credit stands superior to the credit of an individual or any section of individuals - it is universally admitted that one cannot go beyond a certain point. I point out to Senator Gardiner and Senator Greene, who referred to the note issue, that public credit cannot sustain the action of any Government in issuing notes upon its own responsibility and upon the good faith of the nation unless the note issue has, as a compulsory limit, a gold backing to the extent of 25 per cent. Public credit can only be trusted up to a certain point, and if that limit is exceeded universal consent will not sustain the action taken. If any one proposed to provide less than a 25 per cent, gold backing for our notes, universal opinion would be up in arms, and rightly so, too. When it is necessary to employ the public credit and provide a rigid safeguard in relation to our note issue, it is equally important to make similar provision, in regard to the bank, the operations of which we are now discussing. It is only fair to the bank, to the public, and to the good name of the Commonwealth that we should provide such safeguards as will remove the bank from beyond the point of suspicion in order that it may be established upon a foundation, so to speak, of imperishable granite. There should be’ no chance of its tottering. We ought to do this for the further reason .that there has been no change in our banking law since the early nineties. The Com- monwealth Parliament must soon pass a bill to regulate banking that extends beyond the limits of one state. I am sure that this Parliament will require the private banking institutions ‘ to observe some such provision as this. If it does not, the lesson of the early nineties will have been wasted. If the private banks are compelled to provide this safeguard, similar provision must be made in the case of the Commonwealth Bank. I remind the committee that this proposal is not a new one. Until recent years, the Canadian banking law provided that not more than 8 per cent, could be- declared as a dividend by any bank if the reserves fell below one-third of its liabilities. Anything in excess of 8 per cent, had to be placed to reserve, to bring it up to at least one-third of the liabilities of the bank. I want the Commonwealth Bank to be built on the soundest possible foundation. The only way in which that can be done 13 to ensure that, as against its liabilities, it shall have either cash or liquid assets in the proportion proposed by me. I hope that my amendment will commend itself to the committee.

Senator PEARCE:
Minister for Home and Territories · “Western Australia · NAT

– I think I have every justification for taking exception to the submission of this important clause without notice to me that it was to be moved or a copy being supplied.

Senator Lynch:

– I returned from Adelaide only this morning; otherwise I should have supplied the Minister with a copy.

Senator PEARCE:

– This is not a minor matter. The honorable senator proposes one of the most revolutionary changes that could possibly be made in the banking law of any country. No country in the world has in its banking law a provision similar to this. Before agreeing to make such a startling change a great deal more consideration would be necessary than I am able to give it on the spur of the moment. I fear that, whatever merits may be possessed by the honorable senator’s case, he has prejudiced them, because of the fact that one is not able in the time available to look into the full meaning of the proposed new clause. It is. fairly obvious that, if there is one bank in the Commonwealth that does not require this safeguard, it is the Commonwealth Bank. If this provision is a neces sity of banking, it should be applied to every bank other than the Commonwealth Bank. The proposed new clause would place upon the Commonwealth Bank a restriction which would not apply to any other bank in Australia.

Senator GREENE:
NEW SOUTH WALES · NAT

– I think Senator Lynch ought to wait for the introduction of a general banking bill.

Senator PEARCE:

– Then such a proposal might quite properly be made. It would be most unfair to saddle the Commonwealth Bank with this restriction. The people cannot allow that bank to escape its liabilities as some private banks, according to Senator Lynch, did in the nineties. As long as there is a shilling in the Treasury locker, it must be placed at the disposal of this bank. There is another reason why, on the spur of the moment,’ without having had time to properly think the matter out, I do not favour the proposed new clause. It is intended to make the Commonwealth Bank a central bank. We hope that, if a time of crisis does arrive, the Commonwealth Bank will come to the rescue of the private banks. This restriction would operate at such a time, and the Commonwealth Bank, even though it had the resources of the whole of the people of Australia at its back, would be hamstring. In the nineties, when those terrible events referred to by Senator Lynch occurred, it was obviously in the interests of the people that the private banks should be kept going, and the governments of the states took extraordinary action to that end. Had the Commonwealth Bank been in existence at that time it would have been its duty to go to the assistance of the private banks, but such a provision as this would have prevented it from doing so. Everybody must recognize that this is the one bank that can safely do without such a provision. Senator Lynch must see, on reflection, that it would be most unfair to place this restriction on the Commonwealth Bank and allow the other banks to operate without it. I appeal to him to withdraw the amendment at this stage. It can properly be considered when the general banking law is being amended.

