17th Parliament · 3rd Session
The President (Senator the Hon. Gordon Brown) took the chair at 3 p.m., and read prayers.
– I have received from Lady Robinson a letter of appreciation of the resolution of sympathy passed by the Senate on the occasion of the death of the Honorable Sir Arthur Robinson.
– I have received an urgent telegram relating to the lack of shipping facilities to and from King Island. Is the Minister for Supply and Shipping in a position to say when the steamer Kambah will be put into commission?
– I shall have inquiries made, and will inform the honorable senator of the result as early as possible.
SenatorFOLL. - Has the Minister for Trade and Customs perused the newspaper reports of a public meeting of more than 1,200 people, organized by the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia, in the Sydney Town Hall last night, at which the Re-establishment and Employment Rill was described by Major-General Maguire as a “gutless, miserable thing” and by another speaker as a hoax, swindle, conspiracy and betrayal “ ? Further, will the Minister say whether the Government is prepared to give effect to the demand of the meeting for the withdrawal and re-drafting of the bill, with the assistance of ex-service men and women, in order to provide for adequate rehabilitation? If not, will the Government give to the representatives of the returned soldiers an opportunity to express their views before the legislation comes into operation!
– I have read a report of the meeting, which was the sub ject of a question yesterday by Senator Allan MacDonald. I have only to say that in the preparation of the Reestablishment and Employment Bill organizations of returned servicemen were consulted. As I said when that measure was before this chamber, it was new legislation which would be given a trial, and if amendments were found to be necessary, they would be made. I also said that in such an event organizations ofservicemen would be consulted. I decline to give any assurance that legislation which has passed through the Parliament will not he put into operation. Meetings such as that held in Sydney last night are not helpful, although the starting of what, in modern language, is described as a “blitz” against a government to get what some people want is an old custom. There is also a suspicion that the organization which arranged the meeting is not entirely divorced from politics.
– I ask the Minister for Trade and Customs the following questions : -
– I am not aware of the constitution of the meeting, hut it would appear that its effectiveness was spoiled by the individuals who sponored it.
– With the breaking of the drought and the need ro encourage primary production there will be an increasing demand for superphosphate. Can the Minister representing the Minister for Commerce and Agriculture make a statement to the Senate in regard to the supplies of superphosphate! In particular, can he say whether thereis any prospect of obtaining supplies from Nauru and Ocean Islands! This matter is of great importance to primary producers who would appreciate in announcement by the Minister.
– In the temporary absence of the Minister representing the Minister for Commerce and Agriculture, I promise that inquiries will be made, and an answer supplied to the honorable senator.
– A few days ago, in response to a question, I promised Senator Allan MacDonald that I would make a statement on the supply of home knitTing needles. As stated by the honorable senator, the demand for these needles has increased greatly as a consequence of the Government’s action in reducing the coupon rating of knitting wools. The question referred to the local manufac- ture of wooden needles. Locally made wooden needles1 have long been on the market, but wood appears to be suitable only for the coarser gauges. However, further inquiries are being made, and should any material suitable for the finer gauges be discovered every assistance will be given for their production. There are also considerable supplies of steel needles of local manufacture available, but the demand for these is not great, owing to their limited uses. The greatest demand is for composition needles, especially gauges 8 to 13. The production of composition needles is dependent upon the availability of casein rod, local supplies of which have been limited for some time. Every endeavour has been made to procure additional supplies from the United Kingdom and, although the position there also is acute, it has recently been possible to secure a considerably increased allocation from that source. These are now beginning to arrive and should greatlyimprove the position in the near future.
– On the19th June.
asked me to inquire into the possibility of using synthetic rubber to overcome the shortage of elastic. As a result of my inquiries. I am now able to inform the honorable senator that a satisfactory rubber thread for use in the manufacture of elastic can be produced from synthetic rubber, but supplies of a suitable synthetic are not available in Australia at present. It is expected, however, that supplies of the necessary synthetic known as “ Neoprene “, will arrive in Australia in the near future. In the meantime, the only manufacturer equipped to manufacture rubber thread in large quantities has been authorized to produce to the limit of hie factory’s capacity, using crude rubber. Unfortunately, however, full capacity cannot bc reached because of the shortage of skilled operatives, but every endeavour is being made to increase production. At the moment, the corsetry industry has lent a number of operatives to the rubber manufacturer concerned so that increased quantities of elastic may be produced.
– Last week, representations were made by Senator Cooper and Senator Gibson regarding the urgent need to release . 303 ammunition to assist pastoralists and others to keep down pests which were destroying stock and crops. Advice has sincebeen received from the Army that a substantial quantity of new ammunition is now available for disposal, and that arrangements are being made for its immediate distribution through the cartridge associations in all States. These associations are affiliated with the hardware associations and consist of whole- salers, gunsmiths and firms which sell sporting goods. Three million rounds of cartridges will be distributed almost immediately in the various States, and a further million rounds will be issued as required after the first distribution has been made. The cartridges will be sold to users at £12 10s. a thousand, plus freight from the capital city - the price fixed by the Commonwealth Prices Commissioner. The ammunition is of first- grade quality and has been subjected to the normal Army tests. The official representatives of the Department of Supply and Shipping in each capital city will confer with the local trade representatives within the next few days, and I expect that the cartridges will be in the hands of the dealers for sale to users before the end of next week. I recognize the urgent need for this ammunition, particularly in outback pastoral areas, and have taken all possible steps to expedite its distribution. Persons requiring ammunition should make application immediately, through their normal retailers, after obtaining any police permit which may be required under the law. In Queensland, where the need for this ammunition is perhaps more pressing than elsewhere, 50,000 rounds of practice ammunition is already available from the Army for supply to the trade, and another 60,000 rounds is being provided immediately by the Army authorities. This ammunition is being retailed at £10 a thousand rounds, because it is not of the same high quality as that being disposed of through the Commonwealth Disposals Commission. Ct will, however, help to meet the more urgent needs of Queensland pastoralists until larger supplies are available towards the end of next week.
-Is the Minister for Trade and Customs aware that conditions in the hotelkeeping trade in our larger cities, especially Sydney and Brisbane, are becoming so chaotic that they will lead to a general contempt of the law? Is it a fact that the drastic curtailment of liquor supplies is largely responsible for this condition of affairs? Is the Minister aware that this also tends to increase black marketing, the detection of which is already a drain on our man-power? In order to avoid wastage of man-power and help clear up the chaotic conditions for licensed victuallers, will the Minister give early consideration to the easing of war-time restrictions on the manufacture and distribution of liquor supplies?
– I am not aware that chaotic conditions exist in the hotelkeeping trade in Sydney and Brisbane. Matters affecting the interests of hotelkeepers in New South Wales and Queensland are usually the subject of representation by the Licensed Victuallers Association which has been of great assistance to me in the handling of the liquor problem. The sale of beer is curtailed, and, consequently, there is a shortage of wine. When the purchasing power of the community is abnormal, and goods are in short supply, human nature being what it is, will always prefer stolen fruit to the fruit that is easily obtainable. That fact makes the problem most difficult. Considerable man-power is being used in the enforcement of liquor controls. I hope to be able to say more on the subject when I present to the Senate a statement dealing in detail with black marketing. When I point out that the handling of this problem during the first year of liquor control involved 25,000 letters, telegrams, interviews and deputations, honorable senators will have some idea of the proportions to which the problem has grown. Black-marketing in the liquor trade is being successfully combated. Salutary penalties are being inflicted on offenders, and thousands of cases have been investigated with respect to the sale and possession of illicit and inferior liquor. It is not possible at present to lift the present restrictions. Such action at this stage would not be in the interests of the community. The Government will give consideration to that aspect when such consideration if warranted.
– I preface a question which I desire to ask the Minister representing the Minister for Post-war
Reconstruction by stating that I have just received a letter from a man who, because he is threatened with eviction, desires to build his own house. He can provide all the labour necessary, except labour in respect of plumbing and electrical installations. He has a block of land, and will be able to build the house during his holidays. This man has been refused permission to build his own house, although the value of new material which he would require would not exceed £250. Is it the policy of the Government to prevent people from building their own houses?
– The position mentioned by the Acting Leader of the Opposition has been raised on several occasions in the Senate. It is not the policy of the Government to prevent the building of houses, or the making of improvements to homes. I think that I Iia ve already informed the Senate that only last week a review of all these regulations was ordered, and an easing of the controls is already in process. However, the case cited by the Acting Leader of the Opposition may, perhaps, be on all fours with one which I handled recently. A builder and his two sons wanted to build a house during their spare time at week-ends. I used what influence I had to obtain a permit for them, because they assured me that they had all the necessary material; a little later the man in question rang my secretary and wanted to obtain so many thousand feet of flooring boards. I point out that of all building permits actually granted by the department to private individuals, over one-third have not been exercised. Housing is a very pressing problem, and demands the pooling of available materials. Timber may be growing in the various States, but it is not ready for use in building. It has to be kiln-dried or treated in some other way. There is also a shortage of supplies of sanitary, gas and water fittings due to the tremendous demands made on our resources by allied services in the past, and the demand now being made for such materials by the British Navy under our commitments to whom we have already expended £6,000,000. Obviously, if housing is to be undertaken in a big way, as it must be, the present regulations must be eased. The shortage of man-power and material is still very acute; and there is no guarantee that the 50,000 personnel to be released from the defence forces will provide sufficient building operatives to enable the Government to achieve its objective. Construction outside of war service homes and the Government’s own requirements is a matter for arrangement between the State and Commonwealth Governments, and this subject has been set down for immediate discussion.
– In view of the increases of wages that have been granted as the result of the increased cost of living to public servants generally, I ask the Postmaster-General what consideration, if any, has been given in thi? respect to persons conducting allowance post offices?
– I have been advised that before I assumed office this subject was discussed at a conference at which it was agreed that a consent award should be issued. Under that award an increase of wages of approximately 33 per cent, was granted to persons conducting allowance post offices.
Beer Ration in BURMA and India.
Senator ALLAN MacDONALD.Having regard to the large number of Australian personnel fighting on the Burma front, also the recent transfer of a substantial number of Australian Imperial Force personnel to the British forces in India and Burma, will the Minister for Trade and Customs advise the Senate if these Australians are obtaining their full ration of Australian beer? Have any restrictions been placed upon the export of beer from Western Australia to Australian forces in India and Burma? If so, why were these restrictions imposed, and at whose request?
– I am not in possession of the information sought by the honorable senator. I shall endeavour to supply an answer to his question at a later hour.
asked the PostmasterGeneral, upon notice -
– The answers to the honorable senator’s questions are as follows : -
asked the Minister representing the Acting Prime Minister, upon notice -
– The Acting Prime Minister has supplied the following answers : - 1 and 2. Inquiries are being made and a further reply will be furnished to the honorable senator as early as possible.
Debate resumed from the 27th June (vide page 3658), on motion by Senator Keane -
That the bill be now read a second time.
– Like my colleagues who have already spoken in this debate, I regard this measure as one of the most important pieces of legislation ever to come before this Parliament. As far back as 1905, the party to which I belong realized tin necessity for placing the control of banking in the hands of those who owed allegiance to the people of Australia. In 1908 the Labour party made this a plank of its platform; and in 1911 was responsible for the establishment of the Commonwealth Bank. Whilst the Commonwealth Bank has made some progress in the financial field, control of -the banking system remains in the hands of private individuals. Yesterday, Senator Allan MacDonald endeavoured to show that private bankers were kindly men, prepared to risk their last penny in order that they might pioneer the development of the country, and act in the general interests of the people.
– I did not use language like that.
– The inference which I drew from the honorable senators remarks was that bankers were not interested in financial control; all they wanted to do was to ensure that the banking structure of Australia was such that it would be conducive to the best interests of Australia.
– They do not object to fair competition.
– The honorable senator accused Senator Grant of having said that bankers were bloodsuckers who wished to see their fellow men writhing in agony. I believe that neither the picture painted by Senator Allan MacDonald, nor that painted by Senator Grant, is accurate. In my view, bankers are not the all-wise individuals that some people would have us believe, nor are they disinterested in the control of the financial affairs of this country. They believe that the financial structure of Australia should be left in their control. I believe also that many bankers in this country are narrow-minded senile conservative men, completely out of touch with the affairs of this nation, and not fitted to remain in control of our financial structure. With simple child-like faith, the people of this country have been prepared too long to leave banking in the hands of these alleged banking experts. I do not agree that they are experts. How do they become bankers? They do not require any special technical ability or skill. The only qualification required is that they must have sufficient money to enable them to buy shares in a bank. When they become major shareholders, then automatically, because of their voting power, they are elected to the board. It is quite possible for a former drover who has amassed wealth, like the late Sir Sidney Kidman, to acquire sufficient shares in a bank to become one of its controllers. Once elected, such persons remain in office until they retire or die. Therefore, I believe that I have some grounds for saying that many members of bank boards have held office for so long that they have become senile and narrow-minded, and can be regarded only as a hindrance to the progress of the country. In directing banking policy, these men naturally are out to make profits. Their task is to guide the activities of the banks in such a way as to return the greatest profit to themselves and the shareholders. They are not concerned with the interests of the people at large. As businessmen, they are concerned only with running the affairs of the banks in such a manner as to secure the maximum return for the banks and their shareholders. In ordinary business, that outlook may be quite acceptable. It is part of our economic system, and where the interests of the people are not affected so vitally as they are in the case of banking, there may be little objection to it; but when in looking after their own interests, the bankers of this country show a total disregard for the interests of the nation, and do things which bring want and misery to the people, it is time that we, as tne representatives of the people, deprived them of their control of our financial system and placed that control in the hands of individuals who owe allegiance to the people. Experience has shown that in times of depression, when mortgages appear to be unsound and overdraft accounts unsafe, to protect their own interests bankers have found it necessary to reduce overdrafts, foreclose on mortgagors, and to tighten up their finances generally. All these things merely accentuate the onset and the severity of a depression. Then when the worst has passed, the reverse happens. When, in the judgment of the controllers of the private banking institutions, business seems likely to improve, it is their policy to issue credit, grant loans and reduce interest rates to encourage borrowing and speculation. Depressions and booms come in cycles. Eirst there is a period of confidence, then a period of over-confidence, leading to unsound speculation. Then the crash occurs and the banks, in endeavouring to protect their assets, accelerate the approach of adverse economic conditions with which we are all so familiar. This legislation will alter that system. In normal times, we might have permitted private control of banking to continue a little longer, because there might not have been so much agitation for reform as there is at present; but the problem which thiscountry will face in the post-war yearsis such that the Government is compelled to take this action. Unless we grapple with the problem now, disaster may follow. To-day, goods are in short supply. Day after day, at question time, information is sought in this chamber and in the House of Representatives in regard to the provision of houses. People want to buy all kinds of commodities which can not be procured. This state of affair* will continue for some time after the war. People will wish to re-equip their homes and to buy new motor cars, and they will have ample money to make these purchases. All the purchasing power dammed up during the last three or four years, will be available, and in addition, ex-servicemen will return to civil life with large sums of money in deferred pay and later will receive their war gratuities. In a country which has not sufficient goods to meet demands, this may lead to definite inflationary tendencies. Honorable senators will recall the conditions which existed in Germany after the last war. We have to make preparations now to prevent the occurrence of a similar state of affaire in this country. The first step in that preparation is to take from those individuals who are not concerned with the general interests of the community, the right to control our financial system, and to vest that power in the people’s bank - the bank created by the people, and controlled by the people.
