22nd Parliament · 3rd Session
The PRESIDENT (Senator the Hon. Sir Alister McMuIlin) took the chair at 3 p.m., and read prayers.
– I have to inform the Senate that I have received letters from the Leader of the Government in the Senate (Senator O’sullivan) appointing Senators McCallum, Vincent and Wood, and from the Leader of the Opposition in the Senate (Senator McKenna) appointing Senators Poke and Ryan to be members of the Joint Committee on the Australian Capital Territory. I have also received letters from the Prime Minister (Mr. Menzies) appointing Mr. J. B. Howse and Mr. C. G. W. Anderson, and from the Leader of the Opposition in the House of Representatives (Dr. Evatt) appointing Mr. J. R. Fraser and Mr. W. C. Coutts to be members of the Joint Committee on the Australian Capital Territory.
– Has the attention of the Minister for Shipping and Transport been invited to a statement made in Melbourne yesterday by Mr. Jean Vuillequez, a Frenchman of some experience on transport matters? His statement, made after a five-weeks’ tour of Australia, related to the possibility of introducing in Australia a system of conveying laden motor vehicles and trailers on flat-top railway trucks, no doubt similar to the temporary system used in South Australia for conveying narrow gauge railway trucks during the process of building the standard gauge railway to Leigh Creek in that State. He claims that the railways departments of New South Wales and Queensland have approved of the system. Can the Minister say whether the Commonwealth railways administration has considered the proposal, and, if it has done so, has he any comment to make at this stage? Is he aware of any other railway systems in Australia that are favorably considering the matter?
– The Commonwealth Railways are, in fact, using the pick-a-back system in a limited way on the Trans-Australian line at the present time.
I am aware of the presence in Australia of the gentleman to whom Senator Laught refers. As it happens, I shall be having an interview with him later this afternoon in connexion with this very matter.
– Has the attention of the Minister representing the Minister for Trade been drawn to a report emanating from Sydney, which appeared in yesterday’s Melbourne “ Age “ under the heading “ Cheap Shirts Come in by the Back Door “, stating that clothing manufacturers in Sydney have claimed that cheap clothing is being manufactured in Japan and sent to Hong Kong for finishing to give the impression that it is produced in a British colony? If the Minister has heard of this matter, does he, or does the Government, propose to investigate it with the idea of stopping these deceitful practices?
– I did see the newspaper report to which the honorable senator has referred. Unfortunately, I did not make any inquiries to check its accuracy. If the honorable senator will place his question on the notice-paper, I shall obtain some accurate information about it.
– My question is addressed to the Minister representing the Postmaster-General. In yesterday’s press it was announced by the Postmaster-General that, as from the beginning of next month, the power of each of the four commercial broadcasting stations in Western Australia, namely, 6IX, 6KY, 6PM and 6PR, is to be increased from 500 watts to 2,000 watts. Does the Minister believe that this will improve radio reception in the Central Midlands? If it is found that it does not do so, will the Minister consider the erection of a regional broadcasting station in the area, so that the people living there may receive reasonable programmes?
– I am sorry that I cannot give the honorable senator an assurance that the proposed increase of power will do what he desires. If he will place his question on the notice-paper, I shall get the Postmaster-General to have a look at the matter and obtain a reply for the honorable senator.
– I address a question to the Minister representing the Minister for Immigration. I hold in my hand two letters and an enclosure of a most extraordinary nature, containing a violent and scathing attack on Government policy in regard to immigration. Has the Minister seen the letters and the enclosure which have been forwarded to all honorable members by a Mr. Clapperton, the president of the BritishAustralian Association, containing a blistering attack on the Government’s immigration policy? If so, would he inform the Senate what truth is contained in the extraordinary statements made?
– I have not seen the letters to which the honorable senator refers. No doubt my colleague, the Minister, has seen them. If the honorable senator will place his question on the notice-paper, I shall ask the Minister to give him an adequate reply.
– I direct a question to the Minister for Civil Aviation in connexion with the recent very heavy and torrential rains which fell in Sydney and closed Mascot airport for some hours, resulting in overseas aircraft being diverted and causing other incoming aircraft to be banked up over the aerodrome for up to two hours. Is the Minister aware that, approximately 24 hours after the deluge, some side strip taxi-way approaches to the main runways were still under water? Is .any remedial drainage work proposed or in the process of being carried out at the airport?
– My attention has been drawn to the particular occurrence to which Senator Anderson has referred. Excess water is cleared at Mascot aerodrome by means of a ponding area, which has been constructed to take the excess water flowing off the runways and taxi-ways. From this ponding area there is a series of drains - small, narrow drains - which clear the water both to the ocean and to the river. I understand, from inquiries I have made, that on the occasion to which Senator Anderson refers it was found that those drains running to the sea and to the river had not been adequately or sufficiently cleared. Action has been taken to ensure that there will be no repetition of this occurrence.
– Can the Minister for Shipping and Transport say whether it is a fact that the trans-shipping of goods from the Commonwealth railways to the Western Australian railways, and vice versa, at Parkeston and Kalgoorlie, which has been done for many years by employees of the Western Australian Government railways, will in future be done by Commonwealth railway employees? If this is so, will the Minister give an assurance that he will safeguard the employment of those men at present employed on the trans-shipment of goods at those points?
– I have no knowledge at the moment as to whether such a change is definitely in mind. I am sure the honorable senator will appreciate that it is one of those matters which, in the normal course of events, would be arranged as between the Commonwealth Railways Commissioner and the Western Australian Commissioner of Railways. I shall inquire into the matter to ascertain whether any change of arrangements is in prospect and, if a change is planned, the reason for it.
– I preface my question, which is directed to the Minister representing the Minister for Trade or the Minister representing the Minister for External Affairs, whoever is the appropriate Minister, by saying that it is understood that there is a shortage of food in continental India. Moreover, there is a surplus of blue pens in Tasmania. 1 ask the Minister: Is it the policy of the Federal Government to provide food, especially grains, under the Colombo plan to Asiatic countries? Having regard to the high food value of blue peas and the ease of transportation, would not Tasmania and continental India be helped by shipping these surplus peas overseas under the auspices of the Colombo plan? Will the Minister inquire into the possibility of such an arrangement?
– 1 shall be very happy to take up with my colleagues, the Minister for Trade and the Minister for External Affairs, the matter raised by the honorable senator and to let him know their views on it.
– I ask the Minister representing the Minister in charge of the Commonwealth Scientific and Industrial Research Organization whether that organization or any kindred body has investigated the problem of the types of houses and fittings that are best suited to the particular needs of paraplegics. If it has not, could it give some consideration to this very human problem so that persons so afflicted, upon their discharge after long periods of hospitalization, can secure accommodation and resume as normal a life as is possible? If suitable types of houses and fittings can be produced, will the Government consider giving special assistance to State governments to enable them to meet this special situation, in view of the higher cost of such dwellings?
– I am not able to answer offhand the question that has been raised by the honorable senator. It is one of considerable human importance. I suggest that she place it on the notice-paper. 1 shall then obtain an answer from the responsible Minister.
– Last week, the Minister for Customs and Excise stated that he was examining the film censorship regulations to ascertain whether changes were necessary to bring them into line with modern conditions. In view of the widespread concern over recent screenings in some States, will he inform the Senate whether consideration will be given to adopting a new method of film classification?
– The question of classifications is one of the matters that will be examined in the investigation that is now taking place into the film censorship regulations. I have received quite a number of representations on this matter from people who are interested, as is Senator Wedgwood. The honorable senator has always shown a great interest in this particular problem. T can only assure her again that this is one of the matters that will be looked at.
– I preface my question, which is directed to the Minister representing the Prime Minister, by stating that most honorable senators have seen pictures in current newspapers of the circumstances under which Ruth Daylight, the aboriginal girl from Hall’s Creek, is living. It is one which creates a sense of shame in the minds of the vast majority of the Australian people. Because of the difficulties that at present prevent the Commonwealth from having jurisdiction over aboriginals in the States, will the Minister consider the setting up of a Senate committee to investigate thoroughly the whole question of the care of aboriginals, with a view to developing some overall plan to grapple with this sad and pitiful social problem?
– As the honorable senator is aware, at the present time the Commonwealth exercises jurisdiction only over aboriginals who are resident in territories that are administered by the Commonwealth - that is, in the Northern Territory and, if there be any aboriginals in the Australian Capital Territory, those who reside in that area. As far as I know, the States are very keen to retain the jurisdiction that they presently exercise over aboriginals within their own boundaries. Whether it would be worthwhile for the Commonwealth to ask the States to hand over to it the authority they now exercise, is a matter for further consideration.
– My question, directed to the Minister for National Development, relates to research into the changing of salt and mineralized water into fresh water. Can the Minister inform the Senate whether his department is still carrying out research on this very important matter? If it is, can he inform the Senate the stage that has been reached? Does he consider it possible, in the long term, thai some economic process of obtaining cheap fresh water from the sea or the vast underground resources available in the arid regions of Australia, will be developed?
