12th Parliament · 1st Session
The President (Senator the Hon. W. Kingsmill) took the chair at 3 p.m., and read prayers.
– Is the Leader of the Government in the Senate yet in a position to make known the terms of the communication received from the British Government in respect to the suspension of migration ?
– A cablegram has been sent to the British Government asking for leave to release its reply. No answer has yet been received to this request.
– On the 27th November, 1929, Senator Payne asked the Minister representing the Minister for Repatriation, upon notice -
Will the Minister favorably consider granting to returned soldiers who have to travel by train to hospitals for attention, owing to wounds or disabilities caused by war service, first class tickets in lieu of second class, in order to ensure reasonable comfort when travelling for this purpose?
I have now the following answer to the honorable senator’s question : -
First class fares (with sleepers where necessary) are granted in all cases where medical opinion indicates that the condition of the patient necessitates it.
Terms of Lease
– On the 5th December Senator Dunn asked the following questions, upon notice -
I am now in a position to inform the honorable senator as follows: -
– On the 5th December Senator Guthrie asked the following questions, upon notice -
Is it the intention of the Government to endanger the efficiency of the Air Force by disbanding the Air Board and/or the Air Forceas a separate entity in regard to the defence of Australia?
When will a proper aerodrome, with the necessary hangar, windvane, and water supply be made available to aviators at the Federal Capital ?
Is it a fact that, whilst Australia is particularly suitable for aviation, and our airmen second to none, there is not one good and up-to-date aerodrome in the whole of Australia?
I am now in a position to inform the honorable senator as follows : -
The following papers were presented : -
Papua - Annual Report for year 1927-28.
Lands Acquisition Act - Land acquired at Zanthus, Western Australia - For Defence purposes.
Northern Australia Act - Central Australia - Crown Lands Ordinance - Regulations amended.
Post and Telegraph Act - Regulations amended - Statutory Rules 1929, No. 122- No. . 124 - No. 125 - No. 128.
Motion (by Senator Daly) - by leave - agreed to -
That a Standing Orders Committee be appointed, to consist of the President, the Chairman of Committees, Senators Cooper, Crawford, Dooley, Foll, Herbert Hays, O’Halloran and Rae, with power to act during the recess and to confer with a similar committee of the House of Representatives.
representation of senate on joint Committee.
Motion (by Senator Daly) - by leave - proposed -
That a House Committee be appointed, to consist of the President, Senators Barnes, Carroll, Dunn, H. E. Elliott, McLachlan and O’Halloran, with power to act during the recess and to confer or sit as a Joint Committee with a similar Committee of the House of Representatives.
– With regard to the proposed committee sitting as a Joint Committee with a similar committee appointed by the House of Representatives, I have to draw attention to the fact that another chamber has thought fit to appoint nine instead of seven members on its House Committee. It must be obvious to honorable senators that the Senate cannot be expected to suffer the disadvantage of having two representatives less than has the House of Representatives on a joint committee on which the representation of the two chambers is by our Standing Orders made equal. In my capacity as President of the Senate and realizing that the interests, dignity and rights of the chamber lie primarily in my hands, I draw the attention of honorable senators to this fact. It would be impossible for me to preside, as the President has to do in the case of the Joint House Committee, over a joint committee on which equal representation is not given to the two chambers.
Honorable Senators. - Hear, hear!
Question resolved in the affirmitave.
Motion (by Senator Daly) - by leave - agreed to -
That a Printing Committee be appointed, to consist of Senators Cooper, Dunn, J. B. Hayes, Herbert Hays, Hoare, Rae and Thompson, with power to confer or sit as a Joint Committtee with a similar committee of the House of Representatives.
Representation of Senate on Joint Committee.
Motion (by Senator Daly) - by leave - proposed -
That a Library Committee be appointed, to consist of the President, and Senators Sir Hal Colebatch, Daly, Dooley, R. D. Elliott, Millen and Sampson, with power to act during the recess and to confer or sit as a Joint Committee with a similar committee of the House of Representatives.
– I have to direct the attention of the Senate again to a similar state of affairs in connexion with the Library Committee, as that relating to the House Committee, and to say that, for the same reason, it will be . impossible for me to be a party to a meeting of a Joint Committee upon which the two branches of the legislature are not equally represented.
– The fact which you have just mentioned, Mr. President, is of very great importance to the Senate, and I think that the Vice-President of the Executive Council should suggest some way out of the difficulty perhaps by moving to increase the representation of the Senate upon the two committees mentioned by you. If we are not to have the same representation as- the House of Representatives, certainly the Senate will be placed at a very great disadvantage. Not long ago serious trouble arose in the Library Committee. On that occasion the status of the Senate would have been prejudiced if it had not had equal representation with the House of Representatives. Moreover, as you, sir, have pointed out, unequal representation of the Senate on any of the joint house committees is not in conformity with the dignity of this chamber, nor is it in accordance with the Standing Orders. I hope that the Government will indicate a way out of the difficulty. If the Senate is not to have equal representation we should, perhaps, decline to nominate members of this chamber to sit on such joint committees.
– If the debate on this motion is adjourned, I shall convey the views expressed by you, Mr. President, and Senator Duncan to the Government, and intimate that the Senate has protested against the arrangement proposed.
– In view of the statement of the Leader of the Government in the Senate, I suggest that some honorable senator should move the adjournment of the debate.
Debate (on motion by Senator 0’HAL.loran) adjourned.
asked the Minister representing the Minister for Home Affairs, upon notice -
– The Minister for Home Affairs has supplied the following answers to the honorable senator’s questions : -
asked the Leader of the Government in the Senate, upon notice -
– The present special inquiry will be into the establishment of a Commonwealth service between Melbourne and Northern Tasmanian ports. The question of a Sydney-Hobart service will be considered by Cabinet.
– I move-
That the bill be now read a second time.
Honorable senators will remember that early this year, as the outcome of representations made by those persons directly interested in wine production in Australia, two bills were passed ; one, the Wine Overseas Marketing Bill, and the other the Wine Grapes Charges Bill. The first measure provided, inter alia, for the creation of an export control board, the functions of which were to ensure that only wines of true Australian type and quality were exported, and for the organization of an advertising campaign abroad with a view to increasing the export trade in Australian wine. The second measure - the Wine Grapes Charges Act - provided for the raising of the revenue necessary to meet commitments of the organization established under the Wine Overseas Marketing Act. The legislation was largely experimental in character. Consequently one’ might reasonably expect that those entrusted with1 its administration would find the need for certain alterations to render the scheme more effective. The board appointed under the Wine Overseas Marketing Act has made certain representations to the Government and the measure now before the Senate is designed to give effect to such representations. Honorable senators will observe that the bill proposes to amend the definition of the word “ grapes “ by the inclusion of the words “dried grapes.” The board recommends that the scope of the definition should be widened to allow the imposition of a levy on dried grapes in view of the considerable quantity of doradillo and gordo grapes which are dried annually and sent to the distilleries for conversion into spirits to be used in fortifying wines. The dried equivalent of fresh grapes has been calculated on the basis of one ton of dried fruit to three tons of fresh fruit. That explains the reason for a subsequent amendment by which the maximum charge in respect of fresh grapes is 5s. per ton, and in the case of dried grapes 15s. per ton.
The second amendment to which I desire to draw attention relates to charges. The existing legislation provides for a flat rate of 5s. per ton for grapes. The bill provides for a charge of 5s. per tOD in respect of fresh grapes and 15s. per ton in the case of dried grapes. It will also be noticed that in the principal act the levy to be paid by the owner of any winery or distillery on any grapes delivered for manufacture into wine shall be 5s. for each ton of grapes delivered, subject to a lower rate being prescribed by regulation. In an average year, the imposition of the maximum levy would provide about £30,000; but as that sum would be more than sufficient for the requirements of the board during the first year of its operations, it is understood that it proposes to recommend a considerably lower rate of levy in respect of the coming season’s vintage.
The definition of “winery or distillery “ is also amended. The charge under the principal act depended upon the handling of 10 tons of grapes. Under the amending legislation the charge will depend on the delivery of 10 tons of grapes during the year. Under the principal act it was found that once a distillery had taken delivery of 10 tons of grapes in a year the charge might remain indefinitely, notwithstanding that in subsequent years the distillery handled less than 10 tons of grapes. To remove any possible ambiguity the board recommended that, instead of the basis being the quantity of grapes handled, the charge should depend on the delivery of 10 tons of grapes during any year.
The only other amendment proposed is the addition of a new section -
The charge imposed by this act shall be deemed when it becomes due and payable, to be a debt due to the King on behalf of the Commonwealth by the owner of the winery or distillery to which the grapes, in respect of which the charge is payable, were delivered, and may be sued for and recovered by the Commonwealth in any court of competent jurisdiction.
Under the existing legislation the only penalty for non-payment of charges is the imposition of a fine, to be prescribed by regulation, but not to exceed £50. As it might happen that a man who owed, say £1,000 to the board, would evade his liabilities by submitting to a fine of £50, the Government has agreed to the board’s recommendation that, in addition to any fine imposed, the amount actually due may be recovered.
There is nothing contentious in the bill : the proposed amendments have been suggested by the board constituted under legislation already passed by Parliament. The purpose of the measure is to render more effective the machinery already in existence.
Senator Sir GEORGE PEARCE (Western Australia) [3.26]. - I have had an opportunity of perusing this bill, and as I am familiar with the legislation already passed on the subject with which it deals, I realize the necessity for the proposed amendments. There is no alteration of principle; the bill is of a machinery nature, and I therefore do not propose to delay its passage.
Question resolved in the affirmative.
Bill read a second time, and reported from committee without amendment or debate.
Standing and sessional orders suspended and bill read a third time.
Debate resumed from 6th December (vide page 844), on motion by Senator Daly-
That the papers be printed.
– When the debate was adjourned last Friday, I was addressing myself to a very important phase of the budget. I entered my protest against what I considered to be the high-handed action of the Government in having, without giving Parliament any information on the subject, imposed very heavy duties upon some 220 items, through the medium of a new tariff schedule. We were not. informed whether the items were submitted to the Tariff Board with a view to determining whether the new duties were justifiable. 1 pointed out that, since the schedule was tabled and the duties became operative, an advertisement appeared concerning about 60 of those items indicating that they had been referred to the Tariff Board for investigation and report after the new duties had been imposed. The action of the Government appears to me to be on a par with that of a judge who, having an accused before him, sentences him to six months’ imprisonment with hard labour before hearing evidence on- the case, with the intimation that evidence may be submitted after the expiration of the term of imprisonment. I again impress on honorable senators the fact that, when the Tariff Board Bill was before both houses of Parliament, it was clearly indicated to honorable members that its object was to take away from Parliament the right that it had hitherto enjoyed of being able to amend a tariff schedule without first causing a full investigation to be made as to the necessity for its amendment. The principle of the measure was acceptable to the present Minister for Trade and Customs, who voted for the second reading iu another place.
– Does the honorable senator contend that the investigation is obligatory?
– My reading of the bill is that it is obligatory on the Minister to refer to the Tariff Board any item which he feels should be amended, so that evidence from those interested may be taken. That evidence is then submitted to the Minister, who is not, of course, bound to act on the recommendations of the Tariff Board. It is obvious to any thoughtful person that the board was brought into existence to act in an advisory capacity to Parliament. The matter is important. In this instance the people of Australia are called upon to pay higher duties on the greater number of the 220 items. It will be at least four months before Parliament resumes after the recess, and in the meantime the working classes of Australia, who are already bearing a heavy burden, will have a still heavier load imposed upon them through the incidence of the new tariff.
I resent the replies that were given’ to ‘ me and to Senator Johnston when we endeavoured to obtain information as to whether the items had been submitted to the Tariff Board. We were told that the information that we sought would be conveyed to us during the debate on the tariff schedule.
That is not a satisfactory attitude for a Minister to adopt. The Leader of the Senate should have been able to reply to us in the affirmative or otherwise. In view of its much-vaunted platform, this should be the last Government to assume the role of autocrat, and to impose a burden on that section of the community least able to bear it without inquiring as to the necessity for the higher prices involved.
I am surprised at the manner in which the financial statement opens. I have never read another Commonwealth Financial Statement that has cast slurs upon previous Treasurers. The second paragraph states -
It was the duty, however, of the new Government to examine the Estimates. . . This examination revealed that in some important instances the late Government had grossly understated the expenditure requirements, and over-estimated the probable revenue. The late Treasurer has grossly miscalculated the cos l of thu definite commitments of the departments and services for the year, and also the probable revenue.
The term “ grossly “ is inexcusable as applied to the action of a previous Treasurer. The ordinary reader of such a statement would arrive at the conclusion that the Minister had grossly miscalculated his Estimates in order .to delude the people. I regret the adoption of such tactics by the Treasurer. The term is absolutely uncalled for. Mr. Theodore’s predecessor in office adopted a careful attitude, justified by the extraordinary financial position of Australia, and insisted that departments should at all times exercise economy, consistent with efficiency. On the contrary, it has been said that the present Treasurer, when occupying a similar position in a Queensland State Government, made it a rule to over-estimate his expenditure and to under-estimate his revenue so that at the end of the financial period he would come out with flying colours. I contend that the ex-Treasurer was justified in curtailing departmental expenditure, and that he would not have been worthy of his office had he not done so. The alteration in figures submitted by the present Treasurer could easily be made by accepting in globo the estimates of the departments. From personal experience, I know how necessary it is for a Treasurer, after receiving the departmental estimates, to confer with the heads of departments, and to insist that certain items usually included under the heading of “miscellaneous” be greatly reduced. That was the attitude adopted by the late Treasurer in framing his Estimates, and in the circumstances was a reasonable course to follow. The present Treasurer, in his budget speech, stated -
It is now apparent that if the actual requirements of the year had been provided for in connexion with war pensions, repatriation, other war services, old-age pensions, iron and steel products bounty, prospecting for oil and sundry items, for all of which definite commitments had been entered into, the Estimates of expenditure should have been increased by £500.000.
In all probability, £500,000 more will be necessary . to meet expenditure, if that which has been estimated by the departmental heads has been accepted in full by the Treasurer. Instead of being discredited, the late Treasurer should be congratulated upon his endeavour to balance the ledger by reducing expenditure.
Reference is also made in the budget speech to customs and excise revenue, land and income taxation, and other receipts, which, it is stated, would have fallen short of the estimate of the late Treasurer by at least £1,050,000. That is all right so far as it goes, but a:i analysis of the statement shows that it requires a good deal of explanation. What has been our experience in connexion with the receipts from customs and excise? Instead of these receipts falling off during the first five months of the financial year, they were £1,900,000 more than estimated by the late Treasurer. Notwithstanding that, the Treasurer states that under the budget proposals submitted by Dr. Earle Page the revenue from this source would have fallen off considrably. In dealing with the customs and excise revenue, the present Treasurer goes on to state that he expects to receive considerably more than would have been obtained under the previous budget. He estimates to receive a sum of £43,250,000, or an increase of £700,000 over the previous estimate. Although the present Treasurer anticipates receiving more than his predecessor, he states that if the BrucePage Government had remained in office there would have been a considerable diminution in the receipts from the Customs Department. How doe3 he expect to receive additional revenue? I presume it is through the agency of the amended customs tariff schedule now in operation. If the utterances of Ministers as to the protective incidence of the new tariff are correct, its effect must be to decrease the customs revenue, instead of increasing it, as its policy is to ensure that practically everything required by Australian consumers shall be manufactured in the Commonwealth. Many of the duties in the new schedule are not protective, but absolutely prohibitive. Certain duties are given in the British preferential column, but as British manufacturers cannot possibly export to Australia and pay such prohibitive rates, there is no preference shown them. It must be patent to every one that as many of these duties are prohibitive, no revenue can he expected from them. The Treasurer is far too sanguine in expecting additional revenue from some of the duties provided for in the new schedule.
For some time past, as the result of the administration of the Bruce-Page Government, the Australian people have been annually relieved of a certain amount of direct taxation. We should not overlook the fact that the Federal income tax was imposed solely with the object of assisting the Commonwealth in meeting its heavy obligations in connexion with the Great War. As we have gradually reduced our liability in that respect, direct taxation has also been reduced, and a great majority of the people have been relieved altogether of the payment of any direct taxation. The number of income taxpayers in the Commonwealth is small in comparison with the number of adults receiving income in some form or another. According to the statistics published in the annual report of the Commissioner of Taxation, those in receipt of a taxable income up to £501 number 174,099, from £501 to £2,001, 41,502, and from £2,001 upwards, 9,797, or a total of 225,398. Those figures prove conclusively that for several years the Nationalist Government, which had laid itself out to afford relief to the people of Australia least able to bear taxation burdens, had given them effectual relief in this respect. The ex-Treasurer announced in his budget speech that his Government proposed to impose a super tax of 10 per cent. on taxable incomes from £2,000 upwards. All who earned under £2,000 taxable income would remain on the existing rates; the extra 10 per cent. would be levied on 9,000 odd taxpayers only. What do we find the present Treasurer doing ?
