Senate
27 June 1930

12th Parliament · 1st Session



The President (Senator the Hon. W. Kingsmill) took the chair at 11 a.m., and read prayers.

page 3418

QUESTION

LAND TAXATION

Senator E B JOHNSTON:
WESTERN AUSTRALIA

asked the Minister representing the Treasurer, upon notice -

In view ofthe fall in the value of land throughout the Commonwealth, particularly agricultural and pastoral land, owing to the low prices for wheat and wool in the markets of the world and the prevailing depression, what steps does the Taxation Department intend to take to adjust its valuations of land for the next financial year in accordance with existing values?

Senator DALY:
Vice-President of the Executive Council · SOUTH AUSTRALIA · ALP

– The Treasurer has supplied the following reply to the honorable senator’s question: -

The Taxation Department will, as in all previous years, apply the rules of valuation of land laid down by the High Court, and will assess land tax on valuations which are reflectedby sales of comparable lands.

page 3419

SENATOR H. E. ELLIOTT

Payment for Military Services

Senator RAE:
NEW SOUTH WALES

asked the Leader of the

Government in the Senate, upon notice -

  1. Is it a fact that SenatorH. E. Elliott is in receiptof a salary of £250 per annum from the Commonwealth Defence Department ?
  2. Is Senator Elliott paid for services rendered by the hour, day, week, or year?
  3. What would be the approximate rate per day that is paid to Senator Elliott?
  4. Does the act rendering it illegal for members of the Commonwealth Parliament to enter into financial transactions with the Government cover the case referred to?
  5. Is a senator in receipt of such payment precluded from voting in any division concerning the department from which he draws asalary?
Senator DALY:
ALP

– The Minister for Defence has supplied the following answers to the honorable senator’s questions : -

  1. Yes.
  2. He is paid quarterly at the rate of £250 per annum.
  3. He is paid quarterly at an annual rate in the same manner as all other militia formation commanders, subject to a certificate by the Chief of the GeneralStaff that the duties of the appointment have been efficiently performed for the period claimed. These duties comprise the command, recruiting, training and administration of the 3rd Division. The question of an hourly, daily or weekly rate, therefore, does not arise. 4 and 5. I would refer the honorable senator to section 44 of the Commonwealth of Australia Constitution Act.

page 3419

SUPPLY BILL (No 1) 1930-31

Secondreading.

Debate resumed from 26th June (vide page 3313), on motion by Senator Daly -

That the bill be now read a second time.

Senator Sir GEORGE PEARCE (Western Australia) [11.5]. - In moving the second reading of thisbill the Vice-

President of the Executive Council (Senator Daly) said that the various items were based on the appropriation made by Parliament for the present financial year. Later, he referred to a special item of £750,000. That item certainly is not based on the appropriation for the year 1929-30; it is a new item altogether. I ask the Vice-President of the Executive Council whether, in other respects, his statement that the items in this bill are based on the appropriation for the current financial year is strictly correct, or whether there are other new items or increases over the quarterly proportion of the appropriation for the present year?

The special item of £750,000 to which I have referred is the grant to the States to assist them in dealing with the problem of unemployment. With the motive underlying that grant I have every sympathy, for I know thatthe States have obligations in respect of unemployment. I do not object at all to the Commonwealth giving them financial assistance to relieve unemployment. Nevertheless, it is well for us to recognize that, in view of the Treasurer’s forecast of a deficit in the Commonwealth finances for the current year, this £1,000,000 mil mean increased taxation. The payment of this money to the States will mean that the industries of the Commonwealth are to he burdened with an additional £1,000,000 above what would be required to meet the deficit for the current financial year. The Treasurer has no purse ofFortunatus at his disposal from which he can draw £1,000,000 at will. The plain and brutal fact is that this money must be obtained by increased taxation. Moreover, the provision of this money will not cure, or even alleviate, the unemployment problem. Indeed, the additional taxation which it will place on industry will probably have its repercussion in the direction of still further unemployment. At a recent Premiers’ Conference Mr. Theodore said that the combined deficits of the Commonwealth and the States at the 30th June, 1930, would probably total £9,000,000. If the ledgers of the Commonwealth and the States are to be balanced that £9,000,000 must be obtained, either by cutting down expenditure or by the imposition ofadditional taxation to that extent. Any one who has read the commercial and financial history of the Commonwealth during the last six months will have noticed that practically every balance-sheet of the financial and banking institutions, as well as of the pastoral and industrial companies of this country, reveals a falling off in business, profits, and dividends. This additional taxation will have to come out of the profits of industry ; it will bo paid by pastoral companies, pastoralists, wheat-growers, and those other sections of the community which live on the profits they earn. The serious fact that we must face is that a portion of our national wealth is to be diverted from the carrying on of business and the expansion of industries - which provide employment - into governmental channels. We all sympathize with the object of the Government in making this sum available; but our sympathy should not blind us to the fact that that assistance will not lesson by the weight of a feather the burden on industry.Rather will it intensify theburden by causing either increased taxation or further economies. The necessity for stern economies is, perhaps, the most disagreeable task that any government can face, because it knows that they will temporarily add to the burden of unemployment. We have seen that already in connexion with the Commonwealth Public Service. With the utmost unwillingness, I feel sure, the present Government has had to dispense with certain persons in its employ. Every State Government has had to do the same. We should not, therefore, flatter ourselves that by voting the £750,000 provided in this bill for the relief of unemployment, we shall be doing anything at all to alleviate the problems of unemployment. The granting of this money will not even touch the causes of unemployment. All that it will do will be to find temporary employment for a number of citizens who are now out of work, many of whom are close to the starvation line.

Senator Sir GEORGE PEARCE.I agree that it is better to spend £1,000,000 in providing work of some kind, even if it is not entirely reproductive, than, to dole it out in grants. Even the unemployed themselves would prefer to work for it. I hope that my remarks will not be construed as criticism of the action of the Government in making this money available. But it is obviously our duty, not only to recognize ourselves, but also to point out to the country that this grant will not remedy the causes of unemployment. On the contrary, the additional taxation ana economies necessary to provide that sum, will probably increase unemployment in other directions. That is a grave fact which cannot be disregarded. Having passed this bill, we should be unwise to assume that all that is necessary has been done.

Senator LAWSON:
Victoria

– This bill sounds the first note in connexion with the finances of the Commonwealth for the ensuing year. In accordance with well established practice, the Senate is now asked to grant supply for the next three months. I have looked through the bill and find that it is not. possible to check the expenditure for the first three months of the ensuing financial year with that of the first quarter of the financial year just closing. I do not know what is the practice of this Parliament in the matter. I have not been present at a budget debate, nor have I been a member of this chamber during the consideration of financial proposals. I suggest that it would facilitate the understanding of theposition by honorable senators if it were possible to put in one column the expenditure during the year just expiring, and the proposed expenditure for the ensuing three months in another column. That would enable honorable senators immediately to see the contrast. I do not for a moment doubt the statement of the Vice-President of the Executive Council (Senator Daly) that this is the normal expenditure; that the list contains no exceptional items that have not been fully explained; that it is based on the commitments for the ensuing year, of which we are making provision for one quarter.

I endorse what has been said by the Leader of the Opposition (Senator Pearce) regarding the unemployment grant. We all realize how aggravated the unemployed problem has become. It is high time that parties ceased to attempt to make political capital out of this very serious social condition, the greatest problem with which we have been faced. I know that at election time, when party passion runs high, it is the practice to blame the party in power, and to claim that the Opposition would be able to cure the evils if placed in the position of responsibility. I venture to. suggest that the party that is so well represented in this chamber by the Vice-President of the Executive Council has in times past been the greatest offender in that respect. It lias indicated that it held the panacea for this social ill. But the causes of unemployment go deeper than political expedient, and each party, when actually faced with the responsibility of dealing with the evils, discovers that there is no royal and easy road to their removal. The Government is making a grant to the States, and I think that the Senate might be informed by the Leader of the Government in this chamber as to the conditions of the proposed expenditure. We should know whether the Commonwealth Government is merely saying to the States “ Here is this grant - make the best use of it that you can,” or whether certain conditions are to be imposed upon the States as to how the money shall be expended. “No one would harass a government in any genuine endeavour that it made to alleviate the existing conditions. .1 suppose that the experience of all honorable senators at this time is a sad one. We have people, good, steady, honest and reliable workmen, knocking at our doors and asking if we can do anything to help them to obtain jobs. These are not unemployables and n’er-do-wells, but reputable working citizens. We should have hearts of steel if we were not moved to compassion by the spectacle that we have to observe ; by the experience that we are unfortunately compelled to go through. We all find the utmost difficulty in doing anything in independent cases, to meet the situation. Sometimes we meet with a measure of success, but it is not always so. One could paint no more pathetic picture than that of the breadwinner of a family earnestly seeking work, and being refused time after time. The Government must be supported by honorable senators in every earnest and honest attempt that it makes to relieve that condition of affairs. At the same time we have to realize that if taxation is made so burdensome, so excessive, so grievous to be borne, we shall take out of industry funds that are necessary to provide employment; that we shall stifle all initiative and effort, and stop at the source the flow of capital into enterprise, thereby definitely limiting the sphere of industrial activities. That has particularly to be borne in mind in the existing circumstances.

There is one other item on which I should like some assurance from the Leader of the Government in this chamber. The Treasurer seeks an advance of £1,500,000 to cover a period of three mouths. I know that sometimes, in connexion with these temporary supply bills introduced in various parliaments, the amount asked for is greater in proportion than the amount for the complete period of twelve months for which Supply will eventually be granted. I think that we should have some assurance from Senator Daly on that point. The honorable senator ought to give us a general survey of the position so that we may know whether there are any special purposes for which the amount is asked; whether this is the usual, or an unusual amount.

I have before me the last report of the Auditor-General, and if honorable senators will bear with me I shall read one or two extracts from it. At this time, there is nothing new that can be said regarding the financial position, and I have no desire to anticipate the budget debate; nor do I seek to obtain from the Leader of the Government in this chamber a declaration of financial policy at this juncture. We must not attempt to secure from him any advance instalment of the budget proposals. Our press has been full of the financial situation and Australia’s economic position. The matter has been the subject of deep consideration by men in control of big financial institutions, and there is a certain amount of gossip and tittle-tattle going on, the extent of which perhaps we do not realize, but which is apt to add to the sense of despondency and to create an impression of instability. I take it that our obligation as senators and as leaders of public thought is to endeavour to study the position and to do nothing that will destroy the stability and confidence that is essential in every community. But we should not shut our eyes to the realities : we should realize that the facts must be faced. If we are confronted with dangers and difficulties, we at any rate have the resolution and the capacity to overcome them so far as it is within the power of an individual or a community to do so. Yet if the dangers are hidden and unseen ; if we are -not taken into the confidence of the Government and are left more or less groping in the dark, we cannot find a means of removing them. It seems to me. that the situation calls for candour and frankness on the part of the Government. I realize that there are certain things within the ken of men in high places, mon who are charged with great responsibility in times of national difficulty, that’ cannot be spoken lightly. But a general survey of the position should be given with candour and honesty, so that the people may know what it is.