– I am sorry I canno! give an adequate answer to the honorable senator’s question off-hand. The Commonwealth, through my department, is contributing to, or sharing, the cost of research programmes that are being carried out overseas. My recollection is that research, with some prospect of success, is being carriedout at the present time in Holland and the United States of America. The Commonwealth is making a contribution, with other countries, towards the cost of that research programme. If the honorable senator puts his question on notice I shall obtain more detailed information in the nature of a progress report on the stage that has been reached in the research.
– I ask the Minister representing the Prime Minister whether it is a fact that a sub-committee of Cabinet was set up to examine the functioning of the Public Service with a view to effecting some economies. Can the Minister inform the Senate whether any progress has been made by that sub-committee?
– That is hardly the type of question which can be properly or adequately answered in the Senate, at this stage at all events.
– Will the Minister for National Development give early consideration to the question of the Commonwealth Government undertaking further responsibility, either financial or otherwise, for the establishment of a major developmental project in the north-west of Western Australia in view of the unanimity of thought of all political parties in Western Australia on this matter? Alternatively, will the Minister approve the setting up of an all-party committee of the Senate to investigate the problems of the north-west of Western Australia and, perhaps, confer with the State Government on this subject?
– The Commonwealth Government recently announced that it was making a gift, or grant, of £2,500,000 to the Government of Western Australia for that very purpose, in instalments of £500,000 each - I speak from memory - spread over five years. I think that the Government having made a decision of such importance and significance to Western Australia, it would hardly be appropriate to review the matter, when the ink is hardly dry on the last arrangement.
– I desire to direct to the Minister representing the Minister for Immigration a question concerning naturalization ceremonies. I preface the question by reminding the Senate that naturalization ceremonies are carried out by the mayors of municipalities and by the presidents of shires. These functions, which are conducted with dignity, can make a lasting impression on the minds of new citizens. If, as frequently happens, a husband and his wife and children are naturalized together, the occasion is very impressive. But instances have come to my notice of husbands and wives receiving notifications to attend different naturalization ceremonies even though their eligibility is the same. Will the Minister ensure that, in cases of family groups all members of which are equally eligible for Australian citizenship, the naturalization of all members of those families will be carried out simultaneously?
– The matter that the honorable senator has raised is of great interest. I feel, as he has pointed out, that naturalization ceremonies have become far better since that function has been conducted by municipal authorities throughout the country, because the new citizens are thereby brought closer to the people amongst whom they are living. I am sure that we should all like to see adopted the honorable senator’s very human suggestion that members of family groups should be naturalized simultaneously. I shall bring the matter to the notice of the Minister for Immigration and ask him to see that this is done wherever possible.
– I should like to ask the Minister for National Development a question supplementary to my former question about assistance to Western Australia. Is the Minister aware that, at a Liberal party conference held in Perth last weekend, the deputy leader of the party submitted a motion declaring, in effect, that the recent grant by the Commonwealth Government to Western Australia for developmental works in the north of that State is totally inadequate?
– Senator Tangney’s question was the first intimation I have had of the statement attributed to the deputy leader of the Liberal party in Western Australia-.
– I should like to direct to the Minister representing the Prime Minister another question about the Public Service. Can the Minister explain why a question as to whether, or not any progress has, been made by’ the subcommittee of Cabinet appointed to inquire into, the Public Service is not one that can be adequately and properly answered in the- Senate? Will the Minister take an early opportunity to make a. statement on the subject matter of my question?
– The reason for the form of my answer to the honorable senator’s- previous- question is that it has never been the practice to give interim reports on the proceedings of subcommittees of Cabinet, or their findings. Generally speaking, these sub-committees report in the. first instance to Cabinet.
– I asked whether any progress had been made.
– That is a matter for the sub-committee to report to Cabinet.
– Is the Minister representing, the Postmaster-General aware that an announcement was’ recently made that the Postal- Department intends to liberalize the provision of telephones in country areas? Will the Minister give consideration to the installation of further automatic telephone exchanges in the outback country areas in order that the people who live there may enjoy the benefits of the modern communication, service that is available to the residents of more thickly populated areas?
– I saw the statement of the Postmaster-General about the extension of telephone facilities in country areas. It seemed to me to be a very good idea, and one that would be: appreciated by those who live in country areas* It is governmental and departmental policy to install automatic telephone exchanges, and these are being put in at a very fast rate right throughout the country - probably before the city areas. However, the city areas have also received a great deal of consideration. The number of telephones installed in the last twelve months, represents an all-time record.
-By way of preface to- my question, which is directed to the Minister representing’ the Minister for Trade, I’ should like- to compliment the Government upon the excellent’ start that has been made by the Export Payments Insurance Corporation-. Will” the Minister ascertain when it is likely that a corporation office will be established in South Australia?
– I take it that the honorable senator is in favour of the corporation establishing an office in South Australia, and,, accordingly,, I. shall convey his representations to the. Minister for Trade.
– I ask the Minister for National Development” whether one of the terms of the proposed grant of £2,500,000 to- Western. Australia was that, the Government of that State should decide which works should’ be undertaken, and in what order they should be undertaken. Has the Common,wealth Government’ received any request- from the Government of Western Australia- concerning, the works that should be carried out in that. State?
– My recollection of the matter is that legislation making this grant to Western Australia has been prepared and will be brought down during this session; that the Prime Minister has written to the Premier of Western Australia making the offer; that he has accepted with thanks; that the Prime Minister has written again saying; “ Here is the appropriation. Will you now nominate the programme of works on which the grant of £2,500,000 should be expended.? “; and that the Premier has replied, in appropriate terms, that he will do so as soon as he can.
asked the Minister representing the Minister for Labour and National Service, upon notice -
– The following information has been supplied by the Minister for Labour and National Service: -
asked the Minister representing the Minister for Defence Production, upon notice -
– The Minister for Defence Production has supplied the following answer -
– You called me previously in error, Mr. President, and told me there was an answer to another question standing in my name. I think you must have been looking at Question No. 2. I am very disappointed that a reply has not been supplied to that question. There is a more urgent need for an answer to that question than for an answer to question No. 22, which is addressed to the Attorney-General, upon notice, in the following terms: -
– The answers to the honorable senator’s questions are as follows: -
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Spooner) read a first time.
– I move -
That the bill be now read a second time.
As this bill and the Stevedoring Industry Charge Assessment Bill 1958 are closely related, 1 suggest that it will suit the convenience of the Senate if they are debated together. The bills are short, and their purposes are clear. The first bill will increase the rate of stevedoring industry charge; the second will cure some defects, of a purely technical character, arising for the most part, from the repeal by the Stevedoring Industry Act 1956 of the earlier legislation.
The Stevedoring Industry Charge Bill 1958 increases the rate of the charge from 2s. to 2s. 6d. a man hour on a continuing basis, and adds a temporary surcharge of 6d. a man hour to operate until June 1959. These increases are to take effect from the beginning of April. As honorable senators are aware, the stevedoring industry charge is a levy in respect of man hours worked by waterside workers engaged by stevedoring employers. It finances the operations of the Australian Stevedoring Industry Authority. These operations include payment of attendance money to waterside workers on days when no work is available for them, and the payments awarded for sick leave and statutory holidays. In other industries, payments of this character would be made by the employer for whom the person to benefit was working on a regular basis. Waterside workers differ in that they have various employers. lt is necessary for some central organization to distribute these payments, in effect, on behalf of all the employers, to those who have been engaged from time to time by them. The Australian Stevedoring Industry Authority performs this function. lt will be recalled that the levy was increased in October 1956. Earlier that year, Mr. Justice Ashburner had awarded an increase of 50 per cent, in attendance money rates, and for the first time in the history of the industry, had awarded payments for sick leave and statutory holidays. A further increase in the charge, of 5d. a man hour, was made in May 1957. Experience had shown that the lower rate of levy fixed in October 1956 was not providing sufficient revenue to cover the authority’s outgoings. There were various reasons for this. The volume of imports proved to be lower than anticipated. There was a further decline in the tonnage of general cargoes handled by our interstate shipping. There was also some improve ment in stevedoring performance. AH these factors taken together meant that fewer man hours were actually worked. As a result, the income was less than had been anticipated and aggregate attendance money payments higher.
A further increase in the levy is now necessary if the affairs of this industry are to be managed on a pay-as-you-go basis. This has been the general principle followed ever since a statutory authority was constituted. Indeed, the authority is faced with the necessity for securing not only sufficient revenue to meet its outgoings, but also sufficient additional funds to bring its finances back on an even keel. If the current position is not remedied, the authority will be in deficit to the extent of £650,000 by 30th June next.
This recital might suggest bad budgeting That has not been the case. Except for the largely unpredictable factor of attendance money, outgoing expenditure items have been working out much as anticipated. Attendance money payments, however, seem likely to exceed the estimate made last year by more than £500,000. On the revenue side, income is likely to be some £200,000 less than expected.
Let me explain how the movement in these two items has occurred. First, there have been fewer interruptions to work by industrial dispues and rain. There are still far too many industrial disputes in this industry, but compared with the previous year, 1956-57 showed a substantia) improvement over 1955-56, and the first half of 1957-58, while a little worse than the average for the previous year, was a good deal better than 1955-56. Industrial disputes in 1955-56 cost 3,350,000 man hours; in 1956-57, 1,280,000; and in the first half of 1957-58, 760,000. The man hours lost from rain in those three periods were as follows: -
Over the period, more overtime hours have been worked, which has meant thai work has been done more expeditiously and with fewer workers. These factors have combined to produce more attendance money payments. Secondly, import tonnages did not increase as much as might reasonably have been expected. Export tonnages were less .than anticipated, and again, following .the pattern of earlier years, there was a further decline in interstate general cargoes.