– Trying to pay the debts left by his predecessor.
– It is an easy matter to pay debts by taking money out of people’s pockets unnecessarily. As a matter of fact, some people pay their debts by robbing others; but I do not think the Assistant Minister would suggest that was the proper course to adopt.
– The honorable senator does not suggest that the present Government’s proposals are robbery?
– It amounts to daylight robbery to put additional taxation, as this Government is doing, on persons with a taxable income of £201 at a time when the people of Australia have more than they can do to make ends meet. Had the ex-Treasurer attempted to make that impost it would have been a splendid fighting plank for honorable senators opposite on the hustings. But, apparently what would have been an evil step for the Nationalist Government to take, can be taken with impunity bya Labour government.
– Is not the minimum £500?
– The minimum is £201 taxable income; but that would represent a gross income of £501. There is an exemption of £300. On a taxable income of £201, a taxpayer will now be called upon to pay a super tax of 10 per cent. The next gradation of the super tax imposed by the present Treasurer is 15 per cent., and when the taxable income exceeds £2,001, the super tax is 20 per cent. The late Government was of opinion that 215,000 taxpayers of Australia could not bear any additional direct taxation. The present Government will force these people to provide not only the bulk of the additional direct taxation required, but also an infinitely heavier burden of indirect taxation.
At the end of his budget statement Mr. Theodore said -
At the 30th June, 1929, the accumulated deficit stood at £4,987,718. Towards the liquidation of this deficit the late Government proposed to apply the sum of £1,200,000, representing the accumulated income arising from liquidations of ex-enemy properties, in addition to such surplus on the year’s transactions as they had hoped to achieve.
Further on he said -
The purpose for which the accumulated funds accruing from the liquidation of exenemy properties will be applied has not yet been determined.
Would any one suggest that there could be anything wrong in paying that £1,200,000 into revenue for the specific purpose of relieving the burden of taxation that the people of Australia have to bear, or of reducing our deficit? That course would have been adopted by the late Government had it remained in office, and I want to know what the present Government intends to do with this money. It should make some definite pronouncement on the subject. The money * belongs to the people of Australia, and surely it is reasonable to suggest that it should be applied to the reduction of our deficit or to reduce our heavy loan indebtedness. Parliament should have a voice in the matter. I hope that honorable senators will recognize that the purpose to which the late Government intended to apply this money was the correct one. After all, it is money to which we are entitled and it should be used for the specific purpose of reducing our liabilities.
I sincerely trust, in the interests of the people, that the Government’s anticipations in the matter of revenue will be realized, but I am very much afraid they will not be. No one will be more surprised than I shall be if the Treasurer’s estimates of revenue and expenditure are realized and Australia is in a better position at the end of the financial year than it was at the beginning. I deprecate the suggestion contained in the budget statement that the present Treasurer (Mr. Theodore) is the only man who can be relied upon to give a fair account of the financial position. The budget we are considering, in more than one particular, bears the imprint of political propaganda. I regret very much that an important document, which should not be other than a plain statement of facts, should hear any suggestion of political bias.
. - I cannot allow this budget to pass without adding my protest to those which have been uttered against the political propaganda in which some honorable members have indulged. We have heard from the Labour party, firstly during the general election, secondly in the budget, and thirdly in this chamber, statements regarding the late Government’s financial dealings. There is no doubt this propaganda had a big effect on the result of the elections. It was given out everywhere that the Bruce-Page Government was throwing money around lavishly, and that if Labour were returned to power huge sums of money could be saved. The people were told that because of the extravagance of the Bruce-Page Government, extra taxation had been imposed, but that if Labour were returned to power there would be a reduction of taxation. The people of South Australia consequently were tremendously surprised when they heard of the extra taxation which the Labour Government’s first, budget announced would be imposed.
During the course of this debate, honorable senators opposite have declared that Labour found the Commonwealth Treasury empty and, in consequence, had a particularly hard job. But that is only part of the story. Until two years ago the Bruce-Page Government always had a surplus. Two years ago, at a time when Australia struck a pretty bad year, there was an unanticipated deficit of £2,628,743, but the Bruce-Page Government did not impose further taxation. It announced that it would wait until things balanced up with a return to normal conditions. Unfortunately, however, normal conditions did not return, and the next budget did not. balance. The Government simply confined itself to an announcement that it intended to impose further taxation which would serve to balance the ledger. If the Bruce-Page Government had imposed the taxation which the present administration has proposed, the Commonwealth would have had a surplus instead of a deficit during those two years. The surpluses which were available during the regime of the Bruce-Page Government were applied as follows: - £7,415,000 to the reduction of the national debt, £7,000,000 to naval construction, £1,250,000 to the States for the development of main roads, £600,000 for science and industry investigations and so forth. The reduction of the national debt by £7,415,000 saved the taxpayers of Australia £400,000 a year in interest. The Bruce-Page Government announced its intention to apply a certain amount towards the reduction of the current deficit, but the present Government has not made any such announcement. It is well known that it has in hand the sum of £1,200,000 which the late Government said it would apply to the reduction of the national debt. Is it keeping it for a rainy day? The people of Australia are entitled to know what this Government proposes to do with that money, and the Treasurer should have indicated his intentions in the budget speech. Senator Payne, when dealing with this matter, stated the position quite clearly. In November last the Public Trustee reported that, in his opinion, the interest and other revenue earned by the Public Trustee did not have to be accounted for as reparations, but should be paid to Commonwealth revenue. At the same time, the Auditor-General sought legal advice regarding the profits of the Custodian of Expropriated Property. The Solicitor-General advised that it was not necessary to treat the profits and income of either the Public Trustees or the Custodian as reparation receipts, and that there was no objection to the payment of the moneys to the Commonwealth revenue. No one can doubt that the former Government could have used the money in this way
The financial position of the Commonwealth was grossly misrepresented by the Labour party during the recent election. What are the facts? In 1922, when the Bruce-Page Government came into office, the public debt of the Commonwealth was £364,839,590; on the 30th June, 1929, it was £377,621,573, an increase of £12,782,000. It must be remembered, however, that during the period mentioned we discharged war debt to the amount of £45,000,000, for which wc had no assets. Though the debt ii. respect of public works increased by ££8,000,000, we have tangible assets for that expenditure, so that the finances of the Commonwealth have improved very materially.
Notwithstanding this careful handling of Commonwealth finances, the Labour party, from one end of Australia to the other, accused the Bruce-Page administration of reckless extravagance. Let us examine the position of the States during the samo period. In New South Wales, the State debt increased from £180,000,000 in 1922 to £258,000,000 in 1928; In Victoria it increased from £109,000,000 to £157,000,000 ; in Queensland it rose from £85,000,000 to £112,000,000; in South Australia from £54,000,000 to £92,000,000; in Western Australia from £54,000,000 to £77,000,000, and in Tasmania it increased from £21,000,000 to £24,000,000. The total of State debts in . the period mentioned rose from £506,000,000 to £722,000,000, an. increase of over £225,000,000. If, as was alleged by Labour candidates in the last election campaign, the Commonwealth Government was guilty of reckless extravagance because its total debt increased by £12,000,000, what can be said of the different States, some of which were under Labour rule for practically the whole of that time? Queensland, until the last general election in that State, had been under Labour rule, and its debt, as I have shown, increased by £27,000,000. Similarly South Australia, which was under a Labour government from 1924 to 1927. increased its debt by £20,000,000.
This propaganda with regard to. administration of the finances by the former Government is to be found even in the budget speech. The Treasurer (Mr. Theodore) describes the Estimates of the ex-Treasurer (Dr. Earle Page) as “ gross miscalculations “ - a charge that cannot be sustained by an examination of the facts. Last year the estimates prepared by heads of departments were cut, and as result of efficient control the estimates of expenditure were exceeded by only £ per cent. The present Treasurer has mentioned the difficulty of controlling expenditure. Surely his statement is an admission of his own helplessness? And he accused the ex-Treasurer of having grossly miscalculated his estimates. Does he remember his own record as Treasurer in Queensland ? In 1923-24, in a budget of only £13,000,000, he under estimated his expenditure by £358,000 - a difference of 2J per cent., and yet he charges the exTreasurer of the Commonwealth with having grossly miscalculated his estimates which last, year were only one quarter per cent. below actual expenditure. The Treasurer has also increased the ex-Treasurer’s Estimates, of expenditure, by no less a sum than £807,340. In not one single item does he show a decrease, although we all know that at the end of each financial year the figures of actual revenue and expenditure show both increases and decreases of the Treasurer’s Estimates.
The Government proposes to save £150,000 by a cut in the Defence estimates. The people are demanding economy in administration, but I doubt that they will approve the Government’s proposal to save on the Defence vote, because the fi/’st duty of the administration is to provide for the adequate defence of the Commonwealth. The Treasurer states also that departmental expenditure will exceed the estimates of the ex-Treasurer by £61,000. For the year 1927-28 the cost of these services was £3,081,253. The budget estimate for 1928-29 reduced this to £3,025,962. The actual expenditure was £2,987,306, or £3S,656 less than the estimate, and £93,947 less than the expenditure of the previous year. These figures indicate clearly that the former Government was . effecting considerable savings in departmental expenditure, and yet the present Treasurer, in his first budget, declares that these departmental estimates must be increased by £61,000. We are told also that £60,000 more than the ex-Treasurer’s estimate will be required to meet the Government’s obligations in regard to maternity allowance. The former Government decided to save the sum mentioned by altering the basis of payment. The Treasurer says, further, that £35,000 over and above the ex-Treasurer’s estimates will be necessary to provide for the iron and steel products bounty payments thi3 year. It is exceedingly difficult to estimate the Government expenditure in respect of this and many other items. Last year, the expenditure for the payment of the wine bounty was estimated at £150,000, but the actual expenditure was only £76,000. It is singular that the Treasurer makes no pro.vison for a decrease in respect of any of the items mentioned. Last year showed increases amounting to £315,000 and decreases totalling £123,000. I am satisfied that, had the former Government been returned to power, the exTreasurer’s Estimates for the current financial year would have been very nearly right, because every government can influence expenditure to a great extent.
– Can the honorable senator indicate any item in respect of which economy can be practised by this Government?
– It should be possible to exercise economies in nearly all of the items. When Labour was in opposition it never tired of admonishing the Bruce-Page Government because it would not make more drastic cuts in estimates of expenditure.
– But we made practical suggestions.
– The present Government has increased the taxation proposals of the late Government very considerably; in eight months it expects to receive over £2,000,000 more than the budget of the late Treasurer would have provided.
– The additional amount is necessary to pay inherited debts.
– That is not so. In order to justify its taxation proposals the Government states that the estimate of the late Treasurer will not be realized to the extent of £1,694,000. Of that amount customs and excise duties represent £500,000. It is very difficult to estimate with any degree of accuracy the amount which will be received from that source. There is certainly no justification for saying that the late Treasurer grossly miscalculated the amount likely to be received from customs and excise duties. In 1927-28 customs revenue amounted to £41,446,593. In the following year it amounted to £41,057,492. The Treasurer states that the estimate of his predecessor for 1929-30 was £43,750,000, which included £41,000,000 on the basis of the old tariff, and £2,750,000 to be received from the new duties imposed on the 22nd August last. He continued -
The Customs Department, after careful review, now estimates that on the basis of the present tariff the new duties would product £250,000 more than was originally anticipated, and the old duties £750,000 less. The revised estimate by the department is, therefore, £43,250,000 or £500,000 less than thebudget estimate.
The ex-Treasurer estimated the customs revenue for 1929-30 on the basis of the old duties at £41,000,000, which amount was actually received for the previous two years. It would appear that his estimate will prove to be fairly accurate. Figures supplied by the statistician show that the actual returns from customs have exceeded the estimate. For the quarter ended September, 1928, the total net revenue from customs and excise was £9,502,942. The net revenue received for the same quarter in the present financial year was £11,521,979, an increase of £2,019,037 over that of the corresponding period of the previous year. I have before me also the estimated and the actual revenue for the first five months of this financial year. The revenue anticipated was £18,070,146; the amount actually received was £19,667,849 -an increase of £1,597,703. The returns to date indicate that the estimate of the late Treasurer will be more nearly realized than will the new Treasurer’s estimate, yet in order to justify the imposition of additional taxation by his Government, Mr. Theodore has said that the customs revenue this year will fall short of the late Treasurer’s estimate.
It has been said that the increased duties will provide employment in Australia for many hundreds of persons. That may be so for a time; but eventually they will lead to higher prices and increased living costs. That has been the result of the imposition of duties in the past ; and it will be so in the future. Imported boys’ overcoats, will, under the new schedule, be subject to a duty of l5s. each; the duty on girls’ coats is doubled, and children’s hats are to pay 5s. each. The tariff will affect the working and middle classes of the community. People in country districts will probably be hit the hardest.
Some of the taxes really amount to a prohibition of imports. There is already a heavy duty on imported matches, but in order to raise more revenue, that duty is to be further increased.
– The duty will lead to the greater use of Australian matches.
– If that is so, how can the Government contend that the new duties will bring in more revenue? On the 15th December, 1927, I was informed in answer to a question that the declared value of the matches imported during 1925-26 was £279,519, and that the duty paid on them was £152,752. The value of matches manufactured in Australia during that period was £512,514. The matchmaking industry in Australia employed 715 persons, to whom £110,761 was paid in wages. In order to bolster up that industry the people of Australia were called upon to pay £152,752 duty during that year.
– Nothing of the sort. The honorable senator does not understand the position.
– If there had been no duty on imported matches, the people of Australia could have obtained the matches they used for £152,752 less than they actually paid for them. That sum would have allowed every worker in the match-making industry to be pensioned off and to receive an amount equal to full wages under arbitration awards. The people of Australia would have saved £41,991. In considering duties on imported articles we should consider their effect on importers. I have been informed by some importers that when the new tariff schedule was introduced they cabled to manufacturers abroad cancelling all orders because of the loss that would accrue to them on the goods ordered. The manufacturers refused to do so, and apparently the importers will make a loss on the goods when they arrive. Yet in some cases local manufacturers have not yet increased their plant to cope with any additional business that might come to them.
– Name one such manufacturer.
– The honorable senator knows that new machinery cannot be installed in a week or a month, or sometimes in a year. I understand that once duties have been imposed legislative action is necessary to allow of a rebate being made in cases such as this. It would be better to provide that, where the Minister for Trade and Customs is of the opinion that the imposition of a duty results in hardship, a rebate may be made.
– What is the honorable senator’s opinion of the increased duties on motor bodies ?
– I shall tell the honorable senator when the tariff schedule is before us.
The new Government’s income tax proposals will place a tremendous burden on the people of Australia. The Labour party persuaded the electors that they would be better off under a Labour Government.
Senator Daly claims that the people will be better off under his Government, but its very first budget proposes to impose additional income tax to the extent of hundreds of thousands of pounds on the industries of Australia. That must have a reactionary effect. The Government has also hit the man who earns a small income. The Bruce-Page Government increased the taxation exemption from £200 to £300. It increased the permissible deduction for children from £26 to £50. It freed 550,000 small wageearners from the necessity to pay income tax. This Government has increased the taxation on incomes from £201 upwards.
– The honorable member misunderstands the position. The super tax will apply to incomes of £501 upwards.
– The Government proposes to increase existing rates by the imposition of a super-tax of 10 per cent. on incomes of from £201 to £1,500. That must have a retarding effect upon our industries. Representative Adelaide business-men have expressed emphatic opinions on the subject. The president of the Taxpayers Association, Mr. J. Wallace Sandford, stated that, like all increases in taxation, the new rates were subversive of the best interests of the country, as they not only constituted a further burden upon production, but deflected funds from individual control. He added, “What Australians are looking for in Government activities is economy, and not increased burdens.” The Bruce-Page Government used the pruning knife freely and this Government should have followed its example. Instead of making reductions it proposes, during the first eight months of its existence, to bring in £2,000,000 by increased taxation over and above the amount proposed by the late Government. The president of the Adelaide Chamber of Manufactures, Mr. F. M. Simpson, declared that it had been difficult enough to carry on before the introduction of the late budget, as a manufacturer had to consider that for three months of every year he was working for the benefit of the Taxation Department. Those opinions indicate that representative business-men do not think that the policy of this Government will increase employment, but that the imposi tion of additional taxation will adversely affect industry and materially increase unemployment, thus placing additional burdens on an already overloaded community.