Before passing on to one or two. features of the measure, I wish to drawattention to some of the tactics which are being employed by Labour’s opponents to discredit this Government’s proposals. Members of this Parliament who during the war years have had close association with the public servants of this country have developed a great admiration for these men. No organization has rendered greater service to Australia during the war than the Commonwealth Public Service; yet, one hears such descriptions as “ bureaucrats “ applied to these men. In fact, they have been described in such odious terms that many people who do not know the facts have come to believe that all public servants are tyrants, whereas we know them to be a loyal body of men.
SenatorHerbert Hays. - The same descriptions are applied by honorable senators opposite to bankers.
– I do notsay that they are bureaucrats. This play on words applies also to this bill. Opponents of this legislation claim that it means political control of hanking; but what is wrong with political control of banking? If there is not to be political control of banking, what kind of control are wo to have? The banks must be controlled either by a few individuals who do not owe allegiance to anybody in the community, and who can meet in the secrecy of their offices and, without criticism, formulate whatever policy they wish to put into effect, or by the elected representatives of the people. This Government believes the latter course to be the correct one. Every three years at least the elected representatives of the people have to give to the people an account of their stewardship. Whatever action they take must bear the scrutiny and criticism of their opponents in Parliament, and the even harsher scrutiny of the press. Another criticism is that in addition to being politically controlled it is caucuscontrolled. What is caucus? It is the meeting of the Parliamentary Labour party at which a common policy is adopted for implementation by a Labour government. Fortunately, the party to which I belong has been able to reach common agreeement on most matters over the last few years and I am certain that that will continue to be the case. Not long ago when another party in this Parliament was in office, its members were able to agree on very few matters. In this instance, the Government proposes that the policy decided on by caucus shall be put into effect - that is, of government control over the financial structure of the country. If the Government were fortified only by experience and its own opinion it might expect criticism from its opponents. In 1936, however, a royal commission consisting of a conservative body of men was appointed to examine the financial structure of Australia. It included only one man who had not conservative views - the present Acting Prime Minister (Mr. Chifley) and in its report it laid down a number of guiding principles. On the question of the direction of banking, paragraph 538 of the report states -
The Commonwealth Bunk should be in a position to give ; alead which the trading banks and otherfinancial institutions will follow, and if necessary, to give assistance in its capacity of the lender of last resort. Todothissuccessfully it must possess ample resources which it can use at its discretion its prestige must stand high, its capacity for leadership be proved and recognized, its policy be understood and accepted, and its powers be such that in the last resort it can enforce its policy. On their part, the trading banks and other financial institutions must co-operate with the Commonwealth Bank. It should be open to them to discuss freely with the Commonwealth Bank any matter of common interest and to make representations or criticism? on the facts disclosed to them, but in the end the responsibility must rest on the Commonwealth Bank to enforce its policy and on the trading banks and other institutions to conform to the policy and to assist in carrying it out.
When dealing with trading banks, the royal commission, in paragraph 532, stated- . . The efficient operation of a central banking system requires some limitation upon the powers of the trading banks in the general interests of the community. It may be in the interest of any trading bank, influenced by considerations of profit and liquidity, to expand or contract credit at a time when the general interest requires different action. It is not to be expected that a trading bank will take action entirely opposed to its own interest, especially if it has competitors ready to take’ business from it. It is for the Commonwealth Bank to regulate credit in such a way to make the interest of the trading banks conform to the general interest.
That is what the Government proposes to do under this bill.I do not intend to quote from the report on the question of general banking, but the commission suggests that in order that the Commonwealth Bank might effectively enforce its policy of credit control, it should have a voice in general banking. If it is desired to issue credit there must be some person to whom the credit is issued. There must be borrowers and means must be employed to issue them with credit. There is no reason why a bank which is set up by the people should not have the same trading rights as a bank set up by private individuals. Until 1924 the Commonwealth Bank engaged in trading, and had the Commonwealth Bank Board not been set up, consisting of people whose interests were akin to those of the associated banks, the Commonwealth Bank would probably have been the strongest trading bank in Australia to-day. It is the bank of the people, and, therefore, it ought to enter intimately into all the financial transactions of the people. Yesterday an honorable senator stated that the Commonwealth Bank would not know anything about issuing loans because that class of business was beyond it, it was purely a matter for private banks to handle. The suggestion was that the Commonwealth Bank did not know how to issue loans, and that the officers of the Commonwealth Bank had not the technical knowledge or ability or common sense to practise in a way similar to that of private banks. No body of men in the community is better fitted to do such work than the officers of the Commonwealth Bank. When Sir Alfred Davidson was actually associated with the Bank of New South Wales he established an efficient and creditable service by appointing economists who rendered good service to Australian banking. They established a standard which had not been attained in banking circles previously. Unfortunately, however, because that activity cost the Bank of New South Wales money, the scheme was not allowed to continue. I hope that when the Commonwealth Bank is reorganized it will consider the inclusion in its structure of a department to advise the Government on economics and technical matters.
Until 1924, the Commonwealth Bank had operated under the control of a Governor. In that year a non-Labour Government was in office, and in its wisdom it abolished the control by a Governor and set up the Commonwealth
Bank Board. It provided that the members of the board should be . men who had been actively engaged in agriculture, commerce, finance or industry. As a result, the personnel of the board had interests in most of the trading banks which were soon found to clash with those of the Commonwealth Bank, consequently the board did not always function in the best interests of that institution. That state of affairs has persisted until now and the Government is convinced that those people, bearing allegiance to outside bodies, cannot give to the people of Australia their undivided attention and the unswerving loyalty which the position demands. It is considered, therefore, that such a board should be discontinued. The Government is determined to revert to the form of control existing before 1924 - that of a Governor, but he will be assisted by an Advisory Council which will bear allegiance to the Commonwealth and to no one else. It will consist of technical men capable of grappling with any banking problems that may arise, and able to give the Governor whatever advice he requires. Under such a set-up the Commonwealth Bank will operate in the best interests of the people.
The bill contains provision to constitute within the Commonwealth Bank an Industrial Finance Department. It is felt that this will supply a long-felt want. Under the present system, if a person requires a loan he has to go to a private bank. The purpose for which he requires the loan may be the establishing of an industry which will be of great value to the nation, but the banker has to be assured that the loan will return a substantial dividend within a certain period before he will advance the money. If it will not, then the advance will not be made - irrespective of the fact that the industry might be the means of supplying a great need in Australia. The stockintrade of a banker is money on the investment of which he must show a profit. Such a system is considered by the Government to be wrong. During the war period Australia has felt the need of many types of manufactures which have to be imported. Had industry been fostered for the manufacture of those articles in this country our war effort would have been greatly assisted. Under this legislation, if a person or a company desires to embark on a project which will be of benefit to the people of Australia, and afford the nation greater security, the Government, through the Commonwealth Bank, will provide that person or company with the finance to proceed with the project. The proposal of the Government is to make long-term loans available at low rates of interest. The welfare of the people is so closely interlocked with the financial structure that it is impossible to dissociate one from the other. Many wrongs need to be put right, and there are many reforms which t he Labour party would like to bring about, but the greatest of all changes which would give to the people a sense of security and help to provide full employment is one which would ensure a stable financial system capable of weathering the approaching storm, and designed to assist in promoting the welfare of the people of Australia.
.- This is the most important measure that has been introduced since I have been a member of the Senate. I have no illusions regarding the ramifications of money power. The great William Shakespeare said -
Gold yellow glittering, precious gold,
This yellow slave
Will knit and break religions; bless the accursed ;
Make the hoar leprosy adored; place thieves,
And give them title, knee and. approbation
With senators on thebench. 1 do not wish to reflect on the managers of the various trading banks throughout Australia, because I recognize that they are worthy citizens and gentlemen of high standing in the community; but “ they know not what they do “. They work under a system which is operating against the best interests of the general community. The chief function of the Parliament is to serve the people and so far as possible supply them with what, they need. It should be the servant of the people in a democracy. Its main object should be to help the individual to obtain freedom and security and to establish social justice. Its effectiveness must be judged by the welfare and happiness of the com munity. The idea whichactuates the Government in submitting this measure is to provide for the happiness and welfare of the community in general. During the last depression there was no shortage whatever of the necessaries of life. If anybody wished to buy a grand piano, a washing machine, a crow-bar or a needle, there were sellers in hundreds. As has been said times without number, we had poverty amidst plenty. I had three brothers who are as big and strapping as I am. They are good tradesmen, but during the depression years they were chipping grass on the footpaths of Adelaide to provide a living for themselves and their wives and families. At that time I was paying toll to the banks of 8 per cent. in respect of money advanced to me on my dwelling house. The banks desire to have in the community a vast army of slaves - the unemployed - who can be called upon at any time to produce the necessaries of life for only the selected few. During the depression years the private banks restricted credit when they should have expanded it. In times of boom they advance money readily, but in times of depression they do the very opposite to what they should do, and restrict credit. That forces prices up and brings them down suddenly, thus enabling the banks to take over properties over which they hold mortgages. I know several farmers in Tasmania whose properties were taken over by the banks during the last depression. The principles on which the banks acted do not accord with true democratic principles.
The Minister for Trade and Customs (Senator Keane) in his second-reading speech on this bill, stated -
Thus the necessities of the economic situation in Australia produced a central bank. But it did not fully measure up to its responsibilities. In the opinion of the Government, the Commonwealth Bank and the banking system should have done more to mitigate the distress of the depression years. A similar view was expressed by the Royal Commission on Monetary and Banking Systems in 1937 in these words -
Two of the most important monetary measures taken during the depression were the expansion of central bank credit by means of treasury-bills in 1931 and 1932, and the movement in the exchange rate in January, 1931. In each case, in our opinion, the depression would have been lightened, and some of its worst effects avoided, if those measures had been taken earlier.
In 1931, in the depths of the depression, the Commonwealth Bank and the private banks refused to assist the rehabilitation plan of the Commonwealth and State Governments designed to relieve acute unemployment and restore industry. The present Government is determined to ensure, so far as it is in its power, that this will not be repeated.
The introduction of this measure prompts me to say that this is the day I have lived for, and that this bill introduces a principle for which men engaged in industry and service men and women are fighting. We are engaged in a war for democracy, and I am proud to be associated with a ministry that is determined to make democratic government function in the interests of the people. The Acting Leader of the Opposition (Senator Leckie), in complaining about political control, remarked -
This banking bill will give power to the Government to control the banks and make money available anywhere it likes.
But what of the political control exercised by the Opposition through its representatives on the Commonwealth Bank Board. In February, 1931, the Chairman of the board, the late Sir Robert Gibson, in conveying a decision of the board to the Treasurer of the day, said -
Subject to adequate reductions of wages, pensions and social benefits of all kinds, and other factors which affect the cost of living, the Bank Board would co-operate with the Government in maintaining industry and reducing unemployment.
This meant that, provided living standards were reduced, and irrespective of what the policy of the Government might have been, it was only on those terms that the bank would allow the Government to carry on. Wo know what happened, pensions, social services and wages were reduced, but at the same time the Government was not able to continue in office, because it had not been granted the funds necessary to relieve the unemployment position prevailing at that time. A similar position arose in Great Britain, and when the Government of the United Kingdom made an appeal for funds, it was told that it would have to reduce the vote for the dole by £12,000,000 before it could be granted necessary financial assistance.
Senator Leckie also complained that it was wrong for the Government to put its financial policy into operation, but we know, of course, that he desires to give effect to the policy of the trading banks. This bill provides that, if a disagreement occurs between the Government and the Governor of the Commonwealth Bank, the Government shall give to the Governor a written undertaking that it will be responsible for whatever happens in giving effect to the policy of the Government. Therefore, the Government takes full responsibility for its action, and the bank will be called upon to give effect to the policy laid down by the Government. We say that that is in accordance with democratic principles. As the Government is responsible for policy, it should take all the kicks that may be coming to it because of that policy. Remarks by Sir William Beveridge have been quoted on many occasions by members of the Opposition, but they support his statements only when it suits them to do so. In his book, Full Employment in a Free Society, Sir William Beveridge remarks -
The banking system must clearly function in accord with the general financial policy of the State.
I remember well certain remarks by a former great President of the United States of America, Theodore Roosevelt, who many years ago introduced antitrust legislation. His fight against the Standard Oil Trust is fairly well known and is well worth recalling. He secured against the oil trust, penalties, amounting in all to about $29,000,000. Against this and other anti-trust legislation the banks went on strike. They refused to pay in gold, and issued a paper currency of their own creation, stating -
We will continue to trade in paper currency, and pay no more gold, until we get from PresidentRoosevelt. the necessary guarantee against adverse legislation. The people can have paper money, or leave it; they will get nothing else. The mills, mines and other interests, controlled by ourselves or allied interests, will close or slacken down, until we get effective guarantees against antitrust prosecutions.
That was the ultimatum of the money trust to the nation. The President capitulated and apologized and then got the money necessary for the work which he desired to do. In 1921 the Baldwin Government of Great Britain appointed a royal commission to investigate the monetary situation and discover whether there was a bank combine. Lord Baldwin said -
Such a combine would mean that the finan cial safety of the country and the interests of the individual would be defenceless, and traders would be placed in the hands ofa few individuals who would naturally operate mainly in the interests of the shareholders.
That is happening at present. The policy of the private banking institutions is such that they would naturally interest themselves in the making of profits for the shareholders, otherwise they would not be carrying out the job which they are paid to do. I do not blame the bankers, but I blame the system under which they operate. The Government, representing the people of it democracy, claims the right to alter the present banking system. Lord Baldwin said -
We believe it is already in existence and it constitutes one of the gravest menaces of our time, as it can control the credit machine, so effectively, so as to prevent the wheels of production moving, unless a certain tribute is forthcoming to itself.
Shakespeare knew well what he was writing about when he said -
The strongest castle, tower and town,
The golden bullet beats it down.
In a democracy the real issue is whether private banking corporations shall continue in control of currency and credit, or whether the State shall assume control. Unless the money problem is solved, there is little hope of a permanent solution of other problems. Public credit should be controlled for the people by a national credit authority whose duty would be to provide money service sufficient to give effect to the will of the Parliament. Further taxation is out of the question; borrowing means debt in perpetuity, which is reaching almost unmanageable proportions. The intelligent use of currency and credit will not involve the country in debt but will provide money service at cost. I am a member of the Christian Industrial Fellowship of England whose excellent publications I read. That body recently issued a pamphlet entitled Winning
England, written by the Reverend P. T. Kirk, Director of the Fellowship. In it he said -
Money nowadays is created by private institutions for the sake of privato profit, irrespective of what are the needs of the people; and this brings in its wake a fearful bondage. Indeed, it is not without significance that the word “ bonds “ has become the operative word in international trade; or that “mortgage” is by derivation the rule of the “Dead hand”.
The great prophets of ancient time protested against usury; modern usury is deadlier still. It is more than time that we knew enough of its effects to be able to assault its causes. Poverty and slums and wars do not come by chance, and they are not the’ will of God; they come by the sins of mcn, especially the sin of greed.
And, as Balzac put it a century ago: “The final battle for Christianity willbe over the money problem; till that is solved there can be no universal application of Christianity.”
I believe that that is right. Before we can have Christianity in this world - a sane system under which all men will live as brothers - the evil system of banking must be destroyed and something better substituted. In his remarks concerning the general banking department of the ‘Commonwealth Bank, the Minister for Trade and Customs said -
General banking business should bc carried on in a separate division of the Bank to be known as the General Banking Division, the accounts and transactions of which will be kept separate from the other accounts and transactions of the Bank.
It should be the duty of the Bank, through the General Banking Division, to develop and expand, its general banking business, and in doing so, it should not refuse, to conduct any banking business, for any person, by reason, only, that to do so would have the effect, of taking awaybusiness from another bank.
