Senate
18 May 1932

13th Parliament · 1st Session

  1. Senate
  2. 13th Parliament
  3. 1932

The President (Senator the Hon.W. Kingsmill) took the chair at 3 p.m., and read prayers.

page 857

ASSENT TO BILLS

Assent to following bills’ reported: -

Emergency Legislation Suspension Bill.

Australian Broadcasting Commission Bill.

Queensland Meat Inspection Agreement Bill.

page 857

STANDING COMMITTEE ON REGULATIONS AND ORDINANCES

Senator Sir HAL COLEBATCH, as chairman, brought up the first report of the Standing Committee on Regulations and Ordinances, and moved -

That the report be printed.

Motion agreed to.

page 857

QUESTION

DEPORTATIONS

Senator BARNES:
VICTORIA

asked the Minister representing the Minister for the Interior, upon notice -

  1. Is it a fact, as reported in the press, that 53 persons have been deported from Australia during the term of office of the present Minister ? 2.If so, for what reason were such persons deported ?
  2. Did any of them have a trial of any sort of a public nature?

Senator Sir GEORGE PEARCE.The Minister for the Interior supplies the following answers: -

  1. Yes. 2. (a) Twenty- four of these persons had become public charges on account of medical reasons; (b) Fourteen were persons of undesirable character who bad been convicted of criminal offences; (c) Fifteen were prohibited immigrants who had entered Australia illegally.
  2. In the case of the persons referred to in paragraph 2 (c), Police Court proceedings were taken in each case to establish that the deportee was a prohibited immigrant who had entered Australia illegally. With regard to 2 (a), no trial was necessary, as the persons had become inmates of public charitable institutions or insane asylums within three years after their arrival in Australia, and were consequently liable to deportation under the provisions of section 8a of the Immigration Act, and likewise in the case of 2 (b), no trials under the provisions of the Immigration Act were necessary, as the deportees had already been convicted of criminal offences under State laws which brought them within the scope of section8 or section 8a, subsection 1, of the act and rendered them liable to deportation.

page 857

QUESTION

DISABILITIES OF SOUTH AUSTRALIA

Senator HOARE:
SOUTH AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. Is it a fact that the Premier of South Australia made a request to the Federal Government recently for an amount by way of special grant to compensate that State for disabilities under federation, and that he was told to prepare a case in support of the request?
  2. Has such case been prepared and presented to the Federal Government?
  3. If so, can the Minister state if a decision has been reached, and the nature of same ?
Senator Sir GEORGE PEARCE:

– The Prime Minister has supplied the following answers : -

  1. Yes.
  2. Yes.
  3. The case has just been received, and a decision has not yet been reached. The matter will, however, receive early consideration in conjunction with the budget of next year.

page 858

QUESTION

TARIFF DISCUSSION

Scullin Government’s Proposals

Senator E B JOHNSTON:
WESTERN AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. Is it intended to give both Houses of Parliament the opportunity of considering in detail, before Parliament adjourns, each item of the tariff which was increased by the Scullin Government?
  2. If not, why not?
  3. Can the Government fix a definite date for such detailed consideration?

Senator Sir GEORGE PEARCE.The Prime Minister has supplied the following answers: -

  1. No. the discussion will be confined to those items which have been altered by the present Government.
  2. The Government intends to obtain, as expeditiously as practicable, reports from the Tariff Board on the items on which the duties were increased by the Scullin Government without having first’ received reports from the Tariff Board.
  3. No; but it is hoped that all of the more important of such items will be dealt with before the end of this year.

page 858

QUESTION

FEDERAL CAPITAL TERRITORY

Sale of Intoxicating Liquors

Senator E B JOHNSTON:

asked the Minister representing the Minister for the Interior, upon notice -

  1. What was the detailed result of the poll which was taken in the Federal Capital Territory in regard to the control of the liquor trade therein?
  2. Is it intended to carry the decision of the majority of the electors into effect? .

Senator Sir GEORGE PEARCE.The Minister for the Interior has supplied the following answers : -

  1. Provision for the issue of licences was made by the Liquor Ordinance 1929-1932. Liquor is at present being sold in hotels and cafes licensed in the names of agents nominated by the Government. There are also four club licences in existence. In 1930, tenders were invited for a 10-years’ lease of the Hotels Wellington and Ainslie, but the tenders received were unsatisfactory. A later application for a lease of the Hotel Ainslie was withdrawn by the applicants. The Government is prepared to consider applications for the lease of the hotels.
  2. See answer to No. 2.

page 858

QUESTION

IMPERIAL ECONOMIC CONFERENCE

Delegation : Representatives of agricultural interests.

Senator O’HALLORAN:
SOUTH AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. Has a request been received from organizations representative of the great agricultural industry, for a direct representative to be attached to the delegation about to proceed to Ottawa?
  2. Has a decision been reached in this matter ?
  3. If not, will the Government give the question sympathetic consideration, in view of the great importance of this industry to Australia?

Senator Sir GEORGE PEARCE.The Prime Minister has supplied the following reply: -

The Government decided to afford industries in Australia the opportunity of nominating a limited number of representatives to act as consultants to the Australian delegation to the Imperial Economic Conference at Ottawa. The organizations which were consulted mode their suggestions, and the Government then chose the five consultants whose names have already been announced. Two of these gentlemen are ‘ representatives of agricultural and pastoral industries.

page 859

QUESTION

ANTARCTIC CONTINENT

Senator LYNCH:
WESTERN AUSTRALIA

asked the Minister representing the Prime Minister, upon notice -

  1. Have the spheres of influence or ownership of the Antarctic Continentyet been delineated and agreed upon by the respective nations concerned?
  2. Has Sir Douglas Mawson concurred in any such delineation?
  3. Is it correct to say thata certain nation claiming a large part of the Antarctic Continent has set up whaling stations in British territorial waters and disposes of some of their products in Australia?
  4. If so, will the Government see that British, i.e., Commonwealth interests are protected ?

Senator Sir GEORGE PEARCE.The Prime Minister has supplied the following reply: -

  1. No.
  2. See answer to 1.
  3. No.
  4. See answer to 3.

page 859

QUESTION

INCOME TAX

GuaranteeofPayment.

Senator DUNCAN-HUGHES:
SOUTH AUSTRALIA

asked the Minister representing the Treasurer, upon notice -

  1. Does the Taxation Office, in the case of a taxpayer who is proceeding overseas, require a guarantee of payment of the taxpayer’s income taxes from some other person, and is such guarantee a personal one, irrespective of the taxpayer’s estate, capital or income?
  2. Under what section of the Taxation Acts or what regulation is a guarantee of this kind required ?
  3. Will the Taxation Office consider the fairness and desirability of the liability under such a guarantee being limited to the estate of the travelling taxpayer?
Senator GREENE:
NEW SOUTH WALES · NAT

– The Treasurer has supplied the following reply: -

  1. Such a guarantee would be required only if the proper protection of the revenue in the particular circumstances warranted it.
  2. Section 54, sub-section 4, paragraph b, of the Income Tax Assessment Act 1922-1931.
  3. See answer to question 1.

page 859

ACTS INTERPRETATION BILL

In committee (Consideration of House of Representatives’ amendments) :

Amendment No. 1.

Clause 2 -

After section two of the Acts Interpretation Act 1901-1930 the following section is inserted : - “ 2a. Where an Act confers upon any authority power to make rules, regulations or by-laws, then, unless the contrary intention appears, this Act, except section fifteen a, shall apply to any rules, regulations or by-laws, so made as if the rules, regulationsor by-laws were an Act.”.

House of Representatives’ amendment. -

Omit the words “ rules, regulations or by laws “ and insert the words “ grant or issue any instrument (including any rules, regulations or by-laws)”.

Senator Sir GEORGE PEARCE:
Minister for Defence · Western Australia · UAP

[3.11]. - I move-

That the amendment be agreed to.

My explanation of this amendment applies also to those down to and including No. 9. They are a series of drafting amendments, and deal with the same subject.

Honorable senators who followed the speech of the Minister who moved the second reading of this bill will remember that he indicated that the purpose of clauses 2 and 3 was to ensure that the rules of construction contained in the Acts Interpretation Act 1901-1930, and in the Acts Interpretation Act 1904- 1930, should apply to rules, regulations or by-laws made under an act as if any such rules, regulations or by-laws were an act. The sole purpose of these amendments is to enable the rules of construction contained in the acts that I have mentioned to be invoked for the purpose of any instrument, as well as for the purpose of any rules, regulations, or by-laws made under any act. The fact that the expression, “ rules, regulations or bylaws” appears several times in clauses 2 and 3 is the reason for the somewhat lengthy list of amendments proposed.

Motion agreed to.

Amendments Nos. 2 to 9 (consequential) agreed to.

Amendment No. 10.

Clause 3 -

After section 9 of the Acts Interpretation Act 1904-1930, the following section is inserted : -

House of Representatives’ amendment. -

Add the following new section: - “ 9b. Where any resolution is or has been passed by either House of the Parliament whether before or after the commencement of this section, in purported pursuance of any Act, then, unless the contrary intention appears, the resolution shall be read and construed subject to the Constitution and to the Act under which it purports to have been passed, to the intent that where the resolution would, but for this section, have been construed as being in excess of authority, it shall nevertheless be a valid resolution to the extent to which it is not in excess of authority.”

Senator Sir GEORGE PEARCE:
Minister for Defence · Western Australia · UAP

[3.17].- By section 15a of the Acts Interpretation Act it is provided that, even though a section of an act may be declared invalid, the remainder of the act is not thereby invalidated. This new section proposes that the same principle shall apply to a resolution which is required to give effect to any portion of an act. Some words in the resolution may be in excess of the authority conferred by the act, and the intention is that a declaration to that effect shall not invalidate the remainder of the resolution. I move -

That the amendment be agreed to.

Senator LYNCH:
Western Australia

– I realize the necessity for making the provision in regard to resolutions conform with that which governs the sections of an act. Where portion of a regulation is in excess of the authority conferred by the act, it is quite right that that portion should be declared invalid and have no force or effect. I agree also that that portion of a resolution which was not in excess of the authority should be allowed to stand. But there may be resolutions that fall short of the authority. Is it not equally necessary to make provision with respect to them?

Senator Barnes:

– Does not the greater include the less?

Senator LYNCH:

– So I understood when I was at school. This amendment purports to deal with all classes of regulations; but it does not specifically provide for a regulation which might fall short of the authority given to the Government in any act of Parliament, and, as I have explained, it is conceivable that such a regulation might be promulgated. In recent years we have had gazetted a number of regulations in excess of the statutory authority given to the Government; but parliamentary action to disallow has not been effective.

The TEMPORARY CHAIRMAN (Senator Sampson:
TASMANIA

– The amendment deals only with resolutions of either House of the Parliament; not with regulations.

Senator LYNCH:

– That being the case, if I substitute for “ regulations “ the word “ resolutions,” the arguments I have applied will still hold good.

Senator Sir GEORGE PEARCE (Western Australia - Minister for Defence) [3.24]. - I do not quite see the point of the honorable senator’s argument. A resolution is either within the authority of Parliament, in which case it is valid, or it is beyond that authority, and, therefore, invalid.

Senator Brennan:

– Anything below the mark is all right.

Senator Sir GEORGE PEARCE:

– That correctly sums up the position. Either House of the Parliament cannot exceed its authority in the passing of resolutions.

Motion agreed to.

Amendment No. 11.

Add the following new clause: - “ 5. Section nineteen a of the Acts Interpretation Act 1901-1930 is amended by inserting after the word ‘ Commonwealth ‘ (second occurring) the words ‘or where there is no longer a Minister or department of the designation specified in the Act ‘ “.

Section proposed to be amended - “ 19a. Where in any act, it is provided that the act shall be administered by a specified Minister of State of the Commonwealth, or . . . by a specified department of State of the Commonwealth -

  1. the reference to that Minister shall be read as a reference to any Minister to whom the administration of the act is allotted . . . “.
Senator Sir GEORGE PEARCE:
Minister for Defence · Western Australia · UAP

[3.25].- I move-

That the amendment be agreed to.

In a number of Commonwealth acts there appear references to specified Ministers of State and to specified departments. Some acts confer upon specified Ministers of departments the administration of the acts in which the expressions appear. From time to time the Government of the day re-arranges the work of various departments, placing the administration of acts under the authority of other Ministers than those who have previously administered those acts. The specific references to Ministers has hampered the re-arrangement of departmental work, and in 1930 provision was made in the Acts Interpretation Act of that year which enabled the Governor-General to allot the administration of an act to any

Minister or member of the Executive Council, notwithstanding that the act provided that it should be administered by a specified Minister of State of the Commonwealth. It is now found necessary to go a step further. Circumstances have arisen in which it has been necessary or desirable to abolish a department or alter its designation, and also to alter the designation of the Minister administering that department.Where the department or Minister is one to which or to whom the administration of an act is assigned by the act itself the existing law is not adequate to enable the administration of the act to be assigned by executive action to any other Minister. To give a specific instance, the Commerce (Trade Descriptions) Act contains specific reference to the Department of Markets and the Minister of State for Markets. There is now no department or Minister under that name, and it is desired that the act shall be administered by the Minister and Department of Commerce. The new clause now proposes to amend section 19a so as to ensure that references to departments or Ministers no longer in existence shall be read as references to any Ministers or departments to whom or to which the administration of the act is alloted by the Governor-General by order in council.

Motion agreed to.

Resolutions reported; report adopted.

page 861

COMMONWEALTH BANK BILL

Second Reading

Debate resumed from the 17th May (vide page 777), on motion by Senator Greene -

That the bill be now read a second time.

Senator BARNES:
Victoria

.- Before proceeding to discuss the measure I desire to compliment the Minister on his clear and lucid explanation of the situation which the bill seeks to meet. His able exposition was both helpful and entertaining. While he was speaking I glanced in the direction of the Leader of the Senate (Senator Pearce) and was astonished at the expression on his countenance until I remembered that about twelve months ago the right honorable gentleman condemned a similar proposal when introduced by the Scullin Government. On that occa sion he even went to the length of inducing the Senate to summon before the bar of the Senate the chairman of the Commonwealth Bank Board, Sir Robert Gibson, to answer a series of questions designed to show that the proposal of the Scullin Government to ship £5,000,000 in gold to England in order to meet certain commitments in London falling due on the 30th June, 1931, was fraught with great danger to this country. Apparently what was wrong twelve months ago, when proposed by a Labor Government, is now right because the proposal comes from another political party. The right honorable gentleman and those who supported him then said last year that the shipping of our gold would have a disastrous psychological effect because it would destroy the confidence of the Australian people in their own note issue. I suggest that honorable senators should read the H ansard report of the debate on the Scullin Government’s proposal. That Government proposed a fiduciary note issue of £18,000,000. Of that amount £6,000,000 was to be expended for the relief of wheat-growers, and the balance was to provide work for the unemployed at the rate of £1,000,000 a month for twelve months. That proposal was rejected by the Senate on the ground that we would not have a gold backing for our notes.

But now the scene has changed! This bill provides that, should the Commonwealth Bank Board so decide, the whole of our note issue may be left without a gold backing. This proposal means a fiduciary note issue of £52,000,000, as against the £18,000,000 proposed by the Scullin Government, backed in each case by the resources of the country.

I have nothing but praise and commendation for the courage of the Government in openly admitting that it has seen the error of its ways and now accepts the doctrine preached by the Scullin Government. My only regret is that this scheme was not put into operation long ago, for then many of the difficulties which have confronted us during the last twelve months would not have arisen, and our wheatgrowers as well as the unemployed would have had something in hand to tide them overthe coming winter. However, this bill is better late than never, and I am glad that the Government has introduced it. I do not think that it will cause the credit of Australia to be lessened one iota in the opinion of those who matter. “What better security could we have as a reserve than British securities ? And even if such securities were not available as reserve backing, I should not be alarmed. Our notes are backed by the nation, and surely Australia with its vast potentialities is sufficient security for twice the amount of our present note issue.

Attempts have been made to show that the present proposal differs from that of the Scullin Government to ship gold abroad, and to’ set up a fiduciary note issue. I cannot see any difference whatever; the effect of both proposals is exactly the same. In both instances there would be a note issue backed by the good faith and honest intention of the people of the Commonwealth. All the gold in the world would be of little avail unless there was, both at home and abroad, a faith in the nation’s intention to honour its obligations, and to meet the liabilities represented by the notes issued under its authority. It is a pity that the principle embodied in this measure was not accepted when the Scullin Government’s proposal was put forward, for in that case Australia would have realized an additional £1,000,000 from the sale of the gold.

We on this side are in complete accord with the principle underlying the bill, and with the objects sought by it. We shall not willingly do anything which might, in any way, weaken the credit of the nation. The people of Australia stand behind our note issue. To the Labour party this bill comes as a step in the right direction - a move towards the nationalization of banking. That ideal may not be realized in our time; but the condition of the world to-day suggests that some change in the management of finance, and the credit of nations, is necessary. It is to be hoped that the step now being taken will assist in finding a solution of the difficulties now being experienced not only in Australia, but in all other countries in the world.

In the past the conduct of banking has usually been left to men with banking experience and training in general finance. During the last year or two we have been flooded with advice from economists, bankers, and others mostly to the effect that any departure from the old methods was fraught with great danger. These so-called authorities made the people afraid to attempt any change. But economic conditions during recent years have caused financial authorities the world over to consider whether, after all, the old methods are satisfactory, with the result that many of them now openly confess that a fiduciary currency is not so dangerous as they once thought. Britain herself has a fiduciary note issue of about £275,000,000. That issue is backed, not by gold, but by the wealth of the country, and the confidence which the rest of the world has in Britain. The United States of America has a fiduciary note issue of £2,000,000,000. The fiduciary note issue of £18,000,000 proposed by the Scullin Government last year would have been backed by the vast resources of the country, as is the £275,000,000 worth of notes issued by Great Britain. I am glad that a revolutionary change has now come over governing bodies and financial authorities throughout the world, and that an opportunity is provided for this and other civilized countries to make use of the wealth and credit they possess. Under such a system, a country is able to carry on in times of stress in the same way as do business men of integrity who obtain financial assistance through the banks during lean years, and who meet their commitments when good seasons return. The wealth of a country should be available to its people during periods of depression, such as that through which

Ave are now passing, and thus enable misery and want to be minimized. I congratulate the Government upon bringing forward a measure of this character, and trust that it will attain the object which the Government has in view.