– Senator Chapman said that the Bruce-Page Government proposed to balance its budgets by the use of the pruning knife and deprecated the fact that this Government had resorted to increased taxation instead of further applying that knife. I invite the honorable senator to consider certain figures which I placed before the Senate when dealing withthe financial proposals of the Government, and I ask him whether he can justify the use of the pruning knife in connexion with any of the following items : -
The honorable senator would have the Government use the pruning knife still more severely in those departments in order to relieve the people from paying still more taxation.
– The ex-Treasurer proposed to do so.
– Of course he did. He proposed to raise £112,500 less for war service commitments than what this Government contends should be paid. Yet the Labour party is accused of being disloyal because it suspended compulsory military training. The ex-Treasurer also proposed to allocate £68,000 less for war pensions and £300,000 less for invalid and old-age pensions. This Government contends that it is under an obligation to pay 20s. in the £1, and that even if it means the unpleasant task of submitting to Parliament and to the people of Australia a deficit instead of a fictitious surplus, it will undertake that duty rather than evade its obligations.
Any one who analyses the financial position of Australia in the light of the ex-Treasurer’s budget, must be forced to the conclusion thatif the ledger is to to be balanced, there must inevitably be increased taxation. This Government proposes to impose that further taxation to meet its obligations and to balance its budget. When that necessity disappears, the people of Australia may confidently expect that the impositions will be withdrawn.
– Did the Government find it absolutely impossible to make any economies?
– It did not. It carefully examined the estimates prepared by departmental heads, men who have been entrusted to conduct the departmental affairs of the Government, in the limited time at its disposal. It found that it was impossible to prune the items mentioned.
– The exTreasurer’s estimates were particularly closecut as compared with those of the previous year.
– The honorable senator does not realize the position. The departmental heads made certain recommendations and, after the fullest investigation, it was found necessary to provide certain amounts to meet the commitments of the Government.
– Is the Government going to allow departmental heads to have an unchecked fling?
– Certainly not. It intends to balance the ledger and not to misrepresent the facts to this House or to another place. If it finds that it is impossible to avoid incurring a deficit in the next financial year, it will tell Parliament the truth. Had that attitude been adopted by the Bruce-Page Government, twelve months ago the people of Australia would not now be called upon to bear further burdens and to pay additional taxation, with unemployed numbering 180,000. In those circumstances we possibly would not have had the present army of unemployed, who are unable to earn money and to pay income taxation.
– Who is to blame for their position?
– I do not attribute the whole blame to the late Government, but it was one of the main contributing factors to unemployment.
– In what way?
– Because of its gross extravagance.
– How was it more extravagant than this Government ? This Government proposes to spend more.
– I asked Senator Chapman, while he was speaking, where this Government had been extravagant, and he evaded the issue, just as he did a pertinent question in regard to Holden’s motor body works. There was a time when the honorable senator represented the freetrade convictions of the West Coast constituency in a State Parliament, but when he became a member of a National Parliamentit was to be expected that his outlook would become broader, and that he would be prepared to assist such splendid industries as Holden’s motor body works. I ask the honorable senator whether any other Government has done as much for that industry as has this Government.
– Where has this Government saved money where the late Government failed to do so?
– Since this Government has been in power it has been almost continuously within the walls of this and another chamber. That question should be asked when it has had an opportunity to obtain a thorough grip of the position and to effect economies. It has already promised to save £150,000 through the administration of one department only.
– If the late Government was grossly extravagant, the estimates of this Government should show a decrease, whereas they show an increase.
– That is not the true perspective of the position. The Government estimated a certain expenditure, and, except where it had to correct cer tain estimates, it accepted those of the late Government. In many instances departmental expenditure has been so curtailed that a point has been reached where departments can no longer be extravagant; where, in fact, affairs are in such a state of chaos that it will be difficult even for a Labour Government to unravel the tangle. As to the tariff, there is not a very great difference between the fiscal policy of this party and that of the Opposition. We both believe in a high tariff. The point of difference is that this party believes in making the tariff effective, and instead of going half way it has gone the whole distance, in an endeavour to build up Australian industries.
Senator Chapman will not have to pay more for his matches if an extra duty is imposed, unless he wishes to purchase matches manufactured in Sweden.
– Or in Russia
– Yes. The Government desire that Australian products shall be used by our own people, and I am sure that if the present members of the Opposition again occupy the benches on this side of the chamber, they will not throw our fiscal policy overboard, but will adopt it, as they have done on previous occasions. I thank the members of the Opposition for the way in which they have assisted the Government in disposing of this motion, and I compliment honorable senators generally upon the high standard of the debate.
Question resolved in the affirmative.
.- I move-
That the bill be now read a second time.
This is, perhaps, the most important measure that has come before the Senate during this session. Honorable senators who have had an opportunity to study it will admit that the only principles involved are the mobilization of gold, and the control of the export of that metal. This important measure has been introduced during this brief session in consequence of representations made to it by the Commonwealth Bank. In ordinary circumstances, a bill of this character might conveniently have been held over for consideration during a session iri. which it would be possible to discuss it more fully than is practicable in the time now at our disposal. The Commonwealth Bank has, however, sounded a note of warning to the Government. The position, so far as the gold of Australia is concerned, is becoming critical. The Commonwealth Bank Board, in a written document, extracts from which I propose to read-
– Why not read it all.
– I shall do so if so desired; I have no wish to hold back any information. Representations were made to the Government by the Commonwealth Bank, in view of the position of the London exchange, due to the increased volume of imports from overseas, to a reduction in the value of wool, a largely decreased exportable surplus of wheat, and the temporary closing of the London investment markets to Australian borrowing. Owing mainly to these causes, a serious adverse exchange position has developed against Australia.
– Will the Minister table the document from which he intends to quote?
– The original document is not in my possession ; but if the honorable senator desires to see it, it is open for his inspection.
– Is the Minister now quoting from the document to which he referred?
– No. I am pointing out to the Senate the causes which led to the introduction of this measure at this particular time. The board of the Commonwealth Bank, as the note issuing authority, viewed with great concern the immediate possibility of serious inroads being made upon the gold reserve, which is being maintained as a basis of the note issue, and recommended that steps be taken to mobilize the gold resources of the Commonwealth, in order to permit of their most economic use. I am sure that the Senate does not desire that I should establish the fact that there has been an increase in the volume of imports, a reduction in the price of wool, a large decrease in the exportable surplus of wheat, and a temporary closing of the London investment market to Australian borrowers. Neither should it be necessary for me to contend, on these facts, that the exchange position has developed adversely and seriously against Australia.
– Is it not due to the fact that there has been a reduction in the value of our exports, rather than to the increase in imports ?
– There are many aspects that we might conveniently discuss in connexion with this measure; but
I urge honorable senators to keep the real issue before them. It is not a question of whether there has been an increase or a reduction in our imports, but of our adverse trade balance, and its effect upon the exchange position in Australia. We must take the facts as we find them, and realize the possibility of that position becoming accentuated unless action is taken.
This measure has been passed by another place, and it is now the responsibility of the Senate to carefully consider the suggestions made, as a means of overcoming the difficulty, or to minimize the possible effects if the present position continues.
– Was the Minister’s statement concerning the possibilities of the position becoming accentuated taken from the report of the Commonwealth Bank Board, or was it merely his own opinion?
– So far I have been expressing my own opinions. I now propose to read extracts from the letter received by the Government from the Commonwealth Bank -
For some very considerable time past the board has viewed with much disquietude the general financial position, more especially its aspect as regards the situation respecting the availability of Australian credits in London. It does not come within the ambit of the board to enter upon any views as to London borrowing, but it docs fall within the obligation of the board to point out to the Government of the day such positions as they may arise, which affect the whole financial position of Australia. As you are aware, the requirements of Australia in London have been met from two sources of supply, viz.: - through realization of exports from Australia, and from public borrowing by Australia on the London market. The .funds so made available have been used to pay for imports and discharge interest and debt obligations accruing in London. A stable exchange position as between London and Australia can only be maintained by keeping the financial balance as between Australia and London on an even keel. Owing to various causes, which may be covered by the following, viz.: - unfavorable borrowing conditions in London; reduced values in respect of exports from Australia, duc to unfavorable seasons, and a large reduction in wool values, a steady adverse drift has been operating against accumulation of funds in London. So far as has been practicable, this has been met from time to time by adjusting exchange rates as between London and Australia, so as to operate adversely against imports and in favour of exports.
I now come to a very important passage -
The nominal rate of telegraphic transfer exchange on London as of to-day is 3os. per cent., but owing to the scarcity of London credits, the banks generally are unable to meet requirements, even in spite of the fact that higher rates are being asked for, so as to deter importations. At this stage it should be pointed out that the nominal rate of 35s. per cent, is what is known as above “ gold point,” that is to say, that it would be cheaper to export gold from Australia to London rather than pay 35s. per cent, exchange. When this point lias been reached, it becomes necessary for those in charge of gold reserves to see that the position does not get out of hand, and this immediately affects the ‘ position of the Commonwealth Bank.
In view of the situation which I have just outlined, a position arises where those who require London credits, and are unable to obtain them through the usual banking channels, may present notes< at the Commonwealth Bank, obtain gold against same, and ship it overseas to obtain outside credit. The position which I am now outlining to you is not merely a possibility, but the actual state of affairs referred to has now arrived, and the board, after exhausting every possible expedient to meet the situation, now finds itself definitely faced with proposals which must have, the effect of depleting the reserve nf gold, and further taking the control of the situation out of the board’s hands. It has therefore become necessary to lay the matter before your Government for such action as you may deem it wise to take, and at the same time offer your Government such advice as seems to the board wise.
My board is of the opinion that the last resource ‘which should be adopted would be any course which meant even temporary departure from the operation of the gold standard on the part of Australia.
That sentence is important. It demonstrates to the Senate that, when the board was considering the serious position outlined in the previous paragraph, it had in mind the gold standard. The report proceeds -
Such measure would reflect most adversely against Australia in respect of oversea credit, and incidentally have a most serious effect upon our abilities to raise loans abroad. As a measure which would very materially help the position in the meantime, and in addition, having regard to precedent, would in the opinion of the board be a sound measure of permanent legislation, my board definitely recommends your Government to consider immediately the bringing in of legislation on similar lines to that which now exists and is operating in England. I do not propose to traverse the effect .of such legislation, as perusal of the acts referred to will fully acquaint you with the position, but I might briefly say that audi legislation would place the Commonwealth Bank in immediate control of all gold in Australia by whomsoever held.
Whilst this legislation in itself would not prevent exportation of gold from Australia, it would place the gold in Australia definitely in the control of the bank. Once placed in this position there would only be one authority in control of the gold in Australia. No doubt, in view of the representations now made, your Government will give the matter your grave consideration, and, needless to say, any desire on your part to discuss these matters with myself or my board can be arranged for at any time mutually convenient, and any assistance from the executive of the bank which may be desired at any time will be arranged for.
– Can the Minister give the date of that communication?
– The date of the letter is the 9th November, 1929.
– Is it possible for the Assistant Minister or the Government Whip to procure it before the Minister concludes his speech?
– I shall obtain it before the Leader of the Opposition speaks to the motion. The legislation passed by the British Parliament, and referred to in the board’s report, consists of the Gold Standard Act of 1925 and the Currency and Bank Notes Act of 1928. In the Gold Standard Act the right of the holder of a currency note to obtain payment in gold coin was suspended, whilst at the same time it was enacted that notes of the Bank of England should continue to be legal tender. Further, an obligation was placed on the Bank of England to ‘sell gold bullion to any person. The minimum amount that could be so demanded represented approximately £1,700.
– A man with 1,700 £1 notes could get bullion for it, but a man with a smaller number of £1 notes could not?
– That seems to be the effect of the British legislation. The -Currency and Bank Notes Act, with a view to the concentration of the gold reserves and to the securing of economy in the use of gold, placed iu the hands of the Bank of England the power to requisition any gold exceeding £10,000 in value held by any person. Honorable senators will see that the legislation the Government is asking them to pass is not novel, nor is it a scheme originated by any particular political party. Altered to suit local circumstances, it is similar in character and principle to the legislation passed by the Motherland.
– But not proposed new section 7c.
– There is a principle involved in proposed new section 7c which I shall deal with in a minute, but the question of whether it should or should not be retained in the bill is a matter which can be more definitely dealt with in committee.
– Would the Government be prepared to adopt the British legislation?
– I draw the honorable senator’s attention to the fact that Great Britain’s trade with the dominions differs from that of Australia with Great Britain. Whereas we have a surplus of imports over exports, that is not, in an Australian sense, the case in England.
– Great Britain has an enormous surplus of imports over exports.
– That may be so ; but the circumstances are different. In regard to the mobilization of gold, the principle is the same here as it is in Great Britain, but Great Britain has not the necessity we have for control of the export of gold.
– Great Britain is in exactly the same position as Australia.
– Many avenues, including England’s position, could be conveniently traversed in connexion with this interesting subject, but in principle, subject to qualification as to circumstances, there is no distinction between the law operating in Great Britain and that which is now proposed by the present Government.
– They are directly opposite.
– I shall be pleased to hear the honorable senator’s speech on the subject, but that is how it appeals to ‘me. It is certainly the case that both countries have found it necessary to mobilize gold. There is, therefore, no distinction in principle between the British legislation relating to the mobilization of gold and that which has been proposed by the present Government.
– That is so.
– Do I understand, then, that honorable senators opposite object only to the provision in the bill relating to the export of gold?
– Hear, hear !
– The only difference between this bill and the British legislation in that respect is that in Great Britain gold bullion cannot be demanded except at a minimum of £1,700, whereas in our bill the maximum permitted to be exported without the consent of the proper authority is £25. Is that the distinction which is drawn ?
– Then I ask honorable senators to realize the position of our gold reserve. I think they will admit that it is necessary for the Commonwealth to impose greater’, restrictions on the export of gold than may be required in Great Britain.
– The honorable senator does not mean more than that it may become necessary to impose restrictions ?
– Yes, in cases of emergency. I am pleased that I am ad idem with honorable senators opposite on the question of the mobilization of gold, and that the real contest will be on the question of whether or not we are carrying our legislation too far in preventing the export of gold. But before I proceed to deal with proposed new section 7c I want to continue with the main question.
After careful consideration of the representations made by the Commonwealth Bank Board, the Government decided to introduce legislation giving power to the Commonwealth Bank to mobilize the gold resources of the Commonwealth and place the gold under the control of the Commonwealth Bank Board, which is responsible for maintaining a sufficient gold reserve as a backing for the note issue, and I think that we can rest assured that, in carrying out this responsibility, the Commonwealth Bank will not do anything to antagonize the other banks. Thereafter all the mobilized gold, so long as it remains in Australia, will be in the hands’ of the Commonwealth Bank and the bank will be obliged to see that sufficient gold remains in Australia to provide a backing for the note issue. As a matter of fact, so far as the private banks are concerned, they have in the last few weeks voluntarily handed over to the Commonwealth Bank a considerable amount of gold in exchange for an equivalent amount of credit abroad, and there appears to be no reason why the co-operation in exchange matters, which at present exists between the Commonwealth Bank and the trading banks, should not be continued if the proposed bill becomes law.
– So long as their foreign exchange is provided for, it does not matter to the private banks where the gold is kept.
– But it does matter where the gold is kept so far as our note issue is concerned. So long as we can keep in Australia a sufficient backing for our bank notes there is no need for alarm, but so long as we continue our legislation relating to our note issue, we must not only mobilize our gold, but also see that the very foundation of our notes is not blown from underneath us.
I can assure honorable senators that the Government is not prepared to do anything which would directly interfere with the right of the public to obtain payment for notes in gold. The convertibility of the Australian note remains intact.
Power is taken in the bill for the Governor-General, by proclamation, to prohibit the export of gold except with the consent of the Treasurer. The Governor-General, in this matter, can act only on the recommendation of the Bank Board, and every application for permission to export gold, whilst the proclamation is in force, shall be the subject of a report from the board to the Treasurer. The latter will then have an absolute discretion to approve or refuse approval to any such applications. This may be regarded as a purely emergency provision. We are agreed on the point of mobilization and that occasions may arise when it is absolutely essential to preserve, in the vaults of the Commonwealth Bank, sufficient gold to back our notes issue. The question arises whether this legislation is too stringent in its character to effect the result we all desire. Let me explain what must happen before a prohibition against the export of gold operates. First of all the Commonwealth Bank Board, which has its finger on the pulse of world finance, and knows the exact position of overseas exchange, is the only body which really can initiate steps to bring about the issue of a proclamation.