I said that it is not possible to say anything new on the situation; but the words of wisdom written by the AuditorGeneral should not fall on deaf ears. I presume that honorable senators have read the report. Paragraph 6, to be found on page 11, deals with the financial position. What has been said here cannot be repeated too often. It helps us to realize the policy that we have been pursuing. I am not blaming any particular government. The States and the Commonwealth have been equal offenders. I suppose that politicians have never been great apostles of economy. The cry of every Minister and every member of parliament is for more and more expenditure. Now and again we may hear “ the voice of him that crieth in the wilderness,” calling for economy; but it is not a popular cry. The urge is always for more and more expenditure. There is a very definite danger of politics, instead of being concerned with political principles and matters of high public policy, degenerating into a game of placating this section and that section, and of abusing its position to give bribes to States, or to different sections of the community. There is a likelihood of building up the impression that Parliament is to be regarded not so much as an institution for the public weal, as an instrument to extract benefits and confer bribes on different sections of the community. The time has arrived when we must get rid of that idea of poll: tics and of government. We must to some extent cast aside party divisions, and unite in a general endeavour to right the situation, to redress the trade balance, and to bring our country back to a position of stability.

The concluding paragraph of the ministerial statement read by the Prime Minister, and repeated in this chamber by the Vice-President of the Executive Council - one that I have previously quoted in the Senate - urged that it would be a good thing for Parliament to resolve itself into a kind of economic committee to seek a solution of our difficulties. The words of exhortation that I should like to address to Government representatives in the Senate are that I hope that the budget that will, in due course, be presented to Parliament will be framed in a national spirit. I hope that, if sacrifices have to be made, there will be no discrimination; that we shall be called upon to bear them equally and according to our ability to make them. It seems perfectly obvious that additional taxation will have to be imposed, and that expenditure will have to be reduced. But the Government may find that it is impossible to make such wholesale reductions in expenditure as will have a notice-“ able effect on the balancing of our ledger. Customs revenue has dropped, and the effect of certain recent tariff proposals of the Government must inevitably result in reduced revenue from that source, so that there remains only direct taxation. Taxation can he used discriminately- to placate favoured sections, and to deal harshly with others. If it is imposed equitably, we must be willing to carry the burden. My plea is for no discrimination; for equality in the distribution of the burden, according to the ability to carry it. That seems to be the inevitable way in which the” Government will have to shape its proposals. It must effect such reductions as are possible, eliminate waste and prevent duplication, and particularly must it stop the wretched policy of duplication of effort between the Commonwealth and States.

I do not wish to offer criticism of what has happened in the past, but it seems to me that if, for instance, several of the States had forestry departments functioning satisfactorily it was unnecessary for the Commonwealth to duplicate expenditure by superimposing a Commonwealth Forestry Bureau upon the people of Australia. That, unfortunately, has been the tendency in federal politics. There appears to have been a desire on the part of successive Commonwealth Governments to reach out for further activities and responsibilities. This tendency must be checked. Neither the Commonwealth nor State Governments can afford luxuries of that kind. The Auditor-General, in his report for the financial year ended 30th June, 1929, pointed out that the deficiency in Commonwealth accounts for 1927- 28 was £4,209,492 and for the year 1928- 29 £4,395,540. This is a serious situation. The Auditor-General is a judicial officer. He knows no party. He is bound to serve the people without regard to the Government or party in power. It is his duty to report freely and frankly on the financial position of the Commonwealth. I commend his report to honorable senators. I hope they will read it and take heed of what he has said. It is not my intention to read at great length from it, but even at the risk of repeating what has been published in the press and said from the public platform on many occasions, I crave the indulgence of honorable senators while I direct attention to certain paragraphs. The AuditorGeneral states -

The heavy revenue deficiencies shown in the Commonwealth Treasury accounts for the last two years are not only a matter of serious concern to Parliament, but to the whole community. Reduced customs revenue and an increased expenditure are, of course, the main factors in causing these deficiencies. Reduced borrowings abroad and smaller returns from wool, wheat, &c., have resulted in an adverse trade balance which strongly indicatesthat Australia as a community is living beyond her means and mortgaging her future production. Only by reducing imports and increasing exports can the exchange position be remedied.

The difficulties of the Treasury at the present time are great, and the only remedy is economy in public and private expenditure. Two aspects of the matter present themselves -

Excess of expenditure by the whole community.

As to(a), all Government expenditure should be reduced so as to bring the annual costs of government within the revenue.

Duplication in Commonwealth and State activities should not be allowed. In particular, loan expenditure, so heavy in the past, should be confined to services of a reproduce tive character.

In the interests of greater production, industrial stability is vital. Anything in the nature of strikes, lockouts or failure to perform a fair day’s work necessarily adds to the cost of production. Inefficiency in industry, unemployment, or the inability to make full use of available labour or plant operates in the same way. In turn, higher production costs cause higher living costs and increased wages - but not effective wages. Worst of all, the result is that production costs become so high that frequently Australian industries even when assisted by a high tariff, cannot compete successfully with manufacturers abroad in supplying goods for our own consumption. The exportation of the products of our secondary industries is consequently almost negligible.

SenatorRae. - The Auditor-General indulges in a number of platitudes.

Senator Payne:

-they are not platitudes; they are facts.

Senator LAWSON:

– It is true that the Auditor-General is repeating well-known economic truths. By virtue of his high place of responsibility it is his particular duty to direct the attention of Parliament to these truths in a pointed way, and it is but fitting that we should, at all times, take notice of what he has to say. In his lastreport he has indicated very clearly that we have departed from certain elementary economic truths.

Senator Dunn:

– Does the honorable senator say that this Government has done that?

Senator LAWSON:

– All governments have done so, and I must say that I have not heard any of my friends in the party to which Senator Dunn belongs urging governments to refrain from this or that item of expenditure. On the contrary, invariably they have urged the need for more and more expenditure. The AuditorGeneral goes on to say -

The above indicates briefly the necessity for an endeavour by all to secure a return to a satisfactory economic position. The resources of Australia are so great that that end may readily be achieved ifthe whole community will combine to make a moderate effort to pull together, work harder and save more.

Senator Dunn:

– What does he mean by saying that men must work harder? Does he suggest they they must drop dead on the job?

Senator LAWSON:

– Not at all. The Auditor-General is hound to say what he thinks of certain items of expenditure irrespective of whether his comments hurt this or that party.

The Prime Minister has urged all members of this Parliament to come together as an economic committee to consider the problems that confront the Commonwealth. In my judgment the situation is such as to call for united effort on the part of all members of all parties, and what I wish to say to the Government is this: I hope that when we have the details of the budget proposals we shall find that they have been conceived in a spirit of equity; that there is no politics in the budget,, but that it has been framed as a financial instrument by means of which all sections of the community will, be encouraged to pull together in a spirit of goodwill. 1 do not propose to say any more at this stage. This bill is a normal parliamentary measure to provide for the financial needs of the Government. It is the first indication of the requirements for the ensuing year, and this seemed to be a fitting opportunity for me to offer a few general observations on the financial situation and to direct attention to what the Auditor-General has said. I urge honorable senators to read other sections in the report which, out of consideration for their good nature, I refrain from reading.

Senator DUNN:
New South Wales

– I desire on behalf of the party of which I am a member to reply briefly to one or two of the observations made by Senator Lawson. The honorable senator made special reference to certain comments made by the Auditor-General, whose report is attached to the Treasurer’s statement of receipts and expenditure for the year ended 30th June, 1929. I. have no quarrel with the AuditorGeneral for what he has said in that report. The advice tendered by Senator Lawson might well have been addressed to those members of the Bruce-Page Government who are still members of this Parliament. During their term of office they had command of unlimited supplies of money, and did not make good use of them. When the previous Governmentembarked upon its naval- construction policy, it gave contracts, amounting to £7,000,000, to naval shipbuilders in Great Britain for the construction of the Canberra and the Australia, as well as the two submarines, the Otway and the Oxley.

Senator Sir William Glasgow:

– Not all of the naval construction vote was spent overseas. The aircraft carrier, the Albatross, was built in Australia.

Senator DUNN:

– That amount of money did go overseas. In addition, the Bruce-Page Administration incurred expenditure totalling £600,000 on boards and commissions, and was guilty of general maladministration. When it appealed to the people for an endorsement of its industrial policy, it was ignominiously rejected, and the Labour party came back to power with a majority of seventeen members in another place. Senator Lawson’s references to this Government were on the whole of a friendly nature, and I am deeply grateful to the honorable senator for his goodwill. The Bruce-Page Administration did nothing to relieve unemployment. When this Government came into power it found an empty treasury, and general unemployment of a most serious nature. To assist the States to put relief works in hand and to provide work, it made a special grant of £1,000,000 to the State Governments.

Senator Sir George Pearce:

– Where did the present Government get that £1,000,000 if the Treasury was empty, as the honorable senator states?

Senator DUNN:

– This Government made the necessary financial arrangements to make the money available to the States. Only a week or two ago it advanced an additional £750,000 for the same purpose.

As regards the Government’s tariff policy, time only will prove whether it is right or wrong. The fiscal policy of the Government has already proved of tremendous advantage to the people of this country, and when the tariff schedule is under discussion-

The PRESIDENT (Senator the Hon W Kingsmill:
WESTERN AUSTRALIA

– The honorable senator will not be in order in anticipating the debate on the tariff.

Senator DUNN:

– This Government is doing its best with the limited financial resources at its disposal to improve the- conditions in Australia, and, because of the results already achieved, it is likely to receive the endorsement of the electors when the next appeal is made to the people.

Senator DALY:
Vice-President of the Executive Council · South” Australia · ALP

– I shall deal first with the point raised by the right honorable the Leader of the Opposition (Senator Sir George Pearce) as to the sum provided to relieve unemployment. The subject of unemployment was considered at the last conference of Common-wealth and State Ministers. At that time relief was being provided in certain States - in South Australia to the extent of 28s. a week to married men, in the form of a dole. At that conference an endeavour was made to devise a means whereby productive work could be put in hand, and useful employment provided for the unemployed. As a result of the discussions at that gathering, the Commonwealth Government decided to make available to the States a certain sum of money. A sum was allocated to each of the States, but South Australia received more than she was entitled to on a population basis, because unemployment in that State was perhaps more acute than in any of the other States. The Government does not suggest that the granting of this money will solve the problem of unemployment, or in any way assist in removing the cause, but it hopes that it will be the means of alleviating some of the distress occasioned by unemployment. On that point I part company with the Leader of the Opposition, because I firmly believe that during the next four months, relief will be afforded in a practical way to quite a number of these unfortunate men, who, through force of circumstances have been unemployed for many months.