I have tried to borrow money from the Commonwealth Bank toundertake certain work, but I have failed simply because that institution does not transact general banking business. I know of other people who have desired to transfer their accounts from private banks to the Commonwealth Bank when they became enlightened as to the evils associated with private banking, only to be refused because the Commonwealth Bank had agreed not to compete with the private banks. I believe that this bill is a step in the right direction, and that the Commonwealth Bank should go out and get all the business possible, so that it will become the strongest banking institution in the Commonwealth. Before it can compete effectively with the private banks, a branch of the Commonwealth Bank must be established in every town and village of any size in the Commonwealth. During the last decade the Commonwealth Bank has not made much progress. In Tasmania, the only cities and towns which have branches of the Commonwealth Bank are Hobart, Launceston, Devonport and Burnie. Last Christmas I was staying at Ulverstone and when I wished to cash a cheque I had to go either to Burnie or Devonport. The Commonwealth Bank cannot compete with the private banks with any hope of success until it has as many branches throughout the Commonwealth as the private banks have. In Devonport where there is a branch of the Commonwealth Bank, there are branches of five private trading banks. A similar position exists at Burnie. At Ulverstone, there are branches of five private banks but not even a branch of the Commonwealth Bank. I understand that a similar position exists in many towns throughout the Commonwealth. That the Commonwealth Bank has not expanded “to any degree during the last decade is not to the credit of previous governments.
I believe that an Industrial Finance Department of the Commonwealth Bank is an urgent necessity. In my early days, when I was secretary of the Workers Educational Association, the vicepresident of the National Federation, who was also an active member of the Workers Educational Association, used to shake his head in sorrow when I advocated the nationalization of the banks. Years afterwards, he stopped his car in the street and asked whether I would ride home with him. I thanked him and got in his car. As we drove along, he said, “ I used to laugh at you when you advocated the nationalization of the banks, but now I am convinced that you were right. I shall tell you what the private banks did to me. As you know, I have just been given a fairly large contract. I made all the necessary preparation to carry it out, but when I went to my bank and asked for the finance necessary to enable me to carry out the contract, to my great astonishment I was told that money for the purpose was not available. I could not understand that decision, because during the whole of my business life I had dealt with that bank. Accordingly, I made inquiries, and found that the next lowest tenderer was a director of the bank. He had spoken a quiet word in the ear of the manager, telling him to refuse to finance me, because, he said, ‘ If he cannot carry out the contract, it will come to me ‘.” That is the gentlemanly way that financiers work !
– Why did not the contractor go to another bank?
– He did go to another bank, but was told, “ You don’t usually come to us for finance. Why don’t you go to your usual bank ? “. The contractor said that he had done so, but had been refused financial assistance. He was then told that, that being so, he could not expect another bank to finance him. Senator Sampson knows to whom 1 refer.
In considering our financial system we must have regard to the interest burden and the growing national debt. I hope that in the years to come the Government will be able to do something to reduce our enormous national debt. The following table shows how the national debt has increased since 1860 : -
Honorable senators opposite cannot lay the blame for that enormous increase of the national debt on any Labour government, because since federation the Labour party has been in power on only two occasions. When we reflect that the national debt has increased by 1,067 per cent, since 1900, we realize how great is the increase. The interest bill on that debt is over £1,000,000 a week. The national debt to-day is nearly 200 times as great as it was in 1860 although Australia’s population is only four times as great. How long can we continue along these lines? Senator Leckie said that this bill amounted to a great gamble. I reply that in the past banking business has been a great swindle. We cannot carry on the policy that has been followed in the past. The time has come when that policy must be altered. Senator Leckie also said that we could not obtain money unless we had assets. We all agree with that, but the position is that we can issue money which will create assets to provide the necessary cover. I shall deal with that point later.
During the debate on this bill reference has been made to the need for a gold backing to the currency. Honorable senators know that in the United States of America there is gold to the value of thousands of millions of pounds. It has been dug out of one hole, and simply put into another hole. It serves no useful purpose. The real backing of any currency is, and always will be, the productive capacity of the nation. If a nation can produce goods and services, it can issue credit up to the capacity of its production. It cannot issue more credit than is represented by the goods it produces, but when a nation is producing goods, which represent assets, it can issue credit up to the full productive capacity of the nation. Senator Allan MacDonald said that we must have an adequate gold backing to our currency. The Opposition has always said that if we follow Britain we shall be all right. Statistics show that up to the 8th August, 1944, there was in Great Britain a fiduciary note issue of £1,200,241,718 and that its gold backing amounted to only £214,718. Evidently, the people of Britain believe that the real credit of the nation is represented by its productive capacity. Senator Cooper said that this bill provided for the nationalization of the banks and he complained that the Prime Minister (Mr. Curtin) had promised not to socialize any industry during the war. By no stretch of the imagination can it be said that the_ bill represents socialization” of the private banks. I wish that it did. The measure falls far short of the socialization of the banking system, because the private banks still retain the right to create credit, and so long as they retain that right they can carry on. The honorable senator said that it was too much to expect one man to control the banking system. We know, however, that Sir Denison Miller did the job; and Senator Nicholls has given details of the business associations of the members of the first Commonwealth Bank Board. We know the pressure which they brought to. bear upon the Commonwealth Bank during the depression in the interests of their own business associates. We are determined that such a state of affairs will not occur again. Senator Cooper extolled the virtues of the private banks. He said that their pioneering work had been of great assistance to the country. The private hanks have not done one iota of work in pioneering this country. They have not turned one sod of earth, or made one wheel revolve. All that the controllers of the private banks did in the past was to sit in their offices and take toll of the productive capacity of the people; and, during the degression, they did not hesitate to foreclose on the assets built up by the workers, and thus turn to their own profit the nation’s assets.
The provisions dealing with the staff of the Commonwealth Bank are most important. I commend the proposal to set up appeal boards in the interests of the bank’s staffs. For many years I appeared as an advocate ‘before the Railways Appeal Board in Tasmania, and I know something of the good work which bodies of this kind can do. Their very existence has a soothing effect upon employees, because a man who is dismissed, disrated or punished in any way, knows that he can obtain justice from an appeal board provided it is properly constituted. This is a move in the right direction so far as the employees of the Commonwealth Bank are concerned.
– What does the honorable senator mean by “ properly constituted “?
– The board with which I was associated for many years, and which was properly constituted, consisted of a representative of the employers and a representative of the employees with an independent chairman.
-Would the honorable senator agree to a similar provision being inserted in thebill?
– Yes. The appeal boards will be of great value in dealing with promotions. Many people are passed over when promotions are being made because, through no fault of their own, they do not appear to catch the eye of the boss . Should a man think that he is entitled to promotion, he will be able to place his case before an appeal board. I commend the Government with respect to that provision.
At present the Commonwealth Savings Bank is permitted to accept deposits up to only a certain limit from trade unions, friendly societies, charitable organizations, and semi-governmental bodies. Such bodies do not operate for profit. They exist for the betterment of the community, and should be permitted to make full use of the facilities provided by the Commonwealth Savings Bank. I know of a trade union in Launceston which in order to do all its business with the Commonwealth Savings Bank opened a number of accounts with the bank, and in respect of each account operated a separate passbook. After its deposits in, say, its No. 1 account exceeded the prescribed limit the union opened a No. 2 account, and when deposits in that account reached the limit it opened a No. 3 account, and so on. No body of that kind should be obliged to resort to that subterfuge in order to do all its business with the Commonwealth Savings Bank. The provision which obliges it to follow that course is obviously silly. All semi-governmental bodies, trade unions, friendly societies and charitable organizations, which do not exist to make profit, should be allowed to do all their banking business with the Commonwealth Savings Bank.
SenatorLarge. - They can do so by opening accounts in the general ‘banking department.
– But in that case they would not receive interest on their deposits. Mr. Barrett, a member of the Victorian Housing ‘Commission, has estimated that at present there is a shortage of 250,000 houses in Australia. Here, I suggest, is an avenue in which we could well employ the national credit in order to render service to the community. When we create an asset we can issue enough credit against that asset, and by that means we can increase the assets of the community, at the same time providing the people with homes without placing any unnecessaryburden upon the community. I agree with the social credit principle that what is physically possible is also financially possible.On this point honorable senators will recall that the late Senator Darcey was fond of citing paragraphs 503 and 504 of the report of the Royal Commission on Monetary and Banking Systems. I take this opportunity to refresh the minds of honorable senators on those sections of the report. Paragraph 503 reads -
The central bankin the Australian system is the Commonwealth Bank of Australia. This bank isa public institution engaged in the discharge of a public trust. As the central bank, its special function is to regulate the volume of credit in the national interest, and its distinctive attribute is its control of the note issue. Within the limits prescribed by law. it has the power to print and issue notes as legal tender money, and every obligation undertaken by the Commonwealth Bank i.-. backed by this power of creating themoney with which to discharge it.
Paragraph 504 reads -
Because of this power, the Commonwealth Dank is able to increase the cash of the trading banks in the ways we have pointed out above. Because of this power, too, the Commonwealth Bank can increase the cash reserves of the trading banks; for example, it can buy securities or other property, it can lend to the Governments or to others in a variety of ways, and it can even make money available to Governments or to others free of any charge.
Let us suppose that the Commonwealth Bank issued £1,000 worth of credit, portion of which was used to erect a home valued at £1,000. In that case, we should create an asset by the issue of credit. Labour applied to materials creates a greater value than the initial credit used. For instance, if credit of £1,000 is made available to construct a home, the value of the home so constructed would exceed £1,000. The honorable member for Denison (Dr. Gaba) has put forward a very sound proposal in this respect. He advocates that homes should be provided free to all families of five or mow children. Such a scheme is much to be preferred to child endowment as a means of assisting large families, because the cost involved is less than the cost incurred under child endowment. It would mean that a man with a wife and five children would receive aid to the value of 30s. a week represented by the rent of the house. That is equivalent to the endowment payable in respect of four children, namely, £78 a year; but in respect of that house valued at, say, £1, 000 the cost to the nation, at the rate of 4 per cent. interest, would be only £40 a year. Another important consideration is that child endowment is paid out of revenue, whilst a certain proportion of the cost is made up by a payroll tax which increases the cost to the community, because such a tax increases the price of commodities. ‘ Therefore, by providing a house free of rent to families consisting of five or more children in place of child endowment, the community would be relieved of a considerable proportion of the cost now incurred in the provision of child endowment. The provision of a house free of rent to such families would also give more contentment and satisfaction to such families than they now; receive from child endowment. I urge the Government to give serious consideration to that suggestion.
Another aspect of home building is thu need to provide finance to building societies, or, better still, to State governments for the express purpose of constructing homes for old-age pensioners. How our old-age pensioners can live on 32s. 6d. a week, after paying rent out of their pension, is beyond my comprehension. I urge the Government to provide special homes for old-age pensioners at a rental based only on the actual cost of the house. I also draw attention to the plight of many worthy unmarried women who arc obliged to live away from home in our capital cities. Many women in this class, whom one might term “ women bachelors”, are living in Canberra. I can see no reason why the Government should not provide bachelor flats for these women who are entitled to something better than mere boarding-house accommodation, because they are compelled to live away from home. The Government should make some effort to give’ them something which might be called a home of their own. Such projects could he financed under the bill. Refer ence has been made to the shortage of building materials, but honorable senators opposite have made statements on the subject which are not correct. In the present cricumstances the Government is doing everything it possibly can to overcome the shortage of building materials. Through the good offices of the Minister for Trade and Customs (Senator Keane), I was able to obtain from the appropriate department information as to the real position. I have been informed that of the materials available a percentage is allocated by the Building Materials Committee for essential civilian requirements such as housing, agricultural needs, public utilities, &c. A permit issued by the Directorate of War Organization of Industry entitles the holder to purchase the requisite building materials, if the merchant has them in stock. The merchant can replace these issues by quoting the permit number. Likewise, a permit given by a local District Agricultural Committee allows a farmer to draw building materials from the local merchant. Apart from these issues made upon permit, the merchants are also allowed small quotas for day-to-day repairs. The Department of Munitions has avoided instituting controls for every small requirement of the community. It exercises the control by regulating the sales made by the manufacturers and the merchants. If a merchant allows the quota he is given to become exhausted through indiscriminate sales he will very quickly be out of stock and have no more for sale until his next quota is available. Furthermore, if a merchant does not exercise discrimination in the sales of his quota it will be reduced or withdrawn. All this ensures that whilst in legitimate cases, which have to be explained to the merchant, the user has reasonable opportunities of obtaining his requirements, there can be no wasteful use of the limited supplies available.
Senator Gibson stated that at present it is possible to obtain building materials anywhere. The information which I have just given on the best of authority shows that supplies of materials are limited, and can be used only for specific purposes. During the war, Australia, with only 60 per cent. of its normal rural labour, has supplied the food requirements of 12,000,000 people.We have also supplied the clothing requirements of 9,000,000 people. That has been done after 850,000 of the most skilled artisans have been drafted into the armed forces, and while 750,000’ of our most able workers have been employed in munitions factories and war industries. This achievement has been accomplished while 1,600,000 out of our total of 2,500,000 operatives have been engaged on other work. The bill is part of a plan to provide full employment in Australia. I believe in the capacity of Australian workers to produce sufficient goods to provide a reasonable standard of. living for themselves, and for those members of the community who are unable to work. I believe also that we can enjoy in this country a standard of living second to none in the world.
. - I agree with the opening remarks of the two previous speakers on the Government side of the chamber, although I am afraid I do not agree with very much else that they said. Both of them opened their speeches by saying that this was the most important bill that had come before the Commonwealth Parliament for a long time. I agree with that. This legislation will have a profound effect upon the trade and commerce of this country, and upon the lives of the people. It touches every aspect of their well-being and it is a great pity that we cannot discuss it in a non-party atmosphere. Judging by the attitude of the Government towards Opposition amendments when the bill was before the House of Representatives, I am not encouraged to believe that we on this side of the chamber shall receive any better treatment. I do not doubt for a moment that the Government has given the fullest consideration to this measure. Senator Arnold spoke of the bill having been fully discussed bv caucus, and apparently agreed to without dissent; but I point out that all the intellectual canaeity in the Senate is not on the Government side of the chamber, or on this side. As this bill will affect all classes of people in the community, it is only fair that suggestions made by the Opposition should be considered for the improvement of the legislation.
This bill deals, as no other measure has ever dealt, with the people’s money, which, of course, is probably the most important factor in the well-being of the community. Senator Lamp said that this was not a socialistic measure. Of course it is. It will place our entire banking structure and, therefore, our economic structure, under the control of the Government. I remind honorable senators opposite that not long ago a referendum was held on this very question - socialization or nationalization of industry. The results of that referendum do not encourage one to believe that the Government’s action in introducing this legislation will find much support outside Parliament. Before long the people of this country will have an opportunity to express their opinion on this matter, and I have no doubt of what the result will be.