Senator MILLEN:
Tasmania

– I listened with a great deal of pleasure to the speech of the Assistant Minister (Senator Greene) in moving the secondreading of this measure.- The history of currency is extremely interesting. The evolution of the gold standard was by no means haphazard; rather was it the logical conclusion to a long series of events. A study of the literature dealing with the early Egyptian period shows that barter was the method of transacting business , between individuals in those remote days. The earliest instance which I can find is a quotation from Masperowhich indicates, in what I might describe as a picturegraph, how bartering was carried on at the time of Rameses II. A cutting in stone taken from some of the ancient ruins is reproduced, showing a man who, in return for an ox, receives one mat, five measures of meal, eleven measures of oil and several other articles. That system worked very well where reciprocal trade was possible; but Jevons, in his book, quotes a humorous example of what happened to a French songster in one of the islands in the Society group which she visited during a world tour. This sums up the general difficulties of barter. In those islands there is no currency, and when she wished to give the unsophisticated natives some idea of her powers of song, a difficulty arose as to the means by which payment was to be made. Payment for admission to the entertainment had to be made in the form of goods, and at the conclusion of the performance the distinguished lady found that her share of one-third of the total receipts consisted of three pigs, 23 turkeys, 44 chickens, 5,000 coco-nuts, bananas, lemons and oranges. It was quite impossible for her to make use of these things, and it naturally followed that the live stock had to consume the other commodities of a perishable nature to maintain their existence.

Oases such as this one illustrate how necessary it was that something should be done to establish a ready means of exchange. The earliest instance of an attempt in this direction, of which I know, relates to trade between the Cyreneans and the Carthagenians. The earliest forms of money show the uae of some desired article as a unit by which barter could be facilitated. A traffic in the silphium plant was carried on by the Carthagenians and the Cyreneans, giving wine for exchange for this plant, which was desired for the medicinal juice extracted from it. There must have been a wine unit, also a unit for silphium, or barter could not have been carried on. How important it was that this unit should be exact appears in the decoration on a vase recently discovered by some archaeologists showing a king supervising the weighing of the bales. It was the earliest equivalent of a royal mint, determining the common denomination of exchange. It was not long before the Cyreneans resolved upon the issuing of a coinage. Silver coins bearing on them the impress of the silphium root were minted, and these were used as a medium of exchange for quite a considerable time. Aryan peoples used cows as trading units, but there were many difficulties associated with that system, and ultimately gold was resetted to as a standard. That was one of the earliest gold standards. One cow was equated to one talent, 130 grams troy. Gold was undoubtedly one of the first metals to be used for currency purposes. This precious metal has been discovered in tombs of the time of the early Pharaohs. It was used in Thibet, and has been found in tombs in Mycenae harking back to 1,400 years before the birth of Christ. In order of discovery gold came first; then came copper, silver, and iron, and the functions of the modern monetary system were thus evolved from the early experiences of the race. There can be no exchange whatever without previous agreement as to the quantities of each article to be regarded as equivalent. As early as in the time of the Pharaohs in Egypt we find the first well-established table of prices, in which copper was used as a standard.

It is interesting to note the effect of money upon -society. It is obvious that although the monetary system came byevolution based on the needs and customs of men, it reacted upon the development of social progress, and it had an interesting psychological and political effect on society.

In crude social conditions, the absence of divisibility and coincidence under barter made exchanges of goods limited, uncertain and wasteful, and thus the efficiency of production was low. When the division of labour separated workers engaged in a common end into different specialized groups and places, money became a necessary means to an expansion of industry, which in our day has become marvellous. In the history of civilization one can mark the progress of industry by the sort of monetary system adopted. With the emergence of towns, money played a vital and necessary part. It was essential for their growth that the old idea of the dependence of one person on another by the performance of personal service should disappear. “With the develepment of money, which gave freedom to buying and selling, taxes and levies could be enforced. The owners of property could transfer their rights to distant places, if necessary. The intercommunication between peoples by traders had a vast influence on the modes of living. With the development of currency, there came a remarkable change regarding consumption. Once the medium of exchange became imperishable, consumption of perishables could be postponed. This created a system of thrift and saving. It further enabled the producer to transfer his goods to a dealer, who assumed the risk and uncertainty of finding buyers; and the trader’s recompense was the margin of the sale over the purchase price.

All values came to be expressed in money. The accumulation of money was the first consideration, since money was the potent purchasing power. With the phenomenal expansion of the world’s exchanges, and the growth of riches coming from commerce, the pecuniary régime has increased in practical, importance. Indeed, it is in the modern economic system that currency has had its full effect in commerce, banking, credit, taxation, public financing of debts, international exchanges, and the whole complex of business life. There have consequently arisen difficult ethical questions. Nevertheless, pecuniary values are not the most important in business life.

Once we have in mind the functions performed by money, we might as well inquire why metals were preferred. They were preferred, I think, to meet the needs of external commerce; because of the intrinsic qualities of the metals, and because of the uses to which metals could be put by individuals.

This naturally brings one to the establishment of coinage. The invention was attributed to the Lydian King Gyges666 b.cv and Croesus 568 b.c. I need hardly say that a very considerable amount of doubt surrounds this statement, based as it is upon tradition.

Although the course of monetary events forced a’ reliance upon the authority of the State to insure proper coinage, it does not prove that governments were always worthy of the trust. In fact, a debasement of coinage beginning in the very early times, and appearing in various forms down to the present day, affords an unhappy commentary on the honour of States. To meet the fiscal obligations of the State by tampering with the currency seems to be a sempiternal temptation.

Herodotus reports that Polycrates, th* tyrant of Samos, having to pay a large sum to the Lacedemonians, cheated them by giving coins of lead veneered with gold. When Perdiccas II., King of Macedon, was short of funds, he struck copper coins covered with silver to pay his army. At Athens, in the very crisis of the Peloponnesian war, there was an alteration of the coinage, by core money. At Rome, according to Cicero, the first resort of the State to core money, veneered by silver, was the result of the military disaster at the time of the war with Hannibal. This necessitated the Roman Senate considering the question of finance, and it did so by issuing core money - really iron veneered with silver. It was a temporary form- of a fiduciary issue, and Cicero tells us that it was not very long before all the good money was transferred to other countries, and only the core money was left in Rome. Despite the fact that the Senate- had determined that it was legal tender, and that prices were not to be increased, the people would not accept it just as they would the ordinary money in circulation.

Senator Lynch:

– Bad money drives out the good.

Senator MILLEN:

– It invariably does. Without elaborating that point further, I pass on to the question of British coinage.

The origin of the British monetary system is to be found in the gold solidus, the surviving remnant at Byzantium of the Roman coinage system of the Western Empire. Through the mists of antiquity and the confusion of the middle ages a clear course of development is traceable. There being only” transactions of low value, the first pennies coined seemed to be of sterling silver as far back as 755 a.d.

The silver penny of Alfred- 871-901- contained 24 grains. From Saxon times to Henry III.- 1216-1272- the silver penny was the basis of the system. The silver penny of western Europe also weighed 24 grains. The original official standard was the Saxon, or tower pound, containing 5.400 grain silver, which persisted into the period of Henry VIII., 1527. In 1265 the English Statute de Ponderibus fixed the weight of the penny sterling at 32 grains of wheat, that is, 24 grains of barley, or grain troy. Thus, for more than seven centuries - from 755 to 1527 - the English penny was based on a system derived from the solidus. The solidus of 72 grains troy contained 24 siliquae, each weighing 3 grains. Onethird of a solidus or a tremissi weighed 24 grains. In 1257 Henry III. issued gold pennies, weighing l/120th tower pound, each being equivalent to two silver pennies. This was an early exercise of the legal tender power in the first and unsuccessful attempt to keep in circulation both gold and silver in a bimetallic system in England at the ratio of one to ten. This first effort to introduce gold into the coinage was received with protests. It was premature, even though it showed thus early a leaning towards the use of gold.

In 1344 Edward HI. made the first real attempt to introduce gold coins. It was at the time of Columbus and Cabot. The growth of commerce in northern Europe, and the rise of the Hanseatic League, which involved Britain, furnished a proper international setting for the gold money of Edward III. The first trial was a failure. But, without knowing it, the English were precipitated into all the difficulties incident to a bimetallic system - the impossibility of keeping gold and silver in joint circulation when the market ratios, and the coinage ratios of neighbouring countries with whom they traded, varied from their own mint ratio.

It is worth while at this stage to deal with the Tudor debasements. In 1527, Henry VIII. reduced the silver shilling from 144 to 131 grains, and at the same time prohibited an increase in prices. He was also the first to reduce the fineness of English coins. Inasmuch as coins are reckoned by weight in international trade, foreign prices to English buyers rose in proportion to the debasement or the depreciation of the coinage. In spite of prohibitions, prices and wages rose at home, but this was accompanied by a decrease in acceptable money. By 1550 the woollen trade of England with the Continent had been practically ruined.

With the coming of the 18th century, a change of attitude was apparent. Against all their predilections in favour of silver, the practical English were slowly forced by the logic of events to make gold their monetary standard. The first guineas coined in 1668 were in fiveguinea pieces. After a report by Sir Isaac Newton, then Master of the Mint, the guinea was “ cried down “ to 21s. The act of 1816 finally established the single gold standard, which has continued’ to this day. A new gold coin was called the sovereign, and weighing 123.27447 grains troy of standard metal ll-12ths fine was issued to be current for 20s. ; and that still remains.

Following that brief summary, 1 should like to make a few remarks on standards. Starting with a preference for some commodity like cattle, salt, furs, or fish, the use of metals in various shapes and forms came early into recognition. Then, to save dispute, coins of known weight and fineness were adopted. The almost universal adoption of gold as the monetary standard by the most important nations, has no’t been due to accident, or to some passing whim of the time, but to the silent force of commercial practice and opinion throughout the ages. It has been an interesting evolution out of custom and habit crystallized into legislative enactment. Making gold the standard had undoubtedly many points in its favour, in regard to the relative value of any other commodity.

Firstly, the changes in the value of the total stock of the standard gold are very slow, because the accumulation in the world of an imperishable commodity, gold, for many centuries, becomes so large that it is less sensible to the influences of the changes of the annual demand and supply. On the other hand, changes in the methods of producing goods are quick and extreme. Secondly, it is the time element which has raised many problems of the standard. Engagements are entered into, extending over lengthy periods. Anxiety can well be understood if there is any possibility of an alteration in the purchasing power of the standard. There is, of course, no perfect standard, one which can change in purchasing power automatically with the changes operating on the money side of the ratio of price or those on the side of goods. When we have adopted a fixed weight of gold as the monetary standard, for example, the pound, that does not mean that we have a stable standard, since the purchasing power of that gold is constantly changing with every change in the cost of producing any one of many classes of goods. Since that can be done, it was the duty of the State to select that metal which changes least in value for’ causes affecting itself. It is quite clear that this was the reason why the world of practical business, without fully realizing the causes at work, chose the gold standard. As the years passed by, it was found that gold reached a stability not possessed by any other metal.

At this point it might be well to discuss briefly the multiple standard, or what is often spoken of as the commodity standard. The prices of a long list of staple articles, whose quotations have been collected by a government commission in the United States, and averaged, daily, weekly, monthly, and yearly, when added up give a sum of money which will buy the same quality and quantity of goods at different periods of time. It can be translated into money, or money into the multiple standard by the given table of prices. The working of a commodity standard during, and following, a commercial crisis, heeds consideration. It is not likely that its existence would prevent overtrading, and the conditions leading to a crisis, since speculative human nature could operate under any standard. The real difficulty with the multiple standard is in the existence of two standards, and in the attempted conversion from one to the other. It would be impracticable to balance an account whose items were expressed in different standards. Hence merchants would not use the multiple standard in their daily operations. And as the multiple unit would vary between different countries, because the level of prices would vary between them, it could not very well be adopted for international accounts. Considerations in favour of a wheat standard as being more stable than gold, have also been brought forward in past years, but the serious changes in the value of wheat in the last few years have caused that suggestion to be dropped. Then there was another standard brought forward by Ricardo, who is probably better known to us as the authority who dealt with the theory of rent. It was the labour theory of value, which was adopted in an extreme form by Marx. In connexion with that theory attempts have been made to find a standard in a day’s work of an average unskilled workman, which would have the stability of the sacrifice of human effort, and be variable from time to time for goods in general. Speculations .of this sort have been discarded with the labour theory of value. It has to be admitted that labour is but one of several elements combining to give value to a commodity. On the side of supply and costs, capital must be accounted for, and on the side of demand, the subjective element of utility enters, as well as the purchasing power. Even if the labour theory of value were valid, the standard is impossible, because it is indefinite and uncertain. The sacrifice and effort of some workmen vary during any one day, and those of different groups constantly vary. Silver, by reason of its violent fluctuations in value, is easily shown to be unsuitable as a standard.

Now we might consider the substitutes for metallic money. There was a time when men had to make long journeys across deserts, and other territory infested with robbers, as well as across seas in craft that were not altogether seaworthy, and were captained by men who had at their command very few of the instruments of precision that are available to-day. Those conditions necessitated the production of some document or other convertible instrument which proved them possessors of a certain sum of money. This goes back to very early times. If we study Babylonian history we find that 800 years before the birth of Christ clay tablets were issued to people who intended to travel over desert lands that were adjacent to the Babylonian empire. Those tablets were made negotiable instruments.

  1. . remember reading in Cicero that when his son went to Athens for the purpose of being trained in the arts, in which the Athenians were particularly learned, he issued to him a letter of credit which could be exchanged in Athens for money.

I should like to refer now to substitutes for metallic money by governments or States. When we deal with that question we enter a field in which the workings of credit appear together with all the complications of unfulfilled promises to pay aggravated by dishonesty and inefficiency of rulers. The problems connected with what we know as issues of State paper money did not wait on the invention of paper. In fact, the attempt of the authorities to meet expenses, when they had no funds, by creating fictitious forms of money, belongs to a common trait of human nature ancient and modern. It was an attempt to postpone payment to the future - the essence of credit - or to escape payment altogether. They were supported by the fallacious assumption that the decree of the State could give value to valueless substances, and hence the ineffectual”” resort to all the acts of legal tender or forced circulation. Aristotle cites a case whore silver having become scarce on one occasion, an Athenian general caused copper money to be made current as silver, and promised the soldiers to whom it was issued, that when times became better and silver more free, the exchange back to silver would be made. That is quite a common thing, even to-day.

Senator Sir Hal Colebatch:

– He never made the exchange.

Senator MILLEN:

– He did not. The earliest uses of what we call paper money and the earliest examples of its abuses relate to the period when commodities served in some functions as money. Among the Carthagenians, even leather money was falsified. Some heavy article was concealed in an envelope of leather, and put into circulation as money. Even 119 years n.c. in China, Wu-ti of the Hon dynasty issued money in the form of white kid, and gave it what he considered was complete security, and safety by placing on it the authority of the State that it possessed a certain value. That system also broke clown. One interesting fact which emerges as we read Chinese history is the early use of notes. Two thousand years ago, the Chinese issued notes 24 inches long and 2 inches wide, upon which were written certain characters indicative of the value of the notes. It is interesting to observe that at that particular time the Chinese had an idea somewhat similar to that of a past government, in relation to reserves. They held as a reserve in metallic money three-sevenths of the value of the notes issued. “Flying money” and similar terms have been applied by different authors to that currency, because it could be used by travellers to Thibet and other places in the back of China, also as legal tender in the different provinces of China.

I have dealt largely with the evolution of currency, and its various associations. 1 come now to the question of banking, and to the suggestion that has been made in relation to the” transfer of gold from Australia to London. The Assistant Minister (Senator Greene), in the course of his second-reading speech, quoted Dr. Gregory. I shall read a few paragraphs from an article, written by that authority in October, 1931, entitled, “Finance,” which gives an idea of some of the values attaching to the shifting of gold from Australia to England, and shows how it could be enhanced in value thus bringing further increases to ‘the amount so transferred and substantial profit, what the effect may be in relation to the Commonwealth Bank, and, incidentally, the Commonwealth Government. Under the heading “ The International Short Loan Fund,” Professor Gregory says -

There is one form of lending for short periods of time which, since the war, has assumed enormous proportions and presents peculiar features of its own. This is lending by institutions in one money market to institutions in another. The total of the sums so lent and borrowed constitutes the International Short Loan Fund. Before the war, London was the great lender in this way; to-day London is both a lender and fi borrower, while it shaves its former predominance with New York and with Paris. Though the amounts involved are unknown, it is probable that a sum of something like £1,000,000,000 is involved in the aggregate.

He goes on to say -

When the rate of interest is higher, say. in Loudon than in New York, it pays American firms to invest in London, i.e. to lend money to London bankers. What really hap- pens is that in London dollars are sold to those having debts to settle in America, and the pounds paid for these dollars represent the proceeds of the loan. As a general rule, no gold is actually transferred; from the banking point of view, the transaction is then purely a book-keeping one, which has the effect of enabling Groat Britain to meet (temporarily) one set of American debts by creating another.