Senator ELLIOTT:
Victoria

.- I think that the amendment is worthy of more consideration than has been given to it by the Minister. Instead of being withdrawn at this stage, it ought to be deferred until the Minister has had an opportunity to consider it more at his leisure. He has said that the Commonwealth Bank could dispense with a provision of this nature. I differ from that point of view. Those banks which were affected by the last crisis observe this practice strictly without any legislative provision. It is in the interests of the directors and the shareholders that they should do so, because they are liable to suffer heavy loss. The Commonwealth Bank, on the other hand, will be controlled by directors who are under no danger of losing their personal capital, and such a provision as this may be uecessary in its case. If at any time, owing to some great national crisis, it was imperative for the Commonwealth Bank to disregard this safeguard, it could approach the Commonwealth Parliament and have passed a measure conferring upon it extraordinary powers. It is all very well to say that the taxpayer is behind the bank. The taxpayer does not want to be made liable for anything over which he has no control. The shareholders of a private bank can bring their directors to book, but the taxpayers of the Commonwealth cannot influence the directors of the Commonwealth Bank. I hope that the Minister will not press for the withdrawal of the amendment, but that he will defer it until we can obtain a mature opinion upon it.

Senator GARDINER:
New South Wales

– I listened very attentively to Senator Lynch, and I am sure that he is not sufficiently aged to remember the banking crisis of the early nineties. Already this bill contains the provisions that saved the private banks at that time, even after the panic had started. In New South Wales, when private banks had closed their doors and posted the notice, “ Payment suspended pending reconstruction,” the State Government hurriedly passed a measure pledging the credit of the state to the .private bank notes, and making them legal tender. Senator Lynch said that he wanted to build the Commonwealth Bank upon a firm foundation. Let us look at the manner in which firm foundations are made, in a material sense. If an architect were to provide for a foundation of reinforced concrete in the proportion of one part of cement to three of river sand, Senator Lynch would not improve the mixture by throwing in a further quantity of mullock. The Commonwealth Bank has an excellent foundation in a gold basis and the credit of the Commonwealth. On such a foundation one can safely build, because the credit of the institution is limited only by the resources of the Commonwealth. Senator Lynch’s statement drew from the Minis-‘ ter the remark that as a central bank this institution may come to the relief of the private banks. I have no hesitation in saying that that is the chief purpose underlying the proposal to transform the bank from a trading bank to a central bank. In countries in which banking has grown to any extent the thing that most forcibly strikes students of banking is the periodical panic that has to be faced. After a period of prosperous trading something suddenly causes a run on the banks. The chief cause to my mind is that in the days of prosperity, when profits are great, the shareholders get the whole of the benefit. Since the lesson of 1893, in Australia, I believe that banking has been carried on with safety as the guiding principle. I think that we are now going through a most critical banking period, and that is why I favour moving very slowly, lest, in our eagerness to help the private banks, we do more harm than good. Senator Lynch’s proposal is tantamount to throwing too much mullock into a good foundation. What better foundation could one have than a gold basis and a taxable people ? The Australians submit more readily to taxation than the people of any other country. There appears to be no limit to their patience. They appear to be able to adapt themselves to any condition and submit to any hardship in the way of taxation. The people of Australia are behind this bank, and will submit to a good deal to maintain their own reputation. I see no necessity to tie the hands of the management by any imaginary strengthening of the bank’s position. As the Minister has pointed out, if the provision were applied to all the banks there might be something in it, but as it will only apply to the Commonwealth Bank, why this extraordinary precaution? Apart from the service the bank has rendered the community, and the savings it has effected in connexion with the floating of our loans, the actual profits earned on its ordinary banking business totals £4,500,000. If it had been a private bank how much of that £4,500,000 would have remained the property of the people? It would, of course, have been disbursed in dividends. If the bank” is managed as successfully in future as other banks are, and I venture to say it will be, the credit and the accruing profits of the bank year after year will build up a reserve greater even than Senator Lynch now proposes to establish, because with the ordinary turnover of a 5 per cent. profit, the bank will double its capital in fourteen years. In a growing country like Australia, investments in land constitute one of the greatest dangers to banking. One has only to bear in mind the immense fortunes that are made. A friend of mine hot long ago invested £1,000 in a Sydney suburban subdivision, and turned the property over at a profit of about £5,000 in a short space of time. Panic, financial stringency, and difficulties soon come when a sufficient number of people have to pay away their weekly earnings as interest on land transactions. The Commonwealth Bank will not go headlong into that kind of investment. The government of the day, rather than the directors of the bank, must be responsible for the successful operation of the bank. That responsibility cannot be removed from them, but we must have the strong guiding hand of the man upon whom would fall the censure of the people in the event of disaster. The position of the Commonwealth Bank is sounder than the position of the private banks.We have an institution that is already successfully operating. Its earnings to date total £4,500,000. Now it is to be granted another £6,000,000 of capital, and Senator Lynchwants to make its foundations better by adding something. It might be wise if Senator Lynch withdrew his amendment, and submitted it at a later stage when honorable senators had further information as to its details, and knew exactly what it meant. At the moment I do not consider it necessary, and I am not going to impose on the Commonwealth Bank, the property of the people, conditions which are not required of the privatelyowned banks.