There are many unhappy features about this industry, and one of them has been the decline in work opportunities brought about ‘by ‘the loss of customers for sea transport ito the more reliable and regular delivery service offered by rail and road transport.
Thirdly - and this is a happier note - there has been a useful increase in stevedoring efficiency. There has been an improvement in cargo handling rates and more efficient methods of handling cargoes, including increased mechanization and the pre-slinging of cargoes. These processes have proceeded more rapidly than was foreseen when estimates were being prepared early last year. All this has added up to heavier attendance money payments.
The problem which has faced the Government in considering how to deal with the authority’s finances is, in essence, very simple. First, of course, we had to satisfy ourselves that the Australian ‘Stevedoring Industry Authority’s affairs were being conducted in an efficient manner to ensure that all possible economies are made. But ‘the nub of the matter faces us with two alternatives - either reduce drastically, and now, the waterfront labour force, or give the industry, both sides of it, a further opportunity of solving the problems which face it. This latter course would be in the spirit of the 1956 -legislation which ‘tried to throw more responsibility for their own well-being on both sides of the industry. Even had the Government chosen to follow the first course, some increase “in the current levy would be necessary.
It is a matter of common knowledge that there are, at present, more men on the waterfront than are actually needed. There may be differences of opinion as -to the actual , extent of the surplus. The present stevedoring industry legislation gives -to both sides the right to .invite the authority to deal with any labour surplus problem. Neither side has exercised this right. Clearly, the surplus will grow even greater if -there is a continued falling off of the type of cargoes which require large numbers of men. These are the very cargoes which the industry has been losing to road and rail transport. ‘ New recruitment has, for all .practical purposes, ceased. The key to the future lies in the labour force becoming more closely equated to the work available.
The industry has it in its power to help itself. -Undoubtedly, it could attract a great deal more .business to coastal shipping if cargo rates were favorably competitive with those charged by the various forms of land transport, and if prospective shippers could be assured of promptness and regularity in their deliveries. Surely by now, the rank-and-file members of the Waterside Workers’ Federation must have realized the losses in terms of work opportunities -which they -have inflicted on themselves -from the misguided policies of its turbulent .and Communist-influenced leadership. In 1957, the waterside worker averaged forty times the loss of working time -through industrial disputes that obtained in industry generally throughout Australia.
Stevedoring -employers have responsibilities -also, if the position of their industry is ‘to be improved. The facts indicate that they are making a determined effort to bring about ‘this improvement. Mechanization is ‘being increased and supervision made more -effective. -One result of the better waterfront performance secured has been the absence of any general increase in freight rates since -the first quarter of 1’957, in the case of -overseas lines; and -since October, 1956, in the case of interstate owners. In that time, an increase of 10s. in ‘the basic -wage has been -absorbed, and so, too, has ‘the increase of 5d. -a man hour in .the stevedoring charge of May last. Thus, taking these two items together, approximately £1 a week of additional labour cost per man has been absorbed without any coresponding freight increase. It would not have been able to do this unless efficiency in the industry has been improved.
On the financial side, there are, as I have said earlier, two problems. The first is to put the authority on a pay-as-you-go basis and the second is to discharge its accumulated deficit. To .deal with the first aspect, it -is proposed to increase the -charge by 6d. To liquidate the deficit, the Government proposes, what is, in .effect, a surcharge of 6d. terminating on 30th June, 1959. In short, it is proposed that the levy will be 3s. a man hour from 1st April, 1958, to 30th
June,. 1959, and thereafter, unless the Parliament otherwise determines, 2s. 6d. a man hour.
The PRESIDENT (Senator the Hon. Sir Alister McMullin). - Is it the wish of the Senate that the Stevedoring Industry Charge Bill 1958 and the Stevedoring Industry Charge Assessment Bill 1958 be taken together?
Honorable Senators. - Yes.
Debate (on motion by Senator McKenna) adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Spooner) read a first time.
– I move -
That the bill be now read a second time..
This bill seeks to amend the Stevedoring Industry Charge. Assessment Act. The legislation relates to the machinery for. the collection of the stevedoring industry levy. As will be seen from a glance at the bill, the amendments are purely technical. Theyare almost entirely consequential on the enactment of the Stevedoring Industry Act in 1956. The rest are purely verbal. I commend both this bill and the Stevedoring Industry Charge Bill to the Senate.
Debate (on motion by Senator McKenna) adjourned.
Debate resumed, from 20th March (vide page 279), on motion by Senator Spooner -
That the bill be now read a second time.
– When the fourteen bills now before the Senate were under consideration last year they were rejected on the motions that the bills be read a first time. Accordingly, there was no debate in respect of any of those measures. There was only one reason for that position, namely, the inhumane and intolerable strain to which the Government subjected five seriously ill senators, members of the Opposition.. The Government did! that by, confining those honorable senators for days: to the immediate precincts of the: Senate chamber and by a refusal to grant a pair to one of our senators, Senator Arnold’.. I said quite a lot on this subject at the time. I. do not intend to repeat today what I said then, but other Opposition speakers may well advert to that particular phase, which the Minister for National Development (Senator Spooner) opened up when he introduced these measures.
At this stage, I confine myself to only two comments. I say that the Government’s action in that matter gave very great offence to a large number of people in the community outside this Parliament, including supporters of the Government. I refer to a communication addressed to a newspaper by a prominent Liberal man, who was the Tasmanian president and federal vice-president of the Liberal party until comparatively recently. He wrote a letter to the Hobart. “ Mercury “ on the subject. His letter crystallized not only what he thought but also what many others, in all political parties, thought. It appeared in the “ Mercury “ of 2nd December last and stated -
The action of the Federal Government in withholding a pair from Senator Arnold is about the ultimate in infamy. It should be remembered that this’ refusal to grant a pair can have no possible effect on the fate of a bill except in one set of circumstances, namely that the physical effort imposed on Senator Arnold is such as to cause either his death or so serious a collapse as to render him incapable of indicating his vote even if carried into the House. That the responsible heads of a civilized community should impose this strain upon a political opponent makes one ashamed of a party to which I. have previously felt it an honour to belong.
The letter was signed “ H. J. Solomon “.
– Who is he?
– He was Tasmanian president of the Liberal party and federal vice-president of the party until about the end of 1955.
– Who brought Senator Arnold here? We did not ask for him to come here.
– The Government was entirely responsible for that. When the Government declared total war, as it did upon the Labour party, it was met with the same degree of toughness. On the question whether Labour avoided a fight on the matter, let me say that if there is one subject on which Labour has been vocal, and in respect of which its policy is clear, it is banking. We debated the subject in this Parliament in 19S1 and again in 1953. It was debated very extensively last year in the House of Representatives. In addition, the subject was discussed in the press. Our viewpoint on it is well known. There has been no doubt whatever about it.
– What about a double dissolution!
– I accept the honorable senator’s interjection and point out that Labour risked, and got, a double dissolution in relation to legislation of this kind. Labour did not shirk a double dissolution then, and it does not shirk one now.
Of the fourteen bills, four are major bills and ten are consequential upon those major bills and, paradoxically, I suppose they are inconsequential for that reason. Of the four major bills, three affect the structure of the Commonwealth Bank and one affects the powers of the bank as a central bank.
There are three broad feaures of the major bills. First, they separate the central bank activities from the Commonwealth Trading Bank and the Commonwealth Savings Bank and two divisions of the central bank, namely, the Mortgage Bank and the Industrial Finance Departments. Secondly, they create a new entity, the Commonwealth Banking Corporation Board, which will have control over the Commonwealth Trading Bank, the Commonwealth Savings Bank and the new Development Bank. Associated with the second major feature is the importation of private interests into the control of the new corporation which will exercise the jurisdiction that I have indicated. Thirdly, the bills provide for a system of statutory reserve deposits in Heu of the system of special accounts that has operated hitherto.
The key to the whole legislation from the viewpoint of the Opposition is its effect on the central bank. The Government claims that this legislation will strengthen the central bank and will not weaken it.
That has been claimed throughout the speeches that have already been delivered by supporters of the Government. We of the Opposition flatly contradict that.
– Will the honorable senator tell us why?
– This is one of the two main issues between the Government and the Opposition. In reply to the honorable senator who asked for our reasons, let me say that I intend to place at least seven reasons before him. I do not undertake to present them in any order of importance; but, if the honorable senator listens, he will hear seven reasons why we object to this legislation.
J direct attention, first, to what these bills seek to do to the capital structure of the central banking division of the Commonwealth Bank. An examination of the report of the Commonwealth Bank for the year ended 30th June 1957 shows, at page 34, that the capital of the central banking division was £4,000,000 and that its reserve fund amounted to £13,700,000. That is a total of £1.7,700,000. But what does this legislation seek to do? It seeks to take £9,000,000 from the funds of that particular division. I am talking now solely about the funds of the central banking division and not about those of the Commonwealth Bank including its Note Issue Department and its Mortgage Bank and Industrial Finance Departments. Those departments, apart from the Note Issue Department, have their own separate capital and their own separate reserves.