Thus it may very well be the case that London is lending on the one hand and borrowing, on the other. The situation in New York may (on other grounds, however) bo the same. A foreign government may be borrowing in New York by means of a long-dated loan. The proceeds of the loan (dollar procoeds) may be sold by this Government to the local central bank for cash, say, marks. The central bank in question may want to hold dollars permanently as part of its reserve, in which case New York will be a creditor on long-term account and a. debtor on short-term account.

When a currency is disorganized, banks and business firms, as well as private individuals, try to escape from the consequences of further declines in the value of the currency by holding foreign bank balances. Thus, during the period of currency disorganization in France, many millions of pounds of English money- were acquired by French interests. France, in so far as these sums are held permanently in this country, is really making Great Britain a loan to this extent: in so far as French balances are permanently kept in New York, France is making a loan to the United States.

The ‘ concluding paragraph is as follow : -

The growth of the International Short Loan Fund lias thus created new problems, calling for some revision of the traditional attitude on the subject of the benefits to be derived from acting as an international centre. That attitude was based upon the popular conception of London as a predominantly lending centre, and had not taken into account the difficulties arising when a centre is at times more of a debtor than it is a creditor.

Thus by changing the location of the gold from Sydney to London it can be made to serve a useful and profitable purpose under the guidance of the financial experts of the Commonwealth Bank.

I quite agree with what the Minister said in regard to the continuance of gold as a standard. But there is a great deal more to be done than appears on the surface. The honorable gentleman said that the question of reparations makes it very difficult to deal with that of currency. Obviously it does. Take, for example, the case of Germany. Germany had to make certain payments by way of reparations, 7 first under the Dawes plan, and subsequently - a reduced amount - under the Young plan. Germany had no currency, and consequently, could pay only in goods. But even that course was denied to her, because of the high tariff walls that surrounded those countries to which she had to make reparation payments.

Let us now consider the case of the United States of America. After the war that nation issued unlimited credit,* with the result that her manufacturers had, because of the extent of her exports, an extremely profitable time, as she was able to sell all she produced. But she, too, raised her tariff wall, not realizing at the time that the effect of such action could be to keep goods in as well as keep them out. The result was that she lost her customers, because they had no money with which to purchase her commodities. It is an utter impossibility to achieve anything like financial equilibrium throughout the world unless there be some measure of trade between the nations: The reason that Great Britain became the centre of world finance, was that she did not demand that her bills be paid in money, but was prepared to take and to sell the goods of her debtors. I say definitely, that had the United States of America reduced her tariff walls when she extended credits, she would have become the greatest centre of the world’s commerce. Her high tariff walls kept out goods that might have flowed into her territory, and thus have kept her customers in a decent financial state. When she would not accept goods, she found that her customers were to* poor to pay her, with the result that she has experienced a very serious time financially.

Senator FOLL:
QUEENSLAND

– Does the honorable senator think that reparations should be paid in goods?

Senator MILLEN:

– In what other way could Germany pay? There was no other way in which either Germany, or any of the other nations that were debtors of the United States of America, could pay. The United States of America demanded that her credits be paid in gold, with the result that she has been getting gold. But in spite of this inflow of gold,’ of the 7,007 private banking institutions of that country, over 2,000 became bankrupt. So it is in our Commonwealth, it would appear that while, in finance, we are disposed tb take the international view, in all other respects we take the national view. If all nations were self contained, doubtless that course of action would be perfectly all right, but we know that, in actual practice, it is impossible for a country to meet its obligations unless trade avenues are open to it. A country cannot expect other countries to go on buying its products and paying for them only in gold.

I approve of the bill, but I hope that there will be a return to the gold standard. Ever since its establishment, it has served a definite purpose, but, as in the case of England, in certain circumstances, nations have been forced to accommodate themselves to the exigencies of the time. 1 hope that the day will return when gold sterling will bc recognized as the basis of finance, not only throughout the British Empire, but in other countries. If the world is to return to sanity, the various nations must be willing to come together and agree to reasonable trade relationships. Only in this way will it be possible for a debtor nation to meet its obligations.

Senator Sir HAL COLEBATCH (Western Australia) [4.23]. - The honorable senator who has just resumed his seat (Senator Millen) has given us an interesting and very instructive story of the evolution of currency from ancient times. I shall not ask honorable senators to go back as far as he did, but I should like them to carry their minds back to November, 1929, when the first step was taken that has led to the action which we are now, if you like, forced to take. In 1929, the Government of the day introduced a hill giving to the Commonwealth Bank Board authority to commandeer all the gold in Australia. The then Treasurer (Mr. Theodore), in moving its second reading, read a letter addressed to him by the Chairman of the Commonwealth Bank Board in which the following paragraph appeared : -

My board is of the opinion that the last resource which should be adopted would be any course which meant even temporary departure from the operation of the gold standard on the part of Australia; such measure would : reflect most adversely against Australia in respect of oversea credit; and incidentally have a most serious effect upon our abilities to raise loans abroad. As a measure which would very materially help the position in the meantime, and in addition, having regard to precedent, would in the opinion of the board be a sound measure of permanent legislation, my board definitely recommends your Government to consider immediately the bringing in of legislation on similar lines to that which now exists and is operating in England.

Mr. Theodore went on to say that the board strongly recommended the action then proposed. When the bill was before the Senate, the then leader of this chamber (Senator Daly) also read the letter from the Chairman of the Commonwealth Bank Board to which I have referred, and repeated the assertion that the last thing which the board desired was a departure, even temporarily, from the gold standard. Both these honorable gentlemen, the Treasurer in another place and Senator Daly in this chamber, claimed that the bill then submitted was in complete accord with the desire expressed by the Commonwealth Bank Board, which could mean neither more nor less than that the board wanted something done which would not involve even a temporary departure from the gold standard. Those of us who most strongly opposed the bill - and I was among the number - said most positively that the measure so far from doing what the Commonwealth Bank Board had suggested was directly opposed to the practice of English banking. We pointed out that not only did it contemplate a temporary departure from the gold standard, but that, in fact, it meant a final and complete abandonment of that standard. There can be no doubt that we were right. That bill, let me repeat, meant the departure of Australia from the gold standard at a time when we had a large amount of gold. . I forget the exact figures, but I think it was estimated that’ the private banks had in their hands- £44,000,000 in gold, and the Commonwealth Bank also had a very large amount. That was only a little over two years ago. After the passing of this bill, we shall have no gold in Australia, except, of course, those few beautiful caskets down in the basement of this building in which are enclosed the freedom of cities presented to our different Prime Ministers during their visits to the Mother Land, and that equally beautiful gold collar presented by the Indian Empire to the Commonwealth of Australia to mark the festivities associated with the opening of the Federal Parliament at Canberra, But these, too, will go the way of our gold if we continue in the financial course which we are now following.

I do not intend to oppose the bill, for two reasons. The first is that the existing gold reserve has ceased to be of any practical value. Actually, it has been of no value from the date when our notes became inconvertible. Upto that time, it was of enormous value, because, so long as we maintained the convertibility of our note issue, we were obliged to hold a gold reserve of a definite fixed amount. My second reason for not opposing the bill, is that I recognize there is much to be said for holding some portion of our reserves in securities outside Australia. The select committee which considered the bill for the establishment of a central reserve bank, in the course of its recommendations, stated -

The aim of the Central Reserve Bank should be so to restore confidence in the Australian pound as to bring back a condition of effective convertibility, for export purposes, into gold bare or stable foreign exchange.

The provisions with regard to reserves should be made less rigid particularly as to reserves against deposits, us to the location and proportions of the various constituents of the reserve, and as to the limitation of the proportion of interest-earning reserve.

This proposal is in conformity with that recommendation. There can be little doubt that what we have done since the passage of the bill in 1929, to which I have referred, has enabled us to carry on, but without facing up to our obligations. It is as well that we should understand exactly what we are doing in this bill. In the first place, we reduce the statutory reserve against the note issue. Secondly, we free the Commonwealth Bank Board from the obligation that was cast upon it of adding to the reserve during the next three years. Thirdly, we abandon, as a medium for the holding of our reserves, something that has a permanent and fixed value, and substitute for it something that has a fluctuating value.

Let us examine the measure from these three aspects. The first thing we do is to reduce the statutory reserve against the note issue. That is done by substituting the word “ sterling “ for the word “ gold in prescribing the precise nature of the reserve to be held. The principal act provides that the reserve held in gold shall represent 25 per cent. of the note issue. That is subject to provisions contained in a measure passed last year, to which 1 shall refer later. Under this bill, when it is passed, our reserve may be in sterling of the same percentage to the note issue. Obviously, this means a reduction in the statutory amount of the reserve, because we have to hold £10,000,000 in gold to cover an issue of £40,000,000 in notes. After this measure is passed, the reserve may be in sterling to the amount of £10,000,000, which is equivalent to about £7,250,000 in gold to cover a note issue of the same size. Therefore, we are reducing the statutory minimum reserve by 25 per cent. There can be no escape from that conclusion. In the second place, last year we passed an act to amend part 2, section 6a of the Commonwealth Bank Act, authorizing the shipment to Great Britain of a certain amount of gold. That measure contained a clause permitting a reduction of the gold reserve held against the note issue, but by an amendment made at the instance of the party which now comprises the Government, it was provided that the reserve must be added to from year to year until, at the end of June, 1935, it again reached the statutory minimum of 25 per cent. This bill, I repeat, removes from the Common wealth Bank Board the obligation cast upon it by that act to build up its reserve again to the statutory minimum of 25 per cent.

Senator GREENE:
NEW SOUTH WALES · NAT

– In what part of the bill does the honorable senator find that provision ?

Senator Sir HAL COLEBATCH:

– If the Minister follows me for a moment or two, I think I shall be able to show him that my conclusions are unassailable. At the present time, we have a note issue of £52,000,000. A reserve of 25 per cent. means that that issue of notes must have a gold backing of £13,000,000. If this bill is not passed, it is clear that before the 30th June, 1935, the Commonwealth. Bank Board must increase its gold holding by £2,500,000, bringing the reserve up to £13,000,000. But if the bill is passed, and if the present gold reserve of £10,500,000 is shipped to Great Britain and converted into sterling, it will, on present values, purchase £13,000,000 worth of sterling and, as this measure provides that the reserve may be held in sterling, the bank will be in possession of the required reserve without having been compelled to build it up to the extent mentioned. I, therefore, repeat that the conclusion is inescapable that, by passing this bill, we shall be relieving the Commonwealth Bank Board from the obligation that would otherwise rest upon it to increase its gold reserve between now and the 30th June, 1935, by £2,500,000. The passing of this bill allowing the reserve to be held in sterling means that the £10,500,000 in gold will buy over £13,000,000 of sterling so that without any addition to its reserves the Commonwealth Bank Board will have met the requirements of the bill passed last year. I hope that is clear to the Assistant Minister.

Senator GREENE:
NEW SOUTH WALES · NAT

– I shall reply to that later.

Senator Sir HAL COLEBATCH:

– I do not think that the Minister will be able to make anything else out of it.

Senator GREENE:
NEW SOUTH WALES · NAT

– I can.

Senator Sir HAL COLEBATCH:

– I shall be greatly interested in the Minister’s reply.

The third point is that we are departing from a medium that has a fixed and permanent value and adopting one with a fluctuating value. It has been said that gold has failed as a standard of currency. I deny that. Gold has failed only in one respect ; it has failed every country which for an extended period has spent more than it has earned.

Senator Hoare:

– It did not save the banks in their crisis.

Senator Sir HAL COLEBATCH. Gold will not save any nation which spends more than it earns. Gold will always fail any individual or country which does that; but it never has failed, and never will fail, in other circumstances. I defy any honorable senator to prove from history that gold is responsible for our troubles, or to explain where gold has failed except where the expenditure has exceeded the earnings. Gold failed during the war because the nations engaged in the war, with the exception of the United States of America, spent more than they earned. They spent at rates previously unknown, at a time when their income was less than ever. During the war the reserves of every combatant nation were eaten up until they had no more money to spend ; yet they carried on the war. They did so partly by inflating their currency, by means of which they imposed on their own people in much the same way as a person who covers silver coins with gold imposes on others. The method may be different but the effect is the same. The warring nations borrowed largely from foreign countries, chiefly the United States of America, money which they knew they couldnot repay. The gold standard has failed every country that has endeavoured to do that; and it will always continue to fail in such circumstances. But nowhere in history is there evidence that any other form of currency has ever been discovered to enable a country to continue to spend more than it earns.

Senator Hoare:

– Venice carried on for 600 years with a paper currency.

Senator Sir HAL COLEBATCH.But Venice, during that period, did not spend more than she earned. The currency may be wood, paper, or any other substance; any currency will do, so long as the nation issuing it lives within its means. But should a nation become extravagant, no currency can save it. It is said that because Australia and other countries were able to find almost unlimited money for the war, they should be able to find money in times of peace. That would be a sound argument, but for the fact that the countries referred to did not provide any real money for the war; they provided only a spurious currency. They carried on by borrowings which they could not repay, and inevitably they came to ruin. Having completely exhausted its resources by these illegitimate means it is impossible for a nation to carry on indefinitely, even in times of peace.

Senator Hoare:

– Both in England and Australia the gold currency failed in peace times.

Senator Sir HAL COLEBATCH. I repeat that gold has never failed a nation which has lived within its means. A nation may squander money in peace as well as in war. If a nation does not pay its way gold will fail it; but not if it lives within its income. England departed from the gold standard only because she was not paying her way. An extravagant government was in power, increasing social services in accordance with humanitarian idea’s, but beyond the capacity of the people to pay.

Senator Millen:

– England departed from the gold standard in the first place for political reasons.

Senator Sir HAL COLEBATCH:

– I give the Government of Britain credit for the highest motives; but the fact that it was providing services beyond the capacity of the people to pay for them led to the departure from the gold standard. The budget was not balanced, the trade balance was disturbed, and people outside began to lose faith in- Britain. They withdrew their credit to such an extent that it soon became obvious that unless England stopped the free export of gold her gold would gradually be taken from her. England left the gold standard because she was not paying her way.

Senator Crawford:

– She also stopped the importation of many things.

Senator Sir HAL COLEBATCH:

– It is a fallacy to say that waste is involved when gold is allowed to lie idle. In the old clays we carried gold in our pockets, and we spent it; but no one thought that it was idle. It was doing its job. Later, in order to save wear and tear, notes were substituted for gold, and they served the purpose just as well as gold. But that did not: mean that the gold was saved to spend on something else. There must be gold behind the notes to secure the value of the notes. So long as the notes have a gold backing, they are good currency. Sterling depends upon the political stability of the government in power. Directly England went off the gold standard certain things happened; the country went forward, and, as a result, sterling recovered from the low level to which it had fallen. Strangely enough, the most important, thing that happened was something which not one economist had foreseen. The thing that helped England most was the fact that the depreciation in silver, and the apparent added value that it gave to gold, brought to England millions of pounds worth of gold which had been hoarded in India. The amount of gold that came from that source, as a result of England going off the gold standard, was greater than the amount Britain had received in any one year as the result of the production of gold throughout the British Empire. That was the first thing that helped. The second was that the departure from the gold standard and the depreciation of sterling was, in effect, a cutting down of wages and a reduction of the costs of production. Those two things helped England. Senator Crawford suggested that the imposition of tariff barriers also helped. I do not agree with him, and there are many others of the same opinion.

The proposal of the Government is worth a. trial ; in any case, we are not likely to lose much by it whether or not sterling appreciates in value. Whether it appreciates or depreciates will depend entirely upon the political stability of England. If, as may happen, there are violent political fluctuations in the future, and a highly socialistic government is returned in England, which, exercising less restraint than did the Ramsay MacDonald Government because of the influence of Mr. Phillip Snowden, rushes into socialistic experiments and humanitarian projects, it is by no means inconceivable that sterling will go down again.

It has been said that the Ottawa Conference may do something in the direction of establishing an Empire currency. The possibility of that being done and of the currency being maintained will depend upon each country that enters into the arrangement so conducting its internal affairs as to ensure political stability. Any country that fails to do that will inevitably cause the scheme to break down.

Senator Rae:

– It is a vain hope to expect every country to retain political stability.

Senator Sir HAL COLEBATCH:

– Those which do not maintain political stability will become bankrupt, while the others will carry on. The expedients which we have adopted from time to time since 1929 have enabled us to carry on; hut they have not enabled us to face up to our responsibilities. The Select Committee on the Central Reserve Bank quoted the following passage from the 1930 edition of Kisch and Elkin’s Central Banks : -

There cun bc jio question that the power of govern ment to force increased loans from the Bunk of France intensified the depreciation of the franc and contributed to the financial crisis that culminated in 102(i. Such extreme abuses of government power arc, of course, only possible when a country has ceased to be on a gold basis. As long as convertibility is maintained, the worst evils resulting, from government intervention in bunking and currency control are avoided.

Had this country remained on the gold standard, it would have been impossible for governments to finance their deficits and their loan expenditure as they have done. How have we carried on? A fairly accurate estimate shows that during the last two years the governments of Australia combined have spent each week £S00,000 more than they have earned. That could not have been done had we remained on the gold standard. How have we done it? We have done it because we have exported goods which were sold for good money, which has been used to enable governments to meet their obligations to overseas creditors. Had we been on the gold standard, the governments would have reimbursed the banks with the same amount of real money which they would have obtained either by taxation or by loan. They have done neither. Although we have been able to carry on during the last two and a half years by breaking away from the gold standard, our note issue during that period has increased to £52,000,000 without proper cover, we have increased our short-term indebtedness to about £80,000,000, and, by doing this, wc have spent £800,000 a week more than we have received. How much longer can we continue in this way? The illustrations given by the honorable senator who preceded me clearly suggest that in the past no country has succeeded in carrying on in this way indefinitely, and I do not think that we shall. I am bound to ask myself whether, when the “ show down “ comes, we shall be better or worse off as the result of having enabled ourselves to carry on as we have during the past two and a half years without facing up to our responsibilit es. Might it not have been better if we had been compelled by something like a gold standard to get to that condition of affairs under which governments, at all events, would be spending no more than they were earning?