Senator Reid:

– In what way will relief be afforded?

Senator DALY:

– Immediate relief will be given by placing in hand certain works which could not previously be undertaken. We are all hoping that this year Providence will bless us with a good season.

Senator Sir William Glasgow:

– The State Governments .have unemployment schemes..

Senator DALY:

– Some have; and this grant will assist the State Governments to undertake works, and thus provide relief in a more practical form than by granting doles. We admit that it will not go as far as the Government, and I feel sure, members of the Opposition, would like; but the Government is providing all that it can in the circumstances. The Government has granted what it considers the maximum amount of financial relief which can be afforded to the States.

I pointed out in my second-reading speech that the final details of the expenditure have not been definitely determined, and I am sure that Senator Lawson, with his extensive State Parliamentary experience, realizes that, although subjects are discussed at conference of Commonwealth and State Ministers, the State Premiers have to place decisions reached at such gatherings before their Cabinets before action can be taken. I can assure the Senate that every effort will be made to conserve the interests of the taxpayers, whose responsibility it will be to shoulder the burden.

The Leader of the Opposition desired an assurance that, apart from the item of £750,000, the expenditure will not exceed that usually appropriated by Parliament at this period in previous financial years. The amount of £26,000 to cover the cost of the conveyance of members of Parliament is paid during the first three months of the financial year, and no further payment in this respect is made during the remainder of the year. Upon examination of the appropriation for the Prime Minister’s Department, honorable senators will find that the amount has been increased; but this is due to the work of the Development and Migration Commission having been transferred to the Prime Minister’s Department. The increase in that department is only nominal, as no appropriation has been made for the Development and Migration Commission itself.

The Treasurer’s advance is for the usual amount, and, as pointed out during my second-reading speech, it is required mainly to cover certain public works expenditure up to the 30th June, and until such- time as a loan bill is passed for the next financial year. It is not possible to give a detailed list of the items covered by this particular amount. The Treasurer has adopted the usual practice, and details will be furnished when the Budget is submitted.

Senator Ogden:

– Is the amount particularly high for the period, covered by the bill?

Senator DALY:

– I understand it is the usual amount required by the Treasurer at this period.

Senator Guthrie:

– Does that mean that no saving has been effected?

Senator DALY:

– It does not mean anything of the sort. I could point out directions in which savings have already been made and where other economies will be effected.

Senator Reid:

– The Government has made some savings in the Defence Department. ,

Senator DALY:

– Yes; and it has been doing its best to conserve expenditure, consistent, of course, with efficiency. I do not believe in the doctrine which might be subscribed to by following too closely the principle enunciated by Senator Lawson, of watching the pennies while the pound notes fly out of the window. Senator Lawson referred to the overlapping of Commonwealth and State activities. I entirely agree with him that in matters which are essentially of State concern the Commonwealth should not interfere; but no one would suggest, for instance, that the State Departments of Agriculture should not co-operate with the Commonwealth authorities in connexion with, say, the investigations into the disease known as caseous lymphadinites in cattle. No State Government has sufficient money to meet the expenses of providing the necessary scientific staff to carry out such investigations. The Commonwealth has undertaken that work. If the Commonwealth were to stand aloof when the States were unable, through lack of funds, to undertake necessary investigation work, we might find that this disease in cattle had grown to such a magnitude that our beef export trade might be in even a worse position than it is to-day. The same remarks also apply to forestry, which is a national question, and which should be handled by the Commonwealth authorities in conjunction with the States. Our timber position is such as to cause anxiety to every one who has the interests of Australia at heart, and it is no satisfaction to say that afforestation is a matter for the States. If the States do not, or cannot, perform certain functions that should be undertaken in the interests of the nation, it is the responsibility of the National Parliament to give the lead. I realize that during the previous Government’s term of office, valuable scientific research work was undertaken, and no one could possibly quibble with what has been done in this regard. Certain points may however arise in connexion with the overhead expenses which can be dealt with more effectively when the budget is under consideration. In the actual work of investigation into matters of a national character, good results have been achieved.

Senator Sir George Pearce:

– And there was no overlapping of Commonwealth and State activities.

Senator DALY:

– There may have been some slight overlapping; but that may have been due to the fact that the States have regarded with too conservative a mind what they consider the intrusion of the federal authority into certain spheres of activity. I am hopeful that that spirit of co-operation which the Leader of the Opposition (Senator Pearce) wishes to encourage will develop, and when we secure a full measure of co-operation between the Commonwealth and States, our primary industries and production generally will benefit enormously. To give an illustration of the possibilities in that direction I may say that if we were to increase our present annual production of wheat by one bushel an acre, our wool production by 1 lb. a sheep, and our butter fat production by 10 lb. a cow with our present herds, our national income would be increased by some £13,000,000 per annum. That is one thing which science is attempting, and what it feels can be done in the interests of Australian production. Although we are reducing expenditure to a minimum, we should not adopt the policy of concentrating upon small items of expenditure and disregard others of some magnitude. I appreciate the spirit in which Senator Lawson made his suggestions, and I look forward to an interesting and informative discussion on the budget when.it comes before this chamber.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 to 4 agreed to.

Schedule -

Senator Sir WILLIAM GLASGOW (Queensland) :[12.1]. - I was pleased to hear Senator Daly say that he approved of the policy of the late Government in connexion with the establishment of the Council for Scientific and Industrial Research; and as he has recently been administering that branch of the activities of the Department of the Prime Minister, he knows of the effective work it has done.

It was the policy of the late Government to establish the council on a sound basis so that it might do such effective work. The search that has been made for an insect capable of destroying prickly pear is one direction in which money spent on scientific investigation will be more than returned. Whenever I visit Queensland, which I do frequently, I see evidence of the destructive effects of. cactoblastis cac.torum on prickly pear; and if this hardworking little insect can survive the attacks of its natural enemies, it will, I am sure, eventually rid Queensland of one terrible plant pest. Another plant pest that has been doing considerable damage, particularly in the pastoral areas, is the noogoora burr. I should like to know if the entomological branch of the Council for Scientific and Industrial Research is looking for some insect that will attack this burr.

Senator Daly:

– The flies are now being bred for that purpose.

Senator Sir WILLIAM GLASGOW:

– I am pleased to hear it, because this burr is overrunning a considerable portion of Queensland, and I understand that where the land is infested with it its effect is to reduce the value of the wool by at least 2d. a lb. If the Council for Scientific and Industrial Research obtains as good results from its search for an enemy of the noogoora burr as was achieved in Queensland by the authorities there in their search for an insect to cope with prickly pear, great benefit will be derived by Queensland and New South Wales. I have had experience of prickly pear on my property. I can asure honorable senators that the cactoblastis is active, not only in densely affected areas, but also where the pear is scattered. It is at first a grub or caterpillar which penetrates the cactus plant and eats it away. It then passes into the cocoon stage and the moth which eventually emerges from the cocoon flies around searching for pear, even if it is miles away. Having found the pear plant, it lays its eggs ; the grub is hatched out and immediately commences its destructive work. This insect has been a great boon to pastoralists and agriculturalists, and in many respects it has avoided the necessity for having to deal with the prickly pear by means of poison. I sincerely hope that the council will be equally successful in dealing with the noogoora burr.

Senator GUTHRIE:
Victoria

– I desire to pay a tribute to the wonderful work done for Australia by the Council for Scientific and Industrial Research. Australia is blessed by having many eminent and energetic scientists who are willing to co-operate with producers in order to investigate those diseases and pests which are a menace to our great primary industries, upon the success of which depends the prosperity or otherwise of this country. Reference has been made to the results achieved in the sheep and wool industry. For the last five years this industry has been responsible for over 50 per cent, of the total exportable wealth of the Commonwealth. Showing the perfection, to which sheep have been brought in Australia, although last year we produced, only 16 per cent, of the world’s sheep, our sheep are so superior to those of the rest of the world that the value of our wool clip was onethird of the value of the wool clip of the world. It will thus be seen that the value of wool per sheep in Australia is double that of sheep produced elsewhere in the world. Without assistance from governments or scientists our pioneering pastoralists and those who followed after them have been able to produce these excellent results because of the extraordinary suitability of Australia as a home for sheep; because of its climatic conditions, . herbage, and soil. What, however, can be done by the application of science and practical work is worthy of note. It has enabled the quantity of wool produced by the sheep of Australia to be actually doubled in one-third of a century. There is still tremendous scope for work in connexion with sheep, and I am sure the Government will see the wisdom of not starving the Council for Scientific and Industrial Research in the matter of funds. It is computed that through pests such as blow-fly and footrot the sheep industry alone has suffered, losses amounting on the average to £4,000,000 per annum, and, in some years when these pests are bad, the loss amounts to £6,000,000 per annum. I am pleased to note that the Council for Scientific and Industrial Research is always ready and willing to investigate the footrot disease, which is such a great menace, particularly in good seasons. Pastoralists are being asked to provide -facilities for the establishment of field experimental stations for the investigation of footrot and other diseases. I appeal to farmers, sheep-men, cattle-men and wheatgrowers - in fact, to all men on the land - to co-operate with the council and provide these facilities for carrying out practical experiments and investigations wherever they are necessary. It is not easy sometimes to secure this co-operation, because the land-owner does not want to advertise to those who hold a mortgage on his property or others that he is having any trouble among his stock; but I think it is the duty of pastoralists to co-operate with the Council for Scientific and Industrial Research in this direction.

In regard to wheat, scientists in State departments and, since federation, in the Federal departments, have simply done wonders for Australia. They have taught us how to conserve moisture in the soil; they have produced the most valuable breeds of wheat in the world. Our breeds of wheat are to-day considered to be superior, both from a productive and from a milling point of view, to the wheat known as No. 1 Manitoba. ‘ Thanks to the assistance of the scientists the value of our wheat yield is on the average 2s. per quarter higher than that of the wheat of any other country. We should be very proud of these achievements. We produce not only the most valuable wool. .in the world, but also the most valuable wheat in the world; and this is largely due to the assistance which the primary producers have received, and are still receiving, from scientists, and to the experiments conducted at State experimental farms. I have visited these farms in New South Wales, Victoria and Western Australia. They are doing great service in teaching the ordinary “ cocky “ the right class of wheat to plant in his district. They have produced rust-resisting wheats and wheats that will grow with a comparatively light rainfall. They have ascertained the right quantity and the right class of fertilizer for use in each district. With better systems of cultivating, and the use of better breeds of wheat ; by grading and by means of pickling seed, the wheat yield per acre in Australia has been doubled in the last quarter of a century, just as the output of wool per head of sheep has been doubled. I hope that the Government will see that this most valuable department is given every possible assistance, financially and otherwise, because it is of paramount importance to a country that lives on the value of its primary products that scientific investigation should be continued to fight any possible pests that may attack our primary products. As practically all our exports are primary produce, the expenditure of money upon, and the proper treatment of, the Council for Scientific and Industrial Research together with the cooperation of all sections of the community with the council, are essential not only for the well-being of the primary producers, but also for the financial stability of the Commonwealth. _

Senator Sir HARRY LAWSON:
VICTORIA · NAT

– I rise to express my approval of the provision made for the Council for Scientific and Industrial Research. I do so because something that I might have said1 somewhere at sometime or other might possibly have been misunderstood. I judge from the observations made by the Vice-President of the Executive Council (Senator Daly) that he assumes that a statement I made regarding overlapping referred to the Council for Scientific and Industrial Research. Nothing was further from my mind. I quoted from the report of the AuditorGeneral in which he referred to the duplication of Commonwealth and State activities.