I wish now to deal with the real meaning of this measure, and to draw attention to one or two of its main defects. Under the present Commonwealth Bank Act the bank is controlled by a board. That board, which will be abolished by this measure, consists of the Secretary to the Treasury, and six other members who are, or have been, actively engaged in agriculture, commerce, finance or industry - a representative cross-section of the community. Members of the board are appointed at various times, so that successive governments have an opportunity to make appointments. I understand that the present Government has made some appointments to the board, and, therefore, must take some responsibility for its present constitution. The experience of this country has been that it is most undesirable that any large undertaking should be under government control. Take, for instance, our railways system. Governments do not appoint general managers to control our railways under government supervision and direction. They are controlled by commissioners. The same applies to our hydroelectric undertakings, the chief of which are in Victoria and Tasmania. They are not politically controlled. Itwas found advisable to separate them from political control; yet here we have legislation, the object of which is to do exactly the opposite. This bill takes the control of the Commonwealth Bank out of the hands of a board, and vests it in a Governor, who, of course, will be subject to the direction of the Government. There is also to be an Advisory Council consisting of the Secretary to the Treasury, the Deputy Governor - I do not know why the Governor himself is not a member - an additional officer of the Commonwealth Public Service representting the Treasury, and two officers of the bank. I have had long experience with the principal public servants of this country, and’ I have the greatest admiration and respect for them; but a public servant is not associated with trade and commerce, and, therefore, his experience is not of the kind which would fit him to participate in the management of a bank. The Government proposes to take the control of the Commonwealth Bank away from experienced business men, and to place it in the hands of government officers. As the Government has a majority in both Houses, there is no doubt that this measure will pass through Parliament, and when it becomes law, the Government will have full control of the Commonwealth Bank. Clause 9 provides that if there is any difference of opinion between the Governor and the Treasurer of the Commonwealth, the Government’s policy shall be supreme. This is not the last that will be heard of this legislation. The Leader of the Opposition in the House of Representatives (Mr. Menzies) has made it abundantly clear that when a government composed of the parties now on this side of the chamber is returned to office, the Commonwealth Bank will be restored to board control. By their votes at the next elections the people of this country will have an opportunity to indicate whether they believe in control of the Commonwealth Bank by the Government, or by a board consisting of men experienced in trade and commerce. I have no doubt what the decision will be.
The object of this bill is to cripple the private banks so that all banking business may be centralized in the Commonwealth Bank. The Commonwealth
Bank is to be encouraged to seek ordinary trading business, and governmental and semi-governmental bodies will be obliged to deal with the Commonwealth Bank unless they have written authority from the Treasurer to deal with other institutions. I have no objection to the Commonwealth Bank entering into fair competition with the trading banks. In fact, I believe that competition amongst banking institutions is most desirable; but under its new charter, the Commonwealth Bank will not offer fair competition, because it will not have to pay taxes and meet other large commitments which are imposed upon the private banks. Already the Commonwealth Bank has taken from the private banks surplus deposits amounting to £230,000,000, on which the maximum rate of interest payable is 17s. 6d. per cent. The Commonwealth Bank will also have the right to examine the books of the trading banks. Imagine two business firms competing with each other, and one having the right to examine the books of the other ! The Commonwealth Bank will also have the right to direct the private banks to whom their loans shall be made. It has been alleged that the private banks are capitalist institutions, and have been responsible for all kinds of terrible things, including the last depression. I point out to the Government that the private banks of this country are owned by 80,000 shareholders, and that the average sharehold-ing is less than £500, so that the shares are spread over a large section of tha community.
It has been suggested that the powers contained in this legislation may not be implemented by the Government immediately, but may be used only during a depression. If the Government is not going to use these powers, why put them in the bill, and why does the Government refuse to accept any amendment? to this legislation? Repeatedly, honorable senators opposite have said that the private banks caused the last depression, and that this measure is designed to prevent another one, but anybody who knows the circumstances of that depression will realize that it was not caused by the banks. It was caused by a world-wide decline in the prices of consumer goods.
For instance, in Australia the price of wheat, wool and other primary products dropped50 per cent., thus halving the return to primary producers. At present, we are experiencing boom conditions. Never before in the history of this country has money been so plentiful as it is to-day. Any common-sense businessman knows that now isthe time to save money so that he will have a reserve should there be a recurrence of adverse economic conditions, and he will not be obliged to go to a bank for an overdraft. The same thing applies to government finance. At present, this country is spending millions of pounds on huge projects, and planning for further heavy expenditure in the immediate post-war years. In fact, to be respected to-day, one must talk in terms of millions of pounds. Apparently this huge expenditure isto continue, the idea being that should a period of depression occur, the Government will merely have to go to the Commonwealth Bank for financial assistance. It would be far better if the Government were to reduce substantially its expenditure on unnecessary undertakings, and reserve some of its funds for the future, when economic conditions may not be so favorable.I do not suggest that we shall experience a depression as severe as that of1929-32, but there is bound to be some recession. Neither the Commonwealth Bank Bill nor the Banking Bill is necessary. The Commonwealth Bank has been functioning satisfactorily for the past twenty years and it will continue to do so. Government control of the bank is not necessary, and even if the Government were able to secure funds to provide employment that would not of itself be a guarantee against a depression. The bill represents a dangerous and a retrograde step.
– The honorable senator who has just resumed his seat seems to be at sixes and sevens concerning the purpose of the bill. He began his speech with an appeal to honorable senators to approach this matter from a non-party point of view but then proceeded to deliver a partisan speech. How can a subject be dealt with in a non-party manner if those considering it do not rise above their partisan ideas? I have yet to learn that the lion and thelamb have lain down together throughout the years. The honorable senator suggested that the recent referendum dealt with socialization, but such is not the case. The peoples’ opinion was sought on fourteen points, and with the exception of the control of overseas exchange none touched the question of banking. No reference was made to socialization. The honorable senator is labouring under a misapprehension concerning the referendum, and it is not surprising that the people of Tasmania voted against it, when, as an elected representative of that State, the honorable senator could not understand its purpose. The honorable senator referred to the Commonwealth Bank and enunciated the old axiom that this Parliament should delegate its power to control industry to boards.For many years, the Labour movement has triedto get Parliament to shoulder its responsibility instead of placing control in the hands of bureaucrats. For instance, railways and other State instrumentalities have been directed by such persons for many years and the people have had no control. The Government does not. propose to give the control of the bank to a board but to a person who will be responsible to Parliament.
– What about the principle of new men and new measures?
– Senator Leckie referred to the changing times and how the banking system has been gradually evolved. As the honorable senator stated new conditions demand new measures and new measures demand new men.
– Would the honorable senator control judges of the High Court?
– Senator Gibson should realize that the interpretation of the laws of this Parliament is the responsibility of the High Court.
– Why should not interpretation of the law also come under the control of this Parliament?
– My personal opinion is that Parliament should be supreme and it should have the right to interpret the laws it makes, but I have not yet been given sufficient support to have that policy put into operation. Senator J. B. Hayes stated that there were 80,000 shareholders of trading banks, each having an average holding of £500. Does the honorable senator suggest that the 7,000,000 people of Australia shouldbe subjected to the will of those 80,000 persons who, in turn, commit the determination of policy into the hands of an executive authority which controls the private banking institutions? As representatives of the people, we must accept our responsibility and govern. The Acting Leader of the Opposition (Senator Leckie) adopted a similar attitude to that of Senator J. B. Hayes. He pretended not to be able to understand the legislation, but the honorable senator knows what the Labour party is attempting to do. Instead of ‘adopting a non-party attitude, the honorable senator evaded the issues involved, misconstrued the principles of the bill, and did everything possible to condemn the measure.
– I condemned itall right!
- Senator Leckie said that the Labour Government makes money its god - its “golden calf”. He further stated that money without assets is of no use and it was only foolish to suggest that all the nation’s ills will be removed by the socialization of banking. Those statements are figments of his own imagination.
– I did not say that money without assets is of no use. I said that money had to be backed by assets.
– I stand corrected. Assets to back money is exactly the same thing.
– That is not so.
– The honorable senator would lead the people to believe that the Labour Government is making money its “ golden calf “, and that money without assets is useless. Nowhere in the bill can anything be found to substantiate such suggestions. It provides for the control of credits and deposits which for years have been in the hands of private banks. It also provides power to direct private banks concerning the issue of credits and over- draffs. Nowhere does the bill provide that money is to be issued without assets being taken into consideration, nor does it provide that money is the god of the Labour party; or that banking institutions will be socialized.
– They are being robbed.
– They have been engaged in a certain amount of robbing over the years. A little bit of titfortat does not hurt. Under the bill the private banks are not being robbed; the control of the issue of credits is being controlled.
– They are being strangled.
– As a representative of the primary producers in Tasmania, Senator Sampson should realize that the private banks have been strangling the man on the land for years, by their control of credit. As to the suggestion that the bill will bring about socialism, I can only reply that while such is not the case, I wish it were so. The socialization of banks alone will not effect a cure of the country’s economic ills. As Senator Grant pointed out last night, other activities have to be socialized and I hope that that will be done eventually.
– That is the object of the bill.
– The object of this bill and the Banking Bill is to secure control of the nation’s economy for special purposes. One is that Parliament should be enabled to liquidate the national debt and reduce taxes. Under this legislation that will be possible. Honorable senators on the Opposition side of the chamber have said that the banking system has changed through the years to meet changing conditions, and that the Commonwealth Bank has established during that period, a reserve bank in substitution for the old system. I agree that the banking system has changed ; no one will dispute that fact. Another change has now become necessary. I took part in the first conference of the Australian Labour party in 1904, when it adopted the policy of control of the banking institutions.
– Divorced from political control. The honorable senator should read what the late Mr. Fisher said on- the matter.
– His promise was given to meet the wishes of certain individuals at that time. Some honorable senators have said that Mr. Fisher was responsible for the first Commonwealth Bank Act, but although he introduced that measure the man responsible for it was Mr. King O’Malley, who took part in the first conference called to deal with the matter. Senator Allan MacDonald said that the branch bank, system is the only one suitable for Australia.
– I did not mention that system. The honorable senator must have confused my name with that of somebody else.
– I could not do that, because the honorable senator left us in no doubt last night as to the political camp in which he stands. Senator Cooper also said that the branch bank system is the best for this country, but I point out that no suggestions have been made that it should be altered. There is no provision in this bill or in the Banking Bill to alter the present system to a marked degree. We are still leaving the private banks to carry on as in the .past, with the exception that their powers in certain respects will be restricted. The banks will not be nationalized or socialized, although there is a marked difference between nationalization and socialization.
– They could be starved.
– That will not happen. We shall merely tell them to use the money of the depositors, but not the credit based upon the deposits. Honorable senators opposite still think that the banks are using only the depositors’ money, although they are trading on the credit of the nation. I admit that the trading banks will be hamstrung in the matter of competition, but I see nothing wrong with that. If a municipal body requires £5,000 or £5,000,000, it can apply to the Loan Council for the money through a State government, and if the loan is authorized the money will be made available. I see no reason why the local authority should not be required to do its business with the bank through which it obtains the loan. If the Bank of New South Wales agreed to grant an overdraft to one of its customers it would expect him to use the facilities of that bank.
– Not necessarily.
– There may be exceptions to the rule, but if a farmer in Victoria obtained a loan of £1,000 from the State Bank, he would be expected to transact his banking business through that institution. The Labour party believes that if governmental or semi-governmental instrumentalities are provided with loans by the Commonwealth Bank, they should use the facilities of that bank in transacting their business. To that degree the private banks will be hamstrung. Provision is made in the bill to safeguard the money of the depositors. This may be used by the trading banks, but not to the same degree as previously.
Senator Leckie also said that the general banking policy was to safeguard the depositors’ funds, and ho considers that under this bill it will be difficult to do that. That is not the position. The history of the private banks in Australia shows that they have not been carried on for the purpose of protecting the funds of the depositors, but for obtaining profits for the 80,000 shareholders of the banks. It does not always follow that the profits which the shareholders derive from the banks are the only advantages they get. The interests of the banks are interlocked with those of other undertakings, which Senator Grant described as monopolist industries, and the banks secure control of those industries. The fact remains that the banks have carried on business for the sole purpose of profit. Often they have wielded such great power that they have been able to control governments.
The report of the Royal Commission on Monetary and Banking Systems showed what happened during the last depression, and what could have occurred had the Commonwealth and trading banks acted as they should have done. If we go back to 1920, prior to the amendments of the Commonwealth
Bank Act sponsored by the BrucePage Administration, we find that millions of pounds were advanced for the purpose of preventing the depression which then threatened Australia. That course should have been adopted later when the last depression loomed in sight, but the banks want control of the financial structure. Senator Grant reminded us last night that the great Baron Rothchild once said -
Let me control the money of the country and I do not care who makes its laws.
He realized that control of the financial institutions led to the control of governments. That actually happened in the United States of America under exPresident Theodore Roosevelt, because of a ukase issued to him by Mr. Pierpont Morgan.
Senator Allan MacDonald also stated that political control of the trading banks would result in autocratic control by one man. Certainly the administration of the Commonwealth Bank will be in the hands of the Governor, but, if that be autocratic control, every business in Australia is similarly controlled. The honorable senator claims that this hill is the creature of the last depression, and that the Labour party has set out to place the control of banking in the hands of the Parliament. During the depression, several organizations, in conjunction with the Australian Labour party, brought to the minds of the people the necessity for altering the banking system, but the reasons for the introduction of this measure go deeper than the last depression. The honorable senator also became confused with regard to the abolition of the Commonwealth Bank Board. He asked why the board had aroused the displeasure of the Government, and reminded us that some of the members of the board had been appointed by the present Ministry. Members can be appointed by the government of the day as “ stool pigeons “, although it knows that eventually the board will be abolished.
– That is letting the cat out of the bag.
– There is no cat in the bag. What I have said is a matter of common knowledge. If a government has anything particular to do, it is convenient to get somebody to act on its behalf.
– The honorable senator is the first to be brave enough to say it.
– There is no secret about it; it was announced from every platform from which Labour candidates spoke.
– The honorable senator’s speech is the most candid that has been made on the bill.
– The Prime Minister (Mr. Curtin) has been accused of breaking his promise, made at the last general elections, not to socialize any industry during the war. In South Australia, every Labour candidate told the electors plainly that a Labour government would introduce legislation to control the finances of the Commonwealth.
– Was the honorable senator influenced by Mr. Bennett, from Queensland?
– I do not know Mr. Bennett. Is he an old gentleman, about 100 years of age? Those who say that the Prime Minister broke his election promises are prevaricators - I would prefer to use another term. This bill, and another which will come before us, do not break any election promise, because, as I have said, the electors were told plainly what a Labour government would do with the banking institutions of this country. We have also been told that this legislation was referred to in the fourteen points submitted to the electors at the referendum, but I remind honorable senators that this power to implement a plank of the Labour party’s platform existed in its constitution long before the referendum. The bill before us does not set out to socialize the banks. Those who raise such bogies should learn the difference between controlling national undertakings, and socialism; there is a big difference. Senator Allan MacDonald mentioned political control of the banks, and wanted to know how the Government could reduce taxes on the smaller incomes and still maintain its expenditure. He said that a solution of that problem was beyond him. In the light of the honorable senator’s remarks on the adjournment last night, it is easy to understand how a simple problem would be beyond him ; a member of Parliament cannot make a joke about Scotsmen-
– It was not a joke.
– The honorable senator could not see a joke if it was pointed out to him.
– That comes well from an honorable senator named O’Flaherty.
– There are good Irishmen and good Scotsmen, as well as bad men of both nationalities. Senator Allan MacDonald went out of his way to tell us that the Commonwealth Bank now controlled the currency of this country. That shows how much he knows about it.
– The Commonwealth Bank has , had that control since 1911.