Senator GREENE:
NEW SOUTH WALES · NAT

– Perhaps the Minister can see his way clear to postpone consideration of this proposed new clause. I do not think that it would help us very much, for the reason, amongst others, that the Commonwealth Bank can issue notes to itself. If it found that it was running short of the percentage allowed in Senator Lynch’s amendment, it could issue a few more notes and the position would be all right again. That is one of the dangers I see. However, I do not press it, but I suggest that the Minister postpone consideration of the clause until we have considered the position a little more.

Senator Pearce:

– If Senator Lynch withdraws his amendment he may move for the recommital of the bill at a later stage for the purpose of again presenting his amendment.

Senator Lynch:

– In deference to the wishes expressed by honorable senators, I ask leave to withdraw my amendment conditionally upon an opportunity being given later to recommit the bill for the purpose of considering the proposed amendment.

Leave granted; proposed new clause withdrawn.

Clause 7 -

Sections eleven to fifteen, both inclusive, of the principal act are repealed’, and the following sections inserted in their stead: - “11. - (1.) The bank shall be managed by a board of directors composed of the Governor and seven other directors. “ (2.) Subject to this act, the seven other directors shall consist of -

two persons who are or have been as sociated with manufacturing industries or commerce;

two persons who are or have been associated with agricultural, pastoral, or other primary industries; and

two persons who have a knowledge of currency and are declared by the Governor-General to have been chosen because of that knowledge. “ 12.- (1.) The Governor and a Deputy Governor shall be appointed by the GovernorGeneral, andshall hold office for a period not exceeding seven years, and shall be eligible for re-appointment. “ (2.) In the making of the appointments of the directors specified in paragraphs (b) and (c) of sub-section (2.) of the last preceding section, due consideration shall, as far as possible, be given to the fair representation of the geographical divisions of the Commonwealth. “ (3.) The directors specified in paragraphs (b), (c) and.(d)of sub-section (2.) of the last preceding section shall be appointed by the Governor-General. “ (4.) Of the six directors first appointed in pursuance of paragraphs (b), (c) and (d) of that sub-section, one shall be appointed for a term of seven years, one for a term of six years, one for a term of five years, one .for a term of four years, one for a term of three years, and one for a term of two years. ‘ (5.) Thereafter each director shall be appointed for a term of seven years. “ (0.) Each person who is appointed a director shall, upon the expiration of the term for which he was appointed, be eligible for reappointment. “ (7.) In the event of the office of one of the directors specified in paragraphs (6), (o) and

of sub-section (2.) of the last preceding section becoming vacant otherwise than by effluxion of time, the Governor-General may appoint a director to that office for the remainder of the term for which his predecessor in that office was appointed. “ 12a.- (1.) The Governor shall be the chief executive officer of the bank. “ (2.) The Deputy Governor shall perform such duties as- are directed by the board. “ (3.) The Governor and the Deputy Governor shall severally devote the whole or their time to the duties of their office.

Senator THOMPSON:
Queensland

– I move-

That the words “ the governor and seven other directors lines 5 and 6, be left out with a view to insert in lieu thereof the words “ seven directors and a general manager “.

The sub-clause will then read -

The bank shall be managed by a board of directors composed of seven directors and a general manager.

– Because the members of the board, as proposed, will not concentrate.

Senator GREENE:
NEW SOUTH WALES · NAT

– They cannot. - To test the feeling of the committee, I intend to move an amendment.

Senator Pearce:

– Will the honorable senator allow me to make a suggestion without in any way endeavouring to interfere with his right to move in the direction he desires?

Senator GREENE:
NEW SOUTH WALES · NAT

– Certainly..

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

– I can easily see that we shall get into a. state of confusion if we proceed to deal with the whole of the clause at once, as it is almost a bill in itself. I would suggest, for the convenience of the committee, that the proposed new sections be taken separately. If that is done, we shall then have a connected discussion on the different principles involved.