Senator Daly:

– The honorable senator mentioned forestry, which is under the Council for Scientific and Industrial Research.

Senator LAWSON:

– I had in mind the School of Forestry, not investigations into forestry by the Council for Scientific and Industrial Research. I am not concerned with that, however. I accept the warning of the Auditor-General’s as evidence of duplication. It would ill become me to find fault with the Council for Scientific and Industrial Research now, seeing that on every occasion on which I have spoken on this subject I have referred in laudatory terms to the work of the institute, and have applauded the previous Government for having established this instrument of investigation. I realize its possibilities. It may be that scientists will continue their patient investigations for months, or even years, with apparently little result; but one never knows when they will make a discovery of tremendous importance. I rose not only to support this item, but also to express regret for not having made my meaning clear when I spoke earlier. I supported the late Government, and I intend to support the present Government, in encouraging scientific investigation by means of the Council for Scientific and Industrial Research.

Senator McLACHLAN:
South Australia

– I join in the encomiums of the Government for having retained the Council for Scientific and Industrial Research, but there is one matter concerning which I should like an explanation. I take it that the limited amount allocated for fuel investigation is due to the absence of Dr. Rivett in Europe, where he is inquiring into this matter.

I should be glad to have some information regarding the amount of £800 set down for radio research. I assume that it refers to investigations with a view to remedying fading. Isuggest that investigations along those lines might be conducted in co-operation with Amalgamated, Wireless (Australasia) Limited, which is vitally interested in that branch of science.

Senator CRAWFORD:
Queensland

– I appreciate as highly as any one does the work of the Council for Scientific and Industrial Research, and

I know what it has done in connexion with the destruction of prickly pear in Queensland. In this connexion we should not fail to give credit to the men who laid the foundation of that success. Before the Council for Scientific and Industrial Research was established, we had in Queensland, in the service of the State, an entomologist, in the person of Mr. Henry Tryon. In 1910 or 1911 the Queensland Government appointed Mr. Tryon and Professor Harvey Johnson a royal commission to visit the different countries to which prickly pear was indigenous, with a view to finding the best means of exterminating the pest. Those gentlemen made a very careful examination of the conditions under which prickly pear grew in different parts of the world, and of the various parasites which lived on it. They brought back to Queensland specimens of the destructive cochineal insect, of which I understand there are numerous varieties, some of which are not destructive of the prickly pear, and also specimens of cactoblastis. Their efforts to propagate cactoblastis failed, but they were successful with respect to the cochineal insect. Ever since their return from abroad, the cochineal has been steadily at work on the prickly pear and has proved of great value in destroying that pest. I understand that, so far, cactoblastis has not been of great value in New South Wales.

Senator Cox:

– That is not correct.

Senator CRAWFORD:

– I am glad to learn that that is so. I based my statement on something I read recently as to the failure of cactoblastis in New South Wales. Mr. Henry Tryon recently retired from the Queensland Public Service without having received due credit, or any recompense ‘ whatever, for his valuable contribution to a difficult problem. I should have failed in my duty had I not referred to the very valuable work which he performed in discovering a parasite to destroy the prickly pear.

Senator Sir WILLIAM GLASGOW (Queensland) [12.23].- I am glad that Senator Crawford has removed the wrong impression which my remarks might have made.

Senator Daly:

– I think the honorable senator gave the credit to science generally, rather than to. the Council for Scientific and Industrial Research.

Senator Sir WILLIAM GLASGOW:

– The first investigations into the destruction of the prickly pear were undertaken by a commission appointed by the Queensland Government. Later, the work was taken over by the Queensland Prickly Pear Board, since which time the breeding of insects and their distribution has been undertaken on a scientific basis. The Commonwealth has contributed financially towards the destruction of the prickly pear. The Prickly Pear Board of Queensland not only breeds and distributes insects, but it also makes it possible for the lessees of infected land to assist in the destruction of the pest. Science in the abstract and the Queensland Prickly Pear Board have been the main factors in obtaining the satisfactory results which have been achieved in Queensland in connexion with the destruction of the prickly pear.

Senator THOMPSON:
Queensland

– I confess to some disappointment regarding the work of the Council for Scientific and Industrial Research in respect to two important matters, namely, the extraction of petrol from coal and metallurgical research. In connexion with the former matter, I have received replies from the institute, which indicate that it is not abreast of the times. I was informed that the extraction of petrol from coal had not been commercialized in any country, whereas the fact is that in Germany, the United States of America, and elsewhere the industry has already been highly commercialized.

If there is one thing more than another to which scientific methods ought to be applied, it is to the treatment of lowgrade ores. Possibly the limitations of finance have prevented the Council for Scientific and IndustrialResearch from doing as much as it would have done had funds been available. I agree that in many directions the institute has done wonderful work, and I hope that its activities will not be restricted by financial limitations.

Senator Guthrie referred to the losses incurred by the sheep industry. Is it not rather a reflection on the pastoralists that they have not done more in the way of scientific research? Compared with the sugar industry of Queensland, they have done very little.

Senator Sir Hal Colebatch:

– One is a natural industry, while the other is spoon fed.

Senator THOMPSON:

– The Colonial Sugar Refining Company has spent large sums of money in research with the result that the industry has reached a very satisfactory position.

Senator McLachlan:

– After all, it is the money of the taxpayers which has been expended.

Senator THOMPSON:

– Other industries, such as the boot-making industry of Victoria, have received greater protection than has been given to the sugar industry of Queensland. I hope that in the future it will be possible for the Council for Scientific and Industrial Research to give more attention to the two subjects I have mentioned.

Senator COX:
New South Wales

– I was rather surprised to hear Senator Crawford say that cactoblastis has not done effective work in New South Wales. The honorable senator may know a great deal about sugar, but evidently he knows very little about cactoblastis. I travelled recently for some hundreds of miles through the Pillago country, where I found that both the cactoblastis and the cochineal insect were working most effectively. The results are a credit to the men who brought them to Australia. In the Inverell and Hunter River districts they are destroying the prickly pear at a tremendous rate. The cactoblastis is a faster worker than is the cochineal insect.

Senator Sir GEORGE PEARCE (Western Australia) [12.29]. - I had not intended to take part in this debate, but the remarks of Senator Thompson, with respect to the activities of the Council for Scientific and Industrial Research, in connexion with the extraction of petrol from coal, and metallurgical research, compel me to do so. The council has not been unmindful of the possibilities of extracting petrol from coal, and has carried out some investigations in that direction. There is a danger of embarking this scientific body on too many different investigations. Only a limited amount of money is available, and if its expenditure were spread over too wide a field nothing would be done thoroughly.

The money would merely be frittered away on partial and inadequate investigations I believe that this Government will follow the precedent of the last Government, and concentrate on a few subjects at a time. Otherwise it would need a vote ten times as great as the present one for this purpose. There are 101 problems in Australia that call for scientific research, but it is obvious that they cannot all be investigated simultaneously. I hope that the Government will sternly set its face against dabbling in every line of scientific investigation that is put forward, and concentrate on the more important matters and endeavour to obtain effective results.

Senator REID:
Queensland

– I desire to endorse the remarks of my Queensland colleague, Senator Crawford, concerning Mr. Tryon, Government entomologist. When I was a member of the Queensland State Parliament I took a rather active interest in the prickly pear. The State Government of that time simply ignored the spread of the pest, and since then millions of acres have been covered with prickly pear in Queensland. The State Government had a station at Dulacca, where it experimented for years with the cochineal insect. Finding that the onslaughts of these insects on prickly pear were too slow, the Queensland Government turned to a species of pyralid moths, belonging to the genera cactoblastis. I was rather surprised at the statement that the cactoblastis was not proving effective in New South Wales. I have always considered that State to be a hard one, but I felt confident that the cactoblastis would make some headway in it. However, the remarks of Senator Cox reassure me somewhat in the matter. I have seen the cactoblastis at work. It is not easily set back. The result of its labours is almost incredible. It certainly has no goslow policy, nor any 40 or 44-hour week. It simply keeps going until it clears out the interior of the prickly pear leaf. It adopts methods somewhat similar to those of the white ant, and leaves nothing but a thin shell. I have seen miles of country, extending from Dulacca to St. George, and across the border into New South Wales, that have been successfully cleared of pear by this moth in its caterpillar stages. Those who have not seen the ravages of the prickly pear in New South Wales and Queensland have no idea of the harm that it has done. Now it has been checked by the cactoblastis, and land previously in possession of prickly pear has been restored to good wheat-growing and grazing country. I hope that the Government will assist the activities of the Council for Scientific and Industrial Research, and make available to it as much money as is possible in the country’s present financial circumstances. That council is also doing excellent work in South Australia, assisted by State officers, and working in conjunction with the Waite Institute. There, it has increased the carrying capacity of land from half a sheep to the acre to four sheep to the acre, plus lambs. That result has been achieved by the use of fertilizers, and it does one’s eyes good to see the paddocks generally covered with splendid grass from four to five inches high. I know that the council has also worked effectively in conjunction with the Queensland Government. We have been told that the greatest blessing that can be conferred on a country is to increase crops, to multiply the number of blades qf grass by scientific culture. If that is so, this department is one of Australia’s greatest assets. Senator Daly mentioned what an additional pound of wool per fleece and an extra bushel of wheat to the acre meant to Australia. The Council for Scientific and Industrial Research Department is assisting to bring about that happy result, and its activities should be fostered in every way by the Government.

Senator RAE:
New South Wales

– I desire to supplement the remarks of Senator Crawford in regard to scientific investigation in Queensland prior to the establishment of the Council for Scientific and Industrial Research. Every praise is due to the experimenters in the different States, and particularly to the late Mr. W. J. Farrer, who experimented so extensively and so successfully with the cross-breeding of wheat in New South Wales. I have no doubt that similar work has been done in other States.