– But how can a anybody export gold seeing that under the first part of the bill, all gold is taken over by the Commonwealth Bank?
– There is nothing to prevent any person from going to the Commonwealth Bank with notes and, getting gold for them.
– But there is also nothing to prevent the bank from retaliating by issuing one of the notices provided for in the earlier part of the bill and getting the gold back again.
– The honorable senator is referring to the degree of protection afforded in the earlier part of the bill. I could go into the Commonwealth Bank, exchange my notes for gold and be met at the front door and served with a notice to mobilize the gold again. That is certainly possible, and the provision for the mobilization of gold was inserted in the bill for the distinct purpose of making the prohibition against the export of gold effective if the necessity should arise.
– It is very interesting, but would not that provision also apply to the Commonwealth Bank itself?
– Certainly. In order that honorable senators may follow this point I must refer to proposed new section 7c. It reads as follows: - “ 7c. - (1.) Where, after the receipt of a recommendation from the Board, the GovernorGeneral is of opinion that it is expedient so to do, lie may by Proclamation prohibit the export of gold from the Commonwealth except in accordance with the provisions of the succeeding sub-sections of this section, and thereupon gold shall not, while the Proclamation remains in force, be exported from the Commonwealth except in accordance with those provisions. “(2.) Any person who desires to export gold from the Commonwealth may apply in writing to the Board for the approval of the Treasurer of the export of the gold. “(3.) The Board shall refer to the Treasurer with a report thereon any application received by it. under this section. “(4.) The Treasurer may in his absolute discretion approve or refuse approval to any application made under -tin’s section. “(5.) Any person who exports gold without the approval of the Treasurer shall be guilty of an offence.
Penalty: A fine of One hundred pounds or imprisonment for one year or, in the case of a corporation, a fine of two per centum of the value of the gold in respect of which the offence was committed but in no case less than One thousand pounds.
This proposed new section provides that if the board, as the expert authority which safeguards the interests of those people whom honorable senators represent in this chamber so far as the note issue is concerned, is satisfied that such a state of emergency has arisen that it is absolutely essential to prohibit the export of further gold from Australia for a certain period, it will make a recommendation to the Governor-General, who then may issue a proclamation prohibiting the export of gold.
It will be convenient, I think, if, at this stage, I am permitted to deal with certain amendments that have been circulated by the right honorable the Leader of the Opposition (Senator Sir George Pearce). Sub-section 2 of proposed new sub-section 7c provides that after the issue of a proclamation any person who desires to export gold from the Commonwealth may apply, in writing, to the board “ for the approval of the Treasurer “ to the export of gold; and new sub-section 4 enacts that the Treasurer “may in his absolute discretion approve or refuse approval to any application made under this section.” The Leader of the Opposition has circulated an amendment, the effect of which is to provide that any person who desires to export gold from the Commonwealth may apply to the board for the approval of the Treasurer “ and of the board,” and that no person shall export gold without the approval of the Treasurer “ and of the board.” I invite honorable senators to examine: carefully the machinery provisions of the bill, and see whether the insertion of the words suggested by the right honorable the Leader of the Opposition are not a * departure from the British system of government as we understand it.
– The Leader of the Senate will not be in order at this stage in discussing amendments to the bill which have been circulated.
– Then I suggest to honorable senators that, since all are agreed as to the advisability of mobilizing the gold resources of the Commonwealth, we should confine our attention to the best means of giving effect to the real purpose in the mind of the board, which is to make the position of the Commonwealth secure from the point of view of overseas trade, and from the point of view of the convertibility of the note issue. It will be noted that once a proclamation has been issued that a state of emergency exists, the Treasurer will be the authority to determine in reality, not whether gold shall not be exported, but whether gold shall be exported. If in the opinion of the board a state of emergency has arisen, and a proclamation is issued, all the Treasurer can do is to give or withhold his sanction to application to export gold.
– Since the Commonwealth Bank will have all the gold in its possession, will it not be regarded as the custodian of all the gold resources of the Commonwealth?
– It will be the business of the bank to sound a note of warning and advise the executive with regard to the financial position of the Commonwealth. The Governor-General then, acting on the advice of the board, will issue a proclamation declaring that a state of emergency exists. In such a set of circumstances it would be intolerable if any authority other than the Minister responsible to Parliament exercised control over future policy with regard to the export of gold.
– As the bank will control the whole of the gold where is the necessity for the tendering of certain advice to His Excellency the GovernorGeneral?
– Under the bill the bank will advise that a state of emergency has arisen, and the Treasurer after the proclamation issues will be the only person authorized to determine whether gold shall be exported. Parliament would never allow the Commonwealth Bank, in such circumstances, to assume supreme control, especially if, after the issue of a proclamation, there was a change in the personnel of the bank.
As I understand our system of responsible Government, it is only on the rarest occasions, and in the most exceptional circumstances, that powers such as are contemplated in this measure would be vested in even such an institution as the Commonwealth Bank. If we believe in the principle that, in certain circumstances, gold should not be exported, it is better that control should vest in the Treasurer and the executive responsible to Parliament. The amendment indicated by the Leader of the Opposition will not give the Commonwealth greater security than is contemplated in the bill itself.
In order that travellers abroad may be freed from irritating restrictions the bill provides that any person may take out of the Commonwealth gold not exceeding £25.
On Thursday last Senator R. D. Elliott asked several questions, upon notice, dealing with certain matters suggested by the bill now under consideration. In reply I stated that these matters could be more properly considered in the course of the debate. I have already shown that the convertibility of the note remains intact.
– Will not the declaration that a state of emergency exists, affect the convertibility of the Australian note?
– No. The honorable senator will realize that if we take £2,000,000 worth of gold from the Bank of Adelaide and give that bank £2,000,000 worth of notes, the notes will have the same value, from the point of view of Australian trade, as the gold.
– But they will not be convertible.
– Convertibility of a note, so far as trade within Australia is concerned, has assumed for all practical purposes the meaning “ its purchasing power.” If, however, the honorable senator means that it will not be readily convertible into .gold, there may be something in his contention.
– That is what is meant by the term.
– Even after the issue of a proclamation there will be nothing to prevent any man from making application for gold in exchange for notes, because the proclamation will affect only the export of gold.
– The provisions of the old act will stand.
– Exactly. The position of an Australian holder of a Commonwealth Bank note, will not be, in any respect, affected by the passage of this measure. The handling of the foreign, as well as domestic exchanges, is peculiarly the business of the banks, including the Commonwealth Bank. Foreign exchange is in no sense an obligation of the Commonwealth Government other than its obligation to obtain London cover to meet its own commitments abroad. The Loan Council will be unable to borrow the whole of its programme from the local market, and will be compelled to obtain portion of its requirements from the overseas market. Any loan so raised will have a beneficial effect on the exchange position. But the Government never borrows abroad for the sole purpose of assisting exchanges. If the bill becomes law the application of its provisions will be a responsibility of the Commonwealth Bank after the necessary authorities required by it have been given to the board. As I have already stated, there appears to be no reason why the co-operation in exchange matters, which at present exists between the Commonwealth Bank and the other banks, should not continue. In this event there is no doubt that all details in regard to London exchange will be settled to the mutual satisfaction of all the banks concerned.
The remedy adopted by the Bank of England for the correction of adverse exchanges is to increase the bank discount rate. If any increase in the rate charged by the bank for advances would achieve the same result in Australia, then it is entirely in the hands of the banks to take such action, and there is nothing in the laws or charters, under which they operate, to prevent them from doing so. It is contended by the Treasurer that interest rates could not be used in Australia in the same way or with the same facilities as the bank rate is; used in London. He added that the “result of an increase in interest rates here was not so immediate or not so certain as that which follows movements in the rate of the Bank of England. When the Governors of the Bank of England increase the bank rate, as they had to do recently, their action stems the outflow of gold from Great Britain and tends to attract funds back to London. Almost immediately the position is rectified, and the bank has an opportunity to reduce the interest rate again. No one would say that there would be any such quick response in Australia to movements in the interest rate.
Notwithstanding reports in a section of the press that the Senate proposes to test the strength of the Government on this measure, I feel confident that the Senate will give the bill the consideration it deserves. If honorable, senators enter into the debate in a proper spirit, I feel sure that Australia’s credit, both overseas and at home, will be secured.
Senator Sir GEORGE PEARCE (Western Australia) [5.36]. - I do not propose to ask for the adjournment of the debate on this bill, because of the condition of the notice-paper, and also because I realize that there is some urgency in connexion with the measure. Any one who has read the letter from the Governor of the Commonwealth Bank must agree that, if the position is as the board therein sets out, the sooner some legislation is placed upon the Statute-book the better. Here let me remove a suspicion that seems to haunt the mind of the Vice-President of the Executive Council (Senator Daly), as to the attitude of the Senate towards this bill. So far as I understand that attitude, I assure him that the Opposition will not seize upon this or any other bill merely as a casus belli. We shall give every bill, including that now before us, full and fair consideration. I ask the Leader of the Senate not to take any notice of press speculation as to what is in the minds of honorable senators on this side of the chamber.
We realize that this bill deals with a matter of first-class importance. It affects the fundamental principles upon which the finances of this country are ‘carried on, and, that being so, it should not be rushed through any legislative chamber, but should receive the fullest consideration and criticism. In so far as the first part of the bill is concerned, a precedent on somewhat the same lines has been established by legislation passed in England. That legislation, although not quite on all fours with the bill before us, embodies the same principle. We can, therefore, be guided by the experience in the Old Country in relation to the mobilization of gold, for in that connexion we are treading on tried ground. But the second part of the bill does not follow the English act. It is new - it is a proposal to enter upon a new path - and therefore demands a closer scrutiny than the other portion of the bill requires. The fluctuations of exchange rates caused by an excess of imports or exports have hitherto been controlled by the rising or falling of the bank rate of exchange. Its inter-relation with the export of gold is due to the fact that, when the exchange rate reaches a certain point, it becomes more profitable to export gold to meet liabilities overseas. The power given to the Treasurer in the second part of the bill is a power which could be exercised so as to cause an interference with those fundamental principles which hitherto have governed the question of exchange between Great Britain and Australia. It may be necessary, it may be wise that there should be such power. Business credit is very sensitive, and when we touch those things by which it has been’ governed hitherto, we shall learn only by actual experience what reactions may be set up. Those reactions may be so serious as to cause in a few months damage which will take Australia many years to overcome.
For these reasons it is the intention’ of honorable senators on this side to give the bill very careful study, and to make sure of the ground on which we shall proceed. We in this Parliament do not come closely into contact with questions of business finance, and must, therefore, be guided largely by economists and others who make a special study of such subjects. These questions are not simple, but in- tricate. We should not ask Parliament to act on our views alone ; we’ must buttress our opinions with the views of those whose daily lives are devoted to such questions. The letter from the Governor of the Commonwealth Bank dated the 9th November, 1929, contains some very serious statements. I take it that that letter received the serious consideration of the Bank Board. I shall not quote the whole of the letter again, but I propose to ask the special attention of honorable senators to a portion of it -
In view of the situation which I have just outlined, a position arises where those who require London credits, and are unable to obtain them through the usual banking channels, may present notes at the Commonwealth Bank, obtain gold against same, and ship it overseas to obtain outside credit. The position which I am now outlining to you is not merely a possibility, but the actual state of affairs referred to has now arrived, and the board, after exhausting every possible expedient to meet the situation, now finds itself definitely faced with proposals which must have the effect of depleting the reserve of gold, and further taking the control of the situation out of the board’s hands. It has, therefore, become necessary to lay the matter before your Government for such action as you may deem it wise to take, and at the same time offer your Government such advice as seems to the board wise.
My board is of the opinion that the last resource which should be adopted would be any course which meant even temporary departure from the operation of the gold standard on the part of Australia; such measure would reflect most adversely against Australia in respect of oversea credit, and incidentally have a most serious effect upon our abilities to raise loans abroad.
I commend those last words to the consideration of some of the supporters of the Government in this chamber, because proposals have been made by them which, if adopted, would seriously undermine the maintenance of the gold standard in Australia. One thing which would affect that standard would be the inflation of the note issue; and we know that that is the remedy which some Government supporters, and at least one member of the Government, suggest for the present unemployment trouble. There is a message of warning in the letter of the Bank Board.
– Does the right honorable senator suggest that that could be done on the passing of this bill?
Senator Sir GEORGE PEARCE.”We shall see. The letter continues -
I might briefly say that such legislation would place the Commonwealth Bank in immediate control of all gold in Australia by whomsoever held.
Whilst this legislation in itself would not prevent exportation of gold from Australia, it would place the gold in Australia definitely in the control of the bank. Once placed in this position there would only be one authority in control of the gold in Australia.
This bill does not meet the position referred to by the Bank Board, for it will leave the control of the gold in the hands, not of the Bank Board, but of the Commonwealth Treasurer. It will take out of the hands of the Commonwealth Bank Board power to permit the export of gold, and vest the power in the Treasurer.
– Only if the bank has said that it is necessary.
Senator Sir GEORGE . PEARCE.Only after it has concurred in the issue of a proclamation. But once the board has recommended the issue of a proclamation, and it has been issued accordingly, the board will have no more control over the export of gold from Australia. With the issue of the proclamation, the control will pass to the Treasurer of the Commonwealth. That is absolutely contrary to the views of the board.
It is idle to deny that this bill has caused considerable uneasiness in financial and commercial circles in Australia. In support of that statement, I desire to bring under the notice of the Senate some of the telegrams and communications that have been received on the subject. I have here a telegram from the Bank of Adelaide, dated the 9th December, 1929 -
Re Commonwealth Bank of Australia Amendment Bill. As a matter of principle this bank is totally opposed to handing over its gold reserve unless the Commonwealth Bank functions as a central reserve bank but would prefer to see the bill opposed in its entirety.
– Is that an American form of intimidation?
Senator Sir GEORGE PEARCE.The telegram is from the Bank of Adelaide, which is an Australian bank with Australian shareholders. It contains no threats. In the case of the American picture interests there was in timidation, because they threatened to oppose any member of Parliament who dared to attack them. I wish to emphasize that the late Government announced that its view of the Commonwealth Bank was that it should gradually assume the position of a central bank, a bank of reserve ; and it was taking steps towards that end. The present Government has not announced its real intentions concerning the bank.
There have been some vague allusions to the Commonwealth Bank becoming a fierce competitor with private banks, that it should be a trading bank, but there has been no declaration by the Treasurer, or any member of the present Government, whether it is intended to make the Commonwealth Bank a bank of reserve or a central bank. In the absence of any such declaration we can understand the uneasiness felt by bankers, who fear that their gold will be taken over by a bank which will become a competitor. There is the suspicion that behind this there may be an idea to commandeer the gold from the other banks, and actually use their reserve gold to enable the Commonwealth Bank to overcome its competitors.
The producers of gold represent another interested section, and the following telegram, received by Mr. Latham, from Mr. Maughan, of the Gold Producers Committee, Melbourne, indicates their attitude -
In interests gold-mining industry urge addition to Commonwealth Bank Act amending bill exempting from export provisions the production of bona fide gold producers. Glad if you will support; have telegraphed Treasurer.
I know why these people feel nervous. During the war they suffered from the introduction of a prohibition on the export of gold.
– They made a good deal of money before the prohibition came into operation.
Senator Sir GEORGE PEARCE.They made very little, because the prohibition was introduced in the every early stages of the’ war. As a result, gold was stabilized to world’s parity, while the prices of all other primary products appreciated.
Then there are the business people, who deal with exchanges inasmuch as they trade in the import and export of our commodities. Their views are represented ina telegram from Sydney, dated 9th December, reading: -
At a special meeting of the Council of this chamber to-day the following resolution was unanimously adopted, copy of which has been forwarded to the Prime Minister. Resolution reads -
In view of the gravity of the effect on Australia’s credit of any interference with the free flow of gold either outwards or inwards the Sydney Chamber of Commerce earnestly suggests that the bill to amend the Commonwealth Bank Act now before the Federal Parliament should be deferred, ponding an exhaustive investigation of such a fundamental question by a select committee. (Signed) George A. Parkes, President.
Sydney Chamber of Commerce.