The TEMPORARY CHAIRMAN (Senator Payne:
TASMANIA

– There being no objection to the Minister’s proposal, I shall deal with the clause in the manner suggested. - Amendment (by Senator Greene) proposed -

That the word “ seven “ in proposed new section (11) bo left out with a view to insert in lieu thereof the word “ five “.

Senator KINGSMILL:

– I certainly could not have got worse. I shall support Senator Greene’s proposal to leave out the word “ seven,” and shall test the feeling of the committee in regard to the insertion of the word “ three.”

Senator FINDLEY:
Victoria

– Senator Kingsmill has, in a measure, anticipated an amendment which I intended to move later. Clause 7 contains one of the most important provisions in the bill. Whether it is carried in its present form or in an amended form is, for the moment, immaterial. No matter what the number of directors may be, the fact that the bank is to be managed by a board constitutes a complete, if not a drastic, change in its management. What reasons have, so far, been advanced in favour of any change? The Government that brought the bank into existence placed in control of it a gentleman who did an immense amount of service to the Commonwealth and its people. He was - appointed for a period of seven years. He had to organize his staff, establish branches throughout the Commonwealth, and do a hundred and one other things that the governor of the bank is not called upon to do at the present time. After it has been demonstrated that the bank can be efficiently managed by one man, the Government desires to take the management from the governor of the bank and hand it over to eight gentlemen about whom we, at present, know nothing. Then the Leader of the Senate (Senator Pearce) says that we ought to consider the rights of the various states in making appointments to the directorate. Does any other honorable senator share that opinion ? 1 thought that this Parliament and this bank were essentially Australian institutions. If we are to have a board of directors it should have on it the best men available, irrespective of the states from which they come. Why should geographical limitations be imposed when it is necessary to obtain men who will render the best service ? If it were necessary to advertise for a governor for the bank, would Senator Pearce contend that state interests should be considered, and that we should be very guarded in our movements for fear that we should interfere with state rights? Such a proposition, if made seriously, would not be listened to for a moment. If, in the states containing the smaller population there is a man with qualifications superior to those possessed by any one in the states that have the larger population, he should be chosen. Respecting currency, Senator Greene said that varied opinions had been expressed by different people in Australia. That fact is evident from a perusal of the newspapers. In the Melbourne Argus and the Melbourne Age to-day - the latter particularly - honorable senators will find varying opinions regarding the present financial stringency; so-called experts expressing widely divergent views. Even members of the Cabinet differ from each other. The Minister for Trade and Customs (Mr. Pratten) has a panacea for the financial stringency. He says that we should cease from borrowing abroad, stop importing, and float our loans in Australia, to bring ourselves within the safety zone. The Treasurer (Dr. Earle Page) in effect tells the Minister for Trade and Customs that that would be a suicidal policy, and - that we have reached the peak in the flotation of loans in Australia. What is meant by “ currency “1 I have consulted a dictionary on banking, and I find that the word “ currency “ was originally applied to the currency, or passing .from hand to hand, of money, but it has now come to bo applied to the money itself - gold, silver, and copper. Bills of exchange, bank notes, cheques, and any other document which acts as a substitute for coin, are also included under the term. So it can safely be said that if we are to appoint two persons possessing a knowledge of currency they must be chosen from the banking sphere. I take no exception to the term “governor.” The Minister stated that it would not be wise to change the name to that of managing director. He also said that if the Governor were taken ill, the Deputy Governor would be expected to take his place on the board. According to the bill the Governor will be an executive officer, with a seat on the board ; but nd provision is made for such a contingency - which I hope will not arise - as the Governor being laid aside by illness. The proposed new section 12 a provides; -

The Governor shall he the chief executive officer of tho hank.
The Deputy Governor shall perform such duties as arc directed by the Board.

Senator PEARCE:

– The honorable senator is wrong in saying that no provision ‘has been made to meet the case of the illness of the Governor. Section 15 makes such provision.

Senator FINDLEY:

– I hope the committee will not agree to the appointment of a board of eight directors. What real purpose will the directors serve by meeting only once a month? Other honorable senators have pointed out that the policy of the Commonwealth Bank is laid down by the Governor of that bank, and the policy of the associated banks by their general managers. The Government urges that,, for the efficient management of the Commonwealth Bank, it is necessary to have seven other directors, who shall meet monthly, and be paid approximately £50 a sitting. If there is a real necessity to appoint directors, they should be in closer touch with the Governor of the bank than a meeting once a month will enable them to be. The appointment of part-time directors, who will probably be more concerned about their own business activities than about the success of the Commonwealth Bank, will not result in the efficient management of that institution. I favour the present system of management, but, as the committee is not agreeable to that, I shall vote for any amendment that will make a blank in the clause, and enable ns to provide for the appointment of a fewer number than is proposed. I hope that the committee will agree to reduce the number of directors.