While endorsing what Senator Pearce said in regard to the advisability of this body confining its activities to one job at a time, I believe that investigation concerning the production of oil from coal and shale has passed the preliminary stages. I have a friend, an industrial chemist and an engineer, who served some years in Germany, since the war, actively producing oil from coal. I have also read reports indicating that different big industrial concerns in various countries, particularly the United States of America, to some extent Great Britain, and notably in Germany, keep technical staffs that are engaged on experimental work in an endeavour to increase the productivity of their respective industries. We cannot expect one Commonwealth institution to cover the whole ground in such work. There must still be room for individual States and for private enterprise to participate in the investigations. A great effort should be made to place the production of oil, particularly from coal, on a commercial basis. I am reminded that the extraction of oil from shale has been proceeding for many years in New South Wales; but, so far as I can gather, its production from coal offers a far wider and more profitable field.

Senator Sir George Pearce:

– Can that oil be produced on a commercial basis ?

Senator RAE:

– I believe that it can. We must realize that the big oil monopolistic concerns, in one of which the Commonwealth Government is a shareholder, are doing all that they can to prevent the local production of oil.

Senator Sir George Pearce:

– Would it not be in their interests to engage in the endeavour to produce oil locally?

Senator RAE:

– I think that it is more to their interests to do what they are now doing. I draw attention to the enormous profits made by the companies distributing oil in Australia.

Sitting suspended from 12.45 to 2.15 p.m.

Senator RAE:

– In the course of the debate this morning some reference was made to the participation by the Commonwealth in forestry matters. This is a subject in which I have taken a great deal of interest for many years, because I consider it of vital importance to the Commonwealth. In my judgment, it is desirable that the Commonwealth should extend its activities in this direction to the end that we may conserve existing forests and do something substantial in the way of re-afforestation. In a letter which I wrote to the daily newspapers in Sydney some time ago I suggested that in our land legislation provision should be made in all leases that a certain proportion of forest land should be conserved. Although Australia has been peopled by the white races for only a few generations, its area of forest land is very much less than the area of forest lands in the various countries of Europe, which have been occupied by white people for thousands of years. This, I suggest, is significant, and would justify reasonable expenditure on the part of the Commonwealth and State Governments, not only in maintaining existing forests, but also in extending the areas by replanting. Money devoted to this purpose would be well spent, particularly if it were under scientific direction instead of being expended in a haphazard manner as in the past.

Senator COOPER:
Queensland

– I endorse the remarks of Senator Guthrie concerning the seriousness of the blow-fly pest. Much research work has been done in the last few years by the Council for Scientific and Industrial Research and by State departments, but I doubt that people generally realize how great is the menace to our flocks. It is estimated that the losses caused by the blow-fly and by foot-rot amount to between £4,000,000 and £6,000,000 a year. From my knowledge of the industry, I would put the total loss at a higher figure than that. Up to the present time no proved remedy for the blow-fly pest has been discovered. Various methods are employed to keep the pest in check, notably dipping, jetting, and crutching; but in some instances sheep have been struck by the blow-fly within three or four days of dipping or jetting. More research work is urgently called for. It would be of immense advantage if a more effective class of dip could be placed in the hands of pastoralists. Usually the beneficial effects of dipping last for about a month. Blowfly traps hanging in the shade of trees, and poisoned meat, are other methods employed to check the increase in the pest. These are astonishingly successful. It would, no doubt, surprisehonorable senators to know thatIhave seen count- less millions of dead blow-flies removed from blow-fly traps by the wheel-barrow load. Notwithstanding this great mortality, the pest is spreading. Up till 1920 it was unheard of in the north-western portion of Queensland. It made its appearance in the following year, and now is extending over the entire country in that part of the State.

Senator Rae:

– Would the destruction of bird life be any explanation of the increase in the blow-fly pest?

Senator COOPER:

– I do not think so. Apparently, the flies lay their eggs further and further afield. Areas which, a few years ago, were free of the pest are now infested. I admit that the pastoralists could do more than they are doing to supply the necessary funds for research work. A fund has been started, and the amount subscribed totals, I understand, £27,000. In view of the seriousness of this menace, more money is probably required. I have no doubt that, as the result of researches now being made, some effective means will eventually be evolved to combat this pest, which is working such enormous destruction in our flocks.

Senator DUNN:
New South Wales

– I agree that valuable work is being done by the Council for Scientific and Industrial Research, with the object of discovering an effective remedy for the blow-fly pest, the increase of which,. I suggest, is due in no small measure to the negligence of the pastoralists themselves.

Senator Cooper:

– In what way?

Senator DUNN:

– By their neglect to destroy the carcasses of dead sheep and cattle. In the north-west of Queensland, in the vicinity of Longreach, Charleville, and Hughenden, and away over into the Gulf of Carpentaria, pastoral lessees pay little regard to the necessary labour conditions to ensure efficient management. The hands employed are so few that whenever sheep or cattle die the employees content themselves with removing the fleece or skin and allow the carcass to rot. Within a few hours thousands of blow-flies are clustered on it. If squatters and graziers are content to work areas of from 50,000 acres to 100,000 acres with two or three men, we must expect the blow-fly pest to continue unchecked. The destruction ‘of bird life also is partly responsible. Previous governments have done all .that reasonably could be expected of. them in the direction of providing money for scientific investigation. .When the right honorable the Leader of the Opposition (Senator Pearce) was in office and administering the Council for Scientific and Industrial Research, he gave considerable study to the particular work in which that body is engaged. I compliment the right honorable gentleman on his thoroughness. Similarly, I compliment the Leader of the Senate (Senator Daly), who now has charge of that department. I have been through the north-west of Queensland and I know all that country pretty well. It is no exaggeration to say that hundreds, if not thousands, of carcasses of sheep and cattle are allowed to rot instead of being burned as soon as possible. These rotting carcasses attract the blow-flies which deposit their eggs in the putrid flesh. In this way the pest has multiplied until it has become a serious menace to our flocks. The sooner the pastoral companies and squatters and graziers realize their responsiblity and agree upon a common point of attack, the sooner shall we get rid of this pest.

Senator COOPER:
Queensland

– I should like to correct what I fear will probably be a wrong impression in the minds of the people by the remarks of the honorable senator (Senator Dunn) who has just resumed his .seat. He said that the pastoralists themselves were largely to blame for the increase in the blow-fly pest because they did not take proper measures to destroy the carcasses of sheep or cattle. The honorable senator is in error. If he knew anything about the present position in the pastoral industry he would not have made that statement. The practice is not to burn the carcass of a dead animal immediately. The fleece or skin is removed and the carcass allowed to remain for ten or fourteen days to attract the blow-flies, it being considered better to induce them to fasten on to a carcass than to strike a live sheep. At the expiration of ten or fourteen days, when the carcass is covered with maggots, it is either poisoned or burned. In the opinion of experienced pastoralists, this practice is preferable and more in the interests of the industry than is the immediate burning of a carcass.’ : 1

Senator RAE:
New South Wales

Senator Cooper may be right, but I know that the practice which he has described is not universally adopted.

Senator Cooper:

– In Queensland district councils compel all land-holders to burn the carcass of an animal after a certain time.

Senator RAE:

– Possibly they do. But can the honorable senator say that in every instance pastoralists adopt that practice? Some years ago, when I was engaged in fruit-growing, the fruit fly became a serious menace. To combat it fruit-growers were enjoined to burn all fruit that fell from the trees. All did not obey the instruction. Many endangered the security of their neighbours’ orchards by simply carting the infested fruit into the bush and dumping it there. I am afraid that very often the instructions issued by departmental, experts are honored more in the breach than the observance by a great many people. I am sure it cannot truthfully be said that the pest does not increase largely in consequence of the neglect to do what Senator Cooper says is done. The practice which he mentioned is not universally adopted and until it is the pest is not likely to be eradicated.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– I can assure Senator Glasgow that the insectary staff at Canberra is at present conducting investigations in connexion with the parasite which it is hoped will eventually eradicate the noogoora burr. The expense of the Council is met out of a trust , fund, and in the administration of that fund the Government has to take- into consideration the probability of finding it difficult to provide another trust fund within the immediate future. Consequently finances are being conserved to enable the Council to deal with the major problems, particularly in the pastoral and agricultural industries.

With regard to oil and metallurgical research I may explain that most of the States have well-conducted mines departments, and honorable senators may remember that Dr. Keith Ward of South Australia was selected by the Commonwealth Government as a member of the royal commission appointed in this connexion. I entirely agree .with the views expressed by the Leader of the Opposition that until funds are available we should concentrate upon the major problems, as the present trust fund may be absorbed within the next eighteen months. If we were to launch out on new branches of investigation, as some honorable senators suggest, before the end of this financial year we should have insufficient funds to deal with the major problems upon which the institute is at present engaged.

Senator PAYNE:
Tasmania

– Every one recognizes the valuable work being undertaken by the department, and in view of its importance I suggest to the Minister (Senator Daly) that arrangements should be made for honorable senators and members of another place to visit the institute so that they may more fully appreciate the value of the work that is being undertaken. Honorable senators attended the opening ceremony at which the public were admitted, but on that occasion it was difficult to fully realize the extent of the scientific work which is being undertaken. Perhaps the Minister could make arrangements for another inspection to be made, so that honorable senators would be more fully acquainted with the nature of the work that is being undertaken before the budget is presented for our consideration.

Senator Sir WILLIAM GLASGOW (Queensland) [2.35]. - In connexion with the proposed vote for the Treasury, for which a sum of £167,380 is to be appropriated, I direct attention to the following which appeared in the financial statement issued in connexion with the budget for 1929-30-

At the 30th June, 1920, 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.

A further paragraph reads -

The purpose for which the accumulated funds accruing from the liquidation of exenemy properties will be applied has not yet been determined.

Has the manner in which this money is- to be used, yet been determined ?

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– I am not in a position to give the honorable senator the information at present, but if he requires it I shall endeavour to obtain it for him. .If it should be impracticable for me to supply it immediately, perhaps he will raise the subject when the budget is under discussion.

Senator Sir GEORGE PEARCE (Western Australia) [2.37]. - Under the Department of Home Affairs, for which £67,880 is to be appropriated, there is an item of £250 for the administration of the Passports Act. In the Melbourne Argus I notice the following telegram from Sydney: -

With the object of maintaining relations with Moscow the Communist party in Sydney has formed an organization known as the Red Internationale of Labour Unions Defence Committee. The committee is the outcome of correspondence between the Red Internationale and. the Labour Council regarding strike methods in Australia. Following the timber-, workers’ strike the Red Internationale wrote to the Labour Council strongly condemning the action taken by trade union officials, and the council subsequently told the Red Internationale in effect to “ mind its own business.” A move was made by certain sections to sever relations with the Red Internationale, but this was opposed by the Communists. In view of the fact that the council’s letter will be considered at the forthcoming conference of the Red Internationale the Communist party has despatched two unofficial delegates to Moscow. They have thus outmanoeuvred the Labour Council which appointed three representatives to the conference, but had to announce later, that a shortage of funds prevented the delegates from leaving Australia.