The following telegram, received from South Australia by Mr. Latham, gives the opinion of the Savings Banks on the proposal : -
Strongly urge amendment Commonwealth Bank Bill to exempt gold reserve of Savings Bank of South Australia. Gold reserve already proved invaluable in preventing crisis during war period. Future crisis without adequate gold reserve might embarrass South Australian Government because of its guarantee and deposits at call of bank. (Signed) Butler, Premier.
I shall also read the views of the Melbourne Chamber of Commerce, as reported in the Argus of the 3rd of December, 1929. That body sent a telegram to the Prime Minister, as follows : -
The Melbourne Chamber of Commerce considers that any mobilization of the gold reserves of the trading banks, as authorized by the amending Commonwealth Bank Bill, is to the extent of the commandeering of the whole or a considerable part thereof, neither necessary nor desirable in Australian conditions. The arbitrary enforcement of such a policy would be a serious interference with a system that has stood the test of long experience. A change so radical would not only tend to hamper banking business generally, but the chamber feels that it might be injurious to the credit of the Commonwealth and the States, besides disturbing public confidence.
The present unusual exchange position can be met by co-operation between the Commonwealth Bank and the trading banks on sound lines, and it affords no justification for a change so extreme. The compulsory taking of any part of the gold holdings of the trading banks and any embargo placed upon proposed shipments of gold should, so long as such are necessary, be subject to a guarantee of the position of equivalent exchange requirements for the banks.
The mobilization of the gold reserves in England arises from a number of causes, the most important of which do not operate here. The constitution of the central bank and public sentiment there minimize the risks of political interference.
The chamber earnestly hopes that if any gold is demanded from the banks under the act it willnot be used for purposes of note inflation. While it remains in the hands of the banks the public feels that it cannot be used for such a purpose.
Those expressions of opinion exhibit a nervousness and uneasiness that is not put forward merely for political purposes. These people are daily dealing with exchanges, and their communications indicate that there is an element of risk in the bill, which necessitates thatwe should proceed with extreme caution.
– Surely the right honorable senator does not suggest that these banks do not innate their own currency.
– How could they?
– I refer to their cheque currency.
Senator Sir GEORGE PEARCE.I shall read a quotation which shows, to my mind, that their nervousness in regard to the contemplated action of the Government in regard to our note issue is not without foundation. It is a cablegram that appeared in the Sydney Morning Herald of the 6th Deecmber last, and reads -
Denial From United States
Washington, December 4
Considerable surprise has been caused by the circulation of a report from Australia stating that it is there understood that the United States Federal Reserve Bank contemplates expansion of the note issue in the interests of unemployment. It is pointed out that while the report shows a. cognizance of a sensational import of such a step, it lacks familiarity with the structure or purposes of the federal reserve system.
The system was instituted by President Wilson, for the purpose of controlling inflation. An examination of the Federal Reserve Act shows that the main body of notes can only be issued against commercial obligations. This would make impossible any arbitrary expansion. Moreover, the idea that unemployment to any extent necessitating such desperate financial remedies existed in the United States, or was at all impending is received with incredulity. The Australian report is considered fantastic.
The correspondent of the Australian Press Association at Washington interviewed Mr. Young, Governor of the Federal Reserve Bank, who denied the truth of the note issue rumour. He said, “ It is a wild dream “.
Why was that interesting rumour set going? It was based on a report that was circulated in Australia, that that was the project of the United States of America to solve the unemployment problem in that country. Remembering that there is at least one member of this Government who has in the past openly advocated an expansion of the note issue and who, I think, sincerely believes- that money can be made through the printing press, I sympathize with the uneasiness and the nervousness of these people, who fear that this may be the first step towards the introduction of the printing press as a means of inflating our currency.
We have in Australia eminent economists who have given consideration to the undoubtedly serious position that now exists with regard to our overseas expendiditure and our public finance. Professor J. B. Brigden is one, and the following is extracted from an article written by him for the Sydney Morning Herald of the 9th December last. It reads -
Since it has become evident that Australia is about to suffer a drop of at least £30,000,000 in its income from abroad, developments have proceeded rapidly. Our credits have shrunk in London to such an extent that large exports of gold are becoming necessary.
He goes on to say -
Unemployment lias already increased because of the shortage of funds for public works, and the position is becoming acute. It is unfortunate that the Government has found it necessary to control the export of gold. It should have been sufficient to have given the Commonwealth Bank power to requisition the gold held by private banks. The control of gold exports implies a possible refusal of gold to pay debts abroad, which possibility is itself a shock bo our credit. The debts are incurred in gold, and if there is any doubt as to payments they immediately become insecure.
There is also a real danger of inflation once the Australian £1 becomes practically inconvertible. The Government might need all its moral strength to resist the demand for currency inflation in the near future, and with unemployment rife and depression upon us it will not be easy to convince ardent advocates that a small degree of inflation is bad. Every degree can be a small one. It could take place in Australia without reducing the proportion of gold reserve to the note issue, and without requisitioning any of the gold held by the private banks. It could take place merely by preventing the export of gold and by absorbing the current production. It was the control of export that made possible the inflation of currency during the war. If the normal production of gold were added to the note issue reserve, that reserve would be increased by about 10 per cent, in one year. The increase could even be anticipated, and in view of the Government’s pledge to assist in the development of existing gold mines, that increase might be stimulated by subsidies.
A permanent change of the character suggested should not be rushed through, Parliament merely because of a temporary emergency. It should be considered very fully as part of the Government’s general banking policy, and with a more complete realization than at present seems to exist of the effects both here and abroad. In the circumstances, an assurance that there will be no increase in the note issue will be of very considerable value.
That is the view of an economist of considerable standing in Australia. I now desire to give the view of an Australian banker of equally good standing, Mr. A. C. Davidson, the general manager of the Bank of New South Wales. That gentleman wrote, for the Sydney Morning Herald, a series of articles on the gold standard in its application to Australia, and the one from which I shall read appeared in a copy of that publication, dated 28th November last. It states : -
The great benefits of the gold standard carry with them great responsibilities. To maintain the gold standard we must be prepared to allow the free import and export of gold in all circumstances and to maintain the convertibility of the Australian notes without exception. It must be impossible for the note-issuing authority to refuse to give gold for notes, no matter for what purpose they may be required; for trade, for hoarding, for export, or for internal currency ….
First of all we must be prepared to give gold for our notes whenever demanded and in whatever quantity. Secondly, we must be prepared to export gold when our trading and financial position makes it such that gold can be demanded from us, and similarly to import when necessary. There is much to be lost by shirking these responsibilities. The world at large is not to be bluffed. If we had been spending too much, if the position in Australia is such that we have been living, so to speak, beyond our means, and if as a consequence our price levels are high and out of line with the rest of the world, we must be prepared to allow our exchange rates to move towards and even reach the gold export point. 1 think that, since that was written, it has reached the gold export point. Th, extract continues - 17 is is the position to-day. We must, then, allow those who have to make payments abroad to withdraw gold from the noteissuing authority and export it if they arc able to do so at a butter rate than can be obtained by buying exchange on London, or on whatever place to which they may require to send the money. For the note-issuing authority to place a partial or total restriction on the export of gold must break down the convertibility of the Australian note. It must in time create difficulties and disorder iti the exchange market, and have a serious effect both on our export and import trade. But there is a more serious aspect still, and that is the repudiation of the gold standard. The demand for gold for export is a sure indication that we have got out of line with the rest of the world. It may he for one or more of several reasons, namely, that our prices arc too high ; that our currency and credit are excessive, or that we have been over-trading or over-spending.
We all know that that is the cause.
If we are wise we shall permit the export of gold to settle our commitments punctually on due flute, and take the proper stops to set our house in order. The nation should act in such circumstances in the same way that a prudent merchant would do, and take steps to bring his position into line with the conditions obtaining about him. The proper corrective is to raise the rate of interest to all sections of the community in Australia. This would be done by the Commonwealth Bank, with the assistance of the trading banks. It would, wo may suppose, raise its rates of interest on all advances, say, 1 per cent, per annum, and further if necessary. Experience has shown that an upward alteration of less than 1 per cent.- in the rate of interest is seldom effective. Raising the rate of interest would have the effect of checking demands for money and credit. It would tend to limit the demand for accommodation to the genuinely productive sections of the community. It would have the further effect of tending to stop over-buying and over-trading; to encourage exports and discourage imports, and so to rectify the conditions of trade and of our relationship with the outside world which had created the demand for gold for export in having forced the rates of exchange up to a point at which it was profitable to export gold.
He concludes with these words -
Australia has reached another of the great turning points in its history. We will prove ourselves yet again to be a nation capable of facing difficulty, capable of doing the right thing, of following the right ideal and sound principles, even at some sacrifice, may he.
Will our financial loaders see to it that the gold standard is maintained at all costs? That Australia’s name is kept untarnished in the great world of finance and trade?
Senator Sir GEORGE PEARCE.I commend the reasons 1 have quoted to the Minister. If he reads them carefully he will see how the gold standard can be affected by this measure.
Senator Sir GEORGE PEARCE.I have not quoted the whole of the article. If the Minister reads it all, and the succeeding article, he will see how the gold standard may be affected. I now propose to quote the opinion of Professor Copland, Professor of Commerce at the Melbourne University, who, on page 81 of a pamphlet entitled The Banking System of Australia, issued, this year, uses these pregnant words dealing with the situation we are now considering -
Currency AND Exchange.
The traditional statement of the effect of the exchanges on currency and credit was as follows: Assuming that prices were rising in Australia more than in .England, or that Australia had an unfavorable balance of payments with England, exchange rates would move against Australia until they reached the exporting specie point, i.e. the point at which it would be more profitable for importers to ship gold than to purchase drafts on London in settlement of their debts abroad. Gold would therefore be exported, and this would reduce bankers’ reserves in Australia. A contraction of credit would follow, imposing a reduction in the spending power of the community and a consequent recession in prices. Two consequences of importance to foreign trade would then appear. First the falling price level in Australia would reduce imports because the market would be less advantageous to sellers. Exports would increase for the opposite reason. Secondly, the adverse exchange rates would assist exporters whilst discouraging importers. Hence the international balance of payments would be restored and the price levels of Australia and Great Britain again reach a common level. Exchange would return to* par and gold movements would cease until a similar or converse situations arose.
In dealing with the Commonwealth Bank as a central bank, Professor Copland, on page 96 of the same publication, states -
Early in 1027 Sir Ernest Harvey, Comptroller of the Bank of England, visited Australia at the invitation of the Commonwealth Bank. At a series of conferences with the Board of Directors of the bank. Sir Ernest Harvey had the opportunity of discussing the position of the Commonwealth Bank as a central bank. He also had conferences with the commercial banks. No official announcement has been made concerning the details of these discussions; but they were reported toha ve included the centralization of the gold reserves, the development of a discount market, and the trading and savings bank functions of the Commonwealth Bank. On the first of these a pooling of gold reserves under the control of the Commonwealth Bank would promote an economy in the use of gold in Australia, enable a greater portion of the reserve to be held in London, and facilitate exchange transactions. In the second case a decline in the use of overdrafts as a means of making advances by the commercial banks, and a more frequent resort to the practice of discounting bills, would facilitate the development of the practice of re-discounting by the Commonwealth Bank. Sir Ernest Harvey was rather outspoken in his preference for the commercial bill as opposed to the system of overdrafts familiar in Australian banking practice. A combination of these two measures - pooling of gold reserves and the establishment of a discount market - would provide a satisfactory basis for the exchange system - a form of gold-exchange standard suggested in the final section of the above chapter. It is impossible to state at present whether progress will be along these lines.
SenatorSir GEORGE PEARCE. - What is my object in reading these quotations? These experts on this intricate subject all issue a note ofwarning, and point out that the phase with which we are dealing is only a part of the more comprehensive subject of banking, trade and exchange; yet we are considering it only in part. We have not been told by the Government where the proposal which it has put forward will lead us. If it were part and parcel of a scheme leading up to the establishment of the Commonwealth Bank as a central bank and a bank of reserve, I should wholeheartedly support it. But the Government will not tell us its intentions. There is at least one member of the Government, to my personal knowledge, who will see in this measure a convenient means for an unsound and dangerous inflation of the note issue. If that were brought about it would be the beginning of the end.
Senator Sir GEORGE PEARCE.Yes. That would be a most dangerous course to adopt at this juncture. There is another reason why we should hesitate to accept this legislation. Australia is economically sick, but the Government and its supporters will not recognize that fact. Instead of giving the body politic a dose of medicine to cure it of its economic ills, it is giving it more of the economic dope that brought it to its present position. We know the position in which Australia is placed; we on this side of the chamber know the cause and believe we can provide a cure. That cure is disagreeable and unpalatable to many people. By its application votes certainly could not be obtained, and therefore it is distasteful to this Government. We feel that while this measure may be the first step in the wrong direction, it could be made the first step along banking lines towards a sound position by making the Commonwealth Bank a bank of reserveand a central bank. We hesitate to believe that the Government has this in mind. We are. in fear and dread, and that fear and dread is reflected in the opinions of bankers, political economists, and commercial men whom I have quoted.
Sitting suspended from 6.15 to 8 p.m.
Senator Sir GEORGE PEARCE.I do not propose to make any further general remarks about the subject with which we are dealing, but I shall say a few words now about the bill itself. I note, with some interest, Senator Daly’s statement, that the power the bill proposes to give to the Commonwealth Treasurer is of a purely emergency character. Senator Daly would have us believe that under this bill the Bank Board will have full control, but any one who reads the measure will find that the power of the
Bank Board vanishes as soon as a proclamation has been issued prohibiting the export of gold. In this matter, I suggest the Bank Board and the Commonwealth Treasurer should be linked together. I know that Senator Daly contends that that would be an invasion of the prerogative of the Commonwealth Executive, and that that would be a departure from the recognized practice as far as Australia is concerned. That, however, is not so. As a matter of fact, the Dried Fruit Export Control Act gives a board and not the Minister power to prohibit the export of fruit, and I think the same provision is to be found ia other Commonwealth export control legislation.
An amendment, which I have circulated, and which I am submitting to the Government for consideration, aims at bringing about a very desirable association between the Treasurer and the Bank Board. Under the bill as it stands, when a proclamation prohibiting the export of gold has been issued, applications for permission’ to export gold will be made to the Treasurer, not only by banks, but also by trading firms, and it will be extremely undesirable for the political head of the Treasury, whether he be a Labour, Nationalist, or Country party man, to differentiate on his own volition between one firm and another. Such a position will assuredly arise. The circumstances under which one firm may make an application may justify a permit to export, whereas those under which a rival firm may make an application may not justify the Treasurer in giving permission to export gold.
– ‘I ask honorable senators to deal as little as possible with matters that must be reserved for the committee stage.
Senator Sir GEORGE PEARCE.”We can discuss all details in committee. For the moment, I am simply stating my opinion, that it is not desirable for the political head of the Treasury to have sole power to differentiate between trading firms, or even between trading banks.
– The Minister for Trade and Customs has the same power to-day.
Senator Sir GEORGE PEARCE.He has not the same power. In this vital and important matter, there is every reason why the public should be given the assurance that the Board, which is in undivided control of the note issue, and thereby of the gold reserve, should be associated with the Treasurer in respect to applications for permits to export gold. I have already given notice of an amendment on this point.
We realize that Australia is in a serious position, and are not putting forward amendments in a hostile spirit, or simply because as an opposition we want to put up something different from that which the Government has put forward. Nor have we any desire to embarrass Ministers. We are submitting these amendments in a friendly fashion. We are sincerely desirous of doing the right and safe thing, because we feel that, in the matter of our credit, Australia cannot afford to take any risks.
That brings me to the only other point I wish to make in regard to the bill itself: that the second part of it is experimental legislation which, according to quotations I gave before dinner, has been received with some trepidation and indeed, some fear, by the commercial and banking community. Nothing can be more fatal to commercial and banking life than lack of confidence. A Government should avoid doing anything to disturb the confidence of the banking and business community and to that end I shall move an amendment to limit the operation of the second clause of the bill to twelve months, not with a desire to destroy the efficacy of the measure, but simply to give an opportunity for a review of the provision within twelve months. By that time we shall have had experience of the working of the act, and should be in a position to know whether it has been operating in a manner which has not proved injurious to the trade of the country. We may know by that time whether, by the Government’s administration of the law, it has proved of advantage to the country and, if that be established, both Houses of Parliament will agree to make it of a more permanent character. The VicePresident of the Executive Council (Senator Daly) has admitted that it is emergency legislation. Why then cannot we have some limitation of the period for which it is to operate? Such a limitation would not lessen the power of the Government to deal with the situation which has recently arisen. At any rate I propose to test the feeling of the committee on this point.