I again ask: What do these bills seek to do? They seek to take £9,000,000 from the reserve funds of the central banking division and pass £2,000,000 to the Rural Credits Department, £2.000,000 to the Commonwealth Trading Bank, and £5,000,000 to the Development Bank. Two of those bodies - the Commonwealth Trading Bank and the Development Bank - are to be taken right outside the immediate control and supervision of the central bank. What will be the effect of that? The effect will be that the reserves will be reduced from £13,700,000 to £4,700,000. In other words, they will be reduced by approximately two-thirds, and that represents a reduction, by more than one-half, of the total capital structure of the central banking division.
The Opposition’s view is that that will damage the financial standing of the central bank as well as its prestige before the eyes ot the financial community, including the private trading banks. When all is said and done, the central bank is the bank of this Government, it is the bankers’ bank, it is the bank whose duty it is to preserve the liquidity of the private trading banks, it is the bank that is obliged to uphold the bond market from time to time, and it is the bank that has the duty of taking over other banks if the position of their depositors is jeopardized.
– What is the amount of the special accounts compared with the capital?
– That is quite another matter. I point out to the honorable senator that at the moment I am not claiming that that is the only reserve available to the Commonwealth Bank. I am indicating what this Government is seeking to do to its capital structure. There is the note issue as well. I suggest that what the Government seeks to do is not insignificant, not only from the viewpoint of amount, but, above all, from the viewpoint of the standing of the central bank in the community.
– The honorable senator will give us some reasons, surely.
– Your masters have cracked the whip!
The DEPUTY PRESIDENT (Senator the Hon. A. D. Reid). - Order!
– They are only looking for money at election time.
The DEPUTY PRESIDENT.- Order!
– The Minister for National Development has already spoken for three hours on these measures, and T do not propose to let him divert me or to take up my time, particularly when he has been assured of a right of reply. I invite the Minister, above all others in this chamber, to keep out of this debate at the moment.
– Get on to your next point.
– I intend to do that soon.
– You work for the bosses, all right!
The DEPUTY PRESIDENT.- Order!
– I invite any honorable senator opposite to rise presently and tell the Senate and the public just how the cutting in half of the central bank’s capital structure will strengthen the central bank.
My second point is that this legislation seeks to make inroads upon the building up of future reserves by the central bank. Under the existing law, the position in regard to reserves is that the central bank takes one-half of its profits to reserve and the other half goes to the National Debt Sinking Fund. It is proposed, under clause 30 of the Reserve Bank Bill, that in future that shall not obtain, but that only so much of the profits made by the central bank will go to reserve as the Treasurer, after consultation only with the bank board, determines shall so go. The Treasurer, as Treasurer of the Commonwealth, may take the whole of the balance into his maw. He may take the whole of the profits.
– And he may take nothing.
– And he may take nothing. I was about to make that point. The honorable senator should not anticipate me. But where does that lead the central bank to? How can the central bank make any plans for the future when it does not know whether it will have any profit or, if it has, what proportion, to carry to its reserve? The amount could be varied from year to year. This proposal imports an element of complete uncertainty, which should not exist, into the bank’s future.
Is not the Treasury already doing well enough? Why should not the situation be retained in which half of the profits of the division go in reduction of the National Debt Sinking Fund? In the year ended June, 1957, £4,300,000 went that way, and the Treasurer got more than £10,000,000 from note issue profits. The Treasurer, not satisfied with that, like Oliver Twist wants more. He seeks to place himself in a position where he can take the whole of the profits and put them into Consolidated Revenue for the general purpose of the Government.
– Is not that a dividend to the people from the people’s bank?
– One could put it that way, but I suggest that the .bank would be in a much firmer position, in the mind of the public, when .the public and the bank’s staff felt that its .profits were going to reduce the national debt in a specific, clear way. That was a principle generally accepted throughout the Commonwealth.
I come to my third point. The Commonwealth Bank has been subjected to a series of major surgical operations. Let me review them. The Mortgage Bank Department and the Industrial Finance Department are to be lopped off and embodied in a new bank, the Commonwealth Development Bank, over which the central bank will ‘have no more control and supervision than it has over any private trading bank. That is the first operation.
The second operation is that the control hitherto exercised by both the governor and the board over the Commonwealth Trading Bank and the Commonwealth Savings Bank is to be terminated, and those two banks are to be placed under the entirely new banking corporation that this proposed legislation sets up. Again, -the Commonwealth .Bank will ,have no more control over .those .two institutions than over any private trading bank.
That .means that the central bank -will be compelled to function in a vacuum, completely cut off and divorced from the day to day .trends and activities in the banking world. In other words, the central bank will lose not .only its listening post but -also all contacts with the banking world. This legislation will remove powerful instruments by which, in many respects, it could oblige recalcitrant private trading banks to obey its will in the national interest. Those instruments were suitable for that purpose. I am not the only .person to say that, as I shall indicate presently.
This divorcement is to be effected, not merely in law but also physically. In fact, the separation is to be carried to the point where the central bank is to be ordered not to have its head office where the head office of the .Commonwealth Trading Bank or any private trading bank may be situated. That is directed, of course, at the position in Sydney where the head office of the Commonwealth Trading Bank, .the central bank, and even the Sydney branch of the
Commonwealth Bank are located in the one building. They are to be physically separated.
– That principle applies everywhere else in the world.
– The proposed separation .of functions seems to me to be the most inept action that can be taken. The operation goes further. The bank staff that hitherto was freely interchangeable between the various institutions is to be divided. This series of operations, like all surgical operations, costs money. These operations, ordered at the behest of the private trading banks and not by the Commonwealth Bank, will cost £2,000,000, and, like some other operations, are completely unnecessary. Why did not the Government, when it was acceding to the request of the private trading banks, order them to pay the cost?
The Government admits that the transitional cost of these operations will be £2,000,000. That is a sum of a very high order. To >my knowledge, the Government, in ordering these operations at the behest of the private trading banks, has not had the decency even to consult the patient. We have heard not one word about the views of the Commonwealth Bank Board nor what the governor of the patient body thinks of this matter. We do not know whether the governor or the board has been even consulted. On behalf of .the Opposition I formally ask the Government, were they consulted? If so, what were their views on this disturbance of functions? Although I have no knowledge of their views, I think they are clear enough. I repeat, we do not know whether they were consulted, but we can obtain a guide to the views of the governor and the board from a lecture delivered by Dr. Coombs-
– Did the Labour party consult them when the nationalization of banking was proposed?
– Yes, they were in continuous consultation with us for months. I can speak with complete authority on that particular matter because, for a good deal of the relevant period, I was the acting Attorney-General of the Commonwealth, and nobody is in a better position than I to answer “ Yes “ to the honorable senator.
I shall refer now to the one glimpse that we have into the mind of the governor and the board. As recently as 1954 Dr. Coombs, the Governor of the Commonwealth Bank, in delivering the English, Scottish and Australian Bank research lecture, said this -
It is important to realize that, by the direct influence which the Commonwealth Bank exercises over the family of banks of which it is the head, it is able, within limits imposed by their Commercial (and, in the case of the Commonwealth Trading Bank, competitive) character, to -influence their policy so that they contribute directly to the achievement of the objectives of central bank policy - (a) the stability of the currency; (b) the maintenance of full employment. There can be little doubt that this direct link -gives to the Commonwealth Bank a source of strength which can be of particular value in times when the economy is threatened with declining activity and employment.
Does any honorable senator imagine that the Governor of the Commonwealth Bank made that statement without the knowledge and approval of the Commonwealth Bank Board appointed by this Government?
– Dr. Coombs mentions two limiting factors in that statement. Their removal is proposed.
– Dr. Coombs mentions the fact that these bodies give a direct link which constitutes a source of strength to the Commonwealth Bank.
– What are the limiting factors?
– There are none. If the honorable senator has any comments to offer I invite him to do so at the proper time. Dr. Coombs’ voice is not the only one raised in this matter. I refer honorable senators to the voice of Mr. Arthur Fadden, as he then was, in 1950. His remarks inParliament on 16th March, 1950, were similar to those of Dr. Coombs. Mr. Fadden at that time said -
The Government is convinced that the primary responsibility of the Commonwealth Bank is its responsibility as a central bank for the continued health and progress of the banking system as a whole. Part of the strength-
Will honorable senators note that? - of the Commonwealth Bank as a central bank is, however, derived from the direct contact with the financial and industrial system which it maintains throughout its trading sections.
That is not the most recent pronouncement on the subject. Mr. Menzies, the Prime
Minister, on 19th February, 1953, also as Prime Minister, addressed the Parliament in these terms.
We believe also - and there is great argument about this, there being some who do not agree with it - that the Commonwealth Bank’s general trading activities form a useful section of the commercial banking system and that those activities should be developed in fair competition, and not extinguished. We believe that they have great merit, because they act as a source of information to the Central Bank. They enable the Central Bank to have an instrument by which it may give leadership in banking policy. It has a great number of advantages that I need not discuss at this stage.