I understand that if these delegates leave Australia they will have to obtain passports, and I suggest that if they are issued they should be endorsed “Not available for the return journey.” I am sure that Australia would all be happier if they failed to return, particularly in view of the attitude adopted by the Trade and Labour Council in New South Wales, an organization which might be expected to give them some support.

Senator RAE:
New South Wales

– It is” quite consistent with the right honorable senator’s bitterness concerning this matter that he should make this suggestion. Great Britain is by no means in favour of communistic principles, but the Labour Government in that country,, which has not extended any’ favours to the Commun istic party, showed its common sense by . not placing any obstacles in the way of delegates from that country going to Russia. Those delegates, on their return, presented a report which was circulated throughout the Empire. The attitude of the right honorable senator, who was once a member of the Labour party, merely discloses his narrow vision and shows that he never misses an opportunity to make vicious and vindictive attacks upon those who are fighting for the rights for which he once so strongly clamoured. I can recall an instance in which he told me something about the censorship methods adopted with respect to newspapers and documents passing through the post under the Czarist regime; but the right honorable senator when a member of the late Government out-heroded Herod. I could submit quotations, not from communistic sources, to show that Russia is handling many of the problems with which we are confronted in a more commonsense and humanitarian method than was adopted by the Government of which the right honorable senator was a member.

Senator DUNN:
New South Wales

– Personally, I do not care whether the Communistic party in Australia does or does not send a delegation to Russia. The Leader of the Opposition has apparently endeavoured to give prominence to this subject merely because the representation of the press in the chamber this afternoon is stronger than usual. I am surprised that the right honorable senator, upon whom the King has been pleased to confer a knighthood, should suggest that citizens of this country who wish to visit Russia should be prevented from returning if they desire. At the opening’ of the season in the Mother Country a few months ago a representative of Soviet Russia attended a royal function in full regalia, including knee-breeches, and was welcomed by His Majesty the King.

Senator Reid:

– And a representative of the present’ Government who was in England at the time declined to attend.

Senator DUNN:

– That is so. On that occasion His Majesty the King was pleased to converse with the Soviet Ambassador. If the Leader of the Opposition wishes action to-be taken against persons wishing to visit a country whose ambassador was welcomed by His Majesty the King, I think he should inform His Excellency the Governor-General that he no longer wishes to retain the title which His Majesty has conferred upon him.

Senator Sir GEORGE PEARCE (Western Australia) [2.45]. - It was intended by the late Government to endeavour to lease the hotels in the Federal Capital Territory, and I understand that the present Government has been making inquiries with the same end in view. I have read in the press that the Hotel Ainslie has been leased to a Mr.Parer. I should like to know if offers have been received for the leasing of the other hotels, and, if so, why they were not accepted.

Senator DALY:
Vice-President of the Executive Council · South Australia · ALP

– I am not in a position to give the information the right honorable senator requires, but I know that the question of the leasing of the hotels in Canberra has given the Minister for Home Affairs a good deal of concern. Tenders were called for the leasing of these buildings, and I understand that negotiations are still proceeding between the Minister and certain tenderers for the leasing of the Hotel Ainslie and another. If the honorable senator will postpone his request for the information, I shall certainly obtain the latest information, and supply it when the Senate meets next week.

Senator Cooper:

– Does the provision in the Supply Bill for transport, cover all transport in the Federal Capital Territory?

Senator DALY:

– Yes; it covers all transport services.

Senator PAYNE:
Tasmania

– Some years ago, a most important conference was held at Rabaul in regard to native affairs in New Guinea. It lasted a fortnight, and was attended by representatives of the administration and the various missions. As an outcome, a good many resolutions relative to the future control of the natives were adopted as recommendations for the administration. I should like Senator Daly to ask the Minister in charge of the Mandated Territory affairs to supply him with information so that it will be available when the Budget is being discussed later on, as to what recommendations, if any, made by that conference, have been put into operation, and with what result?

Senator DALY:

– I shall do so.

Schedule agreed to.

Preamble and title agreed to.

Bill reported without requests; report adopted.

Bill read a third time.

page 3436

CENTRAL RESERVE BANK BILL

Second Reading

Senator DALY (South Australia-

Vice-President of the Executive Council) [2.55].- I move-

That the bill be now read a second time.

I can quite understand the nature of the opposition with which this bill will be met.

Senator DALY:
ALP

– I understand that one section of the Opposition regards the bill as being another step towards the achievement of Labour’s objective, the socialization of all the means of production, distribution and exchange. I can quite conceive that section arguing that, even if there is a doubt, it should be regarded -

  1. . as a serpent’s egg,

Which, hatch’d, would as his kind grow mischievous;

Andkill him in the shell.

There is another section of the Opposition which will regard the measure with a cautious eye, because of its, to them, hyper technical nature. I hope to be able to show in the course of my speech that there is no need for that fear. Already the Commonwealth Bank, in other words, the nation, controls 75 per cent. of the activities of a central reserve bank. The balance of 25 per cent. cannot be controlled by the nation because the national bank, in its present form, is a trading bank, and if private banks were forced to disclose the information necessary to enable such an institution to control all of the functions of a central bank it would be considered by modern parliamentary students as manifestly unfair. Before the bill reaches the conclusion of the second-reading stage, I feel confident support will be given to it by all sections of the Senate.

As set out in the preamble, the object of this measure is to maintain stability and security in the monetary and credit systems of the Commonwealth of Australia. This is a matter of common necessity to all sections of the community and to all parties in the Senate.

I may, perhaps, commence by briefly describing the functions which a central bank should carry out. The most important function of a central bank is so to control and stabilize credit and currency as to keep the financial position on as even a keel as possible at all times. In times of stress a central bank provides funds to the other banks, and thus enables them to continue making loans judiciously to their own customers, thus avoiding a further slump. Conversely, in times of overtrading and speculation, the central bank will withdraw money from the market by selling securities, and will also increase the rate at which it makes funds available to other banks, thereby applying the brake in time and avoiding boom conditions developing. The’ concentration of reserves and the control of the money market, imperative for the mitigation and avoidance of financial crises, demand a central reserve bank organization. Such an organization standing behind the commercial banks is able, by the use of the reserves held, to bring support to any threatened point in the contingency of a crisis, and to avert loss of confidence, the continuance of which is necessary to maintain the stability of any credit system.

Amongst the particular functions of a central bank the following may perhaps be specially mentioned: -

  1. to act as bankers to the Government, governmental bodies, other banks and investment houses, &c.
  2. to control the note issue and be the sole note issuing authority.
  3. to hold the reserves of other banks, both for the benefit of the country’s banking organization and the protection of the public ;
  4. to keep the country’s foreign exchange on a sound and stable basis.

Having set out the particular functions of a central bank, let me now trace the history of the Commonwealth Bank of Australia in order to see the extent to which that institution has gradually developed central banking functions.

When the Commonwealth Bank was first created and commenced to function in 1912, it was merely an ordinary trading bank with a savings bank department attached. It continued to function in this way for some years. With the breaking out of the Great War in 1914, the Commonwealth Bank was immediately drawn into the maelstrom of war finance, and took the leading part in handling the Commonwealth war loans. From its inception the Commonwealth Bank had transacted the banking business of the Commonwealth Government; but during the war period it also gradually acquired the banking business of various State Governments as well as that of semigovernmental authorities, such as the city councils, boards of works, &c. Within a few years it had drawn to itself the majority of the larger governmental and semi-governmental accounts throughout the Commonwealth, thereby acquiring by natural evolution one of the particular functions of a central bank.

Its next step on this road was the taking over of the Australian note issue. Up to 1920 the Australian note issue had been conducted by the Commonwealth Treasury, not by the Commonwealth Bank. By that time, however, the Commonwealth Bank had secured the confidence of the public to such an extent that the act was amended in order to transfer to it the note issue functions. That was the bank’s second big step on the road to central banking functions .

From 1924 onward the Commonwealth Bank gradually acquired its third central banking function, namely, that of becoming a bankers’ bank. In that year there was a further amendment of the Commonwealth Bank Act, which provided that from a date to be proclaimed the other banks were to settle their exchanges by means of cheques on the Commonwealth Bank. This necessarily meant that each other bank had to open an account with the Commonwealth Bank at the various capital cities of the Commonwealth. To show the extent to which the other banks realized the necessity for some institution carrying out central banking functions, I mention that up to the present day no proclamation has been made under the section of the act referred to, as the other banks opened, and have continued to conduct, their . exchange settlement accounts with the Commonwealth Bank voluntarily. There .was no necessity for any proclamation. Indeed, the other banks have gone considerably further than was necessary, as they have kept with the Commonwealth Bank, not only sufficient funds to enable them to carry Out their exchange settlements, but also a large part of their own reserves which previously they had held in their own strongrooms in the form of gold or notes.

A publication recently issued by one of the banks - I think the National Bank of Australasia Limited - set out that the trading banks between them had on deposit with the Commonwealth Bank upwards of £13,000,000, thus clearly indicating the extent to which the other banks- are to-day using the Commonwealth Bank as a central banking institution.

Among the important functions of a central bank which I have mentioned there is only one other which has not yet been achieved by the Commonwealth Bank of Australia, namely, the keeping of the country’s foreign exchange on a sound and stable basis. It is to some extent owing to this lack of control that our exchange with London and other centres of the world is at present largely disorganized.

Senator Thompson:

– A central reserve bank will not cure that.

Senator DALY:

– I must assume that the honorable senator has an open mind in connexion with the bill before the Senate. I, therefore, ask him to wait until I have finished speaking before he expresses adverse comment.

To enables central bank to keep proper control of the overseas exchange position, it is necessary that it should get periodical figures from other banks indicating the amount pf funds which they have available in London and foreign centres for the purpose of Australian overseas exchange. These figures have never been supplied to the Commonwealth Bank by the trading banks,- because the trading banks have naturally regarded the Commonwealth Bank as a potential competi tor for their overseas exchange business, and have therefore been’ reluctant to disclose .their figures. It. follows, therefore, that each trading bank ‘ knows its own position, but has no idea qf the position of any other bank. Nor is there any central authority which can ascertain the aggregate, position. Had the Commonwealth Bank or any other central authority been in possession of such figures, the trend of the Australian overseas exchange position, would have been foreseen very much earlier than is possible under present ‘ conditions, and prompt and energetic, steps could have been taken to remedy the position.

From these remarks honorable senators will see that, although the Commonwealth Bank of Australia is at present carrying out, say, 75 ‘ per cent, of the functions of a full central1 reserve institution, it would hardly be right to amend the Commonwealth Bank Act in such a way as to give it the remaining 25 per cent., and force the other trading banks to supply their confidential internal .figures to the Commonwealth Bank, acting as a central institution, thereby also disclosing their position to another institution which, acting as a trading bank, might use the information thus obtained for competitive purposes. Therefore, it is proposed to transfer to the nation the outstanding 25 per cent, of the functions of a Commonwealth bank, but not to an institution in the capacity of a trading bank. It is proposed to divorce from the Commonwealth Bank its central banking functions, and then to transfer to the new body such functions together with the 25 per cent, functions which, at the present time, are the right and property of the private banking institutions.