Senator DUNCAN:
New South Wales

– The clause contemplates the appointment of a board of directors consisting, in all, .of eight persons, one of whom is to be the Governor of the bank, and another the Secretary to the Treasury. The. motive actuating the Government when it decided to appoint six additional directors is quite evident from the construction of the clause. It is proposed that sub-section 2 of section 12 shall provide -

In the making of the appointments of the directors specified in paragraphs (b) and (c) of sub-section 2 of tho last preceding section, due consideration shall, as far as possible, be given to the fair representation of the geographical divisions of the Commonwealth.

That is the reason why six directors have been suggested in addition to the governor and the Secretary to the Treasury. There is to be one from each state. The Minister pointed out how vital it was, in his opinion, that each state should have representation upon the board. The clause is about the most unworkable in the whole bill. I asked the Minister how often he expected the board would meet, and he said, perhaps once a month, and in times of great financial importance the board would probably meet once a fortnight. It is absurd to expect gentlemen coming from each state to meet once a fortnight or once a month for tho munificent salary of £-600 a year. The object of securing representation for each state may be quite right, because members of the board would be «m fail with the conditions in their particular states; but it is utterly impossible to expect them to maintain .themselves away from their home states and devote their time to the affairs of the bank for the salary mentioned. Some other suggestion will have to be made. Coming now to the personnel of the board, a further absurdity is revealed, tt is provided that the board shall include two persons who are, or have been, associated with manufacturing industries or commerce. I am wondering from which state those members will be drawn. If they are appointed from, say, New South Wales and Victoria, is it to be expected of them that they will give special consideration to the manufacturing interests of Western Australia or Queensland ? We hear most bitter complaints from Western Australia that the manufacturing industries of the eastern states have gone to almost any length to crush out factories in Western Australia.

Senator Graham:

– So they have.

Senator DUNCAN:

– I agree with the honorable senator. Is it to be expected that the representatives on the board of the manufacturing interests, unless they come from the distant states, will give special consideration to the manufacturing interests of those states? I do not think they will.

Senator Guthrie:

– But that would not be the objective of the directors.

Senator Crawford:

– They will be appointed because they will bring to the board a personal knowledge of the industries referred to.

Senator DUNCAN:

– The object of the Government is to appoint one representative from each state. I want to know from which state the representative of the manufacturing interests will be drawn, from which state will come the representatives of those who are or have been associated with agricultural, pastoral, or other primary industries, and from which state will come the two directors who have a knowledge of currency. The proposal which has, to some extent, been forced upon the Government in another place is farcical. I agree with the principle that has been enunciated here, that the proper course is to settle upon the number of directors, and, irrespective of state interests, appoint the best men available. It should not be necessary to give special consideration to this or that interest as against the interests of the Commonwealth. I do not like the Government proposal, and I shall vote for the amendment to reduce the board of directors to five, because I believe that in doing so we shall be countering the pernicious principle which the Government has endeavoured to set up. The operations of the bank will not be hampered or interfered with, and the Government will be able to get away from its idea of state representation and appoint the five best men available.

Senator LYNCH:
Western Australia

– The Government proposal has been subjected to varying criticism. One honorable senator holds that a board of directors composed of eight persons is too- many, an-d should he reduced to five; another believes that five is too many, and favours three. Still another honorable senator is in favour of one man only. Taking the last objection first, I think we are justified in saying that one-man control of large institutions has proved a failure. Taking the Public Service as an illustration of my argument, we have seen men broken on the wheel of duty because of overwork. Now we have three men doing work which formerly was done by. one man, for the simple reason that