– The honorable senator still believes it! Now we can understand why a simple problem relating to taxation is beyond him. The honorable senator is thinking only of the legal currency of this country; but are there not such things as cheques, which are collateral security for the purpose of issuing credits? Those things are currency, and they are not controlled by the Commonwealth Bank. Under this bill the Government is not attempting to control all the currencies,but only the legal tender of this country. The honorable senator also referred to the stabilization of the currency, and argued that Australia should get back to the gold standard. Senator Lamp effectively answered that contention when he said that gold is a commodity which is dug out of a hole in the ground and then put in another hole. For many years sovereigns have been out of circulation. [ have a son 30 years of age who has seen only one sovereign ; and that wa3 one shown to him by a black marketeer. The honorable senator accuses the Labour party of wishing to go back to the old control of the Commonwealth Bank, but he wishes to go back to the old order when sovereigns were currency. The Labour party is looking ahead, not backward. It believes that there is no necessity to have gold to back the cur’ rency. That is proved by the fact that the total bank clearances during the last six months amounted to approximately £1,600,000,000.
– Which would the honorable senator prefer, a gold sovereign or a £1 nots?
– On presentday values, I would prefer a gold sovereign, because gold is a commodity whereas a £1 note is merely a means of exchange. A £1 note has a fixed value whereas a sovereign is a commodity for sale. As in this country the legal currency is only about £200,000,000 there must be some other currency in existence; there must be some other means whereby credit can be issued. The Labour party says that that other means consists of goods, services and assets. The wealth of the country is derived from the land, plus climate, and the application of labour. Some products, such as minerals, are dug out of the earth; others grow out of the ground. They may then bc transferred to secondary industries and manufactured into useful commodities. But those commodities come from the land, with the application of labour and the blessing of a good climate.
– Are they not all heavily mortgaged ?
– Of course they are; but, even so, the credit of the nation exceeds its national debt. In one year the money which passes through the clearing houses is equal to the amount of the national debt. There is a lot ofl bartering among producers; farmers barter eggs for butter, or sugar, and so on. Those transactions do not go through the clearing houses. The wealth of the nation is represented by the goods which back the currency. The currency of the nation should be based on the goods it produces, and not necessarily on a gold standard. Gold is only a commodity which comes out of the land and has value as n commodity. It should only have a value proportionate to the use to which it can be put. All that the Government is asking is that we shall take the country’s production and utilize it as a backing for the purpose of issuing credits which are necessaryto carry on the activities of the nation.
I come now to the charge that this hill aims at the political control of the Commonwealth Bank. There has been anavalanche of literature on this subject. 1 have received thousands of letters from individuals and organizations, every one of which I ha ve acknowledged ; but most of them have come from people who are opposed to democratic methods of government as, indeed, are most honorable senators opposite who wish to set up various boards beyond the control of the Parliament, The Australian Labour party litis long been aware that the power over finance must be taken from the few financial dictators and restored to the people through the Parliament, but should an attempt to do that be made, a great “ hullabaloo “ is raised by the privileged few, who declaim about political control. We must go back a long time to find out what people have thought about political control. During the course of the American Civil War, Abraham Lincoln said -
I have two great enemies - the Southern Army in front ofme and the financial institutions in the rear; of the two, the one in the rear is my greatest foe.
Does that not apply equally to Australia to-day? We have the Japanese army in front of us and the financial institutions behind us. The more deadly of the two foes is behind us. Abraham Lincoln’s statement continues -
Money is the creature of law and the creation of the original issue of money should be maintained as an exclusive monopoly of national government. A government possessing the power to create and issue currency and credit as money and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest as the means of financing governmental work andpublic enterprise.
The Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of the consumers. The privilege of creating and issuing money is not only the supreme prerogative of governmentbut it is the Government’s greatest opportunity.
By the adoption of these principles, the long felt want for a uniform medium will be satis- fied. The taxpayers will be saved immense sums in interest, discounts and exchanges, the financing of all public enterprise, the main tenance of stable government and ordered progress, and the conduct of the Treasury will become -matters of practical administration.
The people can and will be furnished with a currency as safe as theirown Government. Money will cease to master and become the servant of humanity. Democracy will rise superior to the money power.
It has taken years to realize the necessity for following the advice and principles set out by Abraham Lincoln. In Australia, because of the fact that the financial institutions have become so interlocked with business, they have wielded a tremendous power over the minds of the general public, and have created a fear complex in the minds of the people that no financial reform government has been in power long enough to enact the legislation to challenge the power of these controllers of finance. Although these billsare to provide the machinery whereby the currency of this country can be stabilized and credit issued controlled for the expansion of the nation and for the benefit of the whole of the people the power is vested in the people themselves through this Parliament to utilize such machinery. I warn the people that there will be an avalanche of propaganda against the Labour Government and the Labour party and it will not all be on banking reform. I can assure the people that the sole purpose of such propaganda will be to displace the Labour Government and substitute a government which will control and administer this machinery for the benefit of the privileged few of private enterprise. To break the control of the powerful financiers of the evil money debit system requires great courage. The issue at stake is not so much the actual profits made by the banks, but the power to issue and control credit, whereby we have given into bondage the whole nation, paying continuous interest on the public debt, with ever- rising taxes in order to meet such interest which is sacredly looked uponas a first call upon public finance. Because of this fact, the financial group has, up to the present, dictated the policies of all governments. All members of the same financial group are not, nor have they ever been, resident in Australia. Consequently, the policies of government? have, from time to time, been directed in order to subordinate the interests of Australia to outside interests. These bills will not overcome immediately Australia’s difficulties, because Labour governments will honour contracts made by previous governments; but it will be possible to meet those commitments as they fall due from the resources which the Commonwealth Bank will control. Thus, as we gradually redeem our public debt, both State and Commonwealth, we shall be able to reduce present taxation by at least 50 per cent. This can be done within the next 20 or 25 years. It will also be possible to reduce taxes to a still greater degree within the next decade, because, as times goes on, the earning capacity of the projects fostered by national credit issues, will not only cancel out the debt so created but will also be a source of revenue which will replace a huge proportion of revenue now derived from taxes.
I commend this legislation because it will remove the fear that has been engendered in the minds of the general workers and producers, that despite the use made of them during the war they will be so much human scrap after the war is over. The great majority of the people of Australia who have produced the wherewithal to carry on the war have, throughout the war period, been rather cynical, because they recall bitterly the years they spent on the dole, and the low prices they received for their produce, whilst, at the same time, they saw huge reserves being built up by the financial groups, monopolies and cartels. The worker still thinks that the big monopolies and banks will come out exceedingly well at his expense, and that they will go on profiting while he goes on paying. While he appreciates the need for sacrifice, he is not sure that the sacrifice is really warranted. There is a growing feeling that present taxes could be reduced bv utilizing our banking resource* through the Commonwealth Bank. The worker has become cynically minded. He is entitled to ask for a public pledge by the nation that when victory is won he will not be faced with the bleak prospect of unemployment, unpayable prices for the commodities he produces, and the human scrap-heap. This legislation is an assurance that the bankers’ lie of a money shortage will not again be tolerated. It is a guarantee of control of the credit of the nation by this Parliament which will provide for the expansion of industry in all its phases, public works and the adequate defence of this country according to the will of the people and not the dictates of financial and industrial “bigwigs” inside or outside Australia.
Sitting suspended from 5.5b to 8 p.m.
.- It is with considerable pleasure that I rise in this chamber to support this bill. I have successfully fought two elections on the proposal now before the Senate. In my view, this measure will bring about a great measure of stability in the economic life of this country, and will operate in the interests of the welfare of the people.
There has been much discussion about the merits and demerits of this bill. My view is that the passage of this legislation will not mean a change in our financial system, but there will be a vast change in the administration of that system and in its application to the community generally. I shall deal with a few criticisms of this measure which have been made by honorable senators opposite. One of their chief objections to the bill is that it will abolish the Commonwealth Bank Board. The only reason I can see for that’ objection is that the abolition of the board and the restoration of the control of the bank to a Governor will mean that vested interests which hitherto have been able to direct the policy of the bank in the interests of the private banks will no longer be able to do so, because the Governor, automatically, will implement the policy of the Government. The Opposition has said that members of the Commonwealth Bank Board are experienced business men. I agree with that entirely. They are very experienced - in fact, a little too experienced for our liking, because their association with the private banks means that the policy which they formulate for the Commonwealth Bank is that which will confer the greatest benefit upon the private banks, regardless of whether or not it will benefit the community as a whole. The appointment of aCommonwealth Bank Board by the Bruce-Page Government established’ the Commonwealth Bank as a clearing-house for the private banks, and it is not hard to understand why there is so much objection inside and outside Parliament to the proposal that control of the bank should revert to a. Governor, because control by a Governor will mean the implementation of the policy of, the government of the day. Should we on this side of the chamber and the people of the country, suffer the misfortune of having in office in this Parliament an administration formed by the parties to which honorable senators opposite belong, the policy of that government in connexion with the Commonwealth Bank will be given effect, and if it is not better than the policies to which honorable senators opposite have adhered to in the past, all I can say is, God help the people of this country !
A feature of this legislation is the power which it gives to the Commonwealth Bank to take over private banking institutions which are unable to meet their obligations to their depositors. Ever since this legislation was foreshadowed, the people of this country have been subjected to a barrage of propaganda from the private banks. These institutions have sent circular letters to their customers, enclosing communications to be signed and forwarded to members of this Parliament. Many recipients of these letters have greatly resented these tactics, and have sent to their members, not merely the letters of protest which they were asked to sign, but also the instruction received from the private banks. Thus, the plan by which the private banks hoped to stir up public feeling against this Government’s banking proposals failed utterly. The private banks have also employed speakers to stump up and down the countryside, lecturing all kinds of public bodies on the alleged evils of theLabour party’s banking proposals. On one occasion I listened to the lying propaganda voiced by one of these gentlemen who was addressing an organization known as “ The Fifty Thousand League “ in Launceston, Tasmania. The speaker, whose name was Judd, later visited
Hobart, centres on the north coast of Tasmania, Melbourne, Sydney and Brisbane.
– A waste of manpower.
– Yes. I was most surprised that the man-power authorities did not find a useful job for him. He was an ex-banker and he claimed that banking was so intricate that the average person in the community could not understand it. ‘The mentality of this man was so low that he did not give to members of the public credit for having sufficient common sense to see the fallacies of his statements. His propaganda did not accomplish anything. I have before me one of the circulars sent out by the private banks to their customers. In this case it was issued by the National Bank of Australasia Limited. The circular protests vigorously against the Commonwealth Government having control of the people’s savings, and says that under this legislation the people of this country wild be regimented; but let us analyse the present position: Who is in control of our banking system to-day? First of all, we have the private banks, which are controlled notby people inside this country, but by vested interests in Great Britain and the United States of America.
– I repeat that the banks of this country are controlled by vested interests in Great Britain and the United States of America. Proof of that is to be found in the banking history of these two countries, which shows clearly how wealthy interests have manipulated banks and business organizations, and ruined many of them. They quickly eliminated any organization whichstood in their way, and even brought about civil war inRussia. Vested interests were responsible for the war of 1914-18. and any one with common sense knows that our rotten system of finance was responsible for this war. The time has arrived for us to take stock of ourselves, and to do something to improve the old inadequate financial system which has not changed in hundreds of years. Theonlyalter native is to allow ourselves tobeplunged into future wars. The National Bank of Australasia Limited, which issued the propaganda to which I have referred, was forced to close its doors in the bank crash of 1893, and some of its depositors are still waiting for their money. Should t ho Commonwealth Bank not have power to take over an institution of that kind which cannot meet their obligations to t heir depositors? Would honorable senators opposite like to see a repetition of what happened in 1893? At a later date, t he Van Piemen’s Land Bank of Tasmania also had to close its doors, and many of the depositors of that bank, too, never received their money. What happened to their deposits? Other big financial interests bought them up for 5s. in the £1, and later received full payment; but the unfortunate depositors who had invested their few pounds in the bank, were forgotten. That is the kind of trickery that goes on under our present financial system, which, to use mild terms, is one of the greatest rackets and swindles ever known. It is not only the Government of this country that has awakened to the fact that the time is long overdue for some change in the present financial system. The following is a newspaper report of a speech by Lord Sempill, a member of the British House of Lords, made in Ottawa on the 8th February -
Establishment of a new financial technique in the British Commonwealth to lead the world into an era of peace and prosperity was urged last night by Lord Sempill, member of the British House of Lords.
Under the plan he outlined in an address prepared for delivery to the Ottawa Board of Trade, the Government would spend “ new money “. issued “ interest free “ by the banks as agents for the Government.
Substantial improvements are called for in the economic system, not only of the Empire and Commonwealth but of the world, and it will indeed be appropriate that British people who have contributed so much to world advancement should lead in the founding of a new technique in economic and monetary policy. Lord Sempill said.
Under a revised monetary system, he added, it would be one of the main functions of the Treasury to put into circulation, without creating a debt, sufficient new money to balance the increase in goods and services resulting from full utilization of man-power and materials.
So we see that thoughtful men in other parts of the world, who have made a deep study of the present banking system, are in agreement with the views of this Go vernment. Sir Reginald McKenna, former Chancellor of the Exchequer, and chairman of the Midlands Bank - the largest trading bank in the British Empire - said -
T urn afraid the ordinary citizen will not like tobe told that the banks can and do create and destroy money.
Referring to our antiquated banking and financial system, he said -
They who control the credit of the nation direct the policy of governments and hold in the hollow of their hands the destiny of the people.
It cannot be denied that who ever controls the financial system of a country also controls the government of that country. Similarly, those who control the financial system of the world - itis controlled by a big combine - control the governments of all countries. Many notable banking authorities have admitted how inadequate is the present financial’ system. It is high time that the people of all countries studied what has been said by great statesmen like Abraham Lincoln, most of whose statements on this subject are on the same lines. He contended that gold is merely a token of exchange and although a man might have a mountain of gold it could not satisfy his appetite. The true backing of a country’s currency is its production. Greater flexibility of trade is needed so that economic security for the people may be more assured, and the Government, therefore, proposes to establish a trading section of the Commonwealth Bank. Its purpose will be to provide accommodation for all types of industry whether they be small trading ventures’ or those conducted by primary producers. Under the private banking system, if a bad season occurs - or several in succession as has been the case of the mainland during the last two or three years - the banks press for the payment of interest on loans and the reduction of overdrafts. If the farmers and the traders cannot pay both interest and wages, workers are immediately thrown out of employment. To illustrate the grip that private banks have on rural industry and how they have hamstrung it under the present inequitable system, I shall refer later to statements made by eminent economists. The aim of the Government is to he able to make advances to all sections of the community which urgently need assistance, but without burdening them to the extent that they have been previously.
– Not without security?
-Who would be so stupid as to think that any bank would lend money without the prospect of its being returned either to the bank or to the nation in the form of goods? If a system were in operation under which money could be lent with a reduced security, assistance would be available more freely than now. I shall now refer to some statements made by an ex- political colleague of Senator Herbert Hays. Speaking in this Parliament on the 4th April, 1935 - the passage occurs at page 749 of Hansard for thai; year - Mr. C. L. A. Abbott pointed out that there were then about 70,000 wheat farmers in Australia engaged solely in the production of wheat and 90,000 wool-growers. Their total indebtedness to private banks was £288,000,000, the interest on which, at 5 per cent., amounted to £14,000,000 a year. Mr. Abbott stated further that, expressed in terms of wheat, from a crop of 135,000,000 bushels, 60,000,000 bushels would be required to meet interest charges. Expressed in terms of wool at the price then operating, in order to provide the £7,000,000 required to meet the interest bill due by the wool industry, the wool of 21,000,000 sheep would be required. Those sheep would have to be fed, fences and sheds built to handle them, and they would have to be shorn and the wool pressed, baled and exported merely to meet the interest burden on the properties of the wool producers against which the private banks had made advances. The Royal Commission on Monetary and Banking Systems pointed out that1s. 9d. of the price paid for every bushel of wheat produced was needed to pay the interest on the wheat that was grown. If the people have to go on paying interest on money that has been loaned out of the depositors’ savings in the banks - which never belonged to the banks - the country will eventually be in the grip of the associated banks of the world. They will own everything and the people nothing.