I have just read to honorable senators the remarks of the Treasurer in 1950 and the Prime Minister in 1953. Yet the Government in these proposed measures is doing the reverse to what was said at those times. Tt is throwing into discard the sources of strength, information and the instruments available to the central bank. Every responsible person knows the contents of the report of the Royal Commission on Monetary and Banking Systems in .1936 which said exactly the same thing, that the central bank should have a family of banks supporting it and adding to its strength.
To the honorable senator who, by interjection a few moments ago, referred to central banks operating in the rest of the world, I say that when one looks at the Australian system a central bank in this country cannot be patterned on the central banks of an entirely different kind operating in other countries. The great majority of countries that have central banks covet small areas, have highly developed and diversified economies and markets right at hand, as compared with Australia with our great empty spaces, seasonal fluctuations, distance from markets and all the other factors, including our pre-eminent dependence upon primary production, that differentiate us completely from the financial set ups in other parts of the world.
We in this country must address ourselves to the problem of central banking having regard to the factors that are present in Australia. I say that what was contended by the royal commission, by Sir Arthur Fadden and by the Prime Minister until the private banks began their trek to Canberra, was the right thing for this country and for the Commonwealth Bank.
Let me come to the fourth point. I want to see what is left with the body after these amputations. What is left is immediately put into a straitjacket, because clause 26 of the Reserve Bank Bill prohibits the Reserve Bank from carrying on any business other than as a central bank. I wonder whether the Government gave any consideration to the fact that one day the staff of that service will be called upon to go into one of the private trading banks that is in some danger or jeopardy, to take over and conduct its affairs. Where will the bank, in those circumstances in the future, get the trained staff to walk straight into any bank and take over its day-by-day operations? That, of course, completely weakens the central bank as a central bank. It is an additional reason why there should be available to it at all times men who are handling ordinary banking from day to day. There is no particular staff available to the bank for that type of thing.
Let me come to another matter, something more intangible but nevertheless very real. The legislation not merely amputates the limbs of the Commonwealth Bank, not only puts the bank in a straitjacket, but, in the view of the Labour party, strikes a most vicious blow at the living spirit of the Commonwealth Bank as an institution. Officers of the Commonwealth Bank, from the Governor down to the most lowly clerk have a vast and justifiable pride and a very great loyalty to the bank they serve - pride in its history, its growth and its great traditions, to all of which they have contributed. That pride and loyalty find a focal point in the name of the bank, the Commonwealth Bank of Australia - a very proud and a very well-known name.
Somebody might ask “ What is in a name? “ But the title “ Commonwealth Bank of Australia “ is replaced with cold things like the Reserve Bank of Australia, the Commonwealth Trading Bank of Australia, the Commonwealth Development Bank of Australia and the name “ Commonwealth Bank of Australia “ fades out of the picture. Let us consider what is in a name. I invite the Senate to give a moment’s thought to this matter. How much enthusiasm and affection would we evoke by a toast to the monarch, to the head of state? How very different it would be when we toasted the Queen! That is just the difference as between names, and it is just the difference of connotation that will be apparent to the members of the Commonwealth Bank service, and to the public. These men have been free to serve the bank in its various activities; they have been free to transfer from one section of the bank to another. I repeat that this intangible I am now outlining is one of the most important things in life. As one gets older, one realizes, that in fact, such things are. There is a very strong feeling on the part of the members of the staff of the bank in this matter, as I indicated some time ago. They feel that they are serving this nation, and not in the interests of any group of private shareholders. That feeling was heightened by the fact, as I have said, that at least a quarter of the profit made by the Commonwealth Bank - the trading section of it - has been paid into the National Debt Sinking Fund. I repeat that, under this measure, those funds would go to the Treasury and get into the outflow of extravagant and wasteful expenditure that proceeds year after year at the instance of this Government.
The Minister had the grace to say a word about this, and to express regret about the severance of the association. He expressed himself in this way -
It would, of course be idle to think that Commonwealth Bank officers will feel no pang of regret that the Commonwealth Bank Service, which has given outstanding service in the past, is now being divided into two separate Services. This is a natural feeling and one from which the Government itself is not immune.
How heartrending it was to see the tear that came from one eye of the Treasurer and from one eye of the Minister who represents him in this chamber, when they expressed their grief in those terms. I think that each tear hovered on the cheek; it exhausted itself when it had travelled only a quarter of an inch. I say that it is a serious matter in this country to strike a blow at the esprit de corps of the great number of men who constitute the Commonwealth Bank staff. I say, too, that striking a blow to their esprit de corps is a tragic disservice to this country. The great Commonwealth Bank should not, year after year, be made a political football in this parliamentary arena and before the people. But what I want to point out more than anything else is that for a decade the bank should be left alone. It has been highly successful. Leave it alone and let it work out its own destiny without a constant threat of dismemberment and destruction hanging over its head!
I pass to the sixth point, which concerns the positions of the governor and the deputy governor of the Commonwealth Bank, When we consider the situation in which the new Commonwealth Banking Corporation appears, what do we find? There are three regulars - the managing director, the deputy managing director and the Secretary to the Treasury, and eight other persons imported from outside the bank altogether. Who are to be appointed the chairman and the deputy chairman? Not the managing director, not the deputy managing director, but one of the eight private persons! He will be the chairman of the board that is to control the Commonwealth Trading Bank, the Savings Bank, and the new Development Bank, thus further strengthening the grip of private interests on these institutions. I invite the Government to consider the logical extension of that. Private persons are not the chairman and deputy chairman of the Reserve Bank. The governor and the deputy governor are the chairman and deputy chairman respectively. Are we to assume that the next step, the logical step, on the part of this Government will be to depose the governor and deputy governor and put private members into their shoes as chairman and deputy chairman? Of course, that is what is feared in the bank. That is one of the factors that is undoubtedly unsettling. The Minister, or somebody on his behalf, should be prepared in due course to tell this chamber why one principle is observed in relation to one bank and a different principle is observed in relation to the other bank, and how long it will be before the attack commences upon the Governor and the DeputyGovernor of the Commonwealth Bank.
I come now to my seventh point, that is, the failure under this legislation adequately to arm the central bank with legal power to regulate the volume of credit. The Treasurer in the course of his speech in the House of Representatives indicated that that plainly would be done, and he provides that, on one day’s notice, 25 per cent, of the total deposits of the bank may be called up. but after 45 days, more than 25 per cent, may be called up. I merely put it to the Senate that if the bank will go beyond 25 per cent, only in an emergency. 1 understand it has never gone beyond that for many years. It has never called up, as a special deposit, an amount equivalent to 25 per cent, of the total deposits. Indeed, its demands have always fallen a long way below that level. That being so, it will demand more than 25 per cent, only when there is a grave emergency - and that is surely the time, not for delay but for quick and immediate action. The Treasurer (Sir Arthur Fadden) himself refers to the fact that we are afflicted with “ wide and sudden “ fluctuations in our economy. If there is a sudden and wide fluctuation, how can one conceive a delay of 45 days before corrective action is taken? Any necessary action must surely be taken immediately. 1 recognize that it would be very difficult for a bank to produce speedily and without accompanying distress, a greater proportion of its assets in liquid form, but how would the central bank proceed? It knows the difficulties better than any one and would doubtless direct, in association with its demand, first, that the bank should halt its advances. The central bank would doubtless also fix a date for compliance which would be well in the future. If would provide for payment by instalments. In short, it would make a completely sensible arrangement with the private bank. Why should anything to the contrary be anticipated? Why should the central bank be blocked - unable even to give notice for 45 days?
– Notice can be given, but it will not be effective.
– That is the very point that I am making. Such action would be futile. A situation which would require a demand of more than 25 per cent, would be grave and serious - and the central bank ought not to be hamstrung and handicapped in those circumstances. Why should it not be able to exercise its discretion in such matters? One could surely expect it to act with practical common sense. Why does the Government propose that the central bank should be tied down just when the emergency would be gravest? Surely that is one of the defects of the legislation.
– In a real emergency, Parliament could meet and do anything it wished.
– Yes, but its agent is already on the spot, and following the situation from day to day. In another respect, the legislation has perhaps gone too far. Under the 1945 and 1953 legislation the amount that could be called up into the special accounts was quite limited. With the exception of a base amount, the central bank could demand only a proportion of any increase in assets. I repeat, the figure was never greater than 25 per cent, of the private banks’ deposits. Under this legislation, all of the deposits could be called up - so long as 45 days notice was given. The Treasurer admitted that quite openly, and it is also set out in the legislation.
I invite the Senate to consider what would happen if a .100 per cent, call-up such as that did occur. Every overdraft in the country would have to be called in. There would be wholesale disruption of the business life of the Australian community. There would be innumerable bankruptcies. There would be wholesale unemployment. The banks would be unable to lend. In short, banking would be brought to a full stop if the power envisaged in this legislation were exercised.
– Did you not begin by saying that the legislation gave the Reserve Bank insufficient legal power to perform its functions?