In his very interesting and able speech, the Assistant Minister (Senator Greene) directed the attention of honorable senators to the provision in the bill that the profits resulting from this transaction shall not be treated as profits under section 60.i of the principal act, and revert to the Treasury, as is the case in respect of certain profits from the note issue. I understand that the clause was inserted on legal advice that in its absence the excess value of sterling over gold would be regarded as profit. I have never ventured to quarrel with legal opinion, but I am prepared to dispute with the highest legal authorities a question of fact. It is a monstrous absurdity to say that by converting £10,500,000 worth of gold into £13,000,000 sterling a profit is made. We might as well take ten bottles of whisky, pour the contents into thirteen bottles, fill them up with water, and saythat in that, way we had made a profit.

Senator Rae:

– That is what some people do.

Senator Sir HAL COLEBATCH.Yes, and dispose of the thirteen bottles which do not contain a pure product. The Bank Board may be able to make what it terms a profit by this transaction, but no sane person would say that £13,000,000 pounds in sterling is worth that amount in gold. There are two ways in which profit can be made. The first is the interest which may be obtained from the sterling investments which are made with some portion of this gold reserve. That will be small, because the investments must be made in quickly maturing securities, which yield only a small rate of interest. The only other way in which a profit can result is by further appreciation of sterling. Notwithstanding the serious economic and financial conditions with which the Old Motherland is and has been confronted, an appreciation in sterling may reasonably be expected, but Ave have no right to treat it as a profit until the appreciation comes, and we have to face the fact that it is by no means impossible - although we hope it will not happen - that sterling will depreciate in value. In that case, the Commonwealth Bank Board would be faced with an absolute loss.

It has been suggested, in some quarters, that the world will never get back to the gold standard. The same thing has been said after every great war, when the gold standard has been departed from. After the Napoleonic wars, Britain was forced off the gold standard, as she has been now; but as soon as the country pulled itself together again, it came back to that standard. It is more likely that we shall get back, to some extent, to a metallic currency than it is that Ave shall never return to the gold standard.

Senator Millen:

– England got hack to it, after the Napoleonic wars, in 1818.

Senator Sir HAL COLEBATCH.England Will come back to the gold standard just as she did in 1925. One of the principal reasons for many of our financial troubles is that people are so infernally greedy. They expect more than a fair deal. When England came back to the gold standard in 1818, one of the biggest landholders in Great Britain fought the measure in the House of Commons day after day, and week after week. He denounced it as being unfair to those who had entered into fixed monetary obligations. When he was beaten, he returned to his country seat, called his tenants together, and said that as their leases were based upon a depreciated currency they were henceforth to pay 25 per cent, less than the amount mentioned in those leases, so long as the gold standard was retained. “ For this,” he said, “ I ask you not to consider yourselves indebted to me. I do not desire any credit for generosity. I have merely done what is just.” If all people had been prepared to do only that which is just, we should not have got into half the trouble we have experienced through the alteration in the value of currency that has taken place.

Senator Rae:

– We can hardly expect finance to be conducted on the principle of the Sermon on the Mount.

Senator Sir HAL COLEBATCH.The honorable senator is probably right’. [ am one of those who believe that ethical and economic conduct run hand in hand, and any country or person who thinks that something that is manifestly wrong can be done must ineviably fall.

The Assistant Minister said - I am not quarrelling Avith him over it - that in this matter the Commonwealth Bank Board Avas to be kept entirely free from political control. I suggest to him that it might be possible under this bill to take some steps to remove the board from political control to a greater extent than at present. Australia has gone a long way in the direction of nationalizing banking. If we had not gone so far, we could not have done what Ave have been doing during the last two years. I do not think it possible to free a governmental institution such as the Commonwealth Bank entirely from political control. The select committee which inquired into the Central Reserve Bank Bill investigated the position from every angle We came to certain conclusions, not because we thought them perfect, but because Ave saw no other way of freeing the Commonwealth Bank from political control. To-day, the Commonwealth Bank Board, not only is not free from political control, but is not free from governmental control. I do not suggest for a moment that this Government would attempt to interfere with the board, and I freely admit that there is no evidence that the late Government attempted improperly to interfere Avith it. But every member of the Bank Board holds office only during good conduct of which good conduct the Government is the sole judge. It is competent for the Treasurer at any moment to remove any member of the Common wealth Bank Board. I suggest to the Minister that he should, at all events, give some consideration to the question of whether it would not be desirable under this bill, since we cannot protect it entirely from political control, to protect it, at all events, from governmental control. The members of the board should be given some such security of tenure as is enjoyed by the judges of the High Court and the Auditor-General, who cannot he- removed from office except with the approval of both branches of the legislature. I was very glad indeed to hear the Assistant Minister’s splendid eulogy of the chairman of the Commonwealth Bank Board, Sir Robert Gibson.

I was also pleased to read, in this morning’s newspapers the announcement of the re-appointment, for a further period of seven years, of that able and conscientious gentleman who now occupies the position of Governor of the bank. I think that the Government has acted very wisely in that matter.

The greatest fault that one can find with this measure is that it does not seem to be likely to get us much further forward. What is to happen in the future? Many suggestions have been made. Eissler has made a suggestion which has attracted a great deal of attention. His idea is world-wide inflation on a commonly agreed basis. He denounced entirely inflation by any particular country, and said that any form of local inflation would be like firing a revolver at a battleship - you waste everything and get nothing. Whether his scheme of international action is possible, I do not know.

The Leader of the Opposition (Senator Barnes) referred to the opinions of authorities in other parts of the world. He spoke of authorities favouring the wiping out of war debts and reparations and altering currencies. The general tendency appears to be to accept that portion of the advice of authorities which is most pleasing and easy, and to reject the other part. We take the sugar coating and refuse the pill. I defy the Leader of the Opposition, or any other honorable senator, to name one economist of note in any part of the world, who, having advocated the abolition of war debts and reparations, and the introduction of currency reform, does not finally come down to- the point made by Senator Millen, that all these things will be unavailing unless the nations of the world agree to trade one with the other. For the reasons I have given, I do not intend to offer any opposition to the bill, but I trust that the Minister will give consideration to the points I have raised.

Senator O’HALLORAN:
South Australia

– I followed, with interest, the valuable information given by the Assistant Minister (Senator Greene) who moved the second reading of the bill, and the speeches of other honorable senators who followed him. I cannot rise to the heights of those who have preceded me, neither do I propose to deal with the subject in the extensive way in which it has been covered by others. I have no complaint to find with ‘ the bill, because I think it is a step in the right direction. I cannot, however, help thinking that when the Government which I had the honour to support, endeavoured to do, in a different way, something which would have had substantially the same effect, a great deal of opposition was offered by those who are now supporting this bill. The honorable senator who has just resumed his seat said that no matter what, legal garb we may clothe a certain statement in, we cannot change the character of that statement. Last year it was proposed by the Federal Government to export gold in order to meet urgent commitments due by the Australian nation overseas. The present proposal is to permit the Commonwealth Bank to export gold. Last year’s proposal was also to permit the Commonwealth Bank to exportgold, but under the guidance of the T.ea.surer. The gold now proposed to be exported is to purchase sterling or other corelated securities as a form of investment, to form a backing for our note issue. I do not see that, so far as our gross indebtedness is concerned, it will effect any improvement of the position. Unless there are golden sovereigns at the back of the note issue, it is a charge on the nation. It is a case of Tweedledum and Tweedledee. Instead of reducing the debt, the Government now proposes to invest the gold used as a backing for the note issue. It seems to me that it would be better to use the gold to reduce the debt. It is like a man with a mortgage on his house, who has gold buried in his back yard. He prefers to keep the mortgage going rather than redeem his title.

As the opinions of economists and leading financial authorities the world over have changed materially during the lasttwo years, so have the opinions of honorable senators opposite. If they had viewed the whole, of Labour’s financial policy in the same kindly light as that in which they apparently view Labour’s proposals in relation to the gold reserve as embodied in this bill, Australia, as a nation, would have been a good deal better off to-day. Let me recall briefly what Labour’s financial policy was. First of all, it was to establish a central reserve bank to carry out comprehensively and effectively the whole of the work of a central reserve bank. I admit that the Commonwealth Bank is now carrying out 70 per cent., or an even greater percentage of the functions of a central reserve bank, and doing it very well, but it does not afford to the whole of the people of Australia the same measure of protection as would be afforded by a properly constituted central reserve bank controlled in the interests of the community. Labour also proposed to issue fiduciary notes. Its proposal in that respect was scathingly condemned by honorable senators opposite, yet to-day they are found supporting a proposal which, according to Senator Colebatchs computation, virtually makes about six-sevenths of our note issue fiduciary, leaving the balance with a backing by no means as stable as that which would have existed under our fiduciary notes proposal.

The discussion this afternoon has ranged in the realm of high finance, ancient and modern, and covered the causes that have led to the changes in the monetary systems of the world. It has touched upon mediums of exchange and banking facilities generally, from the earliest days up to the present. It gives one food for thought. In my humble way, for a number of years past, I have given great consideration to this question. There is a good deal in the contention of Senator Colebatch, that it is not the gold standard, but its faulty .application that has failed. What concerns me most is the effect upon production - upon producers and workers alike. When nations, in order to meet the exigencies of the time, have departed from a real gold standard, and for some unknown reason have suddenly decided to get back to it, the effect has always been detrimental to those who are engaged in production - those who are doing the real work of the community - and favorable to those with fixed and permanent investments, whether they be in the form of bonds, mortgages, or leases. If we were prepared to follow the good example set by the land-owners in the early part of the eighteenth century, who reduced the terms of leases to compensate tenants for an alteration in monetary values over which the later had no control, the position would adjust itself. But, when some of us on this side of the chamber are sufficiently bold to suggest that such a course should be followed - in other words, that deflation should be completed - we are immediately condemned as repudiationists by honorable senators supporting the Government, and by the press which supports the Government. By this time next year, we may find a change of mind even on this subject, and a recognition of the fact that we shall not get out of our present difficulties unless we agree that, if deflation is to be adopted, the process must be completed. If that is not done, there must . be some form of controlled inflation and a restoration of world price levels. That has already been advocated by many leading economists, so that production may be made possible throughout the world.

Those sharp depressions which have occurred at certain periods and at fairly regular intervals ever since the present monetary system was created, and which have been accentuated by wars, disclose some fundamental weaknesses in the system. I agree that it is an immense improvement on the old method of bartering. It does away with all those cumbersome limitations to which that method was subject. But it creates a dual psychology - the psychology of saving and the psychology of production. It has, in the main, succeeded in f acilitating the distribution of production; but, when it comes to a question of saving, it is a different matter. Senator Millen has pointed out that the monetary system, as opposed to the bartering method, makes it possible for people to regulate consumption. They can put by something which enables them to purchase what they require when their own production fails, or when, because of seasonal conditions, it is impossible for them to produce what they require. If we are to satisfactorily work that trinity - production of the commodities the world requires, the effective distribution of these commodities, and the regulation of the savings of the people - there must be a standardization of prices.

I do not propose to quarrel with those who say that the gold standard is the most effective means of standardizing prices; but I have very grave doubts on the point. Gold, in its raw state, is a diminishing quantity. If there were an unlimited supply of gold in the mines of the world, and the determining factor was the cost of mining it, gold would be an admirable standard to adopt, because, as its production increased, the prices of other commodities would rise, and because of the’ greater extent of currency available and the greater volume of purchasing power, the cost of mining would automatically increase, thereby retarding its production. The resultant shortage of gold would increase the demand for it by reducing the prices of other commodities, and thus the increased mining of gold would again be made possible.

Yesterday, Senator Greene expressed some confidence in the remonetization of silver. I do not see how silver can be remonetized unless it is done with some relation to the gold standard. If we are to have a dual standard - silver and gold - it seems to me that we shall be making confusion worse confounded. But what I think we could have is something not based on a metallic standard at all. I think that, by international agreement, we could determine a standard of value by an average of the things the people really require. Wool, wheat, meat, and the other commodities which communities require could be fixed at a standard price for a given year, and the average of those prices could become the fixed unit determining the standard of currency throughout the world. The matter would automatically adjust itself; if over-production of one unit took place, the price in relation to the others in the group would be lowered. This lessening of the reward of those engaged in this form of production would automatically retard the production of the type affected, and stimulate production in other types of the group, bringing about an automatic adjustment. If, through their central reserve banks, the nations of the world could be induced to agree to something on those lines, it seems to me that stability of prices could be accomplished. It would be based on the possibilities of the production and the needs of the people, and that, I maintain, is a point we should consider.

We heard a good deal this afternoon from Senator Colebatch about the nation and people living above their means. In this country, the majority of the people do not enjoy the standard to which the work that they are doing or the production for which they are responsible entitles them. For the last two decades there has been a tremendous increase in man’s capacity to produce.

Here I may pause a moment to reflect upon the utterances of honorable senators who support the Government, particularly those of some learned senators who are supporting the bill. They said when the depression came along three years ago, that it was due to our own slackness and inefficiency. The argument, used was that the workers were not working hard enough, and that the wages which they received were too high. It was urged that we could overcome our difficulties by suspending Arbitration Court awards, lengthening hours, and speeding up production. During the last two years, wages have been reduced, standard hours in the main have been lengthened, and production has been increased to an enormous extent. And what has been the effect? The army of unemployed workers has consistently increased, because similar factors have operated all over the world. It is not a bit of use producing in Australia a given commodity at any price, unless that commodity can be sold at a profit to those who need it in other parts of the world. If the people abroad, because of a diminished purchasing power, due to low wages and other causes, are not in a position to trade with us, the whole fabric must fall to the ground. That is the danger that can be seen by many eminent gentlemen in the financial world of Great Britain to-day. Men like Mr. Reginald McKenna, Sir Robert Home, and Lord Beaverbrook, the first two former Chancellors of the Exchequer, have issued strong pronouncements on this subject within recent years. The consensus of their opinion is that, if civilization is not to collapse, this problem must be solved. In Australia, men are working harder than they ever worked before, and yet are receiving less for their labour. While this bill does not make a real contribution towards the solution of that problem, it at least is welcome to honorable senators who sit on this side, because it furnishes evidence of a change of policy, which, I hope, will be continued until the Government adopts, in toto-, the financial policy of the Labour party, the object of which is to enable wealth producers more suitably and more easily to exchange the commodities that they produce. Control must be in the hands of the community, not in the hands of interested persons who may be able to make huge profits out of the manipulation of our monetary system. I believe that, when we return to the producer the real value of what he produces, and not determine by artificial means what he shall receive, we shall have gone a long way towards buttressing our social system as well as towards making secure our constitutional and parliamentary institutions. “We shall then be well on the road towards the real happiness of our people. When I compare the statements that are made to-day by responsible leaders of the Government in this and another place, with the strong criticism that they levelled at the proposals of the Labour Government a few abort months ago; when I realize that men who told the electors last December that they would practise nothing in the nature of inflation if returned to power, but, on the contrary, would absolutely eschew the financial policy of the Labour party, and refuse to remove any buttress of the existing note issue, I welcome this proposal as an indication of a change for the better.

Senator HOARE:
South Australia

– I should not have risen but for certain statement’s that were made by Senator Colebatch, who, seemingly, h.ifc absolute faith in the gold standard, and will range himself alongside any nation that does not spend more than it earns. 1 n considering the value of the gold standard, one has only to recall what happened in the years 1891 to 1893, when our banking system failed, and the nation had to resort to a treasury note issue to enable the banks to escape from their difficulties. In every banking crisis throughout the world, without .exception, the gold standard has been proved a failure, and the note issue has had to be resorted to. Venice, for a period of 600 years, was the financial centre of the world, and had not one banking failure <>r financial crisis, although it had not a gold standard.

Senator Sir Hal Colebatch:

– The people of Venice lived within their means.

Senator HOARE:

– I am not disputing that. The experience of Venice, however, proves that any country can thrive and avoid banking failures without a gold standard. It is my belief that that standard was fixed in the first place by the goldsmiths of England, who saw that by its means they could make profits for themselves out of the people. Had they chosen any other standard, it would have acted equally as well and returned to the nation the same amount of credit. England, according to Senator Colebatch, failed because it did not live within its means. The treasury-note had to come to its assistance and stave off a financial disaster. As a matter of fact, the war was carried to a successful issue on such a currency’ without any gold backing, proving that gold is of no value whatever to England.

Senator Lynch:

– The note issue was backed by securities.

Senator HOARE:

– It was backed by the credit of the nation. The Commonwealth bank-note also is as good as, or better than, gold, because it has the backing of the credit of Australia. There is no better backing.

Senator Sir Hal Colebatch:

– That would not he the honorable senator’s experience if he traded with Australian notes in other countries.