I again assure Senator Daly that I am not putting forward these amendments for a political purpose, nor to embarrass the Government. I am putting them forward because I conscientiously believe that there is a delicate situation to be faced and that it should be faced so as to get the confidence of the people, and so as not to deal a damaging blow to the overseas trade or the exchange position. My amendment, if agreed to, will give the Parliament a guarantee that it will have an opportunity in twelve months’ time to review the provisions of this bill and decide whether they should be given a longer trial.
– I ask honorable senators at this stage not to discuss the merits of proposed amendments.
– This measure deserves of honorable senators the fullest and fairest consideration. Its importance cannot be overstated. It touches, among other things, upon the delicate subject of our overseas trade. While I would not subscribe to some of its provisions without considerable modification, I regret that I must accept the assurance we have had from the Leader of the Government in this chamber (Senator Daly) and the body that is largely responsible for the control of credits overseas and internal, that the first part of this measure is necessary. It is a matter for regret that the state of our overseas exports is such that they have failed to meet trade requirements and that we have had to resort to the shipment of gold. Viewing the measure broadly I feel that while the gold standard is being preserved internally, the later provisions of the bill to which reference has already been made this afternoon will really cut across the principles of the gold standard if they are applied. In my opinion the latter part of the bill touches on very delicate ground, and on that, account we should walk with great wariness.
By interjection during the course of Senator Daly’s speech, 1 referred to. one important phase of this question. Once the gold is demanded from those persons from whom the bank has a right to demand it, it passes into the custody and control of the Commonwealth Bank, which, according to the Leader of the Senate, is the very body responsible for the introduction of this bill. As a matter of fact honorable senators heard this afternoon the very excellent reasons the bank advanced for asking Parliament to pass this amending bill. But one of the reasons advanced is that the bank needs to strengthen its position for the purpose of backing its gold reserves against the note issue. It would appear that without any further review we could have left well alone. We have already placed under the control of the Commonwealth Bank the destiny of the gold reserve, but perhaps the Leader of the Senate can explain why further action is necessary in that regard. For my own part I feel, in common with a number of other honorable senators, and a number of writers, some of whose opinions were quoted this afternoon by the leader of the Opposition (Senator Sir .George Pearce), that, in prohibiting the export of gold we are taking a ,step unprecedented in the history of any British community.
– Perhaps the honorable senator may not be aware that six million pounds worth of gold has been exported from Australia since July of this year.
– I know that there has been a large demand for the export of gold overseas. I have no complaint against the first part of the bill, although I should like to draw attention to one fact. We have not had the figures, but I take it the Leader of the Senate believes that it is within the knowledge of all honorable senators that large quantities of gold are held by the private banks outside the reserves kept by the Commonwealth Bank. I think it behoves the Senate to pay a tribute to the sanity of those financial institutions which have preserved their gold and their credit, and which are continuing to help the credit of Australia during a strenuous time
Contrary to their action of 1893 the private banks have husbanded their resources and looked after their reserves so well that whatever the stress may be on certain branches of industry, or whatever the’ stress may be upon Governments, there can be no financial debacle in Australia to-day. On the passage of this measure nineteen millions worth of bullion and gold will be brought into the coffers of the Commonwealth Bank. Why have the private banks been holding that nineteen million pounds? In the spirit of a miser, merely to look at it? No, they have kept that gold in a spirit of safety so that in times such as the present they would be able to establish overseas credit for their customers. And now, but for the urgent necessity of this bill, there should have been some measure of broad justice done within the four corners of the measure to the institutions that have to yield up that nineteen million pounds worth of gold to the Commonwealth Bank for the purpose of buttressing our note issue. These institutions will be expected to hand this money over to agencies that may be in active opposition to themselves, instead of employing it to provide overseas exchanges for their customers.
– Would it not be more correct to say that those agencies are in passive opposition ?
– I hope I am not putting the case for the private trading banks offensively. All I wish to 3ay is that, if, instead of wisely husbanding their resources, those institutions had handed their reserves over to the Commonwealth Bank, they would have received interest, .1. presume, at the rate of 5 per cent. But from prudent motives, they preferred to keep their assets in liquid form to meet contingencies such as those which have now arisen. I shall be glad to have an assurance from the Leader of the Senate (Senator Daly) that the Commonwealth Bank will he prepared to give these banks some measure of justice in the matter of foreign exchanges.
The Minister has intimated that the measure is not brought forward in any spirit of hostility to the private trading banks. He has told us that the sole object of the Commonwealth Bank, in common with the private institutions referred to, is to mobilize the gold resources of the Commonwealth in the interests of the people of Australia. I think that the institutions concerned- would be glad of an assurance that the Commonwealth Bank will consider, sympathetically, a proposal to establish foreign credits for those customers of private banks whose gold will be mobilized under the Government’s latest proposal. The Leader of the Senate has made out a case for the marshalling, in some shape or form, of the gold resources of the Commonwealth, but it appears to me that it matters very little in whose hands the gold is, so long as it is held within the Commonwealth, unless there is some risk of encroachment on our statutory reserve in relation to the note issue, and no one, I hope, suggests- that we are approaching anything like such a crisis as that in the financial affairs of this country. I understand that the gold reserve in the coffers of the Commonwealth Bank is equal to 50 per cent, of the note issue. As I have said, but for the urgency of the measure, I should have felt it my duty to press for an amendment to the bill to provide that, as a simple act of justice to those banking institutions whose gold reserves are to be mobilized, they should receive some equivalent in the form of foreign credits.
There is one other matter that appears to me to require more than passing attention. 1 refer to the position of those excellent institutions known as the State Savings Banks, which for many years have adopted a policy of caution, having regard to what has happened in the earlier financial history of the Commonwealth. The State Savings Bank of South Australia, after the financial debacle in America in 1907, when savings banks had to close their doors for 30 days or 60 days on end, decided, many years ago, to establish a. gold reserve. While on this point, it may be profitable to remember that the savings banks in the various States are dealing in the main with people who are unacquainted with the ramifications of finance, and whose main concern is to see something tangible in the nature of the sovereign as representing their deposits. This inherent fear in the minds of the majority of depositors in State savings banks arose out of the financial crisis in the United States of America in 1907. As evidence of the far-reaching nature of that financial disaster, the Melbourne Argus, of 16th December, 1907, wrote -
The evolution of the financial crisis in the United States of America has been a study of absorbing interest to British financiers. . . . The shortage of cash was so great in some of thu United” States centres that up to 5 per cent, premium was paid for gold. This was at a time when £ 1.2,000,000 had been shipped from Europe to New York. Those who had the gold clung to it as the one dependable commodity in the country, only to be freed under actual compulsion. Savings banks shut their doors to depositors for from 30 to 00 days, and in many cases banks would only recognize cheques that had to pass through the Clearing-house That scores of .thousands of work-people were thrown out of employment was inevitable, with the curtailment of credit, and the loss nf banking facilities due to an exceptional state of affairs. How much worse, however, that their savings should he cut off by the refusal of the savings banks to pay on demand. Nothing can more clearly demonstrate to the worker the paramount importance to him of maintaining in a country a sound system of banking, and one that will respond to the demand of the hour.
To obviate any such contingency in South Australia, the State Savings Bank established a gold reserve. Fortunately for that institution its trustees occupy much the same position as do the directors of the Commonwealth Bank, for I have a clear recollection of hints by successive governments that the maintenance of the gold reserve by the State Savings Bank was unnecessary. But, as I shall show in a few minutes, the existence of that reserve, and the ability to pay depositors in gold, had a very important influence in checking a mild panic in the early days of the war. I understand that a similar situation arose in Queensland, and that there, too, the fears of the people were allayed by the assurances which the leading bankers were able to give to their depositors. In justifying the action of the. trustees in establishing a gold reserve, the chairman of the State Savings Bank in South Australia said -
The trustees regarded it as incumbent upon them first to select such securities as will ensure absolute security to the depositors as far as they possibly can, and that is why so much of their money is invested with the State. The next is to obtain the best rate of interest consistent with security, then, in accordance with the very foundation of finance, to spread their securities so that they may the better meet any contingencies which may arise. But beyond these, there is one very vital concern, apart altogether from the question of ultimate security, and that is that the moneys placed in the hands of the Savings Bank trustees represent, in the main, the savings of and probably the only available liquid assets of the working classes of the community. These moneys necessarily should be repayable at call.
I was impressed to-day by a letter which a distinguished member of another place showed me, from a traveller who has trading relations with people in the country districts of his State. The terms of the letter are amusing to those who have any knowledge of the banking system. The writer, referring to the Government’s proposal, appeared to be under the impression that the banks would not in future be required to pay depositors in gold, and that, as a consequence, the credit of the country would be destroyed. The point I wish to make is that, in legislation of this nature, we have to consider the mentality of a large number of people who are depositors in State savings banks, as well as private banking institutions, and I repeat that the trustees of the Savings Bank of South Australia, and of its sister institution in Victoria, were wise in their generation when they resolved to establish an adequate gold reserve. I hope, therefore, that the Leader of the Senate (Senator Daly) will indicate that such institutions will be exempt from the provision of this bill.
– What advantage would it be to exempt the State Savings Bank of South Australia?
– I am aware that the amount to the credit of that institution in gold is only £210,000, but again I remind the Leader of the Senate (Senator Daly) that its gold reserve afforded a solid measure of security to its depositors in 1916 or 1917, when there was a small run on the bank. The fact that the trustees were in a position to pay in gold effectively checked what might have developed into a crisis. It might be argued that the Commonwealth note also is convertible, but I would point out that it is convertible into gold only at the head office in Sydney, and that trouble may be experienced by any of the private banking institutions before the necessary amount of gold can be transmitted from head office. As this bill relates to a matter of extreme delicacy and affects the financial status of institutions that handle the savings of the people, we should proceed with extreme caution. The figures relating to deposits in the State Savings Bank of South Australia are remarkable. The accounts number 459,927, and the amount to the credit of depositors is over £11,000,000.
– The accounts represent more than half the population of the State.
– Yes, but a considerable number of accounts are held on behalf of infants and others are duplicated. I am assured that almost one half of the people of South Australia have savings bank accounts and I may sayen passant that the amount to the credit of the depositors per head of population is larger in that State than elsewhere in the Commonwealth. The people of South Australia are extremely prudent. The trustees of these institutions have no interests of their own to serve. They desire to retain the gold in order to allay the fears of the people in times of crisis. If the Leader of the Senate (Senator Daly) cannot give an assurance that they will be unaffected by this measure, I invite him to consider the question from another angle. This measure deals with banking, and as the powers of the Commonwealth in respect of banking are limited under section 51 of the Constitution, I suggest that the bill cannot touch State savings banks or State banks. The Constitution expressly excepts State banking from control by the Commonwealth. Instead of putting the State savings banks in the unpleasant position of having to resist any proceedings which might be taken-
– Does not the honorable senator realize that this bill deals with currency rather than banking?
– The bill purports to deal with currency, because the Commonwealth can deal with coin, whereas it cannot expropriate money from the State savings banks. I put it first to the honorable senator as a matter of fair play; but, if he is not prepared to accept my suggestion in that spirit,I remind him that I have taken the precaution to obtain the opinion of eminent counsel in South Australia, for whom I know the Leader of the Government has the greatest respect. The opinion of Mr. Cleland, K.C., which I received only this evening, is -
That the bill to amend the Commonwealth Bank Act is legislation with respect to banking, and that State savings banks are institutions concerned with State banking, and that as State banking is specially exempted from Commonwealth control by section 51, subsection XII. of the Constitution, it cannot be included in a bill; but to prevent future difficulties the bill should expressly except all State savings banks and State banks from its operations.
Probably neither Senator Daly nor I would be greatly concerned if we received from the bank a number of £1 notes, or even the cheque of some person whose financial standing we know to be secure; but in legislation of this kind we must have regard to the psychology of the people for whom the trustees of the State savings banks act. I ask the Leader of the Senate to submit this matter to Cabinet, for it is a case that calls aloud for exemption. Should no exemption be made to meet the case I have mentioned, and action be taken to enforce the provisions of this measure against the savings banks, they will, I am assured, take action to protect themselves. I submit that that position should not be allowed to arise. I put it to the honorable senator that it will enhance the nation’s credit if the State savings banks, which deal with the peopleen masse, are able to allay any panic which might take place. What has happened in the past might happen again in the future; and if the gold is there, it will go a long way to restoring confidence in the minds of saving bank depositors. If they get gold from the banks, it is more than probable that after a few days they will return it to the banks. I remember that at the beginning of the war a distinguished sportsman in South Australia withdrew 1,000 sovereigns from the bank because he feared a financial crisis. The possession of that gold so worried him that after a few weeks he restored it to the bank. Credit is a delicate thing, and we should not tamper with it. We should be guided by the advice of men who deal. with these matters every day. I trust that something will be done along the lines I have indicated.
It has been said that this bill follows similar legislation in Great Britain. I point out that there is one vital difference between this- measure and the legislation passed in the Old Country. “Without any legal obligation, it has been the uniform practice of the Bank of England, acting, as it were, as a central reserve bank, to provide foreign credits for ‘other banking institutions. In the absence of any lead from the Government as to its intention, I can only conclude that the bill is a step towards the creation of the Commonwealth Bank as a central reserve bank. I am, however, concerned about the second part of the bill - from proposed new section 7c to the end. A proclamation having been issued, and the gold having been obtained by the Commonwealth Bank, that gold will be in the hands of that bank in its capacity as a central reserve bank. The Leader of the Senate (Senator Daly) bases his case upon representations made to the Government by the Commonwealth Bank Board in relation to our gold reserves. Is not the Commonwealth Bank the proper institution to deal with our gold reserves? I take it that the proposal to get the gold into the hands ;of the Commonwealth Bank is a sound precautionary measure. But what further action is necessary? A proclamation prohibiting- the export of gold could be issued. The Leader of the Senate said that it is advisable that the gold shall be in the hands of the Commonwealth Bank in order to allay alarm regarding the bank’s liabilities in respect of the note issue, but I do not think that there is any justification for that fear. Indeed, there cannot be so long as the bank holds more than twice the amount of gold it is required by law to hold. It is like using both barrels of a gun when one barrel is sufficient. The proposals in the bill suggest that the Government is not prepared to trust the Commonwealth Bank. I, for one, am content to leave the control of our gold reserves entirely in the hands of that bank. Having got the gold under the control of the bank, the only institution which could be affected by any proclamation prohibiting the export of gold would be the bank itself. “We must decide whether the Commonwealth Bank is to be controlled by the Government of the day in respect to the export of gold. So far as I am concerned, there is nothing political in this bill. I am just as anxious as my leader to have introduced a workable measure that will not disturb the internal and the external credit of Australia in the slightest degree. Our internal credit has already been disturbed far too much by acts of Parliament. It would be most unfortunate if this measure should be made a squabbling ground between conflicting political parties, either here or in another place. My one desire is that we should interfere in this matter as little as possible, because the less that is done in the delicate realm of finance, more particularly by our Parliamentary interference, the better it is for the community generally. The case has been presented that it is necessary to do something, but surely further action is unnecessary -when once the gold is in the hands of the Commonwealth Bank. Surely, proposed new section 7c goes too far? As yet no emergency has arisen that requires such a provision to be brought into operation. Throughout my short political career I have been associated with men in the political arena whose word is their bond, but I would not entrust to them a matter so delicate and so important as this. I think that iu the interests of the Government itself, and particularly in the interests of the Treasurer, whoever he may be from time to time, it should be definitely laid down that the advisers of the Commonwealth Government are either behind the refusal to allow the export of gold, or are in favour of it. That is merely a measure of safety and fair play. Those who occupy high positions in Australia have neither the time, nor, perhaps, the opportunity, to study the ramifications and delicate relationships of international finance. It would be well, in the interests of all concerned, to define the position. If the money is held by the Commonwealth Bank and is under its control, why should the Government precipitate a panic by issuing this proclamation? Even to-day banking institutions are refusing, in their own interests and the interests of the community, to export some of their gold, and once the gold was controlled by the Commonwealth Bank there would be no necessity for the operation of proposed new section 7c. Under it His Excellency the Governor-General is to act on the recommendation of the board, and make this proclamation prohibiting the export of gold from the Commonwealth. The people would immediately become alarmed. Already they are concerned about this measure, although I admit frankly that there are no grounds for alarm. The more I regard the proposal, the more the necessity for the insertion of proposed new section 7c disappears. If there is, unhappily, any undisclosed reason for the insertion of the provision I join with the Leader of the Opposition in suggesting that the position should be safeguarded, in justice to the bank, and in the interests of the gentlemen who from time to time hold the position of Commonwealth Treasurer.