– That would be nationalization.
– I do not know whether the honorable senator would call it nationalization or socialization, but the present trend is in the direction I have indicated. Instead of property belonging to the masses of the people so that they could develop it for their economic security and welfare it would belong to a privileged few and worked only for the latter’s benefit. How can the debt which is accruing under the present system be paid? The only way is to co-ordinate the whole of the banking business into one bank. This bill does not go so far as that, but I hope to be a member of this Parliament and on this side of the House when such a measure is brought down. The associated banks will be able to trade under this bill as they have traded in the past but the Commonwealth Bank will exercise some measure of control over them. It will also control the interest rates which those banks charge. Some bank? have burdened primary producers with interest of 8 percent.
– I have paid as much as 10 per cent.
– I have paid8 per cent. When 1 secured an overdraft at a bank, I was actually lending the amount I borrowed to myself against my own assets - not against the assets of the bank. All the bank needed to make the loan and to be within thelaw was to have 10 per cent. of the sum required in its possession. It did not matter if it were somebody else’s money - the bank could lend me ten times that amount on the credit it controlled.
– That was an exceptional case.
– The honorable senator has been more fortunate than I have been. He did not have to go to the banks for assistance because he had a large estate and a handsome banking account left to him. I am not complaining about that; I wish the honorable senator good luck on his inheritance.
– I did not inherit anything of the kind.
– When I wanted to secure monetary assistance I had to go where I could obtain it and under the provisions of the prevailing law. Hundreds of thousands of Australians have been in the same position, but the methods by which the banks have made advances represent one of the greatest pieces of trickery ever allowed. That was permitted, however, because an anti-Labour government in 1924 set out to cripple the Commonwealth Bank. It amended the Commonwealth Bank Act so that the bank could no longer operate as a trading bank. If it were approached for assistance, the bank had to advise the intending borrower to go to his trading bank for accommodation; it could assist him only if he were refused by other banks. But if a trading bank refused accommodation then the Commonwealth Bank would also refuse it because, apparently, the borrower had insufficient assets to provide a security against the loan.
The Commonwealth Bank had sufficient power to stave off a depression until its constitution was altered in 1924. In 1920, when a depression was developing in England, America and other countries and was also creeping into Australia the associated banks, under instruction from their administrators in the United States of America and Great Britain began to call in their loans and to tighten up on the granting of overdrafts. They pressed their customers for the payment of interest and the result was an increase of unemployment. At that time, however, Sir Denison Miller, a man of vision and foresight and who understood economics realized what was about to happen and issued an extra £20,000,000 of credit. His action put the fear of the devil into the private banks and they immediately relaxed their policy concerning overdrafts and ceased from calling in loans. That is an example of the power wielded by the Commonwealth Bank in 1920, but that power and all other trading powers were taken away from it in 1924. The purpose of this bill is to restore those powers.
In the past if a man wanted to build a house he could not go to a private bank and ask for £1,000, even though he had a block of land. Neither could he go to a money lender unless he had security in excess of the amount required. Steps will have to be taken to finance the >’ building of the 250,000 houses which Australia now needs. The only way that can be done is through the central bank of the nation. If money is lent at a low rate of interest to enable people to build homes an asset will be created which will yield satisfactory returns, which can be realized upon if necessary. By this means employment will be provided and the money earned will automatically come back to the bank and keep it flourishing. To achieve prosperity one of the greatest monopolies in the world must be attacked and I am proud to know that a Labour Government is about to attack the private banking system which has been one of the greatest rackets and swindles of all time. Nobody with any intelligence who has studied the present financial system could put it down to anything else, in view of the rate at which the debts of the country have accumulated and have been financed by the private banks. New Zealand and Canada have awakened to this position, but, judging by the way in which loans are financed in the United States of America, that country has not done so. One of the biggest war loans floated there amounted to 13,000,000,000 dollars and of that huge sum the Commercial Bank alone subscribed 5,000,000,000 dollars. The balance was taken by the other associated banks and the insurance companies, with the exception of 1,600,000,000 dollars. What did the banks lend to the government? They merely lent the credit available’ on the deposits of the people themselves, but they are charging the people interest at the rate of 4J per cent. It is fortunate for Australia that a Labour government did not allow the same swindle to be worked in this country in connexion with our war loans. The United States of America now realizes that action must be taken to deal with its financial system. The late President Roosevelt, in introducing his “ New Bill of Bights “, referred to some of the rights which the people of America had to acquire before they would have economic security. His statement could well be applied to Australia. Among the rights which he enumerated are the following : -
The right to a useful and remunerative job in the industries, shops, farms, or mines of the nation.
The right to earn enough to provide adequate food and clothing and recreation.
The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.
The right of every business man, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home and abroad.
The right of every family to a decent home.
The right of adequate medical care and the opportunity to achieve and enjoy good health.
The right to adequate protection from the economic fears of old age, sickness, accident and employment.
The right to a good education.
It would not be humanly possible to achieve that ideal under the present financial system, because the burden of debt that would be created would be so enormous that the people could not carry it.
Since Australia, with its comparatively small population, has been able to raise credit for war purposes to the amount of over £300,000,000, surely it could raise another £300,000,000 worth of assets against which credit could be issued for the purpose of finding employment for the people, instead of obtaining the necessary finance from the private banks, which would exact a heavy interest payment from the taxpayers. The people of this country are entitled to the rights referred to by the late President Roosevelt, but they will never enjoy them under the present monetary system. What is the alternative? ‘Shall we say to ex-service men and women, to munitions workers and others, that they have done a good job in this war and have stood solidly behind the Government, and that, although there is a shortage of 250,000 houses in Australia, that matter is not the concern of this Parliament, but should be dealt with by the private banks? Should we say that they must look to private enterprise to re-employ them, or provide them with new jobs, if they were unemployed before the war? These are matters which the Opposition considers should be allowed to go by the board. Shall we say to those people that the problem of providing money for the defence of the country is no concern of ours, but should be left for solution by the private banks, who could charge any rate of interest they desired. I suggest that we should inform the members of the fighting services, the munitions workers and others that they are entitled to good homes, health laws, and freedom from unemployment. Those matters are the concern of the Commonwealth and State Parliaments, and particularly of the Commonwealth Government which is the only government that can provide the necessary finance.
The whole object of the bill is to provide means whereby the people shall be guaranteed economic security. Are we to say to the farmers that, although they are guaranteed fair prices under the the National Security Act, the Government will be no longer called upon to look after their interests after the war, or are we to tell them that they may be accommodated with loans at low rates of interest, and that, if they are unable to carry on their properties, the Government will take them over temporarily, and allow them to continue in employment on them? I am glad that the Labour party has sufficient strength in this Parliament to be able to ensure the passage of this measure, which is nearly 30 years overdue. I hope that in the next 30 years Australia will go forward and provide for the defence and development of the country without imposing huge burdens of debt on succeeding generations. This bill does not make provision in that direction, but I hope that the measure will have a speedy passage, and that in the near future the Labour party will bc returned to power and will have an opportunity to coordinate the whole of the banking business of Australia, so that there shall be one people’s bank, and that any profits derived from the banking system shall be enjoyed by the people as a whole.
.- What is the reason for introducing legislation to abolish the Commonwealth Bank Board, and to continue in peace-time the regimentation of the trading banks which in war-time uncomplainingly submitted to rigid control and loyally co-operated with the Commonwealth Bank? There is only one answer : This is the first step, ami a bold one, towards socialization. lt is a bridgehead from which, with the control of banking, of industry, and of I lie lives of the people, Australia can be reduced to a totalitarian state. A strong radical element in the Labour caucus evidently insisted that the Government should reap to the full the fruits of its victory at the polls in August, 1943. The Prime Minister’s promise not to introduce socialist legislation during the war contributed in no small measure to Labour’s success. That that victory was nothing more than an expression of confidence in the Curtin Government’s administration of our war effort, and in no sense a mandate for the implementation of Labour’s socialist platform, means nothing to those who would seize on any fortuitous victory as a justification for socialism in our time.
At the 1934 elections the main issue was monetary reform. With the distressing depression years still fresh in the peoples’ minds one would have thought I hat any party which could produce a counter to any future depression would sweep the polls. The same speeches were made then as are now being delivered to force this bill through the Parliament. “The Commonwealth Bank Board must go, otherwise the next depression will be worse than the last one “, was their catch-cry. What was the result of the 1934 elections? A non-Labour government was returned with a big majority. Every Labour candidate for the Senate was defeated. I was a successful candidate. By a fortuitous victory in 1943, the Curtin Government says, in effect, “ We hay.e the numbers in Parliament, so we will go right ahead “. Now we are told that the trading banks must go, and a so-called people’s bank - the Commonwealth Bank - is to take up all their activities which have been so closely associated with the progress and development of Australia for nearly a century. Why is the Commonwealth Bank to be designated in the future as the “People’s Bank”? It is true that lens of thousands of Australians have deposited their savings in the Commonwealth Savings Bank, but the nine trading banks also hold the savings of hundreds of thousands of thrifty citizens. In addition to those depositors, nearly 80,000 persons hold shares in the trading banks. These persons are not “ tall poppies “ ; on an average, they have invested- about £500, and so are a cross-section of the thrifty Australians. The nine trading banks are like any other nine public companies; they carry on banking business, just as other companies undertake the manifold forms of business which supply the country’s needs. Each bank produces an annual balance-sheet. The annual dividend paid to shareholders over the past ten years has averaged under 4’ per cent. A glance through the stock exchange reports will reveal that there are many more profitable investments than in bank shares. Why do so many thrifty people put their money into trading banks, and trading bank “shares? They do so because they know that the business of banking is in expert hands, free from political influences. Why did the Commonwealth Bank make a good beginning in 1913? One reason was that all Commonwealth Government departments and instrumentalities were obliged to transfer their accounts to that bank.
There was some opposition to the creation of a new bank, but on the other hand many people considered there should be a national banking institution controlling the printing and issue of one type of bank notes. Thousands of small depositors opened accounts with the new bank more on sentimental grounds than because of any distrust of the private banks. One of the main reasons why the Commonwealth Bank forged ahead year after year was that it wa3 free from political influence. That was a condition upon which the late Sir Denison Miller accepted the appointment as Governor of the Commonwealth Bank.
At the Federal Labour party’s conference at Brisbane in 1908, Mr. Kang O’Malley, the “ father “ of the Commonwealth Bank, secured the acceptance of the following provision in the proposals for establishing the bank - “That this bank shall be conducted purely as a government department, absolutely free from political control “. In eleven years the business of the bank increased beyond all expectations. When Sir Denison Miller died in 1924, the Parliament amended the act by substituting a board of six, excluding the Governor, to administer the rapidly expanding business.
The policy of non-political interference in the affairs of the bank was not altered. On that board were men with long experience in all phases of our industrial life. To ensure that politics would have no place in the administration of the Commonwealth Bank, the Bruce-Bage Government appointed Mr. M. Duffy to the Board, on the recommendation of the Trades Hall authorities.
But what happened when the Curtin Government . had to fill the vacancies caused by the retirement of two of the members of the board? Instead of filling the vacancies with persons of wide industrial and economic experience, Mr. Taylor, President of the Australian Labour party in Sydney, was appointed -a purely political appointment. Dr. Coombs filled the other vacancy. . That was another political appointment. Last year, two other vacancies occurred when the term for which Sir Clive McPherson and Mr. Duffy had been appointed expired. The former, a man with Commonwealthwide experience in primary industries, was dropped; but Mr. Duffy was reappointed for a further term of five years. That showed the way the wind was blowing.Recently, Mr. Armitage’s term as Governor expired, but the Government; extended his appointment for one year. Mr. Armitage was brought into the Commonwealth Bank as an accountant from the Bank of New South Wales by the late Sir Denison Miller many years ago. He has been Governor for four years. Who will succeed him? Will his successor be an experienced banker trained in the Denison Miller school, or some political nominee? Whoever is appointed, the principle of Treasury dictation of banking policy is wrong, because it opens the door to control of the currency for political ends and increases the danger of inexpert authority dictating the management. It may be argued that the proposed Advisory Council, which is to take the place of the present Commonwealth Bank Board, will wisely advise the Treasurer or the Governor. There is no need for such a body. The proposed members are Treasury or bank officials whose advice the Treasurer can obtain at a minute’s notice. Moreover, advice is not always taken. A mere advisory council will be virtually powerless, thus leaving the management of currency and credit in the hands of whatever political party is in power. Political control of banking means political control of the people’s money; it means that the circulation of new money will bo subject to political decisions. In such circumstances, what government will forego easily-won popularity through expending extravagantly when new money is provided merely by a Cabinet decision? The aftermath, in the form of rising prices, and of decline of the value of money, savings, insurance policies, bonds and War Savings Certificates, is always to-morrow’s risk. The money-squandering politician thinks only of to-day and the next election. It is not sufficient to say that the Commonwealth Bank should work inclose collaboration with the Commonwealth Treasury, and should do everything practicable to assist in implementing government policy. There is no serious opposition to that. Indeed, that has been the position since the Commonwealth Bank was created, but once the bank is removed from the authority of a responsible board and made the pliant instrument of any government, the day of reckoning is not far distant. The people, especially the saving and frugal sections of the community, will pay the piper for the tune they did not call.
Advocates of an alteration of our banking system contend that the wings of the trading banks must be clipped or such banks abolished because they caused the depression in 1929-31. That is nonsense; the banks had nothing to do with the depression. It was a worldwide epidemic, due mainly to the fall in world prices for primary products. Professor Copland said -
The banks have met their responsibilities in the crisis with a. considerable measure of success. They have retained the full confidence of depositors and of all financial institutions, and have sustained a high volume of advances to carry producers through two difficult years.
Equally important has been the help rendered by the banks to the governments. This has maintained national solvency, kept up spending power, and staved off some of the worst evils of deflation. The chief criticism to be made of the banks is that they have given too much, and not too little, credit to government.
A former Prime Minister, Mr. Lyons, said in 1934-
Had it not been for those financial institutions we should have been faced with complete and absolute collapse of everything worth while in our country. The banking institutions were the sheet anchor of this country during that period (depression). They saved us from absolute and complete failure.
The Royal Commission on Monetary and Banking Systems, which was appointed after the federal elections in 1934, said -
There is no justification for the view that the trading banks, in order to enlarge their profits, deliberately expanded credit to produce a hoorn and then contracted, so as to produce a depression.
After the war of 1914-18 a non-Labour government built or acquired homes for 37,507 returned soldiers at a cost of nearly £30,000,000, provided partly out of loan money, partly from revenue and partly out of bank credit. The present need for homes for ex-servicemen and civilians is many times greater.