Senator HOARE:

– We trade not with money, but with goods. When the last Government proposed to ship £5,000,000 worth of gold to England, Senator Greene was strongly opposed to the idea, and argued that it would be far better for the British Empire to accord full recognition to the gold standard. 1 admire the honorable senator’s faith in that direction. But if the gold standard spells salvation to an empire, why should it fail at any time? The United States of America and France hold- between them at the present time 75 per cent, of the world’s gold; yet there is just as much poverty and starvation in those countries as in other countries that have not a gold standard. What is there to recommend the gold standard? I believe there is some force in the contention of Senator O’Halloran, which, boiled down, amounts to advocacy of a goods standard. After all, we pay our interest in the form of the goods that we export to other nations. In all probability, as time rolls on we shall accept goods as our standard and our medium of exchange. If by some means exchange could be fixed at par; the nation would benefit. No country can expect to get something for nothing. If we are to receive a premium of 25 per cent, with respect to all the goods that we export, the effect must gradually filter through the different strata of society until it reaches the bottom dog, who is the least able to bear it. I recognize that, if big importers, like Anthony Hordern’s in Sydney, Myers in Melbourne, and John Martin and Company in Adelaide, have to pay £125 for every £100 worth of goods that they purchase abroad, their customers must bear ‘the burden. A high exchange rate may be good . for our exporters, but it has a boomerang effect. We are moving in a vicious financial circle. A high exchange means heavier burdens on governments in the discharge of overseas obligations, and additional taxation on the people to make up the leeway. I should prefer the exchange rate to be at par, because then all sections would be treated fairly. The gold standard has been bolstered up for a number of years by financial and commercial interests which fear, apparently, that a departure from it would cause the British Empire to crumble to pieces. When the preceding Government introduced a measure to provide for the export of gold, and for the establishment of a fiduciary note issue, the opponents of the proposal predicted that all sorts of disasters would befall Australia if effect were given to that policy. The Opposition in this chamber, being suspicious of the Government’s intention, went to the length of summoning Sir Robert Gibson, the chairman of the Commonwealth Bank Board, to the bar of the Senate to answer a. number of questions. Apparently, their views have changed for they are now supporting this bill. As for their objections to the proposed fiduciary note issue, it is a fact that we have been working on a fiduciary system ever since the first banking institution was established in this country, because at no time have the banks held a full cover in gold for the notes issued. Great Britain has a fiduciary note issue of £270,000,000, and no one doubts the strength of the British financial structure. During the war Australia borrowed over £300,000,000, not on the security of our gold reserve, but on the credit of the nation. From day to day we read reports of one nation after the other going off the gold standard. Very shortly there will be few with their currencies based on gold’ Experience has shown that no harm need be apprehended from the shipment of our remaining gold reserves. Australia will not be the worse because, as has been explained, the gold reserve will be converted into sterling reserve, and we shall be able to carry on quite satisfactorily without the gold.

Senator DUNCAN-HUGHES:
South Australia

– I speak to this bill with some reluctance, and I intend to be brief ; but I should not like a measure of this importance to pass without some indication of the views which I hold with regard to it, although a great deal of what was essential to be said from the different points of view is to be found in the excellent speech of the Assistant Minister (Senator Greene) in moving its second reading yesterday, and in the informative observations of Senator Colebatch this afternoon. I think the principal, if not the main reason why members support the bill, is the confidence which all sections of the community have in the Commonwealth Bank Board, and particularly in its chairman, Sir Robert Gibson. There is also, I think, the feeling that these experts in finance, who approve of the course proposed, are much more likely to reach a correct decision as to its wisdom than are .members of this Parliament. So very widely divergent and even varying are some of the theories advanced by the different schools of thought, that some amount of expert knowledge is necessary to distinguish, between them, and determine to which adherence should be given. Last year, a measure was passed authorizing the shipment to Great Britain of £5,000,000, representing portion of our gold reserve. The then Leader of the Opposition (Mr. Latham), speaking to the Government’s proposal, made this comment -

I support the bill with very deep regret that the necessity for it should have arisen . . .

This bill merely provides for the reduction of the gold reserve and not for its abolition. . . The principle of u gold reserve is well recognized … I regretfully support the bill in order to prevent immediate default. lt would seem that the shipment of £5,000,000 of our gold reserve last year was the thin edge of the wedge, and that we are now to send the whole of our gold reserves overseas. In spite of what Senator Hoare has said, it is a fact that at first the Commonwealth note issue was supported by practically a full gold cover. In 1929, the reserve was 52 per cent, of the note issue. It is now 15 per cent., and the amount is approximately £10,500,000. I suggest that this is not a large sum for a country like Australia, with its immense area of undeveloped resources. Expressed in sterling, it will be £13,500,000. Supporters of the Government’s proposal urge that at the present time our gold reserve is frozen, and that, if invested in sterling, ii will earn interest, though necessarily the rate must be low, because it is imperative that the reserve shall be in a highly liquid form. But I ask, as also do many people outside Parliament who know much more about the intricacies of high finance than I do, may not the present advantage of a slightly higher reserve in sterling earning a small amount of interest be more than offset by the absence of a gold backing for our currency? Is it not possible that the psychological effect on the people of, not only this country, but the world at large, may be damaging to our credit?

There are certain factors which one cannot very well eliminate from the consideration of this subject. One is what may be termed the romantic attraction which gold has had for the people in all countries, and throughout the ages, as Senator Millen told us in his interesting address this afternoon. We cannot, I think, ignore that factor, nor can we ignore the confidence which the possession of a gold reserve by a country inspires in the people of other countries; because we know that, properly used, it has never yet let down a people.

Senator Thompson:

– Does the honor- able senator think that prices for Commonwealth stocks in New York will be lower if we ship our gold reserve and convert it to sterling?

Senator DUNCAN-HUGHES:

– I think that a country which has even a gold reserve of only £10,500,000, the amount which we at present hold, inspires a certain amount of confidence in the minds of people of other countries which would not be felt if the reserve were held in sterling. Although our present reserve is small, I think it is of some value to the nation. We are told that as gold values fluctuate in terms of sterling, it should be converted into sterling investments. It has been pointed out that, in September, 1931, our reserve waa worth, in sterling, £10,500,000; on the 7th December, £15,000,000; on the 11th April, 1932, £13,500,000, and the 28th April, £14,000,000. From this it will be clear that the conversion of our existing reserve into sterling, must essentially be a transaction of a speculative nature, and, as I think Senator Colebatch indicated, a speculation which, subsequently, and in the long run, may not be entirely successful.

The bill is, I think, acceptable to the community generally because of confidence, based on the experience of the last two years, in the Commonwealth Bank Board. Yet it is obvious that there are those in this country who do not approve of this proposal to ship our gold reserves. In the monthly statement issued by the National Bank of Australia, part of which was quoted in the Melbourne Argus of the 12th May, there is an interesting article dealing with the gold reserve. I take the following extracts from it: -

Although the amount of gold involved is small compared with holdings of the central banks in the United States of America, France and some other continental countries, it is the only stock we have left, and the problem entailed in deciding whether it should be retained, so that it could be used, if needed, to meet some grave emergency in tlie affairs of the Commonwealth, or whether it should be exported to assist the governments to meet interest and other obligations abroad, is far from easy of solution. . . We should like to feel that a decision to ship the gold will not bo unduly influenced by the temptation to make an exchange profit on its sale abroad, and to gather earnings by investing its proceeds until required for any other purposes abroad. The value of the gold as a reserve here cannot be accurately measured, but it is felt that it provides the main basis by which the confidence of the note-holders is firmly supported. In some quarters it is stated that the gold should not be left idle in the vaults of the Commonwealth Bank, but that idea cannot be too strongly opposed. The gold is the solid foundation upon which public confidence in Australia’s currency and finance is based, and, as such, is a necessary and integral part of a productive structure.

Gold still holds a position of great importance in the world as abasis of the financial structure of great nations, and while that remains so, we are firm in our opinion that it would be imprudent for Australia to denude itself of any material percentage of its remaining holdings of the precious metal.

It is to be remembered that Australia is liable to America for some £47,000,000 in loans, the interest and principal of which are repayable in gold.

We are in accord with the suggestion that portion of the reserve might consist of British securities, so long as a reasonable percentage of gold is maintained in conjunction with them. but wo doubt whether public confidence could be retained in full measure if gold, as one of the supporting elements, were largely or fully abandoned. Gold fills the popular imagination as a satisfactory basis of the currency and banking reserves, and as a bulwark against the evils of inflation.

Obviously, any one who favours inflation would agree to the gold being sent abroad. Senator Thompson would probably agree that the National Bank of Australasia is entitled to express an opinion on the matter of banking and finance.

Senator Thompson:

– It has sounder views on exchange than on some other aspects of finance.

Senator DUNCAN-HUGHES:

– I propose also to quote from a speech which the chairman of directors of the Bank of Adelaide, Mr. Howard W. Lloyd, delivered at the annual ordinary general meeting of shareholders held on the 4th May, 1932. I do so in order to show that there is not by any means unanimity among bankers regarding the step now about to be taken. As far as one can judge, they accept the proposal with considerable hesitation and doubt Mr. Lloyd said -

The pound sterling had been for so long the accepted medium for the settlement of international debt, that its depreciation caused widespread dismay and disorganization. For tunately, Great Britain’s credit and gold reserves are rapidly regaining lost ground and probablyare long, the Old Country will be back on a stabilized gold standard, or on some permanent system linked with that metal, for a standard of value is essential, and gold, though not perfect, is after all the least imperfect used so far.

England’s departure from the gold standard had a tonic effect on her secondary industries, and gave them an opportunity of competing against foreign competitors on favorable terms.

Among bankers, there is a general desire that the absolute power conferred by this bill shall be used sparingly. Last year, when a similar power was given, a state of financial emergency existed; a certain sum of money had to be sent overseas by a given date. That is not the position to-day - or if it is. we have not been so informed - because the bill does not definitely provide for conversion, but provides that part of the reserve may be in gold, and part in sterling.

SenatorRae. - Bankers, like ourselves, know more about things after the event than before.

Senator DUNCAN-HUGHES:

– Many highly qualified men are engaged in banking.

Senator Barnes:

– Bankers are getting back to the layman’s view.

Senator DUNCAN-HUGHES:

– The layman’s view is that gold is a good thing to have as a reserve. It is true that bankers hold different opinions, but that is true also of lawyers and doctors. I am not prepared to criticize those who know much more about- these things than I do.

There is a lot of loose talk about Great Britain going off the gold standard. It is suggested that because Great Britain has taken that step, no objection should be raised to our gold being shipped abroad. Great Britain technically went off the gold standard, but actually she prohibited the export of gold in order that she might be in a position to get back again to that standard, or at least to a metallic standard, as soon as possible. The British Chancellor of the Exchequer, Mr. Neville Chamberlain, has on several occasions indicated that that is his objective. In view of Great Britain’s action in prohibiting the export of gold, does it not seem strange that we should be so ready to export possibly the whole of the gold which we now hold as a reserve? Australia should follow the example of Great Britain rather than that set by countries like Czechoslovakia, Esthonia and Latvia.

I shall not refer to the Ottawa Conference more than to say that if anything is arranged there which requires parliamentary sanction, it should not be difficult to summon Parliament to deal with it should the legislature not be in session at the time.

Like Senator Colebatch, I favour the gold standard for Australia, as a means of preventing extravagant spending. Foi some years, we, as a people, have spent much more than we have received, and I fear that if the whole of our gold reserve is sent out of the country, it will be difficult to start to build it up again.

Many factors have contributed to the present unsatisfactory state of affairs. I shall not mention them in detail. Our difficulties are due, in. part, to the nonfulfilment of the arrangement arrived at by the Premiers last year. Indeed, not one of the signatories to the agreement has complied with it fully. We may, however, expect a change for the better in the near future ; Victoria has definitely decided to adhere to the Premiers plan, and the provisional Government in New South Wales also stands for carrying it out.

Senator O’Halloran:

– Does the honorable senator believe in further reductions of expenditure in South Australia?

Senator DUNCAN-HUGHES:

– I believe in the Premiers plan being carried out; whether that means a reduction of interest, which has been fairly general, a reduction of salaries, which also has been fairly general, or a reduction of wages, which so far has not been general. Honorable senators who disagree with me will find the facts set out in a report of the Economic Committee, which was published about a month ago. Where the Premiers plan provides for a 20 per cent, reduction, and the actual reduction has been only 12^ per cent., it cannot be said that the plan has been fully complied with, whether it be the fault of Parliaments or of arbitration courts. There is naturally a reluctance to make these reductions. We are unwilling to face the problems which confront us, but we must not shirk our unpleasant responsibilities.

A prominent business man once told me that, in his early days in London, he visited a great financier who, at the close of the interview admonished him, saying, “ Stick to gold ; after all, you must tie up to something, and it might as well be gold.” So far, no banker, economist, or politician has been able to show a better anchor than gold. Even when we depart from the gold standard, gold is still not far in the background. Many Labour supporters would have us leave this buoy, and sail into seas where no anchorage has yet been found. I do not agree with that policy. Like Senator Colebatch, I realize that the Commonwealth Bank Board is the best judge of what ought to be done. I realize, further, that it may not avail itself of the power to export all our gold; indeed, I hopethat it will not do so. The complete depletion of our gold reserves would not only have a harmful psychological effect, in that it would tend to destroy people’s confidence in our note issue, but it would also, I am afraid, make it exceedingly difficult for us later to get back to the gold standard. The treasury vaults of France and the United States of America are full of gold ; while Great Britain, although off the gold standard, has taken precautions to ensure that she will not further lose her gold. I hope that we shall not find that within a few months our gold reserve has been depleted.

Senator GREENE:
NEW SOUTH WALES · NAT

– I thank honorable senators for the manner in which they have discussed the principle embodied in this bill. In dealing with the subject of finance at the present time one cannot advance any definite or positive theory and say that it will stand the test of time. I have very decided views on several points which have been discussed this afternoon; and have no doubt whatever that the adoption of some of the suggestions made by honorable senators opposite would throw the country into a state of financial chaos. I cannot agree with the view expressed by the Leader of the Opposition (Senator Barnes), Senator O’Halloran and Senator Hoare, that there has been any change of policy on the part of those supporting the Government, and that they have now no desire to maintain a statutory reserve against our note issue. Senator DuncanHughes referred to the tremendous difficulty which may be encountered, if effect is given to this measure, in building up our gold reserve should it be’ considered desirable to do so. If I thought that difficulty would arise I would not . be sponsoring this bill. Should the occasion arise later on I do not think that there would be any difficulty in re-converting a sterling reserve into a gold reserve, unless, of course, as a result of some cataclysm, the whole of the world’s supply of gold had been destroyed. It must not be forgotten that Australia is a goldproducing country, and if no other sources of supply were available our gold reserve could be reconstituted from our own production. If every single bar of gold in Britain were to vanish we should still be able to reconstitute a gold reserve from our own production.

Senator Lynch:

– It would take about ten years to do that.

Senator GREENE:
NEW SOUTH WALES · NAT

– It could be done.

Senator Sir Hal Colebatch:

– We could build up to our present reserve in five years.

Senator McLachlan:

– The production of gold is increasing.

Senator GREENE:
NEW SOUTH WALES · NAT

– Yes. I wish to make it abundantly clear to honorable senators opposite that there is no similarity whatever between the act passed last year by the Scullin Government providing for the shipment overseas of £5,000,000 in gold and what is proposed in this measure. In the first-named case, £5,000,000 in gold, representing a portion of the backing of our note issue, was shipped overseas and sold to pay our debts. That £5,000,000 in gold ceased to be any part of the reserve behind the note issue. This proposal, however, is to give the Commonwealth Bank Board the power to convert a portion of the reserve now held in gold into sterling which will still be held as a reserve against the note issue. It does not give the Commonwealth Bank Board power to dissipate the reserve; the reserve must be kept intact. I think, as I said in my secondreading speech, that this will probably mean - as Senator Colebatch admitted - a strengthening, rather than a weakening, of the reserve. Senator Colebatch said that sterling would probably appreciate. If, in the meantime, there has been any conversion of this gold reserve and we get the appreciation in the value of sterling, which is highly probable, and if as Senator Duncan-Hughes and Senator Colebatch suggested, sterling is again to be linked with gold, we shall come out of the transaction in the long run with a definite strengthening, and not a weakening, of the reserve.

Senator Lynch:

– What would happen in the event of an unexpected rush upon the banks?

Senator GREENE:
NEW SOUTH WALES · NAT

– Supposing, for the sake of argument, a rush were made to-morrow on all the banks, does any one suggest that the £10,000,000 in gold held in the form of a reserve would be issued by the Commonwealth Bank to the public ? Honorable senators know that that would not be done. The Commonwealth Bank, acting as a central reserve bank, would issue the necessary notes to the trading banks to meet the run, and these notes would be paid out, returned again to the Commonwealth Bank, and subsequently cancelled.

I do not propose to deal at length with the various arguments adduced during the debate; but I should like to mention a point raised by Senator Colebatch. I think he said that it was monstrous to suggest that the conversion of a portion of the gold reserve into sterling would result in what could be termed a profit.

Senator Sir Hal Colebatch:

– Apart from appreciation in sterling, of course.

Senator GREENE:
NEW SOUTH WALES · NAT

– After all it is a matter of accountancy. The accounts of the Commonwealth Bank are kept in Australian in pounds sterling. Whether the board converted this gold into sterling or sold it in Australia and allowed some one else to ship it, the extra amount secured would be shown on the books of the bank as a profit.

Senator Sir Hal Colebatch:

– I would be sorry for the bank which kept its books on that principle. Does the Assistant Minister say that the Commonwealth Bank values the £10,000,000 in gold on the same basis as it values £10,000,000 in Australian notes ?

Senator GREENE:
NEW SOUTH WALES · NAT

– It is on the books of the bank to-day in those figures. That is one of the objections which is being urged overseas against the retention of this gold in Australia. It is said that it is undervalued in the books of the Commonwealth Bank, and, of course, that is so. The transaction would inevitably lead to a profit being shown under the accounting system of the bank. If the gold were sold, the profit made would, under section 60j of the principal act, ,be payable by the note issue branch to the Treasury, but for the clause dealing with the matter in this bill.

Senator Sir Hal Colebatch:

– Does the Assistant Minister think that any shareholder in a company would believe that such an amount represented profits?

Senator GREENE:
NEW SOUTH WALES · NAT

– If any company in Australia with which the honorable senator was associated had £1,000,000 in gold and sent it to-morrow to the United States of America, it would make a profit on its sale there and would carry that profit to its profit and loss account. That is inescapable.