– Does the honorable senator remember that, in another place, the Treasurer declared that the second provision was inserted after a conference with the Commonwealth Bank.
– I understand that is so, and I do not wish to pursue the subject to any length, because I realize that there are matters upon which the Government must accept the advice of the bank. But what-; ever the directors of the Commonwealth Bank may have thought with regard to the proposed new section, I maintain that they are only reflecting upon themselves in asking for its incorporation in the bill. I admit that those gentlemen have a. far more extensive knowledge of finance than have many of us who are debating this measure, and that their soundness and integrity are undoubted. I am quite prepared to leave the financial business of this country, its foreign credit and gold reserve, in their hands. But that they should have advised such a step is beyond my comprehension. It is practically saying, “ We have the gold ; but we intend to tell you not to export “ - and they are the only people who can export. The gold goes into the Commonwealth Bank, and cannot be taken out unless somebody comes along with a quantity of notes and demands gold.
– And what would he do with the gold after he had received it?
– He would have to take it back to the bank and accept notes in return.
– The gold may be in the bank before the proclamation is issued. It is not necessary to issue the proclamation before the gold is mobilized.
– That is so; but once the gold is mobilized it remains under the control of the directors of the bank, who will not let it go lightly. I suggest that it is an entirely mistaken gesture to incorporate this provision in the measure, and I appeal to the Leader of the Government in the Senate to reconsider the matter, even at this late hour. It will not do us any good abroad or locally. The Commonwealth will have all the gold, and the proclamation will simply prevent our own. Commonwealth Bank from exporting that gold. I think that it will be advisable to eliminate the provision. Of course, if the Government insists upon proceeding with the proposal, and it has the approval of the majority in this chamber, I shall not make any attempt to hold up the measure, as I understand that advice has been tendered to the Government along the lines already indicated by Senator Daly.
There appears to be a feeling abroad that the note issue of Australia may be unduly inflated. I propose to give to honorable senators the benefit of one or two observations that were made not very long ago in regard to the expansion of the note issue, by quoting from Bryce, on The American Commonwealth, as follows : -
It may seem incredible that there should be still masses of civilised men who believe that money is value, and that a liberal issue of stamped paper can give the poor more bread or better clothes. If there were a large class of debtors and the idea was to depreciate the currency, and let them then pay their debts in it, one could understand the proposal. Such a depreciation existed during and immediately after the Civil War. As wages and prices had risen enormously, people were receiving more money in wages, or for goods sold, than they had received previously, while they were paying fixed charges, such as interest on mortgage debts, in a depreciated paper currency. Thus the small farmers were on the whole gainers, while creditors and persons with fixed incomes were losers. It is true that both farmers and working men were also paying more for whatever they needed - food, clothes and lodging - still, they seemed to have felt more benefit in receiving larger sums than they felt hardship in paying out larger sums. Those who now call for a great increase of paper money do not profess to wish to depreciate the currency ; or have they been to any great extent supported by a debtor class to which a depreciated currency would be welcome, as a debased coinage served the momentary occasions of mediaeval kings. But the recollections of the war time, with its abundant employment and high wages, cling to many people, and arc coupled with a confused notion that the more money there is in circulation so much the more of it will everybody have, so much the better ofl” will he lie, so much the more employment will capital find for labour, and so much the more copious will he the fertilizing stream of wages diffused among the poor.
There are other very pertinent observations, which I could quote in connexion, with this most intricate problem; but I do not wish to detain honorable senators any longer. Generally speaking the measure does not commend itself to me, find it gives me no sense of pleasure to support it. Our duty, however, is to endeavour to alleviate the present condition to the best of our ability, and that being so, I intend to support the second reading of the bill, but in committee I will move an amendment in connexion with savings banks, on the lines I have indicated.
Senator Sir HAL COLEBATCH (Western Australia) [9.1]. - We are ail indebted to the Leader of the Senate (Senator Daly) for the clearness and moderation of expression which characterized the speech in which he moved the second reading of this bill. He evidently recognizes that the measure is one of first class importance. I do not think any of us will fail to recognize that whether or not this is the right course to adopt an emergency has arisen, and it behoves us to give the most careful consideration to a proposal of this kind. I hope that if I may seem to criticize with some severity the bill that has been put forward, it will be appreciated that I do so because I believe that unless some very important amendments are made in its provisions, it will only accentuate the difficulties it sets out to cure. It contemplates an extraordinary alteration in the methods by which Australia is at present carrying on its commercial relations with the outside world. It is idle to suggest that there has been, or that in the remaining few days of the session there will be, time to give a matter of this importance the consideration it deserves.
I am sorry that I find it necessary to repeat to some extent some of the observations made by previous speakers. One point is of such great importance, that I desire to emphasize it most strongly and that is that this measure is not in accordance with the advice tendered to the Government by the Commonwealth Bank Board. The letter which the Minister read contains this paragraph -
My board is of the opinion that the last resource which should be adopted would be any course which meant even temporary departure from the operation of the gold standard on the part of Australia.
The Government is adopting that course as a first step. The letter continues -
Such measure would reflect most adversely against Australia in respect of oversea credit and incidentally have a most serious effect upon our abilities to raise loans abroad. As a measure which would very materially help the position in the meantime, and in addition, having regard to precedent, would in the opinion on the board be a sound measure of permanent legislation, my board definitely recommends your Government to consider immediately the bringing in of legislation on similar lines to that which now exists and is operating in England.
The Minister has suggested that the Government is adopting the English practice, and altering it “in detail in order to adapt it to local conditions. It is not doing anything of the kind. The difference between what is proposed and the British practice is not a difference of detail; it is a difference in fundamental principles. It is as marked as the differences between “ yes “ and “ no “, black and white. Every sentence of the two paragraphs I have read is diametrically opposed to the principles of the bill now before the Senate. It follows an exactly opposite course from that of the British legislation. Under the English act notes in small amounts are not convertible.
– The first portion of the bill is in conformity with the letter from the Commonwealth Bank Board.
Senator Sir HAL COLEBATCH.Yes.
– Would the honorable senator favour the Government bringing the English scheme into operation in its entirety ?
Senator Sir HAL COLEBATCH.I should not mind an alteration of details, but it is the alteration of fundamental principles to which I am opposed.
– If the Government decided to accept the British act in globo would it be acceptable to the honorable senator ?
Senator Sir HAL COLEBATCH.So far as I know without going into the whole subject very exhaustively I think a great deal can be said in support of the English act. In that legislation the bank and the bank only is the authority and not the Treasurer or the executive. Under the English legislation notes are not convertible into gold in small sums. The object of that is to prevent the dissipation of gold in internal currency or the hoarding of gold. The Commonwealth Government’s proposal is that notes 3hall still be convertible. I do not suggest that that is a very important difference or that it means very much, because we have grown so accustomed to the use of notes instead of gold that no one is likely to be rushing to the bank for gold for internal currency or to hoard. The other difference is essential. Under the English act no. embargo can be placed upon the export of gold. Any person demanding gold for notes for export to the amount of over 400 oz., which is equivalent to £1,600, must receive it, and whilst under that act the bank can demand from any holders of gold to the amount of £10,000 or more, that the gold shall be handed over to it, it cannot touch one penny of it, although it may run into mil1 lions, if it is held for immediate export. Having got the gold in its coffers the bank cannot refuse to hand it over to any person who applies for it in quantities exceeding 400 oz. for the purpose of export.
– What would be the advantage of holding gold if the internal note was not convertible?
Senator Sir HAL COLEBATCH.The bank holding it?
Senator Sir HAL COLEBATCH.The advantage of the bank holding it is that it would know the position. The
British practice arose very largely from the position disclosed at the outbreak of war. At the time the highest authorities were at variance, to the extent of hundreds of millions sterling, as to the amount of gold available in England.
– In England when war broke out the amount was less than £60,000,000.
– That was approximately the amount held by the Bank of England.
Senator Sir HAL COLEBATCH.The amount was far more than Senator Hoare suggests. No one actually knew what the amount was. There can be no question that in certain circumstances this hill authorizes the executive not only to regulate the export of gold, but to entirely prohibit its export. It also authorizes the executive to say that Australia shall step off the gold standard and divorce itself from the currencies of other countries.
In proposed new section. 7c, provision is made for a proclamation, which can be issued only on the recommendation of the Commonwealth Bank Board. But once that proclamation is issued the matter passes entirely beyond the discretion of the board and comes within the absolute discretion of the Treasurer. An emergency might arise in which the board of directors of the Commonwealth Bank considered it necessary to recommend the issue of a proclamation ; but after it had been issued it would not be competent for the board, even if it thought it desirable, to withdraw it. The Treasurer has made it clear that whilst he will not act in the absence of a recommendation from the board, the action determine!! upon will be that of the executive which may or may not be in accordance with the recommendations of the board.
Since this bill is recommended to Parliament on the strength of a letter received from the board of directors of the Commonwealth Bank, and since it is obvious that the bill in its most essential features is contrary to the recommendations contained in the communication to which I have referred, I should like to know if the Minister in charge of the measure is able to assure us that the directors of the Commonwealth Bank approve it in its present form. It is important from the viewpoint of the Australian people that the directors of the Commonwealth Bank should assume their share of responsibility in this matter. The members of that board, eminent public men, holding high positions in the commercial world, have made certain recommendations to the Government which has seen fit to do something entirely different.
– How does the honorable senator know that?
– I have already stated that the directors of the Commonwealth Bank suggested that the Government should adopt the English practice under which the matter is entirely in the hands of the Bank of England - under which the bank has power to mobilize the whole of the gold reserves of the country but is compelled to supply gold for export on demand.
– The Government had also to consider whether it would still keep the note convertible.
– It is all moonshine to say the note is convertible. Directly an embargo is placed upon the export of gold, the note is no longer convertible. It is mere humbug to say that it is. A convertible note is one that can be turned into a sovereign and a sovereign that can be used. It is nonsense to say a note is convertible if it is to be converted into, a sovereign that cannot be used.
– Notes up to the amount of £25 can be converted.
Senator Sir HAL COLEBATCH.What is the use of such a small amount? Who wants to carry about £25 in gold? When I was going abroad, on one occasion, having been told that I could obtain a big premium on Australian sovereigns, I obtained 100 of them; but I was the most miserable man in the world until I got rid of the last one. It would have been quite competent for the Government to say that it did not believe in the gold standard. There are two schools of thought on this question, but I venture to say that the school of thought in the Old Country that is opposed to the gold standard is in a weaker position to-day than it has ever been, and for this reason : That during this last twelve months the gold standard has been put to a test of unexpected and unexampled severity. During the twelve months ended the 30th September last, the . United States of America and France increased’ their gold holdings by £143,000,000, nearly £60,000,000 in excess of the amount of gold produced during the period. It looked as if the gold standard could not possibly be maintained if that sort of thing were to continue. In September of this year the Bank of England, after waiting until between £30,000,000 and £40,000,000 had been taken out of its gold reserve, put up the discount rate from 5£ to 6£ per cent., and that “ did the trick.” The gold came back to England and I venture to say that the gold standard is now on a firmer base, not only in England, but in the old world generally, than ever it was before. I commend to honorable senators opposite the speech made by Mr. Phillip Snowden, the British Chancellor of the Exchequer. I shall quote one or two paragraphs from it to illustrate not only what he thinks of the gold standard, but also the fundamental difference between the proposal set up in Great Britain and that recommended by the directors of the Commonwealth Bank. Mr. Snowden said -
A rise in the bank rate is, under existing conditions, the only means we have to restore unfavorable exchanges and to regulate the basis of credit.
He was speaking to a Labour conference on the 31st October of this year. He went on to make use of the following pregnant sentence -
I want to assure you that the Treasury have no influence in this matter of the bank rate, and they have no responsibility for it.
That is not what is suggested in Australia. What is suggested here is the complete discretion of the Treasurer. Mr. Phillip Snowden went on to say -
I repeat that, in regard to the bank rate, the Treasury has no more control than any individual whom I happen to be addressing. The country is on the gold standard. There were some of us who, at the time the change was made five years ago, doubted whether that step was not a little too precipitate - but it was taken, and since then practically every other country in the world has come upon the gold standard, and there is no one, not even the advocates of what was known a year or two back as managed currency, who does not admit that now that the gold standard has been universally re-established it must be maintained until the wisdom of man has devised some better substitute for it.
I suggest that the first time any step is taken to prohibit the export of gold, Australia will be no longer on the gold standard; it will be out of step with the rest of the world. The gold standard means that when we buy goods abroad we must pay for them, and we can only pay for them in one of three ways - by goods which we export, by money which we borrow, or by gold. That is the acid test as to whether a country is or is not on the gold standard. If it cannot pay for the goods it buys in kind, or if it cannot borrow, it must pay in gold, and if it refuses to pay in gold it is no longer on the gold standard, and its currency will inevitably depreciate. This is my last quotation from Mr. Phillip Snowden’s speech -
Three days before the bank rate was raised last February the number of registered unemployed was 1,309,000. Two months later it had dropped to 1,178,000, and it continued to fall, but for a slight seasonal increase in August, down to the present time. A week ago the number of unemployed was 200,000 less than it was at the time the bank rate was raised in February.
Any endeavour to keep up an artificial standard of things, saying “ We will have cheap money whether it is there or not “ does not help us. The only way in which we can maintain our gold standard and our credit is to face things squarely. An increase in the bank rate does not, according to Mr. Phillip Snowden, increase unemployment or a country’s difficulties. One Australian authority has written an open letter to the 46 Labour members advocating an increase in currency, and saying among other things -
Your Ministry has now the power to so improve its financial policy that it can issue credit to the States at 2 per cent, interest. It can also issue credit to the municipalities at the same rate.
It is a most alluring prospect, this policy as it is called, of the development of consumer credit. We have an example of that in the establishment of the cash order system, a nefarious scheme to induce people to buy things they do not want, with money they have not got, in order that some utterly unnecessary middleman, by charging usurious rates of interest, can make profits altogether out of proportion to the’ service he has rendered to the community.
I do not think that the position in which we find ourselves to-day has come upon us suddenly. That it has not come about many years before, i3 solely due to the prices we have received for our wool and wheat. As a general rule in Australia, the difficult period, from a banking point of view, is early October. At that time, most of the advances have had to be made and few returns have come in. As a general rule also the conditions have steadily improved, until after Christmas, by which time more money has come along in return for primary produce exported. This year, however, contrary to general experience, the position, has got steadily worse from the beginning of October, and there is no doubt that it has now to be regarded with a good deal of anxiety. I submit that the correct way of getting out of our difficulty is to’ follow the English practice favored and recommended by important financial institutions, that of increasing the discount rate and at the same time increasing the rate of interest on fixed deposits for short periods. If that is done speedily, as soon as the present Commonwealth loan is out of the way and before the money begins to come in for the wool and the wheat, such as it is, I think we shall find that there will be Australian investment, and a check to the necessity for the export of gold. We can safely export a little gold before the trouble begins to be serious.
One of the methods by which we can pay our way is the raising of external loans, and I should like to say a word or two in that connexion. At the conference of Commonwealth and State Ministers, held yesterday, a minor amendment of the financial agreement designed to empower States to issue their own securities in Australia, with the unanimous consent of the Loan Council, was regarded favourably, and it was decided to settle the terms of the amendment by correspondence. That relates to loans raised in Australia, but I think the Commonwealth Government should explore the possibilities of applying the same principle to loans raised in London. The financial agreement originally provided that the
Commonwealth Government only could raise loans in London. Our present difficulty, and the necessity for the bill we are now considering, arises out of the fact that we cannot raise loans in London. If we could do so, there would be no need for the bill. The amendment made in the financial agreement provides that, with the unanimous consent of the Loan Council, the States may raise loans in their own names, and I suggest that the possibilities of that provision should be further explored.
It has been frequently stated that the reason Australia had to pay more for its loans than South Africa or New Zealand was that we had seven borrowers competing against each other, whereas New Zealand Or South Africa had only one. But that statement never had the least substance in. fact. New Zealand borrowed at lower rates than Australia because it borrowed less and spent less of its loan money on State trading concerns, and things of that sort, which, however good or bad they may be, do not meet with the approval of the London market. South Africa was able to borrow cheaper than Australia because there are great British investments in that country; it was only natural that they should draw further money to them.