– I ask the honorable senator to wait until I develop my theme. I have already made the point that the Reserve Bank cannot move until 45 days have passed. I was half way through my task of developing my second point when the honorable senator interrupted me. I would say that the same result would be achieved - the bringing of the banking system to a full stop - if only a substantial part of the private banks’ deposits were called up - a percentage not nearly as great as 100 per cent. The statutory reserve deposits system contemplated is far more open to constitutional attack than ever was the special accounts system. I suggest that the private banks know this perfectly well. How else could one ever explain the mystery of their ready acceptance of such provisions without protest, for there is no doubt that what I have indicated could in fact be. done.
The reason for the private banks’ ready acceptance of the 45 days’ notice requirement falls into place much more readily. It would give them an opportunity to approach the court for an injunction to prevent the central bank from acting to whatever extent it might feel was necessary. The Government, in going too far here* instead of strengthening the Commonwealth. Bank and giving it a much stronger weapon, has sought to put into its hands a. bomb that will explode in its face. Conversely, it has given the private trading banks a whip to lay on the central bank. Both the Government and the Opposition have competent legal advisors and I believe that this, provision, when understood, will be seen to place a constant threat over the central bank which will, make it hesitant in giving directions, and make the private trading banks even more recalcitrant than they have been in the past. I do not consider that that would strengthen the central bank, or make the system any more rigorous. I think it opens the way to infinitely more trouble for the central bank than has hitherto been possible.
– What is the suggested, basis of constitutional invalidity?
– There are at least three or four. I remind the honorable senator - to put it very briefly - that, the 45 days’ notice provision being complied with, the whole of the deposits can be called up indefinitely. It may be argued that that is an acquisition of property. The just terms set out in the provision amount to the payment of interest at a rate determined by the Treasurer. That is obviously a point of attack. A further point of attack might well be that this would achieve indirectly what the High Court and the Privy Council have said cannot be done directly. It might well be argued, on the third count, that purposes such as conditioning the capital issues afloat in the community are not purposes related to banking at all - that the exercise of the right to call up deposits for such a purpose has nothing to do with banking, and that the power to do- so lies outside the Commonwealth ambit altogether. 1 have stated at least three of the possible ways in which this particular provision might be brought down. In my opinion, its net effect will be to make the central bank far more hesitant than it has been to date, and to make the private trading banks even more recalcitrant than they have been hitherto.
What is the reason behind this disruption and sabotaging of the Commonwealth Bank? The Treasurer professes to give the reason. According to him, it is mainly the need to restore harmony in the relations between the central bank and the private trading banks; that there can be no harmony while a central bank, directing the policies of the private trading banks, also competes with them through the Commonwealth Trading Bank. I say at once that it is completely against human nature, and accordingly quite stupid, to expect the private trading banks to submit with grace and willingness to the dictates of anyone, including the central bank.
– What nonsense! Central bank control is the whole essence of modern banking.
– I quite agree, but the whole history of modern banking is a story of the continued resistance of the private trading banks to the directions of the central bank. There is no question about that. Presently I will give honorable senators some instances. If the Government believes that this legislation will make the private trading banks cheerfully do everything that the central bank asks them to do, why has the Government retained all the penalty provisions? If what the Government is doing now will make the private trading banks cheerfully obey the central bank, why do we want to retain the provisions for a penalty of 8i per cent, per day on amounts that are not lodged in accordance with an instruction of the central bank, a penalty of £1,000 for failing to obey advance policy and a penalty of £5,000 or five years’ imprisonment for not obeying directions in relation to interest?
– Who was the father of those penalties?
– The Labour party. The Government is completely rewriting the act, but it has adopted every line and word of those penalty provisions. If the Government thinks that we shall have complete harmony the moment we separate the Commonwealth Trading Bank from the other activities of the Commonwealth Bank, why does it not repeal those penalties? The fact that the. Government is writing those penalty provisions into this legislation shows that it has no confidence that we shall get the co-operation of the private trading banks.
The Treasurer (Sir Arthur Fadden) himself completely repudiated unfairness by the central bank as a reason for this legislation, because during his second-reading speech on the Reserve Bank Bill he said -
The private banks have made it plain that they do not criticize the way in which the central bank has used the powers and functions it has under the present legislation. On the contrary, they have been at pains to commend the competence, integrity and impartiality of the central bank.
What is the complaint against the central bank? It is not impartial, nor is it unfair. The Treasurer himself, in giving the reasons why the Government has produced this legislation, showed that in this respect the Government is completely and absurdly wrong. During his second-reading speech on the Banking Bill, referring to the private trading banks, he said -
Although they emphasize that they have no criticism of the manner in which the central bank has exercised its power in the past, they are most concerned about the scope which they see in the provisions for unfair attack on them.
Not one word of criticism of the behaviour of the central bank can be produced by the Government as emanating from the private trading banks. There is not one word of criticism of its impartiality. So I put it to the Senate that the Treasurer himself rejected the main reason that he gave for this legislation.
Under this new legislation, the three banks - the Commonwealth Trading Bank, the Commonwealth Savings Bank and the Commonwealth Development Bank - are to be grouped and put under a new corporation. It will, be an insult to the executive staffs of those banks to superimpose onthem, in a corporation, eight ignorant people - people ignorant of the procedures, the history and. the activities of the three banks, which they are going- to dominate and control. That will be a complete insult to- every executive. Is the complaint that the sections of the Commonwealth Bank have failed? Have they some defects? Is not the complaint made by the private trading banks that those sections have been too successful? The Labour party approaches what the Government has done in this matter with the very strong feeling that these private interests - they are not required, because the Commonwealth Bank has been conducted most successfully - are to be put there to halt the development of the bank rather than to further it. That is the view we take.
There is one other thing. Let us see what could be done under this legislation. Let us suppose that, after it was passed, the general managers of the private trading banks all resigned one day. If that happened, the Government would be completely free to appoint the whole lot of them to the board controlling the three great Commonwealth banks. Where is the protection against that? Is there anything in this legislation to prevent a person who was heavily indebted to a private trading bank, and therefore was coercible, from being appointed to the board? Where is there any protection in relation to those matters in this legislation? By importing private interests into these Commonwealth banks, the Government is striking at a fundamental principle of the Australian Labour party. There is not the faintest justification for that proposal. It is obvious that the Government wants to weaken the Commonwealth Bank and to have it neatly parcelled and ready for sale.
– What has been the history of the Commonwealth Bank since the Commonwealth Bank Board was appointed?
– I am not talking about the present board; I am talking about the new board.
– I cannot make head nor tail of what you are talking about.
– Amongst other things, I am talking about the Minister’s own outlook on this matter. I shall remind the Senate of what he has said about selling Government assets, about selling undertakings in which the Government is interested. When we were discussing the Fishing Industry Bill, the Minister laid down the principles that govern the Government’s actions in that respect. He said -
It is a matter of commonsense for us to get private capital at work in as many directions in Australia as possible, in order to release public funds for use in directions which are beyond the scope of private enterprise.
In the case of the whaling station, why should the Government continue to have capital invested in it when private enterprise is willing to come in and do the job?
My goodness, would not the private trading banks of Australia be completely able and willing to walk straight into the Commonwealth Trading Bank and the Commonwealth Savings Bank, and also take over the Commonwealth Development Bank if it suited them!
– I have never heard of anything so fantastic. The Leader of the Opposition knows what we have said repeatedly in our policy speeches.
– I know that the Government has broken every major pledge it has made in its policy speeches. It is completely clear that the whole thing is lined up for sale by this Government at the first opportunity. Let us consider what the Government has done in regard to the Commonwealth Trading Bank. It put private interests into the Commonwealth Bank in 1951. In 1953, it separated the trading section and put it under a neat corporation. It is true that at that stage the Government allowed the Governor and the Commonwealth Bank Board to exercise general control over the trading bank, but now the Government is taking the next step. It says, in effect, “ Get the Governor out of the picture; get the old board out of the picture. Put a new board on top of them and carry out the principles that have been laid down by the Minister.” The Government will carry out its policy in good time. It is not going to rush things. It is not going to sell the Commonwealth Bank to-morrow, but it is getting it ready for sale, in accordance with the principle enunciated by the Minister. Each section of the bank is being wrapped up in a separate parcel, ready for sale. The private trading banks are getting ready themselves by moving into the savings bank field. They are pushing the Government about at will. The whole thing is being lined up for them.
– Does the Leader of the Opposition really believe that?
– I do. It is completely in line with the principles laid down in this matter by the Minister. I invite him, when he replies, to say whether what I have said is at variance with his principles. Where is the exception in it? Let us hear that.
I promised to say something about the private trading banks and their recalcitrance. Mr. Chifley drew attention to it in the course of his dissenting judgment as a member of the royal commission when he indicated that the private trading banks just lifted deposit rates and lifted overdraft rates in complete defiance of the Commonwealth Bank. I now bring the Senate more up to date and refer to the annual reports of the Commonwealth Bank for the years 1954 and 1955. In those reports, the Commonwealth Bank itself indicated a new arrangement and asked the private trading banks to keep a level of 25 per cent, liquidity of liquid assets and government securities to deposits. The private trading banks agreed to it, and to cut their advances down. But what happened? Within six months the private trading banks had lifted their advances by £100,000,000. The only banks to honour the arrangement were the Commonwealth Trading Bank and the Commercial Banking Company of Sydney. Why, one bank got its liquidity down to as low as 6 per cent.! It is all recorded in detail at about page 175 of Professor Arndt’s book, and the facts are also recorded in the reports of the Governor of the Commonwealth Bank for the years 1954 and 1955.