Sitting suspended from 6.16 to 8.10 p.m.

Question resolved in the affirmative.

Bill read a second time, and reported from committee without amendment or debate.

Report adopted.

page 884

CONCILIATION AND ARBITRATION BILL

Second Reading

Debate resumed from the 17th May (vide page 772), on motion by Senator McLachlan -

That the bill be now read a second time.

Senator BARNES:
Victoria

..- I consider that I am more competent to deal with arbitration matters than most honorable senators. For long years I have been chief officer of the Australian Workers Union, the biggest union in Australia, and in that capacity I have had considerable experience in putting cases before the Arbitration Court. The Australian Workers Union spent its money and energy in advocating the establishment of arbitration courts, and since their establishment has stood steadfastly to the principles of arbitration. It has freely been stated that, because of the results which followed the adoption of arbitration in industrial disputes, the wives of the workers of this country taught their children to go dow7n on their knees, and say “ God - bless Mr. Justice Higgins.” Awards of arbitration courts have always been accepted unreservedly by members of the Australian Workers Union, with one outstanding exception. I refer to an award given in 1922 reducing the shearing rate from £2 to 30s. per 100. It was so absolutely opposed to all the evidence submitted to the court that the men refused to obey it. I was the responsible officer of the union conducting the case, and a week after the verdict was given the President of the court asked me to call upon him. When I did so he informed me that a mistake had been made, and that it was proposed to readjust the rate and fix it at 5s. per 100 more than the rate fixed in the award. I said, “ Even now, your Honour, it is not an award; it is a tragedy.” Our people were so outraged at the injustice of it that they disobeyed it. They knew that the evidence which had been compiled and put before the court was unanswerable: that it was sufficient to convince the court of the justice of their claims. To this day they do not regard the 1922 verdict as an award. It was something that should never have been put before any body of men except to provoke strife.

If I criticize this bill, it cannot be said of me that I am opposed to the principles of arbitration. I do not want to see anything done at this stage that is likely to imperil the success of arbitration. Yet this bill is likely to have that effect. It reminds me too much of the old days when we had no arbitration courts, when the only remedy for adjusting an industrial dispute was a fight. We were compelled to realize that there was a saner method of settling differences. I, like many other men, have had experience of the conditions that existed prior- to the establishment of the Arbitration Court, and know what were the effects of the industrial conflicts that then took place. In 1894, on the river Darling, an organization with which I was connected began a fight with financial resources amounting to only £8,000, with which between 35.000 and 40,000 men had to be fed. Honorable senators can imagine how long such an amount would last. I have taken mussels out of the river bed of the Darling, and roasted them on the coals, to provide myself with sustenance. I was only one of thousands who were reduced to such straits. It was because of these experiences that we blessed the day when we were given the opportunity of placing before a legal tribunal the circumstances under which we were compelled to work. We knew full well that the fairmindedness of the people was such that they would not in any circumstances tolerate the continuance of those conditions. Now, however, this bill not only proposes to revert to the old penal days in regard to the punishment provided for certain alleged offences, but goes further and threatens to filch from bona fide trade unionists, who have made so many sacrifices for arbitration, the benefits arising from that system, by allowing bogus unions to participate in them. These bogus unions are organized chiefly at the expense of the employers, and are used by them for the purpose of destroying the objects for which the legitimate organizations are formed. We have always claimed that only those who are prepared to submit their case to the court should reap the benefit of any award that is made, and that those who will not contribute a shilling to attain the objects for which we strive should not ,be provided by this Parliament with the means to enjoy the benefits for which we pay and fight. That is what this bill proposes.

Section 9 of the principal act provides that an employer shall not dismiss an employee by reason of the fact that he is a member of an organization that has applied for registration under the Arbitration Act, or has given evidence before the court. That is a very fair provision, and it was cordially accepted by all parties at the time that it was enacted. A.n employee might have to go into the witness-box and give evidence against an employer in his presence, and an employer who was not scrupulously fair might victimize such a person by dismissing him from his -employment. For that reason alone Parliament enacted this provision, which both employee and employer alike considered was amply justified. It is now proposed that that protection shall not be withheld in the case of an employee who is an officer or member of an organization, by reason of the circumstance that the said employee is -not a member of any other organization or association of employees. That is destructive of the remedy which is provided by the principal act for any disability from which an employee may suffer.

Senator Sir GEORGE Pearce:

– How does it affect the protection of the employee ?

Senator BARNES:

– Any person who is not a member of an organization that secures an award may come along and claim all the benefits that that organization has obtained for its members. What are termed “ scab unions “ are to be given protection. They may not even be registered under the Arbitration Act ; although I notice that, by another iniquitous clause, it is proposed to grant registration, to such bogus unions from the commencement of this act. These scab unions will be able to obtain the benefits of arbitration, and their members will be protected against dismissal, even though they have not shared the trouble and expense of securing the award. I say definitely that that will tend to destroy the arbitration movement.

There is another provision that I feel sure will be regarded as penal by those honorable senators who have a sense of fairness. It deals with the cancellation of the registration of an organization. Section 60 of the principal act sets, out that, if it appears to the court, on the application of any organization or person interested, or of the Registrar, that an organization should be registered, the court shall act accordingly. That was accepted by both parties. If an organization offended against an award of the Arbitration Court, and if its members went on strike, the penalty was deregistration, but the existing law provides that if, to use a phrase lately favoured by the Acting Attorney-General (Senator McLachlan), its members purged themselves -of their sins, they had the right to approach the court again and seek registration. This bill will take away that right in certain circumstances. It enacts that if an organization is affiliated with any body of persons within or beyond Australia which advocates or encourages the overthrow by force of the established Government of the Commonwealth, or of a State, or of any other civilized country, it shall not be eligible for registration in our Arbitration Court.

The PRESIDENT (Senator the Hon W Kingsmill:
WESTERN AUSTRALIA

– I remind the honorable senator that it is not in order, in a secondreading debate, to refer to specific provisions in a bill.

Senator BARNES:

– I am afraid that I am digressing somewhat from our Standing Orders, but I shall endeavour p.ot to do so during the remainder of my remarks. The general intention of the measure appears to be destructive of our arbitration system, because if it is carried in its present form, it will not be possible for industrial grievances to be settled as hitherto, in our courts. It is common knowledge that powerful influences are at work to destroy arbitration. Those ‘who favour this course make no secret of their intentions. Many declare quite frankly that it is industry’s greatest handicap, for the simple reason that it ensures the payment of a wage which a late distinguished arbitration judge declared was necessary to enable a wage-earner, his wife and family .to live in frugal comfort. He also declared that if an industry could not pay that wage it was of no use to a country, and should not be encouraged.

Senator Thompson:

– That declaration has been abused tremendously to the detriment of a great many people.

Senator BARNES:

– Nevertheless it shines like a beacon in the industrial sky.

The purpose of the bill, apparently, is to deprive the organizations of labour of whatever benefits have accrued to them from awards ‘of our Arbitration Court, and other industrial tribunals. Surely the Senate will not be a party to such a proposal. Why should members of any organization who pledge themselves to abide by the awards of our Arbitration Courts be deprived of their right? The measure deals drastically with organizations of labour which affiliate with organizations in other countries, the reason given being that such bodies are a menace to the’ welfare of Australia. Withoutbeing given the opportunity to defend their action, they will come automatically under the provisions of this bill, and their members will suffer disfranchisement for a period of three years. I hate to say it, but the bill appears to have been conceived in a spirit of vindictiveness to the industrial organizations of this country. It is totally unwarranted, and I feel sure that, if it is carried in its present form, it will recoil with disastrous effects upon those responsible for it. I have given the measure a great deal of anxious thought, and I am convinced that it has been designed to destroy whatever remains of organized labour in this country.

Senator Sir George Pearce:

– Surely the honorable senator does not believe that organized labour depends on affiliation with Moscow?

Senator BARNES:

– No. I hold the contrary opinion ; but other people who have every right to express their views, believe that an interchange of industrial thought may be beneficial to organized labour in Australia, and personally I see no harm in the free interchange of such views.

Senator Sir George Pearce:

– There can be a free interchange of views without affiliation with Communistic organizations.

Senator BARNES:

– I am afraid that I shall have to challenge the honorable gentleman on that point, because, so far as I am aware, there is no evidence that industrial organizations in this country are pledged, through their affiliation with similar bodies in other countries, to do a grievous injury to the people of Australia.

We have had 30 years’ experience of our arbitration system. To estimate its value to the community we should consider the conditions that obtained for, say, twenty years prior to its introduction. Every one with any knowledge of the state of affairs then existing will recall the industrial turmoil that prevailed in industry in every part of Australia. Allegations of sweating in industry, and of the inhuman treatment of boys and girls, the latter particularly, in the various factories, were so persistent that royal commissions were appointed to investigate the charges, and suggest a remedy. Many of the newspapers of the day also were generous enough to place before the people of Australia the evidence given before such royal commissions and boards of inquiry. Following that, there was a fight reminiscent of the days of savagery, when men fought as long as they possibly could on empty stomachs. I could show honorable senators the report of a royal commission which sat in Sydney about 40 years ago, containing facts which would horrify the people of Australia, if made public. Australians of to-day would not believe that such things ever happened in this country unless they saw the report themselves in black and white, authenticated by those who conducted the inquiry. The fight continued with a view to convincing the people of Australia that something was wrong. “We elected to this Parliament men who, through the pages of Hansard, acquainted the public with the facts. After much effort we succeeded in passing through this Parliament a law which, although amended many times, has done much for this country. Workers who, prior to its enactment, despite their skill and education, were on the lowest rung of the ladder - for compulsory free education preceded arbitration - and not able to use their talents to the fullest advantage through being frequently in the ranks of the unemployed, have been enabled by it to get fairer treatment. At that time men were sweated and underfed, while their wives and children suffered even greater privations than they did. I say, emphatically, that the arbitration laws of this country have been of great benefit to Australia.Now, after 30 years under arbitration, this Government, which promised the electors only a few months ago, that it would find a job for every man at decent rates of pay, introduces a bill which nullifies all the benefits of the Arbitration Act, and takes us back to where we were 40 years ago. At the present time, the timber merchants of Australia are asking the court to reduce the wages of the timber-workers in the mills and forests of Australia by 25 per cent. But that is not all; they are seeking to be relieved of the obligation to care for their employees by providing ambulances for them in the event of accidents which, as honorable senators know, are not infrequent in timber-cutting and milling. Everything that arbitration has won for the timber-workers, the timber merchants now want taken from them. Another case now before the court affects the members of the Australian Workers Union, of which I am president. The pastoralists are asking the court to vary the award for shearing from 32s. 6d. to 20s. for every 100 sheep shorn. That was the rate which operated about 40 years ago. Are honorable senators pre pared to put back the wheels of progress 40 years?

The PRESIDENT (Senator the Hon W Kingsmill:

– The honorable senator’s remarks do not appear to be relevant to the bill.

Senator BARNES:

– This bill appears to cover everything of importance in the Arbitration Act. It will destroy everything that is vital to the workers.

The PRESIDENT:

– The bill seeks to amend sections 9, 60 and 68 of the principal act.

Senator BARNES:

– Those are the vital sections of the arbitration law, and that is why I feel so strongly on the matter. We on this side hope to convince the Minister and those sitting behind him, that they should act more fairly towards every man whom this bill will affect, whether he be a public servant or the most modest labourer in the country. In committee, I hope to deal more in detail with the matters which I have mentioned.

Debate (on motion by Senator Sampson) adjourned.

page 887

BANKRUPTCY BILL

In committee: Consideration resumed from the 27th April (vide page 5).

Clauses 9 to 17 agreed to.

Clause 18-

Section 84 of the principal act is amended -

by adding at the end of that subsection the following paragraph: - “ ; and (j) Eighthly, in payment of such preferences, priorities or advantages, in favour of any creditor as regards any other creditor and in payment of such costs, charges, and expenses incurred in the interests of creditors prior to - as are passed by an extraordinary resolution of creditors at a general meeting . . . “ Provided that no payments shall be made under this paragraph until twenty-eight days after a certificate that a copy of such extraordinary resolution has been forwarded to the debtor and to every creditor appearing in the statement of affairs or debtor’s affidavit has been filed in the court together with a copy of such resolution. Before the expiration of that period of twentyeight days the bankrupt or debtor or any creditor may apply to the court to reverse or vary the decision of the creditors and the court may make such order as it thinks fit.”.

Amendment (by Senator McLachlan) agreed to -

That after the word “creditor “ (first occurring), paragraph (c), the words “or group of creditors “ be inserted.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– I move -

That the word “ an extraordinary “, paragraph (c), be left out.

I do so with the object of inserting in their stead the words “ a special “. An extraordinary resolution must be carried by three-fourths of the number and value of the creditors present, either in person or by proxy, and voting on the resolution. That appears to be too drastic a provision. A special resolution requires to be passed only by three-quarters of the number of creditors present and voting.

Senator. Sir HAL COLEBATCH (Western Australia) [8.58]. - I am agreeable to the deletion of the words “ an extraordinary”; but I am not satisfied that the substitution of the words “ a special “ will meet the case.

Amendment agreed to.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– I now move -

That the words “ a special “ be inserted.

In its present form the paragraph provides that an extraordinary resolution of creditors shall be necessary in certain cases. As I have stated, the definition of “ extraordinary resolution “ appears to be too drastic. A special resolution would meet the case. A special resolution means a resolution passed by a majority in number, and three-fourths of the value of the claims of creditors actually present, or present by proxy, at a meeting at which such resolution was carried. Exception was taken to the drastic nature of the provision as originally drafted, and numerous representations have been made to the Government in this respect. It is, therefore, proposed to amend the clause by substituting for the word “ extraordinary “ the word “ special “. The use of the word “ resolution “ without any qualification would leave the way open for resolutions to be carried in a holeandcorner way to the detriment of the general body of creditors. The Associated Chambers of Commerce considered the original provision too drastic, but have agreed to the modification now submitted. Representations have also been made by the Registered Trustees Association in the various States, and the amendment proposed affords the protection essentia] in regulating priority to the estates and to creditors.

Senator Sir HAL COLEBATCH (Western Australia) [9.3]. - I do not think that the Acting Attorney-General (Senator McLachlan) is quite correct in saying that the Associated Chambers of Commerce and other interests which have protested against the use of the word “ extraordinary “ are satisfied with the amendment which he has proposed.

Senator McLachlan:

– I can only take their word for it.

Senator Sir HAL COLEBATCH:

– I understand that they contend that what is proposed is an improvement on the clause in its original form, but I have received a communication from the Associated Chambers of Commerce to the effect that the words “ special resolution “ are not altogether satisfactory to them. A point which we should note is that the right of dissenting creditors or debtors to make application to the court to vary or reverse a decision of the creditors is preserved, and in that case I do not think there can be any fear of hole-and-corner methods such as the Minister suggests. If the committee allowed the clause to pass with the word “ resolution “ it would meet the case, as, according to the definition of “ resolution “, it would mean a resolution by a majority.

Senator McLachlan:

– Resolution means an ordinary resolution.

Senator Sir HAL COLEBATCH:

– It seems to me that when there is the right for creditors or debtors to appeal to the court as to whether a resolution shall be carried out, it should not be necessary to provide for such a big majority as threefourths.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– This matter has been the subject of discussion for many weeks, and the Associated Chambers of Commerce have approved of the word “ special “. Only this afternoon, the matter was further discussed when their representatives reiterated their approval of this provision. They strongly objected to the words “extraordinary resolution.” This is a com promise. We have to be guided by experience, and it is considered by all concerned that a special resolution is preferable to an extraordinary resolution.

Senator LAWSON:
Victoria

.- Senator Colebatch referred to a letter, which ho had received from the Associated Chambers of Commerce, copies of which have been forwarded to honorable senators. A number of suggestions have been made by the Associated Chambers of Commerce, the Bankruptcy Trustees Association and the Law Institute recommending various amendments. This is a highly technical measure, which should be referred toa standing committee to obtain expert advice from those engaged in administering bankruptcy legislation. Such a committee could then make recommendations to the Minister or this committee. At a conference which I attended this afternoon, lasting for four hours, the various amendments were considered in detail by the representatives of Chambers of Commerce, and the Bankruptcy Trustees Association, who have given the Minister the benefit of their experience. They have, accepted the proposal to substitute the word “ special “ for the word “extraordinary”, which was considered too drastic. These organizations have approved the numerous amendments, which the Minister proposes to move, and upon which agreement has been reached. Those charged with the administration of the law have reconciled their differences with those who have had experience of the measure. I support the amendment.

Amendment agreed to.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– I move -

That the proviso to paragraph (c) be left out, with a view to insert in lieu thereof the following proviso and sub-section : - “ Provided that no payments shall be made under this paragraph until twenty-eight days after a certificate that the notice convening the meeting was duly forwarded to the debtor and to every creditor appearing in the statement of affairs or debtor’s affidavit has beenfiled in the court together with a copy of such resolution. Before the expiration of that period of twenty-eight days the bankrupt or debtor or any creditor may apply to the court to reverse or vary the decision of the creditors and the court may make such order as it . thinks fit.” “ (1a.) (a) Where the bankrupt is under a contract of insurance (entered into before be became a bankrupt) insured against liabilities to thirdparties, then in the event of any such liability being incurred by the insured (either before or after he becomes a bankrupt) the amount of the liability so incurred shall upon being received by the trustee from the insurer be paid to the third party to whom such liability was incurred in priority toall the payments referred to in the last preceding sub-section, except those in paragraphs (a), (d), and (f) of that sub-section.

If the liability of the insurer to the insured is less than the liability of the insured to the third party nothing in this sub-section shall limit the rights of the third party in respect of the balance.