I would go all the way with the Government in the use of the central bank credit to provide homes, because over a period of years the money so expended would be returned to the Treasury in the form of rent or instalment payments. A working man, or any man on a small salary, would be more contented if he had a home of his own, or a reasonable opportunity of becoming the owner of his home. Even more contented would be the housewife if she, on setting out to do her weekly shopping, was sure that the £1 note in her purse could be exchanged for goods to the full value of 20s. At present a £1 note oan procure goods worth only about 14s. In other words, the currency is inflated. There is more money in circulation now than there are goods and commodities available, because peace production had obviously to make way for war production of unsaleable goods - articles and services which must be available to continue our war effort. There will be a gradual change-over from war to peace production as the end of the war with Japan draws near. More goods will come on the market, with the result that the purchasing power of the £1 note will get nearer to 20s. In other words, Australian currency will be steadier. That surely should be the hope of any sane person. The Treasurer and the existing Commonwealth Bank Board are to be commended for having kept a steady hand on the fluctuating value of our currency. Apart from taxation and loans over the war years, about £300,000,000 of central bank credit has been drawn upon. With the removal of the Commonwealth Bank Board, the steadying hand on our currency will vanish. The question of how much of the nation’s credit, to be used in peacetime in the post-war period is to be left entirely to the Treasurer of the day who, in the present Government, takes his orders from caucus, which, in turn, must bow down to the will of outside pressure groups. In other words, the control of our currency becomes political. There are indications already that the slogan of these pressure groups in relation to bank credit is “ The sky is the limit “. The inevitable result of such a policy is inflation, the one and only road to a country’s insolvency.
The real motive behind the measure is to submerge private enterprise, and substitute government control of all industry. What chance has a government factory, with its extravagant overhead expenditure, in competing for overseas markets? Produce we must, if we wish to survive; we must produce for our own consumption and for export. Production on an economic basis means employment, and employment means happy homes. The function of a government is to govern, not to enter into competition with private enterprise, nor to pour bank credit into uneconomic ventures. Why this urge to destroy private enterprise? Where would Australia have been in this war but for the industrial establishments built up over the years by efficient management and expert direction of the skill of our splendid workmen? Overnight, these establishments turned from peace production to the production of war equipment. The private factories of Great Britain and the United States of America supplied mountains of equipment to the Soviet Red Armies. Marshal Stalin has expressed gratitude to the Allies for their magnificent assistance in supplying war equipment so that the momentum of his armies might be sustained after the fall of
Stalingrad. It is sheer madness to destroy something that has stood the test of peace and war merely to satisfy socialist cranks, and outside extremists. That is the underlying motive of the bill.
Besides favoring the use of bank credit for home building, there is something to be said for its use on big national projects, such as the conservation of water. This means more land settlement for ex-servicemen and migrants. Closely bound up with such a desirable proposal is the provision of markets for our products. Overseas markets are imperative. It would not pay a settler, or farmer, to produce for the limited home market; he must have an outlet for his surplus products.
I object to handing over the treasure house of the Commonwealth Bank to the Government, leaving it to scatter largesse among its supporters, to make millions available for any scheme, profitable or otherwise, and to nationalize any industry that caucus, or the executive of the Labour party, may deem expedient. The Government’s record of mismanagement and waste is deplorable. Who knows to what the Commonwealth Bank is committed? Who knows what works have been promised in this or that electorate to be financed by the note issue.
I repeat that the bill is a bridgehead, which, by the control of banking, of industry and the lives of the people, can reduce Australia to a totalitarian State. It is undemocratic to sneak in legislation on financial policy of which the majority of the electors of Australia expressed disapproval in 1934. I oppose the bill.
– It will be appropriate by way of preface to the remarks I shall make to point out that finance in itself is not a power. It is only an accountancy of the operations of real power. Its chief function is to regulate what we know as credits and debits. The real power is the right of ownership of the means of production; and all goods created by the activities of the working community. This fact should be kept in mind owing particularly in view of the attitude adopted by bankers and their supporters who always endeavour to cloud the issue and make it appear to those who do not know better that real wealth is money. That is not the case. Money is simply a medium of exchange. The objective of private bankers is to control and to capitalize the use of credit in the interests of the bankers, and not in the interests of the people; because if it were not profitable to control and capitalize the use of credit, bankers as such would not be interested in that activity. They are interested in banking only to the degree that it is profitable to themselves; and in order to maintain their own position they play on the fears of the people, making it appear that unless the people are prepared to continue to trust the bankers, the country will go bankrupt and the people will lose their money. In this way the bankers also seek to uphold the prestige and power of bankers.
Like other honorable senators, I have received hundreds of letters on this subject since the Government foreshadowed its banking legislation. I have read all of those letters very carefully; but not one of them dealt with the merits of banking. All of them constituted an appeal to the fears and prejudices of the people. Control of banking is not a panacea for all economic ills. When honorable senators opposite say that we on this side hold that view they are not correct. As I have said, banking is merely a system to control and capitalize the use of credit. It may be that we in Australia may, in order to stabilize our economic system, have to consider, in addition to controlling the banks, the striking of a capital levy. Already such a levy is being discussed in Prance, a fact which proves, as I have said, that control of banking is not a panacea for all economic ills. A cabled report published in to-day’s Sydney Morning Herald states that French incomes exceeding £1,875 in Australian money will be subject to a capital levy under a bill which is to be submitted to the French Cabinet on Friday next. Apparently, in France they have reached the stage where taxation as it operates to-day, and the control of banking, are no longer effective; and in order to carry on in the interests of the nation, the French Government is now considering striking a capital levy. We may reach that stage in Australia. A number of members of the House of Representatives, and also some honorable senators opposite have stated that the control of banking proposed under the Government’s legislation really amounts to the socialization of banking. That is not correct. Socialization really means the establishment of the. ownership by the people of all national resources upon which production and services depend. In Australia those resources are practically unlimited. With more intelligent methods of handling them there is no good reason why human life in this country should not completely satisfy its needs. Banking reform does not mean ownership of the means of production. This legislation simply means that government control of the banks compared with private control will be more efficient, cheaper and safer, because, unlike the depositors in the private banks, the depositors in government-controlled banks will now be guaranteed a return of their money. Should the private banks fail, as they have failed in the past, depositors have no guarantee that they will recover their deposits; but under this legislation that guarantee is provided by the Government. Therefore, when I say that the proposals of the Government represent a more efficient, cheaper and safer banking service, I am not in any way exaggerating, or misrepresenting, the position. The Macmillan Committee on Finance and Industry, appointed by the British Parliament, reported in June, 1931, as follows:-
When practical bankers and business men can explain clearly the causes of the trade cycle, why prosperity is followed by depression, and depression by prosperity, and can find practical means to avoid the economic waste caused thereby, and when they can adjust more satisiactorily the powers of the modern world to consume and absorb wealth with its powers to produce wealth, they will have more justification than they now have in ignoring and treating as of little or no consequence economic research into these very difficultbut vitally important problems. The practical man is satisfied to make profits when the sun shines, and to bear his losses when thebad times come, regarding these alterations more or less as laws of nature, when very often they are due to the working of the monetary machine and are to some extent at any rate under human control.
When bankers can explain why there should be periods of prosperity followed by periods of depression, or, in other words, establish the relationship between cause and effect, they will be entitled to speak with authority; but up to date, so far as I have been able to ascertain, no banker has attempted to do that. On the contrary, most bankers indulge in a maze of generalities and jargon peculiar to bankers with the object of covering up their ignorance. Speaking at a bankers’ dinner in 1933, Mr. Montagu Norman, who was then Governor of the Bank of England, said -
The difficulties are so vast, the forces so unlimited; so novel, and precedents so lacking, that 1 approach the whole subject not only in ignorance, but in humility. It is too great for me.I am willing to do my best.
Montagu Norman, of course, is regarded as one of the leading banking authorities in Great Britain. In making that statement, he was repeating, in effect, exactly what was said in the report of the Macmillan committee. Bankers are not all learned men, as they would have us believe. They are not all men who understand the origin and purposes of our monetary system. We should judge them on the results they have achieved rather than on their own claims. The results of banking in the past - their failure to meet their obligations to the community, and to live up to the expectations of the people - have influenced the people more convincingly than mere words. Because of that state of affairs, we have in existence to-day the organization known as the Labour party, pledged to fight for reforms in our banking system. One of the first steps that must be taken to achieve the objective of the Labour party - the establishment of economic security for all - is to secure control of banking. The findings of the Macmillan committee and the statements of Mr. Montagu Norman constitute a direct challenge to the banking community throughout the British Empire - a challenge which has never been answered effectively. The attitude of bankers is that they have a right- to be a law unto themselves. That attitude is expressed in a resolution which was carried at the International
Economic Conference held at Genoa in 1922. The resolution reads -
Banks, and especially banks of issue, should be free from political pressure, and should be conductedsolely on the lines of prudent finance.
These people apparentlybelieve that they should be above governments, and above the will of the people; that they should decide precisely what is meant by “ prudent finance “. They object to political pressure; but that is only a half truth. They do not object to political pressure in support of their own policies. The political pressure to which they object is that directed against their policies. If the resolution which I quoted were given effect, the bankers would set themselves up as masters of the situation, and would dictate to governments the conditions under which national undertakings should be carried out. Governments would be subordinate to the banks. Governments would be responsible to the people, and the bankers would be responsible only to themselves. That is exactly the state of affairs which to some degree has operated in the past, and which the bankers seek to continue, hence the legislation now before Parliament. For an example of the attitude of bankers towards governments, we need not go outside Australia. In 1931, the then chairman of the Commonwealth Bank Board, the late Sir Robert Gibson, wrote to the then Treasurer, Mr. Theodore, stating that the following resolution had been carried by the board: -
Subject to adequate and equitable reductions in all wages, salaries, and allowances, pensions, social benefits of all kinds, interest and other factors which affect the cost of living, the Commonwealth Bank Board will actively co-operate with the trading banks and the governments of Australia in sustaining industry and restoring employment.
That is an illustration of the manner in which the Commonwealth Bank Board can place itself in a position of authority over the Government. If that state of affairs were to continue, what would be the use of people being interested in politic. No matter what government held office, it would be subordinate to the Commonwealth Bank Board.
– Sir Robert Gibson carried out what he wrote, too.
– Yes. Unfortunately, he was able to influence many people, and the policy which the Commonwealth Bank Board laid down was implemented. The effects of that action were evident right up to the declaration of war in 1.939. Those effects’ included hundreds of thousands of wage-earners being reduced to working for the dole. Similar effects have been experienced in other parts of the world where bankers are accepted on their face value and permitted to exercise powers over governments. The resolution carried by the Commonwealth Bank Board meant that the Commonwealth Bank would not provide the credit necessary for the relief of unemployment in this country and for the assistance of primary producers during the depression years. The then Government - the Scullin Administration - made a praiseworthy attempt to relieve the situation. It proposed to secure the issue by the Commonwealth Bank of credit to the value of £18,000,000 - a very modest request compared with the measures that have been necessary to finance the war - but rather than interfere with the rights and prerogatives of the trading banks, the anti-Labour Senate at that time, some members of which are still in this chamber, voted against the proposed legislation. In doing so, they condemned thousands of workers and pensioners of this country to semi-starvation. These are the men who to-day tell us that the state of affairs which existed in the past cannot be improved, the inference being, that the process, if possible, will be repeated in the future. Of course, the object behind the whole scheme is to reduce the price of labour to the absolute minimum that will be tolerated by the workers and so increase profits. If it were possible for the workers to live on less than the dole during the depression years, they would have received less. It has been proved beyond all doubt during this war that bank credit can be used successfully for war purposes; yet Sir Robert. Gibson, supported by his reactionary friends opposite, attempted to lead us to believe that credit could not be issued for the relief of unemployment and thus to enable thousands of men and women to create the wealth necessary to enable them to enjoy a reasonable living standard. At that time, the natural resources of this country were practically unlimited. There was no shortage of important national works, and man-power and materials were in abundant supply. Take for example housing: Imagine the thousands of homes that could have been built during those years with the vast resources of labour and materials then available.
– Thousands of houses were empty during the depression.
– Yes, because the people of this country did not have sufficient money to pay the rents demanded for them. In many cases, State governments had to come to the rescue of tenants, otherwise landlords, just as callous, indifferent and ignorant as bankers and some honorable senators opposite, would have allowed unfortunate citizens of this country to live as the aborigines live. Had the available labour been used to the best advantage at that time, there would not be a shortage of houses to-day, and the country generally would be much better off. Senator J. B. Hayes in his criticism of the bill to-day stated that members on this side of the chamber had attributed the cause of the depression to the banks. That is not a correct statement. The honorable senator also said that the depression was caused by a fall of prices. What causes a fall in prices? Not one honorable senator on the Opposition side has attempted to establish the relationship between cause and effect. They all simply say “ a fall of prices “, as if it were something that could not be helped in any circumstances and a matter beyond human control. Why do prices fall ? Obviously ‘because markets become glutted; and that is duo to the lack of purchasing power of the consuming community. When the supply of goods exceeds so greatly the limited demand and purchasing power naturally prices fall. That is all part and parcel of the present financial system, which has for its purpose the elimination of competitors, and establishing private monopolist control of primary and secondary production. As a result of the depression, leading monopolists in Australia and throughout the world were able to reap a veritable harvest because of the bankruptcies and failures of their competitors. That went on until the war broke out in September, 1939; then, almost overnight, labour power that had been dispensable, and starving on account of lack of sustenance, became indispensable. When the government of the day realized that its material interests and the safety of the people were in jeopardy, it found use for the hundreds of thousands of men and women who were idle and living in a state of semi-starvation in peace-time. During the depression years, Montagu Norman pointed out that credits were frozen; that, in the banks, credits in the form of deposits were mounting up and could not be liquidated or thawed, but the Government took no action when it could have done so. It could have assumed control of the banks then and issued credit for the purpose of creating assets in the shape of houses, or the undertaking of national works, such as the standardization of railways, water conservation and reafforestation. Had the credits been thawed, the money could have been put into circulation to finance such works, but that was not done. On the contrary, until September, 1939, hundreds of thousand’s were forced to work for the dole. Within a few months after war was declared, men were working excessive hours of overtime to overtake the arrears of work that had accrued owing to the policy of the bankers and the Government. I repeat that the banks did not create the depression, but they did all that wa8 humanly possible to prolong it.
The lesson from such an experience is that the only limit to the creation of credit that can be used safely and beneficially in times of peace is the quantity and quality of unemployed labour available. When I first became a member of the Senate, I pointed out to the then Government’s representatives in this chamber that rather than have hundred’s of thousands of men working for the dole the Government should step into the breach and provide full-time work, at award rates, for the unemployed. Obviously, private enterprise at that time was unable to employ all the labour power at its disposal. It was, therefore, within the province of practical politics for the Government to control credit and act as I have suggested. By consciously expanding or curtailing credit as labour power is or is not available, public enterprise can be expanded as private enterprise fails or becomes contracted, thus paving the way for the ultimate state of society in which poverty or destitution cannot be exploited or capitalized by bankers and business men who have nothing in common with the interests of the people as a whole. Private enterprise under existing conditions will not be able to employ all the men and women available after the war. When the fighting forces are demobilized and munitions workers are released it is certain that all the labour power will not be used to the best advantage by private enterprise. One reason for that is that the purchasing power of the wage-earners will not be sufficient to buy all the goods being produced. It should be remembered that labour power in primary and secondary productionis a diminishing factor to the degree that it is being replaced by machinery. Purchasing power is also a diminishing factor because the wages of the workers are based not on the values they produce but on the cost of subsistence. As the cost of subsistence is reduced in consequence of labour power being a diminishing factor, obviously purchasing power is also reduced. Since the basic wage was fixed in 1907, wages, in terms of money, have been increased, but not in terms of purchasing power. They have been increased by about 130 per cent. in terms of money, but purchasing power in terms of commodities has not been increased one iota. What saves the situation at the moment is the war-time circumstances in which all the goods being manufactured are used for the purpose of war. In times of peace such a quantity of goods would cause a glut on the market. When I say that private enterprise will not be able to employ all the labour power at its disposal after the war, I am not exaggerating. It was so immediately after the last war when war damages had been prepared. A short period of compara tive prosperity obtained during the time of building up reserve stocks to meet demands, but that was followed by a depression which was practically unprecedented in the history of Australia or the world. The people will pass through exactly the same experience after this war unless there is government control of banking and an issue of credit to the extent of millions of pounds to enable assets to be created far in excess of the actual cost. If the government in power is able to do that - and that is the purpose of this bill - through the control of banking,then the experience following the last war can be avoided.