Ave have come to the conclusion that one man was unable to do it. At the entrance to these legislative halls there is the inscription, that “ In the multitude of counsellors there is safety.” “We walk over it every day. In that I believe. If Ave go back to the system of one-man control in connexion with this fine institution we shall be courting ruin. The arguments that have been advanced against the’ Government’s proposals are inconsistent. Senator Duncan objects to the appointment of eight directors. Let us see what would happen if we adopted his suggestion and deprived the board of the services of the governor, who has a right to be there, and the Secretary to the Treasury, who should also be a member. There remain six directors. Senator Duncan’s criticism would almost suggest that the board should be further reduced to three. Senator Greene is in favour of five. The position created by him would be on all fours with Senator Duncan’s views. Suppose only three are to be appointed. From whom. will the selection be made? It is fair to assume that they will be selected from the populous parts of the country and from particular states. “We have, for better or worse, cer- ‘ tain states which are given over principally to manufacturing industries, while other states are in the pioneering stage of development. If among the directors there is a majority of men representing . the manufacturing or commercial interests, what chance will the interests of a state whose people are engaged chiefly in ‘ pastoral pursuits have 1 Human nature being what it is, the Government’s proposal is admirable, as it combines all interests. So far as the number on the bank directorate) is concerned, Senator Greene will tell us that even the smallest bank operating in the Commonwealth has a directorate of at least four or five.

Senator DRAKE-BROCKMAN:
WESTERN AUSTRALIA

– I shall give the exact figures presently.

Senator LYNCH:

– In the case of the Commonwealth Bank, which has to deal with so many interests, the proposal of the Government is eminently sane and sound. I, therefore, have pleasure in supporting it, as I believe that it is necessary to hold the balance fairly between different interests, and between different state’s. Particularly do I see the importance of having all interests represented on this board. I am in favour of having one director to represent the wage-earners specially. We need a man to deal with the control of the currency in the interests of the wage-earner. Later, I shall move in that direction, as by that means we shall have a board worthy of the work it will have to do - one which will make for the best management of the bank itself, and act in the interests of the -whole, and not merely a section, of the Commonwealth.

Senator DRAKE-BROCKMAN (Western Australia) [10.131. - One honorable -senator, in criticizing the proposed -board, desired to know what was the use of a board which would meet but once a month. He evidently assumes that, when a bill specifically sets out that a board shall meet not less than once a month, the minimum is to be the maximum. The same provision is to found in the act which constituted the Notes Issue Board. It is true that on occasions that board meets only once a month, but it is true also that it frequently meets at intervals of three or four days. A board constituted to control the Commonwealth Bank would meet much more frequently than once a month. I am not sure that Senator Duncan was not on safe ground when he suggested that £600 was a rather small remuneration for the members of the board. If the honorable senator proposes that the amount should be increased, we can consider his suggestion later, but at present we are not dealing with that question. Most of the criticism of this bill is directed towards the size of the board, and the consensus of opinion seems to be that it is too large. Personally, I think that it is too small, and that if an alteration in the number suggested by the Government is to be made, it should be in the direction of increasing the number of ‘ directors. Although Senator Gardiner stated that the path to the Opposition benches was paved with good intentions, he indicated .also that if the Labour party were in power it would endeavour to see that th<» people of its own particular shade of thought were placed in control of the bank, so that it could be used as an instrument for nationalizing banking.

Senator Gardiner:

– The honorable senator is wide of the mark.

Senator DRAKE-BROCKMAN:
WESTERN AUSTRALIA · NAT

– BROCKMAN.That is the impression I gathered from the remarks of the honorable senator. But whether or not he intended that, it expresses my view of what would happen if the Labour party were in control of I he bank. I see considerable danger in these political appointments, especially if the power to make them is in the hands of a party whose policy it is to nationalize banking. It would be very easy to make the appointment of directors the spoils of party, for the purpose of forwarding the party’s policy. For that reason, I would be very loath to see the number of directors reduced to three, as suggested by Senator Kingsmill, or even to five, as Senator Greene proposes.

Senator GRANT:
NEW SOUTH WALES · ALP

– What difference would it make?

Senator DRAKE-BROCKMAN:
WESTERN AUSTRALIA · NAT

– BROCKMAN. - Without any necessity to alter the bill - ti matter of some difficulty, possibly - any party in power would be able to control the board within the life of one Parliament. If the board consisted of three directors, one of whom was to retire each year, a party could in two years, by making political appointments, obtain, control of it. Even with a board of five, that control could be obtained during the life of one Parliament.

Senator GRANT:
NEW SOUTH WALES · ALP

– It could be done even more quickly than that.

Senator DRAKE-BROCKMAN:

– To do so would require an amendment of the act,

Senator Guthrie:

– Could that not be overcome by an alteration of the term of office ?