I hope that I have clearly indicated that the present bill will not bring into being any new or radical banking machinery, but will merely confirm by legislation, practices and methods already largely in existence. At the same time, the opportunity is being taken to place the central banking functions - and central , banking functions only - on a sound basis, with the object of keeping both the local position and the overseas exchange position as sound and stable as possible at all times. The method by which the Government proposes to maintain stability is, therefore, by the creation of a properlyconstituted and fully-equipped central reserve bank.

It has been contended that the present time is inopportune for the introduction of a measure of this nature; but I submit that the time was never more opportune, for at the present moment the country is experiencing considerable economic and financial stress, and the prompt organization and use of the powers of a central bank can do much to ameliorate those conditions. Many of the countries of post-war Europe, when faced with difficult economic and financial conditions, under the advice of the best financial authorities of the world, promptly turned their attention to the creation of a central banking system to help themto overcome their difficulties. The experience in every case was that a wise and judicious use of central banking powers was, of inestimable assistance in obtaining monetary and financial relief and stability.

Under modern economic and financial conditions the banking system of a country is not complete without a properlyorganized central bank. The principle has been so fully recognized that central banks have now been created in 27 of the leading countries of the world, including practically all European countries, as well as in the United States of America, Japan, and even theRepublic of China.

Another great advantage of having a recognized central banking institution is that, in times of stress or crisis, it gives a definite leadership. Such an institution, being on a plane of its own and not in direct competition with the trading banks can always set a lead, whereas the other banks, if left to themselves, being competitors, are not likely to work in coordination and in the best interests of the community.

All banking and financial authorities have, for some time past, realized that an inherent weakness exists in the Australian banking system through the lack of aproperly organized central bank; and in an endeavour to meet this difficulty the Commonwealth Bank of Australia has, as I have indicated, attempted, to some extent, to carry out central banking functions during recent years. The constitution of the Commonwealth Bank, however, made it quite impossible for that institution fully and effectively to carry out such functions.Furthermore, the Commonwealth Bank, as originally created and envisaged by its founders, was not intended to carry out such functions; indeed, many of the provisions of the Commonwealth Bank Act are quite antagonistic to such an intention. The mere fact, however, of the endeavour of the Commonwealth Bank to carry out such functions, and the partial cooperation of the other trading banks, clearly indicates that the banking community realizes the imperative necessity of bringing into being a central banking organization.

In press comments on this bill the proposal has been made that, instead of creating a central reserve bank the Commonwealth Bank of Australia should be allowed gradually to evolve into a central reserve bank; but, as I have indicated, it is quite impossible for one institution effectually to carry out the functions of both a trading bank and a central reserve bank at the same time, because at times the policy of a central reserve bank and of a trading bank must of necessity be absolutely at variance.

We in Australia are handicapped to some extent in our financial operations owing to the fact that no true money market has developed similar to that’ in many other large centres of the world. This is, to a considerable extent, due to the national habit of obtaining accommodation by way of overdrafts, instead of by way of discounting bills. This national habit, in turn, is almost entirely due to the fact that up to the present time no central institution has been in existence to rediscount such bills when they are of a satisfactory class. The creation of a central reserve bank will, therefore, be of inestimable value in the way of bringing into being a more elastic money market in Australia, thus facilitating all financial transactions.

Senator McLachlan:

– It will be harder on the man who wants an overdraft, because he will have to pay interest.

Senator DALY:

– We must look. at this matter, not from the point of view of the man who wants an overdraft, or even that of a bank which wants to retain its profits in connexion with overseas exchange, but from the point of view of the nation, irrespective of whether the national interest inconveniences individuals or sections of the people.

In other countries when banks desire to make advances to their customers, but are unable to do so from their own resources, they immediately go to the central bank and rediscount bills, and with the money thus obtained they continue to make advances. In Australia bills are not used as freely as in other countries, the national practice being to work on an overdraft instead of discounting bills. The banks in Australia would, therefore, not have bills to rediscount with the central bank; but exactly the same object can be achieved by their getting direct advances from the central bank, as authorized in the bill.

In drafting the bill which I am now bringing before the Senate, close and extensive study has been given to central banking systems throughout the world, in an endeavour to formulate a thoroughly sound and orthodox measure which will produce practical results, and at the same time be thoroughly applicable to Australian local conditions.

Although ordinarily, in a secondreading speech, matters which properly belong to the committee* stage are not dealt with in detail, in order that honorable senators may understand the system by which the Government intends the central bank to operate, I propose briefly to touch on some of the more important aspects of the measure, leaving the discussion of the details of the various clauses and sub-clauses until the committee stage.

Sections 8 and 9 set out respectively what the reserve bank may and may not do. Perhaps the more important of these is what the bank may not do, as this clearly defines the new institution as a true central reserve institution, not in any way a competitor with the trading banks. A perusal of these clauses will clearly indicate that the main intention is that the resources of the central bank shall be kept in a thoroughly liquid condition and not tied up in long-term advances. This is absolutely essential in order that the reserve bank may, at such times as are necessary, use its liquid resources in ameliorating conditions in times of temporary stress.

In aiming to keep complete liquidity of resources, which is one of the fundamental requisites of a central reserve bank, advances against fixed assets or unsecured advances should not be made, and it will be seen that provision has been made to this end. An exception has been made as regards advances to the Commonwealth or State Governments and governmental authorities and to other banks. I should like to point out to honorable senators that such advances, though nominally unsecured, will actually be very fully secured as government and governmental bodies can, at all times, issue their own stocks and debentures as security should such a course be desirable. Special provision has been made by a later clause of the bill by which debts due to the reserve bank by any other bank have priority. That in effect means that the whole of the assets of the borrowing bank become security for any advances made by the central bank. In its capacity as bankers to the Government and various governmental .authorities, the central bank will need to make temporary advances to those authorities from time to time, pending receipt of revenue and the issue of loans to the public. The practice of governmental authorities, such as the city councils of the capital cities, the Melbourne and Metropolitan Board of Works, the Sydney Water and Sewerage Board and other such bodies, is to finance themselves by an overdraft from their bank pending the receipt of their annual revenue. In addition to this they finance themselves by way of overdraft to provide money for capital works, pending the issue of loans. Honorable senators will readily appreciate that it would be bad finance for these bodies to raise a loan from the public before they began to spend the money, as that would mean that they would be paying interest on the whole amount of the loan before the money had been put to reproductive use. It is for this reason that the central reserve bank has been given power to make temporary advances to such bodies by way of overdraft.

Though the bill gives the central bank power to accept money on deposit the bank has no power to pay interest, and will thus not attract deposits away from the ordinary trading banks. The reserve bank will not do what may be described as “retail banking,” but will have as its clientele the other banks and financial concerns such as trust companies and stock exchange firms.

Clause 10 makes definite provision for other banks to maintain reserves with the central institution and such reserves are set down as being 10 per cent, of a bank’s demand liabilities and 3 per cent, of its time liabilities. In fixing these proportions reference has been made to the practice in other parts of the world. For the information of honorable senators I would mention that in the United States of America, perhaps the leading exponent of the central banking system, the proportion of reserves is fixed on a geographical ratio and ranges from 13 per cent, down to 7 per cent, on demand liabilities, and at all points is 3 per cent, on time deposits. In South Africa the respective ratios are 10 per cent, on call liabilities and 3 per cent, on time liabilities.

In order that there may be no misunderstanding as to the approximate amount of reserves to be lodged by the trading banks, including the trading department of the Commonwealth Bank, I quote the following figures for the information of honorable senators. They are based on the quarterly average returns of the banks for the quarter ended 31st March last. After allowing for government balances, which will be transferred to the central reserve bank, it is estimated that call deposits, on which the banks will have to lodge 10 per cent., will aggregate £104,702,000, whilst time deposits, on which only 3 per cent, will have to be lodged, will aggregate £188,004,000. The combined figures total £292,706,000, against which the banks will be called upon to lodge £16.110,320. This works out at only 5.5 per cent, of the total deposits held by the trading banks and as the trading banks at present hold aggregate reserves against such deposits to the extent of 15.5 it means that after lodging the necessary reserves with the central institution they will still continue to hold in their own possession approximately 10 per cent, of their reserve cash. That will be used for till money and other general purposes. This clearly indicates that the reserves which the banks will be called upon to lodge are by no means onerous, and it cannot be denied that great benefits will accrue, both to the banks and the general public, from the existence of a central institution. “Whilst dealing with- the reserves to be lodged by other banks I should like to touch on an inexplicable misconception of the position that has been widely disseminated through the public press and other sources. It is that the lodging of these reserves with the central institution will, to some extent, impair and reduce the capacity of the trading banks to lend to the public. This is quite incorrect; in fact the very reverse is the case. Banks must, as a matter of necessity, hold reserves against their liabilities to the public. Whether these reserves are held in their own vaults or by a central institution on their behalf makes no difference in regard to their power to lend to the public. Furthermore, where the reserves are held by a central institution, that institution can, as I have already indicated, make further funds, available to the trading banks for the purpose of advancing to the public. Instead, therefore, of impairing the power of the other banks to lend to the public, the creation of a central bank will increase their power tq do so.

It will be seen that sub-clause 3 of clause 11 provides that the banks shall furnish returns containing particulars of the state of their business in the United Kingdom and elsewhere. This is essential in order that the central reserve bank may be able to follow the overseas exchange situation and make all necessary provision to keep exchange on a stable basis. As I have mentioned it is one of the weaknesses of our present banking system that there is no authority who is able to keep in touch with the aggregate exchange position and ascertain its trend.

I now come to the proposals for the management of the” reserve bank. The capital of the bank not having been subscribed by shareholders there is no one who can definitely claim to be represented on the governing body. The Government recognizes, however, that the whole community is vitally interested, as also are the banks which are by law obliged to keep their reserves with the central institution. It is considered that the provisions laid down in the bill meet the necessities of the case and will result in a strong and effective governing body representative of all sections of the community and quite free of political control.

In passing, I may suggest that honorable senators will readily appreciate that in times of stress a central bank has, perhaps, to adopt a policy against the wishes and the temporary interests of the trading banks. Such a policy may be vitally necessary in the interests of the community as a whole though unpalatable to the trading banks and it therefore follows that any undue proportion of representation of the trading banks on the governing body of the central bank may be most embarrassing. From press comments which have come to my notice, it is observed that a fear is expressed that the constitution of the board of management of the central reserve bank is such that it may be subject to political influence, which admittedly would be most undesirable. However, I cannot see how that contention can be maintained. The method of appointment of the directors and the governor and deputy governors of the central reserve bank is on practically the same footing as that of the Commonwealth Bank of Australia, and it is generally admitted that the latter institution has been quite free from political control or influence of any kind. The appointment of the first directors for periods varying from one year to five years, thus having one only retiring each year, and the appointment of the governor and deputy governors for periods up to seven years, will place the directorate of the bank far beyond the reach of political influence, and should ensure the board being able to adopt and carry out a stable and consistent policy without regard to political parties.