– Will the honorable senator connect his remarks with the second-reading debate on the bill?
– 1 submit that if what I am suggesting had been clone there would be no need for the bill. The reason Australia was able to borrow so largely, and perhaps it is a pity it was able to do so, was that it borrowed as seven different governments and in small sums. Ever since the British Colonial Stock Act was passed, trustee investments have been the dominating factor in dominion loans. They give the British investors long-dated securities, which they like, at a shade better rate of interest than they can get from home investments. That trustee money becomes available in comparatively small amounts «a.ll the year round. For years there was never any competition among Australian States for loans. The States always worked on as orderly roster, prepared by the people who knew most about the condition of the London market. The result was that the loans were placed in small sums every two or three months, and the money was available. When the Commonwealth took over the matter of raising loans for ‘the States, instead of floating a number of little loans they had to invite subscriptions for one or two large loans. But when they made the applications there was not sufficient money available, at any rate not more than would have been available had a small loan been raised a couple of months earlier. Financial advisers in Loudon strongly deprecated the change. They said that if a certain sum of money had to be raised for the Commonwealth and the States in a single year it could be got much more readily by the six States separately than if it were raised in one big loan in the name of the Commonwealth alone.
– The States securities are depreciated now.
Senator Sir HAL COLEBATCH.So are those of the Commonwealth.
– Not to the same extent.
Senator Sir HAL COLEBATCH.I am satisfied to accept the advice of our financial advisers in London, that we can borrow better in the name of the seven borrowers raising small loans at short periods than we can by borrowing in the name of the Commonwealth . and raising one big loan once in six months. Experience has proved it. Small loans raised by the States in between the Commonwealth issues have always been successful. Dear money is objectionable, but I do not see how we can arbitrarily say that we will not adopt the known methods of other countries to meet the situation, namely, to increase the discount rate. Germany, early in January, made a reduction in the discount rate from 7£ per cent, to 6-^ per cent., but before long it was raised again to 7% per cent., and in every other country the discount rate is higher to-day than it was in the beginning of the year. How are we going to meet the situation which has been developing for some time in other parts of the world? In England at the beginning of this year the discount rate of the Bank of England was 4-J per cent. Later, it was increased to 6i per. cent., and now it is back to per cent. As recently as 1925, it will be remembered, Australia imported over £30,000,000 of gold,’ but the following year it went out again, together with £2,000,000 worth of our produce: Since 1926 there has been practically no movement in gold until this year; when, because of the adverse exchange situation, Australia has been obliged to export £6,000,000 worth of gold.
The Leader of the Opposition (Senator Sir George Pearce) made reference to the gold-mining industry. I certainly think that if this bill is passed - I hope it will not be accepted in its present form - there should be included in it a provision to ‘exempt altogether from the operation of the act all gold won in Australia from the ordinary process of mining. The right honorable senator stated that the people interested in mining were deeply concerned because of the loss which they sustained through the commandeering of their product during the war. I have no doubt that the real cause of their present anxiety is the fear that this bill will involve them in heavy losses. There is nothing surer than that, if the bill is passed in its present form, and if an embargo is placed on the export of gold, the Australian note will depreciate in value. It will become inconvertible to the extent that it cannot be said that it will purchase a pound’s worth of goods anywhere. And the gold-miner in Australia, who, it should be remembered, has been more severely hit by Commonwealth policy than has any other section of the community, wants to know why he should be compelled to sell his gold in a depreciated currency. The act sets out that he is to receive the equivalent in notes at so much per ounce, so that if there is any depreciation in the Australian note, as is inevitable under the bill as it stands, he will be forced to accept for his gold something less than it is worth. There is, therefore, every justification for the request that he should be exempt from the operation of this measure.
It has been suggested that there may be shortly an increase in the note issue. In this regard I think there should bp included in this measure an amendment of section 60k of the original act which provides -
When that act was passed, it was contemplated that the total issue of .notes would not exceed four times the amount of the gold reserve. If this measure is passed without amendment it will be competent for the Commonwealth Bank to control £20,000,000 of gold now held by private trading banks. Is it suggested that the “gold reserve of the Commonwealth Bank then shall have relation to the bank’s own gold, or that the bank may issue notes for every £1 worth of gold mobilized from other sources? That would be utterly unreasonable; but, if the Commonwealth Government issues notes to those institutions in payment for their gold, then possibly no great harm may be done. The position will be as before; but if it will be competent for the bank to increase the note issue in the direction suggested, clearly we shall have a serious inflation in the note issue.
– The gold to which the honorable senator has referred would lie in the vaults of the Commonwealth Bank, and as long as it was there notes could not be issued against it. It would not come under the trustees of the note issue.
– I think it should be legislatively expressed that the provisions of this bill will in no circumstances be used to inflate the note issue. That might have a very reassuring effect.
– Would not our overseas credit be automatically affected under this proposal?
Senator Sir HAL COLEBATCH.We may assume that this power is to be used for some purpose and the only purpose I can conceive is to check the volume of imports. I am not much concerned about that matter, though it would completely destroy the Treasurer’s budget expectation of increased revenue from customs duties; but, if the power is to be used to evade payment on the due date of Australia’s obligations - I am not speaking so much of public commitments as of the responsibilities to our private citizens - it will be a bad day for Australia when this bill is passed.
We cannot altogether ignore the avowed belief of a large section of the party supporting the Government that much of our present trouble could be removed by increasing our currency.’ I have already referred to the suggestion that, by this means, we could make loans to the States at 2 per cent. A prominent member of the Labour party in Adelaide the other day, coming almost direct from a caucus meeting, said there was going to be an abundance of money shortly, because the Commonwealth Bank would increase the note issue. I do not suggest that this is what the Government proposes to do; but I do say that, without this bill, the Government cannot arbitrarily increase the note issue. Indeed, the Ministry dare not take such a course, although there is a substantial margin at the present time. Any attempt to inflate the note issue would undoubtedly result in the withdrawal of large sums of gold from the Commonwealth Bank. Nothing is more certain than that, if this bill is accepted, there will be nothing to prevent a very substantial increase in the issue of notes, either in the form of loans to the States or in payment of some portion of the internal debt of about £100,000,000 falling due next year. Is it suggested that the Government will do this? Are we to understand that the Ministry proposes to follow the lead of Germany and pay its debt to its own people in notes? If this is in the mind of the Government the inevitable result will be the repayment of the internal debt in depreciated currency.
– That is not the British way.
Senator SIR HAL COLEBATCH.At all events that will be possible if the bill is passed in its present form. As a matter of fact it has been advocated by certain supporters of the present Government. There are several courses open to the Senate. Personally I waver between two courses; either to urge the rejection of the bill, or to amend it on lines closely approximating to the English legislation on the subject. If it can be shown that the English legislation in some detail is unsuited to our practice, by all means let us have something different. If the Commonwealth Bank mobilizes the gold and makes the best use of it, that course will be entirely unobjectionable. The bank will then be in control of the financial situation as is the Bank of England in the Mother Country and it will be under an obligation to provide gold in such quantities as may be necessary to maintain our good name and credit abroad. By increasing the discount rate it will be able to right any situation that may arise. I am afraid, however, that underlying this bill there is the idea that instead of following the ordinary commercial practice of protecting the gold reserve by increasing the discount rate, the Government will be able arbitrarily to prohibit the export of gold without regard to the effect of that course upon the credit of the country. If that is done the last state of the Commonwealth will be worse than the first. We cannot safely substitute arbitrary political prohibition for proved commercial practice.
It is deeply to be regretted that there is not time to refer this bill to a select committee. We should then be sure of a detailed investigation of the position. I recognize, however, that it may be highly desirable to take action before Parliament meets again in March of next year, and while I think that one of the courses which I have indicated should be adopted - either that the bill should be rejected, or that it be amended on the lines of the English act - I hope the Senate will not go further than to say that if the measure must be passed, it shall be allowed to operate only for a limited period so as to permit of a complete investigation before it is made a permanent legislative enactment. It will be fatal to the good name of Australia if by the passing of this legislation, we give the impression that the Commonwealth is no longer adhering to the gold standard and no longer a ble to pay its debts in gold. It would, as the directors of the Commonwealth Bank say, reflect adversely against Australia’s overseas credit and incidentally have most serious effects upon our ability to raise loans abroad. This opinion, I am sure, cannot be controverted. .
I do not wish to discuss the measure at greater length. In closing I join with the Leader of the Opposition (Senator Pearce) in the hope that the Leader of the Senate (Senator Daly) will be able to tell us whether the directors of the Commonwealth Bank, having written to the Government suggesting a certain course of action and the Government having adopted a different course, the directors of the bank approve the action which the Government is taking in introducing this bill as it now stands; and further, if the directors of the Commonwealth Bank as a body are prepared to take full responsibility for the course adopted.
– Like other honorable senators, I approach the consideration of this measure not in any captious or party spirit, but, with a full recognition of the seriousness of the responsibility devolving upon me. The Senate may congratulate the VicePresident of the Executive Council (Senator Daly) upon the admirably temperate and reasonable way in ‘which he presented his case. He told us’ clearly the circumstances which in his opinion justified the introduction- of this measure. Honorable senators realize the sensitiveness and technical nature of the subject under consideration. I do not want to cover ground which has already been traversed by other honorable senators, but I want to ask the Leader of the Senate .a few questions with the object of extracting certain information from him. Other honorable senators have asked for certain assurances; but so far the Leader of the Senate has not given them, although he may do so when replying to the general debate.
In the first place, I observed that Senator Daly quoted the same extracts from Sir Robert Gibson’s letter that were quoted by the Treasurer in another place. When he was asked by way of interjection, whether those extracts comprised the full letter of the chairman of the Commonwealth Bank, he said that, excepting the salutation and the subscription, the “Dear Sir” and the “Yours Faithfully “ it did-
– I said that, so far as I knew it contained the whole recommendation.
– I suggest, with all deference and humility, that the best Parliamentary practice in a matter of this kind is to put the full letter upon the table so that honorable senators may peruse it. If certain parts of the letter are confidential, then I suggest that there should be a full and frank statement that there are other portions of the letter which cannot be made available to honorable senators. Certain fears and suspicions would be allayed, if the Leader of the Senate were to state whether or not the quotations he read comprised the whole letter of recommendation from Sir Robert Gibson to the Treasurer, as otherwise there might be a lingering fear that the whole story had not been told. I should be glad if the Leader of the Government would follow a well-established Parliamentary practice, and lay the letter on the table.
– Or show it to honorable senators who desire to see it.
– I am not suggesting any malafides on the part of the Leader of the Government in this chamber; but there is a responsibility attaching to his position to give in the fullest and frankest way, all possible information to members. If the whole letter cannot be divulged, he should explain why there is only a partial presentation of the document from which certain quotations are made.
– I give the Senate an assurance that that procedure will be followed in the future.
– I feel certain that the Leader of the Senate will give to honorable senators the fullest possible information in this matter. In his letter SirRobert Gibson says -
My board definitely recommends your Government to consider immediately the bringing in of legislation on similar lines to that which now exists and is operating in England.
I may be that the letter referred entirely to matters of principle. But speakers in this debate have shown conclusively that, if not in matters of principle then in matters of detail - and it seems to me that it is in matters of principle - there is in this measure a substantial departure from the legislation of Great Britain. Credit is a sensitive thing; we do not know what injury may be done if we tamper with it. We should, therefore, be guided by the best advice available. Cannot the Leader of the Government say candidly and unequivocally whether the Commonwealth Bank Board which has made suggestions for dealing with an acute position is, or is not, wholeheartedly in favour of the remedy suggested by the Government in this measure? Senator Colebatch, on more than one occasion during his speech, pressed the Vice-President of the Executive Council to say whether the bill is, in effect, an expression of the mind and the intention of the Commonwealth Bank Board. If that board made a recommendation the Senate would pay great deference to it, because it realizes that the hoard comprises a number of financial experts who would not make a definite recommendation of this kind without a full sense of the great responsibility resting upon it to do nothing which might prejudicially affect our credit.
– The second part of the measure seems to conflict with the advice of the Bank Board.
– Exactly. The board recommended that, in no circumstances, should there be a departure from the gold standard. We are entitled to a more definite and emphatic assurance than has as yet been vouchsafed to us that this measure is not to be used in any way for the purpose of inflating the currency. That would he a dangerous expedient. The Senate’s attitude to the Government should he one of helpful cooperation in the interests of the country, and not merely captious criticisms or an attempt to take advantage of the overwhelming numbers on the opposite side of the chamber.
– That is painful enough without reminding us of it.
– I am not so greatly concerned with the numbers of members in opposition in this chamber as I am with the spirit in which those members approach the consideration of the measures submitted to them. I think, however, that we ought to have an assurance that the mobilization of gold in the hands of the Commonwealth Bank will not, in any circumstances, be used for the purpose of inflating the currency. The Leader of the Senate inferentially made such a promisewhen he said that the gold would lie in the vaults of the Commonwealth Bank, and that as it would not come under the guardianship of the trustee of the note issue it could not be used for that purpose.
– Anything that the Government does will be done openly. It will not adopt any “ back-door “ methods.
– It did not act openly in relation to the suspension of compulsory military training.
– It did.The Government said what it would do; and it did what it said.
– I do not want to talk about “ backstairs “ influence, or of the methods which might be employed by parties or governments; but I think that it would allay the apprehension in the minds of people outside if the Leader of the Government in this chamber were to make such an emphatic declaration. It would assist the passage of this measure through the Senate.
– Does the honorable senator suggest that we are” crooks “ ?
– Perish the thought ! The unfortunate circumstances in which this measure is submitted have been set out by Senator Daly, and cannot be denied. We all regret the circumstances which have arisen; we realize their seriousness. We do not want to become pessimistic or panicky, or to do anything which might disturb the public sense of confidence and security. A measure of this kind must be approached with a full realisation of its seriousness ; and I take it that the Government has so considered it. The Government must take the responsibility for the introduction of a measure of this kind. I therefore ask the Minister for the assurances I have indicated.
Senator Daly made a clear case for this bill having a limited operation. He referred to an emergency proclamation. He said that this bill was an emergency proposal. We have had experience of measures of that kind. During the war, regulations of an elastic nature were promulgated from time to time. There was nothing permanent about them; they could be altered by resolution of the Executive Council, as changing circumstances required. I suggest that there is abundant parliamentary precedent for limiting the operation of this measure. In agreeing to limit its operation until the end of 1930, the Government would not place itself at a disadvantage. It may be that the passing of this bill will render unnecessary the issue of a proclamation. I heartily support the suggestion that a time limit should be imposed, and I hope that the Leader of the Government in this chamber will see his way clear to agree to the proposal. It is made, not in any obstructive spirit, or in any desire to humiliate the Government. The measure is an emergency one, promulgated in a period of financial difficulty and stress. Apparently the bank believes that this is the remedy. In view of the statements that have been read by Senator Sir George Pearce, and of the opinions cited by Senators McLachlan and Sir Hal Colebatch, the Government must realize that there is much to be said on both sides. This is a measure on which even economists would have great differences of opinion. It is experimental. Therefore, it should be probationary in its application. It should prove itself over a period of twelve months. If, after that period, its operation has proved beneficial and Australian credit has not been in- jured, there is nothing to prevent this Parliament permanently enacting it. If the modifications that have been suggested were adopted, the measure could be accepted tentatively, and the Government would have an opportunity to remedy existing evils.
I invite the Leader of the Government in the Senate (Senator Daly) to consider those other questions which have been raised as to the mining position, the gold won in this Commonwealth, and as to the constitutionality of the demands that might bc made on State savings banks under the provisions of the first part of the bill. I know that the Leader of the Government says that that matter comes under the currency and banking provisions of section 51 of the Constitution. As against that Senator McLachlan has quoted an eminent authority whose: opinion is certainly worthy of consideration. I suggest that the Leader of the Government might investigate those aspects and that approaching the position with a desire to do that which is necessary and best to safeguard Australia’s interests, he should endeavour to meet the suggestions made by honorable senators of the Opposition. I do not propose to take up the attitude of opposing this measure. The responsibility for it is on the Government. I view it with some doubt and misgiving, and can only hope that its operation may remove my doubts and prove beneficial to the country.
Debate (on motion by Senator Thompson) adjourned.
Senate adjourned at 10.4 p.m.
Cite as: Australia, Senate, Debates, 10 December 1929, viewed 22 October 2017, <http://historichansard.net/senate/1929/19291210_senate_12_122/>.