Senator DRAKE-BROCKMAN:

– Possibly it could be accomplished in that way. I should prefer to see sixteen members on the board, one to retire each year. That would give continuity of policy without risk of undue political interference. The directors should have a reasonably lone term of office, so that there could not be undue political influence from anywhere. The temptation to use that influence will always be present to any party, no matter to what political creed it belongs, if there is a short-term board, and if within the life of one Parliament half of that board retires by effluxion of time. It is even possible within the fife of two Parliaments, because most political parties hold office for at least two Parliaments. As men automatically retire from the board of directors of the Commonwealth Bank, others will be appointed to succeed them who will serve the political ends of the party in power. How this difficulty can be overcome, I do not know; but it is a danger which causes me to wish that the members of the board of directors of the Commonwealth Bank could be surrounded with such protection as would make the risk of it as remote as possible. The number proposed to be appointed to the board is small as compared with the directorates of most central banks. The Bank of England has a governor, a deputy governor, and 24 other directors. Of course, the Bank of England is a very much bigger concern than the Commonwealth Bank, but as time goes on I hope that our institution will occupy in Australia, and ultimately in the whole world, a position corresponding with that of the Bank of England in the British Empire to-day. The board of directors of the Bank of France consists of a governor, a subgovernor, and fifteen others. There are eleven directors of the Reserve Bank of South Africa. Each of the twelve reserve banks in the United States of America is controlled by nine directors. Even in the case of trading banks the directorates are large. The Western Australian Bank, which operates in Western Australia only, has six directors. The Bank of Australasia has twelve directors.

Senator GREENE:
NEW SOUTH WALES · NAT

– How many of those are in Australia?

Senator DRAKE-BROCKMAN:

The TEMPORARY CHAIRMAN (Senator Payne:

– The honorable senator must confine his remarks to the amendment, which relates to the number of directors to be appointed.

Senator GRANT:
NEW SOUTH WALES · ALP

– The proposal to appoint eight directors would have some justification if the number of branches of . the bank had been greatly increased. The Bank of New South Wales, in addition to its head office and its Melbourne office, has 399 branches throughout the Commonwealth, and has only seven directors. The Commercial Banking Company of Sydney, in addition to its head office, has 232 branches, and only five directors. Yet we are asked to appoint a directorate of eight to control a bank having a head office and only 68 branches. I shall support the proposal to reduce the number of directors, in order to give the Commonwealth Bank the chance it has never had up to the present moment. I should prefer the board to consist of only three members, but, failing that, I shall support a hoard of five members which shall include a representative of the employees.

Progress reported.

page 2591

ASSENT TO BILLS

Assent to the following bills reported : -

Seat of Government (Administration) Bill. Hop Pool Agreement Bill.

page 2591

ADJOURNMENT

Progress of Business - Pensions to Retched Military Officers

Senator PEARCE:
Minister for Homo and Territories · Western Australia · NAT

– In moving -

That the Senate do now adjourn,

appeal to honorable senators to assist the Government in its endeavour to make a little better progress with business. We are moving along very slowly. I do not say that the matters with which we are dealing are not important, but it is the desire of the Government, if it is at all possible, to get the Commonwealth Bank Bill through this week, and I ask for the co-operation of honorable senators.

Senator GARDINER:
New South Wales

– I am quite in agreement with SenatorPearce’s desire to make better progress with the business; but I take it that he was responsible for the “stone-walling “ of the bill to-day by his own supporters.

Senator Pearce:

– I did not hold anybody responsible for the little progress made.

Senator GARDINER:

– I hold the Minister responsible for. it. Valuable time is being frittered away now, and I suppose that later on we shall be asked to agree to some all-night sittings in order that the Government’s programme of business may be completed. I do not feel in a fit state of health for that kind of thing. I ask the Minister representing the Minister for Defence whether, to oblige me, he will find out before we meet to-morrow if it is the intention of the Government to introduce to Parliament this session a measure to provide adequate pensions for certain officers, non-commissioned officers, warrant officers, and others who have been retired on allowances which are altogether too small to support them. I am asking the Minister to obtain this information to enable me to ask a question, without notice, to-morrow.

Senator WILSON:
Honorary Minister · South AustraliaHonorary Minister · NAT

– I shall do everything possible to meet the honorable senator’s wishes.

Question resolved in the affirmative.

Senate adjourned at 10.45 p.m.

Cite as: Australia, Senate, Debates, 30 July 1924, viewed 22 October 2017, <http://historichansard.net/senate/1924/19240730_senate_9_107/>.