I point out that the reason given for all this upheaval is not supported even by the Government. The Government says that the central bank must be divorced from all trading activities, yet we find that the Rural Credits Department of the Commonwealth Bank is still being kept under the control of the central bank. That is a trading activity, So the Government does not honour the principle which it affirms. All this difficulty follows the visits of the bankers to Canberra. These visits were so constant that the “ Sydney Morning Herald “, in a leading article, referred to the incidents as the bankers traipsing to Canberra and having sessions with the Government. The private trading banks were all for these reforms, as they are called.
Why is all this being done? Is there anything wrong with the Commonwealth Bank? What are the difficulties in the administration of the bank to justify any disruption of it? It is completely clear that the trip in October 1956, the trip in February 1957 and all the other discussions about which we know nothing were responsible for this action by the Government. It is being done at the instance of the trading banks.
Reference has been made to harmony. If the Government wants harmony, what is wrong with having a little harmony in the staff of the activity itself? How can there be harmony in the Commonwealth Trading Bank when ignorant people, who have not grown up in a successful institution, are brought in and put over the top of highly skilled executives? If harmony is required, then I submit harmony is needed within the Commonwealth Trading Bank, too. I ask why some consideration cannot be given to that.
Let us carry the principle of the private banks a bit further. They say they cannot be happy and co-operate when in fact the Commonwealth Bank is able not only to direct their policies but also to compete with them. A complete separation of the two will not be the answer to what the private trading banks are contending for, because, immediately this legislation goes through, the position will still be that this Federal Parliament will be able to direct the central bank, which in turn will be able to direct the private trading banks and simultaneously this Parliament, through the Commonwealth Trading Bank, will be able to compete against the private trading banks. The position will be the same as it is now. The grounds for complaint will still be there. It is obvious that the next complaint the private trading banks will make will be either that the Government should get out of the picture altogether and let everything revert to them, or that the Government should get out of the private trading field. That is the obvious, logical and certain next step to get the Commonwealth Trading Bank out of the picture, for the problem or the principle about which the private trading banks complain is still there.
– But they will take their time getting it.
– I do not suggest that the private trading banks will hurry. They will take it step by step, but it is so obvious that they are getting near the climax now that the matter must be pointed out.
I conclude with the broad comment that this legislation is dangerous, that it is deceptive. I have not had an opportunity to cover it completely. We regard it as completely wicked legislation, and we on this side of the chamber will treat it as such.
– I suppose it was more or less natural that anyone listening to the Leader of the Opposition (Senator McKenna) speaking on banking today would remember the debate on the banking legislation introduced in 1953. On that occasion also, we had the opportunity of listening to the Leader of the Opposition give the Senate the benefit of his opinions on the future of banking in Australia under the 1953 legislation. Recently, I took the opportunity of refreshing my memory of that debate. No doubt the Senate will recall that his first criticism of the bill introduced in 1953 was that immediately the central bank commenced operation there would be a spate of actions by the private trading banks against the central bank, on the ground that the central bank was exceeding its functions as a central bank. I can recall no action taken by the trading banks in the last five years against the central bank; indeed, I challenge the Leader of the Opposition to tell me what action has been taken since 1953 by the private trading banks against the central bank as forecast in bis 1953 speech.
The Leader of the Opposition then subjected the Senate to a prophecy of what would happen to the Commonwealth Bank. He said that the Commonwealth Bank would be greatly weakened, that the 1953 legislation would bring about a marked down-turn in the activities of the Commonwealth Bank. Such has not been the case. Indeed, if one cares to examine the deposits of the Commonwealth Trading Bank, the advances of the Commonwealth Trading Bank and the number of branches of the Commonwealth Trading Bank, one will notice the remarkable growth of that organization over those years. I do not wish to give personal offence to the Leader of the Opposition but, using the jargon which he understands much better than I do, I can only say that he and the members of his party must be regarded as unreliable witnesses in respect of banking. Indeed, nothing that the Leader of the Opposition has said today has induced me to believe that any of the prophecies that he has made today will be any more accurate than those which he made in J 953. Perhaps there is one exception. He did say at the commencement of his remarks that the policy of the Labour party is clear, that it has been made clear over the years. I agree. The policy of the Labour party is and always has been the nationalization of banking and no one should ever forget that.
The Leader of the Opposition proceeded to say that the Opposition based its objection to the present legislation on the effect it would have on the central bank. He quoted a number of points and adduced a number of arguments as to what would happen to the central bank under the legislation that is before the Senate. The first point he made was that the capital structure of the central bank was being distorted because of the fact that £9,000,000 was being subtracted for the purpose of applying additional capital to other agencies of the Commonwealth banking instrumentality. I do not know what this has to do with the function of a central bank. Senator McKenna was asked by my colleague, Senator Wright, by way of interjection, how the sum of £9,000,000 compared with the amount held in special deposits. Senator McKenna declined to answer, so in order to keep the record right, I shall cite the figures. The amount of special deposit accounts of the trading banks is £340,000,000, and £9,000,000 is being transferred. The total assets of the central bank of Australia are not less than £615,000,000. The argument used by Senator McKenna completely ignored the most vital fact of all - that the Commonwealth Bank operates under the guarantee of the Commonwealth Government. Therefore, I submit that the first point made by the Leader of the Opposition is completely invalid.
The honorable senator then turned to the question of the proposed treatment of reserves of the central bank under the new legislation. He pointed out that, under the existing legislation, one-half of the profits is allocated to the reserves of the central bank, while the other half of the profits goes to the National Debt Sinking Fund. The conditions governing the National Debt Sinking Fund provide that when a payment is made from the bank to the fund, the amount transferred from Consolidated Revenue is correspondingly reduced. In point of fact, therefore, all that the proposed arrangement will do will be to do away with something which is quite unnecessary. But as I understood the honorable senator, he took further exception to the fact that the Treasurer, not of his own decision but in consultation with the board - with whom else, might I ask - would decide what amounts were to be transferred to reserves. I suggest that that is a completely normal and rational arrangement. In my opinion, nothing could be more normal than such an arrangement. There is nothing sinister about it. It is merely the pursuit of a practice which is adopted in any commercial organization comparable with a banking organization.
The next point made by the Leader of the Opposition concerned what he referred to as the major surgical operations which were being performed on the central bank. He mentioned the fact that the Commonwealth Development Bank, the Commonwealth Savings Bank and the Commonwealth Trading Bank were being placed under the control of a corporation which would itself, for the purposes of commercial banking, come under the control of the central bank. I cannot see what is wrong with that. I know, of course, that my party and the Australian Labour party would differ on the point, because we on this side believe that all banks, both government and private, should receive from the central banking organization the same treatment and should operate under entirely fair and equal conditions of competition.
The honorable senator complained about what he called the vacuum in which the central bank would have to operate. He contended that it would lose its listening posts. Mr. Deputy President, true central banks operate just like that - in complete isolation from any of the trading banks -which fall under their control. Indeed, would it not be unfair if the central bank had some nexus with a particular trading bank? Is not that one of the reasons for the introduction of this legislation?
In order to support this argument, the Leader of the Opposition quoted what the Treasurer (Sir Arthur Fadden) had said in 1950, what the Prime Minister (Mr. Menzies) had said about the same matter in 1953, and what the Royal Commission on Monetary and Banking Systems had said as long ago as 1936. We, as a government, can make the modest boast that we learn from experience. We appreciate that the flood of public opinion moves on and that what was said in 1936 by the royal commission, although it might have been perfectly good then, in the 22 years that have since elapsed has been proved not to be appropriate to the Australian banking system.
The next point which the Leader of the Opposition made concerned the possible take-over by the central bank of a trading bank, and the absence of staff to conduct the operations of the trading bank which was taken over. With great respect, I hardly thought that the Leader of the Opposition, at that stage of his speech, was serious. Disregarding the fact that such an eventuality, under a properly regulated trading bank system controlled by a central bank, is unlikely in the extreme, and assuming that such unfortunate circumstances should eventuate, obviously the central bank would obtain trained trading bank staff to carry on the day-to-day business of the bank taken over. I suggest it would retain, in the main, the staff of the trading bank taken over, so that the bank might carry on under the control of the central bank.
– As in the case of the appointment of a receiver.
– Yes, in much the same way that a receiver moves into a business. I suggest that the point that Senator McKenna attempted to make is utterly invalid.
The honorable senator then referred to what he described as the blow at the living spirit of the bank which this legislation will strike. I make it a practice, probably because years ago I was associated, as an employee, with a bank, to move about among the staffs of banks. Particularly, do I move about among the staff of the Commonwealth. Bank. I say quite emphatically that I have found no evidence of any loss of esprit de corps, or any down-turn of enthusiasm for the business of the Commonwealth Bank, because of this legislation. Indeed, on the other hand, most members of the staff of the Commonwealth Bank with whom I have discussed this legislation welcome it as a natural development of banking in Australia.
– Tell us who wanted this legislation, or why it is necessary.
– The Government wants the legislation. The honorable senator may be assured of that.
– Tell us for what reason.
– I am going to do so.
– Tell us what we want to hear!