The provisions of this sub-section shall take effect notwithstanding any agreement to the contrary entered into after the commencement of thisact.”.

The proviso is regarded as a suitable substitute for that to be deleted. The proposed new sub-section is to give effect to the wishes of certain States now undertaking compulsory third party insurance.

Amendment agreed to.

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

Clause 19 verbally amended, and, as amended, agreed to.

Clause 20-

Section 88a of the principal act is repealed and the following section inserted in its stead : - “ 88a. Where a deed of assignment registered under Part XI. of this act or a deed of arrangement registered under Part XII. of this act is avoided by reason of the debtor becoming a bankrupt, any expenses properly and reasonably incurred, any lawfully authorized and bona fide commitments of the trustee under the deed, and such proportionate part of the remuneration as the court directs, shall be allowed or paid to the trustee under the deed by the trustee in the bankruptcy so far as the assets which pass to that trustee will permit.”.

Section proposed to be repealed - 88a. Where a deed of assignment under Part XT. of this act or a deed of arrangement under Part XII. of this act is avoided by reason of the bankruptcy of the debtor, any expenses properly incurred by the trustee under the deed in the performance of any of the duties imposed on him by this act shall be allowed or paid him by the trustee in the

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– I move -

That proposed now section 88a be left out with a view to insert inlieu thereof the following new section : - “88a. - (1.) Where any administration is followed by any subsequent administration, any expenses properly and reasonably incurred by and lawfully authorized by any trustee and any lawfully authorized and bona fide commitments of any trustee or debtor under the prior administration and such proportionate part of the remuneration of the trustee as the court directs shall be. allowed or paid pari passu by the trustee under the subsequent administration so far as the assets which pass to such last mentioned trustee will permit as a first charge thereon and in the event of there being two or more previousadministrations, the expenses and remuneration of an antecedent administration shall have priority over any administration subsequent thereto. “ (2.) Any payment made or to be made in or under any administration which came into force prior to tho commencement of this section shall, subject to any order which may have been made by the court in any case prior to the commencement of this section, be deemed to have been as validly made as if sub-section (1.) of this sectionhad been in force at the time of the antecedent administration coming into force and as regards payments made prior to the commencement of th’is section irrespective of whether such payment was made by the trustee or thedebtor under the first or only administration or by the trustee under the later administration. “ (3.) For the purposes of this section, administration ‘ means the administration of the estate of a debtor or bankrupt -

in bankruptcy;

under any composition, scheme of arrangement, or deed of assignment duly made or entered into under Part XI. of this Act; or

under any document duly registered under Part XII. of this Act.”.

That amendment has not been circulated. It covers one of the matters which have given rise to the immediate need for amending the act. Indeed, it covers one matter which has called loudest for remedy. It was always thought that the cost of administrations, that is the carrying on of a business under part XII., was covered by the law as it originally stood. But, according to a decision of a court which has not been the subject of an appeal, it is not so covered. In order to clarify the position, section 88a has been re-drafted.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 21 verbally amended, and, as amended, agreed to.

Clause 22-

Section ninety-three of the principal act is amended by omitting sub-section (2.) and inserting in its stead the following subsection : - “ (2.) Where, under an execution in respect of a ‘judgment for a sum exceeding twenty pounds, the goods; of a debtor are sold or money is paid in order to avoid sale, the sheriff shall deduct his costs of the execution f rom the proceeds of sale or the money paid and retain the balance for fourteen days, and if within that time notice is served on him of a petition having been presented by or against the debtor he shall continue to hold the balance until the petition shall be heard.

Section proposed to be amended -

93.- (1.) . . .

(2.) Where under an execution in respect of a judgment for a sum exceeding twenty pounds, the goods of a debtor are sofd or money is paid in order to avoid sale, the sheriff shall deduct his oosts of the execution from the proceeds of sale or the money paid, and retain the balance for fourteen days, and if ieithin that time -

notice is served on him of a petition having been presented by or against the debtor, and

a sequestration order is made against the debtor thereon or on any other petition of which the sheriff hatnotice, the sheriff shall pay the balance to the trustee, who shall be entitled to retain it as against the execution creditor :

Provided that the costs of the execution up to the dale of the service of the notice, and the iaxed costs incurred by any creditor in the action or proceeding under which the execution issued or such costs as are fined or allowed by the court before which the action or proceeding was tried or heard (not exceeding fifty pounds) shall be a first charge on the balance paid to the trustee.

Amendments (by SenatorMcLachlan) agreed to -

That after the word “ amended “ the following paragraph be inserted: - “ (a) by inserting, after sub-section 1, the following sub-section: - (1a) The provisions of the last preceding sub-section shall, so far as applicable, apply to any execution against land ‘ ; and 6 “.

That after the word “heard” (first occurring), proposed sub-section 2, the words “or withdrawn” be inserted.

Clause, as amended, agreed to.

Clause 23 verbally amended, and, as amended, agreed to.

Clauses 24 and 25 agreed to.

Clause 26-

Section onehundred and seven of the principal act is amended -

by adding at the end of paragraph (d) the following words “or for carrying on his business so far as is necessary for its beneficial wind ing-up “ ; and

. . .

Section proposed to be amended - 107. The trustee may, by permission of the creditors by resolution passed at any general meeting or of the Committee of Inspection, or by leave of the court, do all or any of the following things: -

Mortgage or pledge any part of the property of the bankrupt for the purpose of raising money for the payment of his debts.

Amendment (by Senator McLachlan) proposed -

That the words “ (a) by adding at the end of paragraph d the following words: - ‘or for carrying on his business so far as is necessary for its beneficial winding up’; and (b) ” be left out.

Senator RAE:
New South Wales

– Quite recently in New South Wales, a solicitor was sent to prison for five years for having embezzled trust funds. His head clerk was also convicted, but sentence was suspended. I was told by a lawyer, whom I engaged to look into the affairs of a poor widow who had given the solicitor money to invest, that the room in which his documents were kept is in a terrible state of muddle. A mere youth is in charge. There are piles upon piles of mortgages, contracts of sale, and so forth; the indexes are scattered about, some lying on the floor with portions torn out. The prisoner is permitted to go there, whether under escort or not I do not know, and make representations to the clerk in charge concerning the nature of the documents. But if any person attempts to obtain particulars regarding a trust account, he finds that it is practically impossible to do so owing to the fact that there is no index or catalogue of the documents, which fill almost to the ceiling a very large room. Does the act make provision against such loose conduct? This poor woman, for whom I have endeavoured to procure information, has been rendered almost destitute? How may such cases be dealt with ?

Senator McLACHLAN (South Aus - I am glad that the honorable senator has referred to this subject. I have recently taken steps to tighten up the administration. If the honorable senator will be good enough to supply me, in confidence, with the name of the bankrupt, I shall have inquiries made into the matter. The state of affairs that he has outlined certainly ought not to be allowed to continue. There are appropriate provisions for bringing before the Bankruptcy Court any bankrupt who happens to be in prison. It has been a big task to set up the administration allover Australia, and the profits are not as great as they were when bankruptcy was handled by the several States.

Senator Sir HAL COLEBATCH:
WESTERN AUSTRALIA · NAT

– The cost to creditors is a great deal higher.

Senator McLACHLAN:
UAP

– That is no reason why the sort of thing to which SenatorRae has directed attention should be permitted to continue. I am obliged to him for having raised the question, and shall have inquiries made by the officer in charge of the department, who is at present in Canberra and who, I feel sure, would not countenance such loose conduct. This class of administration depends on the regulations, which at present are under review and will be completed immediately this measure is enacted. We do not want to move until we know exactly the nature of the legislationunder which we have to work.

Senator RAE:
New South Wales

– I thank the Minister for his courteous explanation. There is no reason why this man’s name should not be published. He has led a double life, and has been an unmitigated scoundrel. His name is Clegg.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 27 agreed to.

Clause 28 (Effect of order of discharge).

Senator DUNN:
New South Wales

.- I should like the Minister to state whether the Bankruptcy Act affords any protection in the case of a person who is brought before the court by reason of debts that have been incurred, not by him, but by other persons.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– I am afraid that the honorable senator will find in the Bankruptcy Act very little relief for that class of person. Sequestration and acts of bankruptcy depend on. a variety of things. A judgment of the court of a State or of the High Court gives to the person who holds it the opportunity to take such action as will compel the debtor to commit an act of bankruptcy. The time to prevent that sort of thing is before the judgment is given by the court having the jurisdiction so to act.

Clause agreed to.

Clauses 29 to 31 agreed to.

Clause 32-

Section 128 of the principal act is amended . . .

Section proposed to be amended. 128. - (1. ) Where a sequestration order is made (3)If one-sixth in value of the creditors notify to the court that they object to any appointment . . .

Amendment (bySenator McLachlan ) agreed to -

That the followingbe added to the clause - “and (b) by omitting from sub-section 3 the words “ notify to the court that they object,” with a view to insert in lieu thereof the words “ or the Registrar lodges with the court an objection “

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

Clause 33-

Section 133 of the principal act is repealed, and the following section inserted in its stead : - “ 1 33. - ( 1 ) Where the creditors appoint any person other than the official receiver to be trustee of an estate in any bankruptcy proceeding under this act, his remuneration (if any) may he fixed by a resolution of the creditors, or if the creditors so resolve, by the committee of inspection, and shall be in the nature of a commission fixed within the prescribed limits on the amount realized or brought to credit by the trustee after the deduction of -

any sums paid to secured creditors in respect of their securities;

all moneys spent in carrying on the business of the debtor; and

all books debts collected by an agent of the trustee : (2.) Notwithstanding anything contained in the last preceding sub-section, the remuneration of the trustee may, if the creditors so resolve, be a sum of money fixed in accordance with the prescribed scale. (5.) Where the trustee pursuant to a resolution of the creditors carries on the business of the debtor, he may be allowed such commission on the turnover or sales made in the ordinary course of carrying on the business as is prescribed or as the Court on application directs. (8.) Notwithstanding anything contained in this section, the Court may order the remuneration of a trustee to be increased or reduced.”

Amendment (by Senator McLachlan) proposed -

That after the word “ may,” proposed new sub-section 1, the words “from time to time” be inserted.

Senator E B JOHNSTON:
Western Australia

– I should like the Minister to explain what is meant by the words “ within the prescribed limits “. Who is to fix those prescribed limits? Are they to be of such a nature that they will meet the varying conditions that exist from one end of Australia to the other? I know that a good deal of difficulty is experienced by farmers because the law as it now stands does not permit the performance of some of the services that have to be undertaken in the conduct of a. farm with a small annual turnover. Are not these words likely to limit the operation of the act, and cause difficulty to debtors by reason of their not permitting adequate remuneration?

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– This provision has been receiving consideration in certain other connexions. No exception is taken by either the Chamber of Commerce or the Registered Trustee Association to the interpretation that will be placed on the words in this part of the section, but exception has been taken to it in the following sub-section, and the honorable senator will see, from the amendments to be.made, how we have handled those objections to the satisfaction of the parties concerned. The term “ within the prescribed limits “ may be interpreted in a number of ways. It may. be satisfactory in one connexion under this law, but there may be a conflict of opinion as to its interpretation in other sections. In Western Australia, where the remuneration has been fixed at 1½ per cent. it has been found to operate harshly, especially in the case of small farms, the income from which might be only about £500, which means that the person watching the business on behalf of the creditors gets only £7 10s. for his year’s services. We have, I think, made the provision sufficiently elastic to give general satisfaction.

Senator LYNCH:
Western Australia

. - Is there any conflict between this sub-section and sub-section8, which states that the court may order the remuneration of a trustee to be increased or decreased.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

. - No. The honorable senator will see, from the amendments to be made, how we are dealing with that matter. Although we are dealing with an excellent class of people, there must be some control by the court. I do not know that the point raised by the honorable senator matters very much, because the registrar always has jurisdiction to move the court. Proposed new sub-section8 gives an over-riding power to the court in the event of there being any collusion or anything in the nature of a fraud.

Amendment agreed to.

Amendments (by Senator McLachlan) agreed to -

That after the word “any”, paragraph (a) of proposed new sub-section (1.) the word “ principal “ be inserted.

That the words “ ; and (c) all book debts collected by an agent of the trustee “ paragraph (c) of proposed new sub-section (1.) be left out.

That the words “ fixed in accordance with the prescribed scale “, proposed new subsection (2.) be left out.

That proposed new sub-section (5.) be left out with a view to insert in lieu thereof the following sub-section : - “ (5.) Where the trustee carries on the business of the debtor or where a debtor’s business is carried on under the supervision of a trustee pursuant to a resolution of the creditors, be may be allowed such periodical sums or commission on the turnover or sales made in the ordinary course of carrying on the business as are fixed from time to time by resolution of the creditors and agreed to by the debtor, or as the Court on application directs.”

That after the word “ may “, proposed new sub-section (8.) the words “on application of the registrar “ be inserted.

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

Clause 34 agreed to.

Clause 35 -

Section 136 of the principal act is amended -

by omitting from sub-section (1.) the words “ and brokers “ and inserting in their stead the words “agents, managers and other persons not being trustees;” and . . .

Section proposed to be amended- 136. - (1.) All bills and charges of solici tors, accountants, auctioneers, and brokers shall he taxed by the prescribed officer . . . (2.) The prescribed officer shall satisfy himself, before passing the bills and charges, that the employment of those persons . . . was duly sanctioned by the official receiver or trustee …

Amendment (by Senator McLachlan) agreed to -

That after the word “ trustees “, paragraph (a) the words “or persons exclusivelyemployed by trustees “ be inserted.

Clause, as amended, agreed to.

Clauses 36 to 39 agreed to.

Clause 40-

Section one hundred and fifty-seven of the principal act is amended -

by omitting from sub-section (1.) the words “ , his solicitor, or agent “ and inserting in their stead the words “or his solicitor”;

) by omitting from sub-section ( 1 . ) the word “ or “ (last occurring) and inserting in its stead the word “and”; and

Section proposed to be amended - 157. - (1.) A meeting of creditors . . . may be called by a debtor, his solicitor, or agent, by circulars delivered at or posted . . or by advertisement . . . .

Senator E B JOHNSTON:
Western Australia

– In this clause an important alteration of the existing law is contemplated. It has been customary in South Australia and Western Australia, and perhaps in some of the other States also, for meetings of creditors to be called by the debtor himself, or by his solicitor or his agent. This clause proposes to strike out the words “his solicitor or agent”, with a view to inserting in their stead the words “or. his solicitor “. That means that registered trustees or agents will not in future be permitted to call meetings of creditors. That may be a good thing for the legal profession, but not for the debtor or the general public.

Senator McLachlan:

– The bill seeks to protect the general public.

Senator E B JOHNSTON:

– The registered trustees will have the responsibility of handling the assets of the debtors, and I cannot see any objection to allowing them to call a meeting of creditors. The practice which has been followed in Western Australia and South Australia has proved satisfactory, and a change should not be made without good reason.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– When recommendations for amendments to the bankruptcy law came before me, I was surprised to find one providing that meetings of creditors shall be called only by members of the legal profession. The object of the clause is to ensure that a debtor shall have independent advice from the outset. A lawyer has nothing to gain, whereas a registered trustee has everything to gain by taking steps to bring about proceedings under the act. The same principle applies in other legislation; a bargain is not binding in certain circumstances should one of the parties thereto not first have had independent legal advice. As a lawyer myself, I do not wish to pursue this subject too far, and I shall, therefore, confine myself to reading the following report which the departmental officers have supplied to me : -

This amendment is designed to assure that before committing himself to any scheme or composition the debtor shall have proper legal and disinterested guidance. At present it is open to unqualified persons to persuade him to enter into a scheme under this particular part of the act so that such person may obtain the fees for performing the work. Such unqualified person would not be permitted to charge foes of a similar nature against the estate under any other method of winding up a debtor’s affairs.

A proposal has been put forward that persons registered to act as trustees should be authorized to call the meeting for the debtor and charge fees therefor, but this proposal cannot be accepted. Solicitation to obtain the trusteeship of an estate is strictly forbidden (section 135), and to adopt the proposal would not only have the effect of authorizing solicitation, but would also infringe another principle that a trustee must not obtain any profit or “advantage from his connexion with the estate other than his duly authorized remuneration (section 134 (1) (c) ).

A contention is advanced by the trustees that statements and accounts can be better prepared by accountants than by solicitors, but it will be observed that the section in question only refers to the calling of a meeting of creditors. There is no reference to any statements or accounts at this stage.

A contention that the fees charged by agents would be lower than those charged by solicitors is specious. The solicitor is usually required to give legal advice in addition to convening the meeting of creditors, and his costs must be itemized and duly taxed by an officer of the court. They must, therefore, be reasonable.

A man whose position is imperilled should not be permitted to get further into difficulties without first having the advice of some person who has nothing to gain whatever action he takes. Should a debtor be foolish enough to call a meeting of his creditors without seeking any advice, he must bear the consequences; but the Government is of the opinion that it is unwise to allow his agent to act for him. Having had some experience in these matters, I say that the amendment is sound.

Senator THOMPSON:
Queensland

.- At first I felt inclined to support Senator Johnston; but the position is different if we are dealing with the voluntary sequestration of deceased persons’ estates. In those cases, I agree that a solicitor rather than an ordinary trustee should be employed.

Senator LYNCH:
Western Australia

– If it is an ordinary sequestration, the case against the Minister is all the stronger. The clause seems to restrict the liberty of action of the debtor. It appears that the system of allowing trustees to call meetings of creditors has given satisfaction in Western Australia and South Australia. If not, it is strange that the injustice of that system has not been discovered before this. The calling of a meeting of creditors is not a matter requiring a vast amount of legal lore; it is largely a matter of accounts. We must consider the position of the debtor, for he is the unfortunate person who will have to pay the piper.