I regard this aspect of the situation as being vitally important. The problem to be solved after this war will be much greater than that following the last war. Historically, it is recorded that great banks of the world which are decorated with, and which trade under national names began only as associations of private speculators. Men speak loudly of the Bank of England, and the implication is that it is a bank owned and controlled by the people of England through the medium of its government. That is not the case. The same applies to the Bank of France. These titles are adopted for the purpose of misleading people who do not know any better.
SenatorSampson. - Nothing of the sort.
– I would expect the honorable senator to deny anything, because where there is a lack of knowledge there is no appreciation of facts. Would the honorable senator say that the Bank of England is owned and controlled by the Government?
– It was not given its name to mislead the people as the honorable senator suggests.
SenatorCAMERON.- It was, and there is no doubt about that. Why was it not called “ The bank owned by English speculators and shareholders “ and their names included in the name? The “ National Bank of Australia “ and the “ Bank of Australasia “ are names that have been adopted for the purpose of conveying the impression that in some way or other the banks are directly responsible to the peopleof Australia through the Government. That has been done to enable the .banks to control the finances of the nations on their own terms, as in the past, and not for the purpose of making adequate provision for the maintenance and the welfare of the people as a whole.
A good deal has been said about political interference with the banking system. The statement has been made that political control would ruin the banks and possibly cause tho bankruptcy of the nation, but I point out that political control has been responsible for the establishment of the banks. Without political control in their interests, the private hanks would never have been able to carry on. It was political control which saved them from bankruptcy in England during the war of 1914-18. In his Triumph of Nationalization, Sir Leo Chiozza Money, who held such positions as private secretary to the Minister of Munitions, and Secretary of the Ministry of Shipping, in which office he was chairman of the Tonnage Priority Committee and of the National Maritime Board and an ex officio member of the Shipping Control Committee, while the last war was in progress, has written as follows : -
The declaration of war would have been the signal for the complete collapse of our hanking system but for the intervention of the State. . . . The private banks which rule our credit operations had to be saved by national action. The State throughout the war, as before the war and after the war, had to go cap in band for credit to the concerns which without its aid would have shut their doors. … If the Government had been in control of credit, the existence of national banking would have simplified the financial operations of the war. . . .
That statement was written after the war, and events have proved its correctness. One of the legacies of the last war is that the people are committed to pay perpetual tribute to hankers and to bondholders, a section which has contributed nothing to the nation either in production or in assistance to the fighting forces. All that section did was to capitalize wartime conditions. The effect has been that the debtor section of the community, not only in Australia, but, also throughout the British Empire, has had to pay perpetual tribute to the creditor section represented mainly by the banks.
That is one of the reasons why adequate provision could not be made on behalf of ex-servicemen after the last war. It is true that those who were permanently or partially incapacitated received benefits under the Australian Soldiers’ Repatriation Act, but thousands who were able and willing to work did not receive the consideration to which they were entitled. We cannot pay perpetual tribute to creditors and at the same time make adequate provision f01 the debtor section. The railways of this country are affected by financial obligations to bondholders, which determine the conditions under which the railways of Australia shall be conducted. We found that we could not correct the evils of inadequate rolling stock before war was declared. We had underpaid employees and the railways system was not up to date, but, at the same time, approximately two-thirds of the revenue of the railways had to be paid in interest to bondholders. So the bondholders are the people who constitute the real government. As that state of affairs affects the railways departments throughout Australia, it also affects other government departments.
Will honorable senators opposite say, in effect, that that state of affairs must continue indefinitely? Are we merely to make the best 6f the position, or are we to support an effort to bring about some improvement? It seems to me that they wish matters to remain as they are, and allow unemployment, poverty and destitution to continue in the future as in the past. If they are wise in their day and generation, and if they are capable of reading the signs of the times, they will realize that throughout the British Empire a feeling is being generated, and will be expressed in the form of action, in a direction that will make it impossible to allow a recurrence in future of conditions which have prevailed in the past. Honorable senators opposite will have to choose whether they will act as the Government proposes to act, and prepare for the future by providing for the control of banking and the issue of the credit which is sorely needed by the nation. Will they wait until a state of chaos arises and physical action will possibly be taken where constitutional action would suffice and be more beneficial. The experience of many countries after the last war should convince honorable senators opposite that they must make a choice one way or the other. Their choice should be in favour of placing on the statute-book in the form of an act, the bill which is now before the Senate.
Debate (on motion by Senator Gibson) adjourned.
ROYAL Australian Navy : Mails - Broadcasting : Sunday Advertising - Returned Sailors, Soldiers and Airmen’s Imperial League of Australia : Policy - ‘Clothes Rationing.
Motion (by Senator Keane) proposed -
That the Senate do now adjourn.
– I call attention to happenings in forward areas which I think should not occur. About two months ago I received a letter from a friend serving in the Philippines who had participated in the Lingayen Gulf engagement, and who bitterly complained about the condition in which second-class mail matter is received by units in advanced battle areas. He pointed out that newspapers are almost invariably undecipherable and that valuable articles such as photographs are destroyed by contact with salt water. Even tins containing cakes and other goods have been eaten through by the action of salt water. He said that this was having an injurious effect on the morale of the men. I submitted the complaint to the Postmaster-General (Senator Cameron), eliminating only those portions of the letter which would identify the sender. The Minister told me that a few weeks would elapse in dealing with the matter, as he would have to communicate with the naval authorities before he could reply to the complaint. A week or so later I received a letter from the Minister as follows : -
With further reference to your letter dated the 1st May, I immediately took up with the Department of the Navy, the question of the condition in which mail is reaching His Majesty’s Australian ships in the northern areas, and have now received a communication from that department containing the following: - “ It is difficult to investigate the complaint forwarded by Senator Large, as fax as it concerns this department, in the absence of the name of the ship or the area referred to. It is suggested that the senator be asked to furnish particulars so that inquiries can be made.”
If you are in a position to furnish further particulars, I would be glad to receive them, or, if it should suit your convenience better, you may care to send them direct to the Navy Department.
The department desires to know to which ship I referred, but the complaint was in regard to “ships” and to mail matter received by the forces in the forward areas generally. Whoever is responsible for that letter is more anxious to get a victim than to remedy a disability. The official wishes to know who wrote to me, so that his head may be metaphorically taken off. I have made inquiries from various ratings on ships returning from forward battle areas, and invariably from every ship I have heard the same complaint. The department wants me to name the ship to which the complaint refers. I shall give that information publicly by saying that the complaint refers to every ship in the locality mentioned controlled by the Royal Australian Navy. My charge now relates to every one of its ships. Enclosed with the letter which was forwarded to me was a piece of wrapping, about 5 inches square - the kind of wrapping that is used for parcels. The letter contained an apology for enclosing wrapping of a “ smelly “ nature, and explained that it had first been washed. The material was a kind of hybrid hessian - something between, a coarse sack and hessian. As a member of the War Expenditure Committee, I found that identical wrapping was used to wrap lend-lease machinery imported from, the United States of America. When I made inquiries at a depot whether any of this kind of wrapping was used, I was told that quite a lot of it was forwarded to various places The Royal Navy places first-class mail in watertight canvas bags, whilst the American Navy, in order to be doubly sure that mail will not be damaged, encloses it, first, in a rubber bag, which is then placed inside a canvas bag.
Australian second-class mail is forwarded in the wrapping to which I have referred, and then, apparently, it is tossed into the ship’s hold, where it may become saturated with bilge water. Honorable senators who have friends serving on the Philippines front will have heard the same story. Recently, a reliable young fellow said that the complaint relates not to one battle station only, but to every place at which he’ had served. He added that he had participated in every landing that had been made. Invariably, men from battle areas have the same tale to tell of the condition in which their mail reaches them. This deterioration of mail matter is affecting the men’s morale. They look forward to receiving messages and parcels from home and read avidly any newspapers sent to them. Even newspapers which they would not read at home are eagerly studied. But when their mail is a mere smelly mass, soaked with bilge water, and when tins containing cakes and other things are eaten through by salt water and the contents rendered valueless, their disappointment develops into resentment. I know of many sailors who have told their home people not to send periodicals, journals, photographs, trinkets or parcels of any kind to them, because their second-class mail is handled so carelessly. I call attention to this matter because when I receive a letter stating that “ it is difficult to investigate the complaint … in the absence of the name of the ship or the area referred to “ I know that if I were to mention any particular vessel the authorities would pounce upon the man who sent the letter and victimize him. The letter also asked that I should indicate the area to which the complaint referred. I have mentioned that the particular case to which I drew attention was in the Philippines area. I regard this as an important matter, particularly because the morale of the troops is being affected. I am not silly enough to fall into the trap that has been set for me. Instead of naming any particular vessel, which I could do, I say that the complaint refers to every ship and to every forward battle area. I hope that instead of looking for a victim, the authorities will look for a remedy.
– The responsibility for the state of affairs to which Senator Large has directed attention lies with the naval authorities, not the postal authorities.
On the 20th June, Senator Grant asked me to consider the advisability of prohibiting the broadcasting of advertisements on Sundays by commercial broadcasting stations. The matter is one that was exhaustively examined by the Broadcasting Committee which investigated all aspects of broadcasting in 1941 and 1942 and, although the committee reached the conclusion that some limitation should be placed on the broadcasting of advertisements on Sundays, it felt that if Sunday advertising were entirely prohibited many stations would have to go off the air completely on Sundays, and the listening public would be deprived of much highly appreciated entertainment. Arising out of the committee’s recommendations in the matter, provision was made in the Australian Broadcasting Act that a licensee of a commercial broadcasting station shall not broadcast advertisements on a Sunday except in such manner and in accordance with such conditions as the Minister determines. In pursuance of the terms of the relevant section of the act the following conditions were laid down respecting Sunday advertising : -
– This afternoon, the Minister for Trade and Customs (Senator Keane) said that he had a suspicion that the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia had party political associations, and Senator O’Flaherty, by innuendo, said that it was the tool of the financial institutions. The league was founded in 1915 by men who returned from the war of 1914-18 in order to afford some assistance to their less fortunate comrades, particularly those who were sick and wounded, and the dependants of those who had fallen. Later the league was consulted by the then government in connexion with the drafting of the repatriation legislation which, on the whole, has proved most successful. The basis of the league and the reason for its success, is the comradeship formed by men who shared the dangers of war, which gave to them an understanding of individuals and enabled them to work together without regard to any man’s politics, religion or social status. On that basis the league has worked ever since. When Australia, in common with most other countries, experienced a period of unrest after the last war, the league exercised a steadying influence on the community which was greatly appreciated by those responsible for good government. That influence has continued for twenty years, and was particularly noticeable during the depression period. During the present war the league has contributed in no small way to the nation’s war effort; it was mainly responsible for the establishment and maintenance of the Volunteer Defence Corps. Apart from its responsibilities to its members, the league has a public policy which I suggest is acceptable to every good Australian. That policy embodies the following ten points: - (1) The integrity of our Empire; (2) White Australia; (3) adequate defence force; (4) a vigorous immigration system, with necessary safeguard to ensure suitable migrants being obtained; (5) unification of railway gauges; (6) nationalization of main roads: (7) systematic immigration of industries; (8) reafforestation; (9) public health; and (10) trade within our Empire. I have been an active member of the organization for 26 years and have worked on the executive of the league in Western Australia for a long period without any difficulty, indeed, with considerable pleasure and satisfaction, with members of every political party, religion and social status. The organization has had the respect of the people, and it enjoys that respect to-day. It has successfully repulsed every effort to force it into any party political camp. As an organization in Western Australia, it refused to discuss the secession movement ten years ago, and it adopted a similar attitude towards last year’s referendum. Those matters were not permitted to be discussed within the organization. Nevertheless, the league has always encouraged its members to take an active part in public life in whatever capacity their talents indicated. That has been of great advantage to the community. A capably led and welldirected organization of about 200,000 members can do much to solve the great problems which lie ahead of us, and it is unfortunate that the Minister for Trade and Customs should have made the remark he did, unless he desires to destroy the organization. I do not think that he had that in mind. I have taken this first opportunity to protest against his statement because I regard it as most untimely, as well as entirely unmerited.
– This morning I asked the Minister for Trade and Customs (Senator Keane) a series of questions for which he asked for notice. They related to a serious situation which has arisen in Queensland in connexion with goods for which coupons are required. I have been advised that in that State there is an accumulation of Australian-made goods in four wholesale houses which represent approximately half a million coupons, andI understand that there are other warehouse goods which the people cannot purchase because they have not sufficient coupons. Manufacturing has reached the stage at which certain articles are being produced in quantities greater than people can purchase under the present rationing scheme. If such a state of affairs is allowed to continue, it is obvious, particularly as defence orders are likely to be considerably curtailed, that we shall shortly be faced with the position that manufacturers will be turning out considerably greater quantities of articles than the public are permitted to purchase under the present rationing scale. This will give rise to black marketing in such articles. The alternative is that manufacturers will be obliged to curtail their output; and this will cause unemployment and a decrease of the use of wool and other raw materials. I presume that the Minister will need to discuss the matter with the Rationing Commission, but I emphasize its urgency.
– in reply - The matter raised by Senator Large will be referred to the Minister for the Navy (Mr. Makin). Senator Collett dealt with remarks I made this afternoon in answer to a question regarding a certain man who presided at a meeting of the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia in Sydney last night. I repeat that the selection of that individual, in view of his close association with a political party to act in such a capacity on behalf of the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia was a bad blunder, and was ample justification for my statement that a suspicion exists that the organization is becoming political.
– The Minister is responsible for that suspicion.
SenatorKEANE. - And it is amply warranted. The same gentleman was recently an aspirant for a certain position in the newly formed Liberal party. Why he should have been selected as president of the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia in Sydney, I do not know.
– He has been a member of the organization for twenty years.
– Certainly ; the honorable senator, who is also a member of the league, is not non-political. As I have said on previous occasions, my only connexion with the Returned Sailors, Soldiers and Airmen’s Imperial League of Australia was when I was a trade union leader; and in that sphere we did not have any trouble with the league in any State.
– Every member of the league subscribes to the policy of preference in employment to ex-service personnel.
– If they do, they are good supporters of this Government. However, I express regret to Senator Collett if, in his view, any commentI made reflects unfairly upon the organization. My remarks arose as the result of a question asked to-day; and I shall say no more about the matter.
The matter raised by Senator Follis under consideration at the moment, but I shall obtain an early report from the Deputy Commissioner of Rationing in Queensland on the subject. I hope to be able to make a statement with respect to it next Tuesday.
Question resolved in the affirmative.
The following papers were pre sented : -
Lands Acquisition Act - Land acquired forPostal purposes -
Nannup, Western Australia.
National Security Act -
National Security (General) Regulation - Order - Control of Automotive Spar-
Parts (No. 4).
National Security (Munitions) Regula tions - Order - Declaration of Certain Items to be munitions.
National Security (Prices) RegulationsDeclaration No. 155.
Orders- Nos. 2072-2112.
Navigation Act - Regulations - Statutory Rules 1945, No. 92.
Senate adjourned at 10.19 p.m.
Cite as: Australia, Senate, Debates, 28 June 1945, viewed 22 October 2017, <http://historichansard.net/senate/1945/19450628_senate_17_183/>.