Regarding the question that has “ been raised by some critics as to whether the governor of the reserve bank should also be chairman of directors, the Governs ment is convinced ‘ that the principle (aid down, in the bill is the correct one.

The governor of the bank will be a tried banker of long experience, and with a comprehensive knowledge. of high. finance. If one of the outside directors were elected chairman of directors, and happened to be a man of strong character, he would inevitably assume some of the functions of management, which should properly be in the hands of a trained and experienced banker. “When the original Notes Board of the Commonwealth Bank of Australia was created, the then Governor of the bank, Sir Denison Miller, was, under the act, also, chairman of directors, and this arrangement worked admirably and without the slightest friction.

The note issue sections of the bill require no comment, as this is merely a transfer of the present powers of the Commonwealth Bank of Australia to the central reserve bank. This brings me to the portion of the bill dealing with the statutory reserves that the bank must hold to protect the note issue and its deposits. It will be seen that clause 50 divides the reserve into two separate parts, one of which is held against the note issue and the other against the bank’s deposits and general liabilities. The reserve against the note issue is set at 25 per cent, of the amount of Australian notes in circulation, which is the present figure, and one that has been found over an experience of many years, to be an adequate reserve.

Turning to the reserve to be held by the bank against its deposits, it will be seen that a slightly different principle has been followed.’ It is estimated that immediately the banks lodge a portion of their funds with the central reserve bank, and the government banking business is undertaken, the minimum amount which the reserve bank will hold on deposit will be in the vicinity of £20,000,000. In order to conform with the provisions of this bill it will be necessary, as I have already indicated, for the trading banks to lodge amounts of approximately £16,000,000 to £17,000,000, whilst government balances, &C., will readily make up the difference.

Before arriving at a decision in- regard to the reserves to he held by the bank the practice and laws of other countries were carefully studied. After full, consideration it was decided that the basis laid down in the hill was the one . most applicable to Australian local conditions, and at the same time would give proper elasticity to enable both the note issue and the bank’s deposits to rise and fall according to seasonal and business conditions.

Sub-clauses 3, 4, arid 5 of the clause under review make provision as to the constitution of the reserve, which is to consist of at least 50 per cent, of gold, and the other 50%per cent, can be held in British Government securities and first-class trade bills that must not, however, have a currency of more than 120 days. Here again prevailing practices throughout the world have been closely studied, and; in a large number of cases, similar provisions exist. At least eight European countries, among which may be mentioned Italy, Sweden, Denmark, and Germany, provide for a portion of their respective Central Banks’ reserves being held abroad in bills of exchange, &c, whilst the South African Act provides that 25 per cent, of the reserve may bo held outside the Union of South Africa. British Government securities and trade bills with a currency not exceeding 120 days, such as bills for export of our wool, wheat, and other products, can rapidly be turned into gold in London should the trend of circumstances make it desirable. Furthermore, the fact of reserves of this nature being held in London, gives the central bank an opportunity to build up large balances in London, either in gold or its equivalents, and by this means enables it to place itself in a position to meet a drain on London exchange balances such as that we have recently gone through, and are, in fact, still going through. This will perhaps be one of the most important functions that the reserve bank will be called upon to carry out for the benefit of the Australian community.

Clause 51 merely embodies in part in this bill the provisions laid down in the Commonwealth Bank Amendment Act which was passed by the Senate during the last session. It will be observed that the provisions that are embodied in that amendment giving the Treasurer of the Commonwealth power to prohibit the export of gold, .have been eliminated from this bill. At the time the amendment to the Commonwealth Bank Act went before -the Senate there was no properly constituted central reserve bank, and, in these circumstances, the Government thought it proper that they, through the Treasurer, should exercise some measure of control. However, with the creation of a central reserve bank, as provided in this bill, the Government is quite prepared to leave the full protection of the country’s gold reserves in the hands of that institution, as is the usual practice in other countries, and to withdraw from any part in the control which they previously considered it desirable to exercise.

Coming to the general and miscellaneous provisions of the bill there is very little that needs comment as, broadly speaking, they are simply a repetition in this bill of clauses which previously were in other acts. In passing, however, I would draw attention to the fact that as with the Commonwealth Bank of Australia, half of the ordinary trading profits of the central reserve bank will be paid to the National Debt Sinking. Fund, though this provision will not take effect until the bank has built up accumulated profits to the extent of £2,000,000 in addition to its original capital fund.

In conclusion I would say, Mr. President, that though the whole central reserve banking subject is one that can be readily surrounded with high-sounding and abstruse technicalities I have endeavoured to give this House full information in plain and every day language, and I trust that I have made clear the Government’s reasons for the introduction of this bill and the anticipated effect of the various clauses. There is no division of informed opinion as to the desirability of the creation of a properly constituted central reserve bank in the Commonwealth of Australia, and I venture’ to claim that the bill now before the Senate lays down an absolutely sound and orthodox basis for such an institution. Its existence should do much to mitigate any financial or economic difficulties that may arise in the future, and will put Australia’s banking legislation and organization in line with those of the leading countries of. the world.

Debate (on motion by Senator Sir George Pearce) adjourned.

page 3444

PRINTING COMMITTEE

Order of the Day called on for the resumption of the debate from 26th June (vide page 3266), on motion by Senator Hoare-

That the report be adopted.

Motion agreed to; report adopted.

page 3444

ADJOURNMENT

Gold Bonus : Criticism in Queensland Press.

Motion (by Senator Daly) proposed -

That the Senate do now adjourn.

Senator E B JOHNSTON:
Western Australia

– I direct the attention of the Senate to an article which appeared in the Brisbane Telegraph on Monday, 23rd June, in regard to the gold bonus. It is headed -

page 3444

AGITATION FOR BONUS ON GOLD

Inequitable, Uneconomic, Unjust

Western Australia Seeks to Plunder Other States

By “Searchlight.” [Specially written for the Telegraph. ]

I do not wish to read the whole of the article. I shall quote a portion of one paragraph only, which reads -

Five of the States and the people in the Federal Capital Territory, and the Northern Territory, would be heavily taxed for the benefit of Western Australia, which would be a violation of the federal spirit, a sure instrument towards disruption and in any case an outrage upon justice.

I could have understood an article of this biased and misleading description appearing in the press of any State except Queensland. It is extraordinary that this Queensland journal should publish an article accusing Western Australia, quite falsely, of attempting to do, in a very small way, what Queensland has been doing in a wholesale, and continentwide manner for the past generation. I am amazed at the audacity of the writer in making this charge against Western Australia because for years the people of Australia have been paying about £7,000,000 a year by way of increased prices for their sugar in order that the industry in Queensland may flourish and expand.

Senator E B JOHNSTON:

– The Queensland sugar-growers charge the people of Australia £37 6s. 8d. for every ton of sugar which they consume, and sell their surplus in the world’s market at from £9 to £11 per ton. It is worth noting also that last year the Colonial Sugar Refining Company showed a profit of nearly £1,000,000 on its operations for the year, and paid a huge dividend on its watered capital out of the profits earned at the expense of the householders of Australia. Notwithstanding the benefit which Queensland enjoys at the expense of the people in the other States, this Queensland newspaper publishes an article charging Western Australia with an attempt to exploit the Commonwealth during the very week in which we passed a bill giving Queensland further benefits in the form of promised bounties on cotton to the amount of £1,250,000. Goodness knows how much more that State will ask for. I have a list of bounties paid by the Commonwealth to the various states during the last seven years. It is an informative statement and shows the following payments to the various States: -

The total payments were £4,973,543, of which amount Western Australia received in round figures little more than 1 per cent. I fail to understand the reason for this charge by a Queensland newspaper in view of the fact that the rest of Australia pays such heavy tribute to Queensland for its sugar. The gold bonus is required not for any of the reasons mentioned in the article, but to relieve unemployment, to improve the financial position of the Commonwealth overseas, and, above all, to repay and compensate the mining industry for the heavy burdens imposed on it by other bounty legislation and high tariff protection. I say in reply to the writer of the article referred to that if the Commonwealth would give the people of Western Australia their sugar, their agricultural and mining machinery and their other requirements at world’s prices this request for a gold bonus would never he made. We should much prefer to break down the tariff wall and have control of our own customs tariff inWestern Australia rather than to get even the necessary gold bonus; but under existing conditions, it isessential to the existence of the gold-mining industry. I am sorry that a leading newspaper, published in Queensland, which State has received so much from the Commonwealth in the way of bounties, and effective protection for its most important industry, should adopt an unfriendly attitude towards this request fromWestern Australia.

Senator DUNN:
New South Wales

– The article about which Senator Johnston has just complained may be regarded as the outcome of the competition between these capitalistic States! How dearly they love one another! Senator Johnston, I admit, is quite within . his rights in advocating the payment of a bounty on the production of gold, and I am surprised and pained at the thought that any newspaper in Queensland should publish an article in criticism of the suggested gold bonus. I understand that the people of Western Australia are thinking of seceding from the Commonwealth. I feel that my dignity as a citizen of this country and a member of this Senate will be affronted when I see a copy of the new dominion stamp of Western Australia showing the swan sailing backwards from the Union Jack! Until I have an assurance from the senators representing Western Australia that they will not nail the swan to the Gross of St. Andrew, which is a symbol of the Union Jack, I feel thatI cannot support their request for a gold bonus. As for the State of Queensland, I admit that it has received substantial benefits at the hands of the Commonwealth. But it has established an important industry, and there is every prospect that the new cotton-growing industry will likewise play an important port in the expansion of our secondary industries. If the Commonwealth Government is prepared to pay a bounty on gold production, will we have any guarantee that no portion of the money will be sent overseas to enable selected citizens from that State to acquire the science of naval tactics in the Swiss navy! The people of Western Australia, itseems, are raising the fiery cross, and have secession as their objective.

Until I receive a definite assurance from honorable senators representingthat State that thegold bonus, if granted, will he used to develop the industry, as Queensland extended its sugar plantations when adequate protection was given by the Commonwealth, I shall not feel disposed to support the request. I trust that the senators from that State will take to heart the pearls of wisdom that are falling from my lips, and note particularly my attitude towards the proposal for a gold bonus.

Senator Thompson:

– Would the honorable senator surrender the sugar industry for the gold bonus?

Senator DUNN:

– I do not think I would, because sugar is sweet and gold is hard to get.

Question resolved in the affirmative.

Senate adjourned at 3.43p.m.

Cite as: Australia, Senate, Debates, 27 June 1930, viewed 22 October 2017, <http://historichansard.net/senate/1930/19300627_senate_12_125/>.