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Senate30 July 1924

QUESTION

COMMONWEALTH SHIPPING LINE

Senator KINGSMILL:WESTERN AUSTRALIA

Senator NEEDHAM:WESTERN AUSTRALIA

Senator NEEDHAM:

Senator NEEDHAM:

QUESTION

CANBERRA CITY LEASES

Senator GRANT:NEW SOUTH WALES · ALP

Senator PEARCE:Minister of Home and Territories · WESTERN AUSTRALIA · NAT

Senator PEARCE:

QUESTION

PENSION APPLICATION

Senator GREENE:NEW SOUTH WALES · NAT

Senator PEARCE:NAT

PUBLIC SERVICE BILL.

Senator GARDINER:NEW SOUTH WALES

Senator PEARCE:NAT

PAPERS

QUESTION

PUBLIC SERVICE: TEMPORARY OFFICERS

Senator NEEDHAM:

Senator PEARCE:NAT

QUESTION

TERMINAL CABLE RATE

Senator DUNCAN:NEW SOUTH WALES

Senator CRAWFORD:Honorary Minister · QUEENSLAND · NAT

COMMONWEALTH BANK BILL

Senator NEEDHAM:Western Australia

The TEMPORARY CHAIRMAN (Senator Kingsmill:WESTERN AUSTRALIA

Senator NEEDHAM:

Senator Lynch:

Senator NEEDHAM:

Senator Findley:

Senator NEEDHAM:

Senator GRANT:NEW SOUTH WALES · ALP

The TEMPORARY CHAIRMAN (Senator Kingsmill:

Senator GRANT:NEW SOUTH WALES · ALP

Senator Thompson:

Senator GRANT:NEW SOUTH WALES · ALP

Senator Duncan:

Senator GRANT:NEW SOUTH WALES · ALP

Senator Payne:

Senator GRANT:NEW SOUTH WALES · ALP

Senator PEARCE:Minister of Home and Territories · Western Australia · NAT

Senator FINDLEY:Victoria

Senator PEARCE:

Senator FINDLEY:VICTORIA · ALP

Senator Sir Thomas Glasgow:

Senator FINDLEY:

Senator McDOUGALL:New South Wales

Senator LYNCH:Western Australia

Senator GARDINER:New South Wales

Senator GARDINER:

Senator Lynch:

Senator GARDINER:

Senator GREENE:NEW SOUTH WALES · NAT

Senator Needham:

Senator GREENE:NEW SOUTH WALES · NAT

Senator Elliott:

Senator GREENE:NEW SOUTH WALES · NAT

Senator Elliott:

Senator GREENE:NEW SOUTH WALES · NAT

Senator REID:Queensland

Senator Findley:

Senator REID:

Senator REID:

Senator Findley:

Senator REID:

Senator Findley:

Senator REID:

Senator McDOUGALL:

Senator REID:QUEENSLAND · NAT

Senator Findley:

Senator REID:QUEENSLAND · NAT

Senator GRANT:NEW SOUTH WALES · ALP

Senator REID:

Senator GRANT:NEW SOUTH WALES · ALP

Senator REID:

Senate
30 July 1924

Senator KINGSMILL:
WESTERN AUSTRALIA

Senator NEEDHAM:
WESTERN AUSTRALIA

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister of Home and Territories · WESTERN AUSTRALIA · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator PEARCE:
NAT

Senator GARDINER:
NEW SOUTH WALES

Senator PEARCE:
NAT

Senator PEARCE:
NAT

Senator DUNCAN:
NEW SOUTH WALES

Senator CRAWFORD:
Honorary Minister · QUEENSLAND · NAT

Senator NEEDHAM:
Western Australia

The TEMPORARY CHAIRMAN (Senator Kingsmill:
WESTERN AUSTRALIA

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister of Home and Territories · Western Australia · NAT

Senator FINDLEY:
Victoria

Senator FINDLEY:
VICTORIA · ALP

Senator McDOUGALL:
New South Wales

Senator LYNCH:
Western Australia

Senator GARDINER:
New South Wales

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator REID:
Queensland

Senator REID:
QUEENSLAND · NAT

Senator REID:
QUEENSLAND · NAT

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator THOMPSON:
Queensland

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

Senator GARDINER:
New South Wales

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator PEARCE:
Minister for Home and Territories · Western Australia · NAT

Senator GREENE:
NEW SOUTH WALES · NAT

Senator GARDINER:
New South Wales

Senator GRANT:
NEW SOUTH WALES · ALP

Senator PEARCE:
Minister for Home and Territories · “Western Australia · NAT

Senator GRANT:
NEW SOUTH WALES · ALP

Senator GREENE:
NEW SOUTH WALES · NAT