Senator Thompson:

– The creditors are the more unfortunate people.

Senator LYNCH:

– If it is found that legal advice should be obtained, there is nothing to prevent a trustee from consulting a solicitor. Why should we restrict the debtor’s freedom of action in the matter of calling a meeting of creditors ?

Amendment (by Senator McLachlan) proposed -

That paragraph (b) be left out.

Senator E B JOHNSTON:
Western Australia

– I am sorry that the Acting Attorney-General (Senator McLachlan) has submitted this amendment, as I consider that the proposal embodied in the measure as originally drafted, providing that a first meeting of creditors shall be advertised, is necessary. Such a provision existed in the Western Australian Bankruptcy Act, and should be embodied in the federal law. The population in Western Australia is scattered, and unless such meetings are advertised, many people engaged in business have no knowledge of what is happening. If a first meeting is advertised in the press it eventually appears in the Trade Gazette. The Government provided in the first instance that such meetings should be advertised, and now, at the request of certain interests, without any reason being given, has decided to amend the law.

Senator THOMPSON:
Queensland

– The Queensland law, which I regarded as one of the best insolvency measures we had in Australia, was, in accord with this amendment, which provides that a solicitor shall call a meeting of creditors, although I think that the original provision in the Commonwealth law, permitting an agent to do so, was an improvement. I am sorry that it is to be departed from; but, as the chambers of commerce are satisfied with the proposal it is not my intention to oppose it. The, Queensland law does not provide, so far as my knowledge goes, that meetings of creditors shall be advertised. I prefer to leave the clause as it stands.

Question - That the amendment (Senator McLachlan’s) be agreed to - put. The committee divided. (Temporary Chairman - Senator O’Halloran.)

AYES: 16

NOES: 9

Majority … .. . 7

AYES

NOES

Question so resolved in the affirmative.

Amendment agreed to.

Clause, as amended, agreed to.

Clause 41 agreed to.

Clause 42 verbally amended, and, as amended, agreed to.

Clause 43 -

Section one hundred and sixty-one of the principal act is amended -

Section proposed to be amended - 161. …..

The chairman of each meeting shall sign a certifiate in the prescribed form of the resolution passed thereat, and the certificate shall, . . . in the absence of fraud, be conclusive evidence that the meetings were duly convened and held and the resolutions duly carried.

If default is made . . . the court may’ on the application of any creditor or of the debtor annul the composition . . .

Amendments (by Senator McLachlan) agreed to -

That the following new paragraphs be inserted: - ” ( ba ) by omitting from paragraph ( c ) the words ‘ in the absence of fraud be conclusive ‘ with a view to insert in lieu thereof the words be prima facie ‘ “. and (d) by inserting in paragraph h after the words ‘ application of ‘ the words ‘ the Registrar ‘ “.

Clause, as amended, agreed to.

Clauses 44 and 45 agreed to.

Clause 46-

Section 163 of the principal act is amended -

Amendment (by Senator McLachlan) agreed to: -

That the following new paragraph be added : - “; and (h) by adding at the end thereof the following sub-section : - (3.) Such deed shall not operate to assign or make any of the debtor’s property divisible amongst his creditors which would not under section 91 of this act be so divisible under a sequestration order unless the deed, in express and specific terms, by direct reference thereto, assigns the particular property in question for the purposes of the deed.

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

Clauses 47 to 49 agreed to.

Clause 50 (Duties of trustee).

Senator McLACHLAN:
Acting Attorney-General · South Aus tralia · UAP

– I find that this clause is unnecessary, and the conference to-day has further fortified my opinion in that respect. I therefore ask honorable senators to leave it out of the bill.

Clause negatived.

Clauses 51 and 52 agreed to.

Clause 53-

Section 189 of the principal act is amended by omitting the definition of “ Creditors generally “ and inserting in its stead the following definition: - “Creditors generally” includes all creditors who may assent to a deed of arrangement.

Section proposed to be amended - “ 189. In this part, unless the contrary inten tion appears -

Amendment (by Senator McLachlan) agreed to -

That all the words from and including the words “ by omitting “ to the end of the clause be left out with a view to insert in lieu thereof the following words: - “by inserting in the definition of ‘ Creditors generally ‘ after the words ‘ creditors who ‘ the word ‘ may ‘.”

Clause, as amended, agreed to.

Clauses 54 to 57 agreed to.

Clause 58 -

Section 199 of the principal act is amended by inserting in sub-section (1.) after the word “debts” (second occurring), the words “and distribution of dividends “.

Section proposed to be amended - “ 1 99. - ( 1 . ) The provisions of this act as to -

the payment in priority of certain debts,

the proof of debt . . . shall apply to every deedofarrangement . . as if a sequestration order had been made against the debtor.”

Amendments (by Senator McLachlan) agreed to -

That after the word “ and “ the words “ in cases of deeds of assignment, the “ be inserted.

That the following new sub-clause be inserted: - “ ; and (b) by adding at the end thereof the following sub-section : - (4.) The provisions, so’ far as applicable, of Part XIV. of this act shall apply to every debtor under a deed of arrangement as fully and effectually as if an order of sequestration had been made against the debtor on the date of his execution of the deed.”.

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

Clauses 59 to 65 agreed to.

Clause 66-

After section 222 of the principal act the following section is inserted in Part XV.: - “ 222a. Any notice required by this act to be inserted in the Gazette may, in relation to the bankruptcy’ district of the Northern Territory, be inserted in the Gazette of the Northern Territory or in the Commonwealth Gazette.”.

Senator LYNCH:
Western Australia

– I am informed that the fees charged under the Commonwealth administration of the bankruptcy law exceed those which were charged by the States prior to the passing of the Commonwealth act.I should like to know what justification there is for such an increase of fees on a section of the community that, least of all, can bear an extra impost, and I hope to get an assurance from the Acting Attorney-General (Senator McLachlan) that the position will be made easier for creditors or debtors who cannot afford to pay the extra fees.

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– The matter referred to by Senator Lynch is now the subject of consideration. I have been guilty of writing some very fiery letters upon this matter of fees, and I can promise the honorable senator that, immediately this bill becomes law, we shall have a complete revision of fees. The whole of the rules are now being examined.

Senator HERBERT HAYS:
Tasmania

.- Many complaints have been voiced in regard to the charges under our bankruptcy law, and, indeed, in regard to its administration generally. It is said that the procedure is difficult and slow. Our experience in this respect is quite consistent with our experience of the Commonwealth control of every matter taken over from the States. One of the strongest reasons advanced for the passing of a Commonwealth bankruptcy law was that it would lead to simplification and expedition, as well as to a reduction of costs. But, according to complaints, the very opposite has resulted. Proceedings under the Commonwealth bankruptcy law are costly, difficult, and slow. I hope that the Minister can give us some ray of hope that the people will be relieved of the increased costs, and that the procedure will be made simpler and speedier.

Senator Sir Hal Colebatch:

– Does the honorable senator know of one case in which increased cost has not been brought about as the result of the Commonwealth taking over services from the States?

Senator HERBERT HAYS:

– No. I have already said that our experience in regard to bankruptcy administration is consistent with our experience in all fields in which the Commonwealth has assumed control as against the States. It is suggested we should have a Commonwealth company law. If the complaints raised against the administration of the bankruptcy law are also voiced against the administration of the company law, I do not know that any advantage will have been derived by the passing of such a law.

Amendment (by Senator McLachlan) agreed to -

That the following new section be inserted: - “ 222b. Any policy of life assurance or endowment in respect of the debtor’s own life, assigned, without the express consent of the debtor, for the benefit of creditors under a deed of assignment executed under Part XI. of this act or under a deed of arrangement registered under Part XII. of this act, prior to the commencement of this section, and . which policy has not been surrendered to, and terminated by, the insurer, or realized by the trustee, and, where any such policy has been realized by the trustee, any undistributed moneys arising therefrom in the hands of the trustee at the date of the commencement of this section, shall be deemed to be property not divisible amongst the creditors and shall, subject to any order of the court, re-vest in the debtor.”.

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

Senator McLACHLAN:
Acting Attorney-General · South Australia · UAP

– There are certain new clauses that I wish to have inserted in the bill, and I desire to be informed of the procedure that should be adopted. Standing Order No. 199 reads -

The following order shall be observed in considering a bill, and its title: - Clauses as printed, proposed new clauses . . .

May we now proceed to have the proposed clauses inserted, or must the bill be re-committed for that purpose?

The TEMPORARY CHAIRMAN (Senator O’Halloran:
SOUTH AUSTRALIA

– My interpretation of Standing Order No. 199 is that the clauses of the bill, and the proposed new clauses must be taken in their proper order: that is, that the consideration of the latter should follow that of the relevant clauses in the bill.

Senator Sir George Pearce:

– In what way can that be done ?

The TEMPORARY CHAIRMAN.Let us take a hypothetical case. If a proposed new clause was numbered 16a, the moving of its insertion should follow the passing of clause 16 of the bill.

Senator Sir George Pearce:

– Does that mean that the bill must be recommitted ?

The TEMPORARY CHAIRMAN.The bill will have to be re-committed.

Senator Sir George Pearce:

– I agree that the Standing Orders must be adhered to. But surely their purpose is to enable the business of the Senate or of any committee thereof to be transacted in a way that will meet the convenience of its members. Standing Order No. 199 provides that the order in which a bill shall be considered is, first the clauses as printed, and then proposed new clauses. The bill as printed ends at clause 66. “We have taken the clauses as they are printed. Having done that, I take it that we may now, under Standing Order No. 199, deal with the proposed new clauses. If that is not the meaning of that Standing Order, I do not understand English. The re-committal of the bill would involve the reading of every clause until the appropriate places for the insertion of the proposed new clauses were reached.

The TEMPORARY CHAIRMAN.The Standing Orders are for the guidance of the committee, not of the Minister in charge of the bill. If it were competent for the Minister to introduce proposed new clauses after the stage appropriate to their introduction had been passed, it would also be competent for any member of the committee to move at any stage for the insertion of a new clause. The correct procedure is the recommittal of the bill for the purpose of inserting specified new clauses. That is the sole purpose of the re-committal, and no new matter may be introduced.

Title agreed to.

Ordered -

That clause 2 be re-considered.

Clause 2-

Section 4 of the principal act is amended -

by omitting the definition of “trustee” and inserting in its stead the following definition: - “ Trustee “ includes the trustee in bankruptcy of a bankrupt’s estate and any person acting as a trustee or holding property in trust under any composition or scheme of arrangement under Division 5 of Part IV. or composition or assignment under Part XL or deed of arrangement under Part . XII. respectively of this act, but does not include any company, partnership, corporation or association.”.

Amendments (by Senator McLachlan) agreed to -

That after the word “ composition “, second occurring, the words “ scheme of arrangement “ be inserted.

That the words “ but does not include any company, partnership, corporation, or association “ be left out.

Clause, as amended, agreed to.

Bill reported with amendments.

Standing and Sessional Orders suspended.

Motion (by Senator McLachlan) proposed -

That the report be now adopted.

Amendment (by Senator Sir George Pearce) agreed to -

That thebill be re-committed for the purpose of considering proposed new clauses 15a, 31a, 38a, and 47a.

In committee (Recommittal) :

Amendments (by Senator McLachlan) agreed to -

That the following new clause be inserted: - 15a. Section seventy-one of the Principal Act is amended by omitting from sub-section (12.) the words “ or under an affiliation order, or undera judgment against him as a “ and inserting in their stead the words “ or for breach of promise of marriage, or under an affiliation or maintenance order, or under a judgment against him as a respondent or “

Sectionproposed to be amended - (12.) A composition or scheme accepted and approved . ‘ . . shall be binding on all the creditors . . . but shall not release the debtor from any liability under a judgment against him in an action for seduction, or under an affiliation order or under a judgment against him as a co-respondent in a matrimonial cause, except to such extent and under such conditions as the court expressly orders.

That the following new clause be inserted: - “31 a. Section one hundred and twenty-six of the Principal Act is amended - (a)by inserting at the end of subsection (1.) the following subsection : - “ (1a. ) For the purposes of the last preceding sub-section,’ person ‘ docs not include any company, partnership, corporation or association.”; and

by adding at the end thereof the following sub-section : - “ (6.) Any person not registered as in this section provided who acts as a trustee in contravention of this Act shall be liable on summary conviction to a fine not exceeding Five pounds for every day on which he is proved to have acted as trustee unless he satisfies the Court that his contravention of the law was due to inadvertence or that his action has been confined to taking such steps as were necessary for the protection of the estate.”.

Section proposed to be amended - 126. - (1.) Any person may apply to the court in the prescribed manner to be registered as qualified to act as a trustee.

That the following new clause be inserted: - 38a. Section one hundred and fifty-five of the Principal Act is amended by inserting, after sub-section (4.), the following subsection : - “ (4a.) The provisions of Division 4 of Part VI. of this Act shall so far as they are applicable, apply to the case of an order for administration under this section in like manner as to a sequestration order.”.

Section proposedto be amended -

155 (I.) -

(4.) With the modifications mentioned in this section, all the provisions of this Act . shall . . apply to the case of an order for admins tration under this section in like manner as to a sequestration order.

Th at the following new clause be inserted: - 47a. Section one hundred and sixty-five of the Principal Act is amended -

by inserting, after the words “provable debts “, the words “ except those from which a debtor would not he released by an order of discharge in a sequestration,”; and

by omitting the words “ (except such necessaries as are mentioned in paragraph (b) of section one hundred and sixty-three of this Act)” and inserting in their stead the words “ which in a sequestration would be divisible amongst his creditors “.

Section proposed to be amended - 165. Every such deed, until set aside, as in this part provided, shall release the debtor from all provable debts, and shall vest in the trustee all the property of the debtor (except such necessaries as are mentioned in paragraph (b) of section 163 of this Act), upon the trusts and for the purposes of the deed; and the trustee may recover the property . in like manner as a trustee in bankruptcy.

Billreported with further amendments; reports adopted.

Bill read a third time.

page 899

ADJOURNMENT

Royal Australian Navy: Ex-Able Seaman Watts

Motion (by Senator Sir George Pearce) proposed -

That the Senate do now adjourn.

Senator DUNN:
New South Wales

– I desire to bring under the notice of the Minister for Defence (Senator Pearce) the case of ex-Able Seaman Watts, who was discharged from the Royal Australian Navy after several years’ service, and has been deprived of deferred pay which ‘it is claimed is due to him. His discharge arose out of an incident that occurred on the lower deck of H.M.A.S. Albatross. I have had some experience of the lower deck in the Royal Australian Navy, because prior to my transfer to the military forces for war service, I was a naval rating, and 1 know that it is customary for the lower deck to discuss very earnestly all manner of topics, including politics, and all the various forms of sport. On one occasion there was a heated controversy on the lower deck, in consequence of which Watts was “ pitched “ for a fight. Any one who has had experience on the lower deck knows that whenever a fight is arranged the combatants forget all about the Marquis of Queensbury rules, and that it is an “ all-in “ fight.Watts, it seems took part in a fight, and when brought before the commanding officer was awarded fourteen days confined to barracks. During his period of detention his personal belongings were examined, and in his locker was found a marked copy of Hansard Debates, with certain arguments put for word in another place underlined. When the Albatross reached Jervis Bay, Watts was discharged, and he claims that deferred pay, amounting to about £100, was withheld ; all he received was a few pounds and a rail ticket to Victoria via Nowra. His naval discharge was intact, thus indicating that his discharge was a good one. Had he been a man of bad character during his period of service, the perforated corner of his discharge would have been torn off, and this would have told against him in any attempt to obtain employment in civil life.Watts must have been regarded as a man of excellent character, because he was one of the picked naval guard of honour to His Excellency the Governor-General at the official opening of the Sydney Harbour bridge. Feeling that he has a definite grievance against the Navy Department he made representations to the honorable member for East Sydney (Mr.Ward), who wrote to Mr. Macandie, the secretary to the Naval Board, on the matter. A few days ago Mr. Ward received the following reply from Mr. Macandie : -

Dear Sir,

With reference to your letter of the 4th May, 1932, relative to ex-Able Seaman William B. S. Watts’. I desire to refer yon to Naval Financial Regulation51, Statutory Rule No. ‘ 49 of 1928, which provides, paragraph 4, that “ no payment under this regulation ( i.e. deferred pay) shall be made to any person who is discharged from the Service as “ services no longer required.” As Watts was discharged “ Services no longer required,”he is not entitled to deferred pay.

As regards the corner of his certificate not having been cut off, I am to point out that such action is only taken when a man is discharged with a character assessed as “ bad “ or with disgrace, a severer assessment than has been awarded to Watts.

Yours faithfully,

L. Macandie, Secretary, Naval Board.

The treatment meted out to Watts, for having taken part in a fight with another naval rating on the lower deck, was as severe as if he had gone on board drunk, and made his way to the quarter deck in the belief that he was another Lord Nelson, or if in a heated moment he had struck a petty officer. In the circumstances, I hope that the Minister will give me an assurance that he will call for an inquiry, and see if it is not possible to redress this man’s grievance. I suggest that there be an inquiry, at which ex-able seaman Watts shall be legally represented, so that his case may be properly stated. All I ask is that this man be treated fairly, and I hope that the Minister, when replying, will promise that that will be done.

SenatorSir GEORGE PEARCE (Western Australia - Minister for Defence) [11.15]. - I confess that I am at a loss to know what the honorable senator desires me to do; but if he will let me have a Hansard proof of his remarks, I shall endeavour to understand his request.

Question resolved in the affirmative.

Semite adjourned at 11.16 p.m.

Cite as: Australia, Senate, Debates, 18 May 1932, viewed 22 October 2017, <http://historichansard.net/senate/1932/19320518_senate_13_134/>.

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