– I am extremely sorry if I am causing the honorable senator discomfort by making a few comments on the remarks made by his leader.
– Tell us who wanted this legislation, and why.
– You will hear the whole story in due course.
– We are waiting patiently.
– The next point that the Leader of the Opposition attempted to make was what he described as the unnecessary delay, and the effect of that delay, in the calling up of deposits in excess of 25 per cent, of the total. I do not know what alternative the honorable senator would offer. Would he give no notice as to a call up of deposits in excess of 25 per cent, of the total? The Leader of the Opposition remains silent. Of course, he would not give any notice! That is the socialist philosophy. That is the way the Labour party wrecks the banks and their customers, and every one knows it. That is completely in line with Labour’s philosophy and approach to the whole question of banking. The very purpose of issuing a notice of call up is to put on notice, not only the banks, but also the many hundreds of thousands of the banks’ customers who will be affected so that they may make a readjustment of their financial affairs to enable them to carry on their businesses in as normal a way as possible. The very fact that there is to be a notice immediately warns everybody and influences the banks concerned to restrict their activities to enable them to meet their commitments after the expiry of 45 days.
Then the Leader of the Opposition developed an obscure legal argument, as I understood it, about the possible constitutional invalidity of the provisions governing the call up of deposits. The honorable senator made a legal forecast in 1953 which proved to be wrong, and I base my judgment on his present forecast accordingly. He asked for the reasons why the Government had introduced this legislation. He said that up to date the existing system had worked well and that the banks had had no complaint about what had happened. But they have expressed a fear - I submit it is a very justifiable fear - about what might happen in the future. Admittedly, the Leader of the Opposition had some difficulty in finding the relevant passage in the speeches of the Treasurer and my colleague the Minister for National Development (Senator Spooner), and perhaps that is why he did not deal with the matter adequately. If the honorable senator examines the speech of the Minister for National Development, he will find the reasons set forth in crystal clear terms. The relevant passage reads -
There is one main reason why the Government has decided that the central bank should be separated from the rest of the Commonwealth Bank group - and it is entirely a practical reason. Experience has shown that there cannot be full harmony within the Australian banking system, nor that close co-operation which ought to subsist between the central bank and the trading banks, unless and until this separation is effected.
In other words, unless and until the central bank exists in isolation, is impartial, and is independent of all the trading banks over which it exercises a control, there will be very grave misgivings and very grave doubts on the part of some of the banks.
I come now to one of the last points that were made by the Leader of the Opposition. The honorable senator attempted to develop a theme with which we are all rather familiar - the sale of the people’s assets. He said that this was the first step towards effecting a sale of the Commonwealth Bank. Senator McKenna is a legal man, and 1 direct his attention to the fact that at the commencement of the relevant act it is provided, for all to see, that the Commonwealth Trading Bank shall have the duty of expanding and developing, and that the bank cannot be sold without that act being repealed by the Parliament. Any proposal to sell the bank could be given effect to, not by the will of the Government, but only by the will of the Parliament expressed in a repeal of the relevant act.
The Leader of the Opposition introduced, finally, the question of what is called the L.G.S. ratio of the banks in 1954 and 1955 and said that an agreement had been broken. There was no convention between the Commonwealth Bank and the trading banks in 1954 and 1955. It was not until March 1956 that there was a convention between the central bank and the trading banks as to the L.G.S. ratio which they would maintain. Ever since that convention was agreed upon, the ratio has been maintained by the Commonwealth Bank.
– Now let us hear why the people want this change.
– It might be useful if, at this stage, I were to say quite briefly just what is the object of this legislaion. Let me state it quite plainly. First, the object is to end the association that exists between the central bank, shortly to become the Reserve Bank, and the Commonwealth Trading Bank. Further, it is to establish a strong, independent, impartial central bank.
– As it was in
– I wish to take advantage of this opportunity to tell the honorable senator something about the proposed new central bank and its powers, because no doubt he will learn with considerable surprise that, under this legislation, its powers as a central bank will be vastly increased. Tt is desired, further, to clothe the bank with all the powers that are necessary for it to function as a truly central bank exercising control over a banking system consisting of both private banks and the Commonwealth bank group, to modify the system of special account deposits in such a way that the system will operate with complete impartiality and equity between all the trading banks, both private and government, and to remove from the present system the possibility that action taken by the central bank could constitute an attack on the trading banks, government or private, or upon the customers of those banks.
– Has that happened in the past?
– No; but, as has been pointed out repeatedly, under the existing legislation it could happen.
– If I must put it in terms that you cannot mistake, let me say now that this Government and the people of Australia do not trust the Labour party as to how it will deal with the trading banks under the existing legislation. (Opposition senators interjecting) -
– Mr. President, I am a fairly accommodating sort of person. It was only two minutes ago that Senator Hendrickson asked me to tell him the purposes of this legislation. Now, because I am doing that and it is . finding disfavour with some senators opposite I am being howled down. I do not mind. If Senator Kennelly has any ideas on banking to put forward I shall be delighted to accommodate him.
The Commonwealth Banking Corporation, under its own board, separate and apart from the board of the Reserve Bank, will control three Commonwealth Bank instrumentalities, the Trading Bank, the Savings Bank and the Development Bank, the latter being a fusion of the present Mortgage Bank Department and the Industrial Finance Department. I have mentioned those matters in answer to the specific question of the Opposition as to the purpose of the proposed legislation, and at this stage of the debate it is as well that the statement should go on record.
I have referred to the establishment of a central bank in the true sense. No powers will be deducted from the central bank under the proposed legislation. It will continue the administration of exchange control, the note issue, the acquisition and sale of gold, the protection of depositors in other banks, determination of advanced, policy to be followed by the trading and savings banks and, subject to the approval of the Treasurer, the regulation of bank interest rates.. When one looks at the proposed statutory deposit procedure one sees the development of a central banking function to a point which has not been approached previously in Australia.
Under the present legislation a bank can be required to lodge with the central bank the amount in special deposits as at October 1952, plus 75 per cent, of the increase in deposits since that date. It is interesting to note that the lodgment of that money is not required without a period of notice being given to the banks. Under the proposed system each bank wilt be required to have on deposit with the Reserve Bank such percentage of its deposits as is determined by the Reserve Bank. Only one day’s notice to the banks is required of the intention to call up an amount of deposits up to 25 per cent, of the total. If more than 25 per cent, is required, 45 days’ notice must be given. If the amount of money is required for a period longer than six months, the central bank must give to the trading banks 45 days’ notice to that effect.
It is further provided that each quarter the Reserve Bank will be required to give to the trading banks an estimate of the amount to be held in the statutory deposit. The great power which this proposed legislation will confer on the central bank is the right, if circumstances so dictate, to call up the entire deposits of the trading banks. That power, I suggest, will give to the central bank an authority it did not possess in the past and which, in suitable circumstances, will be extremely active.
– Considering that only 22 per cent, of deposits was called up under the existing system, does not the honorable senator think the extreme power that will be given to the central bank is only theoretical?
– It is a fact that since 1950 only 25 per cent, of the deposits has been called up. What objection can be taken to that?
– The honorable senator knows, as does everyone else, that the power will not be used. It is giving something for nothing.
– -That is not so.. Another aspect to which. I shall refer briefly is the establishment of a Commonwealth Banking Corporation.
– You will all get your election expenses paid.
– Mr. President, 1 call your attention to the disorderly interjection by Senator Kennelly, that the election expenses of all Government senators, will be paid. That is an implication of corruption, and I ask that it be withdrawn.
– There have been many interjections and it is evident that feelings are running fairly high. I ask the Senate to come to order.
– That was a particularly foul insinuation by Senator Kennelly. It was an insult to every senator on this side of the chamber, and is a lie.
– I shall refer briefly to the establishment of the proposed Commonwealth Banking; Corporation which, as I have said, will’ conduct three instrumentalities, the Trading Bank, the Savings Bank, and the new Development Bank. 1 do not wish to dwell at length on the individual functions of each unit of the corporation but I shall indicate what appears to me to be a matter of some significance and importance. A point of criticism by the Labour party over the past few years has been that trading bank activities have been restricted or hampered because of the existence of a central bank and because the Government, through, the central bank, has imposed certain restrictions on the Commonwealth Trading Bank and not on other trading banks. Under the legislation the board of the corporation will be in complete isolation from the Reserve Bank Board. The corporation will conduct three instrumentalities, not dominated by the central bank, if I may put it that way, and will pursue, in accordance with the charge under its charter, a policy of expansion and development. For my part, I cannot understand the attitude of the Labour party in criticizing this particular arrangement having, in the past, directed all its criticism to the fact that the Commonwealth Trading Bank was restricted, in its activities as a result of domination by the central bank.
No doubt other honorable senators will enlarge- upon the important aspects of the
Commonwealth Development Bank and the part which it will play in Australian banking, in the Australian economy and in Australian development generally. I leave the matter on the note that this legislation will improve the stature of the central bank and will, in fact, create a truly competitive trading banking system operating under an independent and isolated central bank. For that reason the proposed legislation must have a beneficial effect, not only on the Australian banking system but also on our -economy and development.
.- This legislation is unsatisfactory because it does not seek to solve the greatest problem affecting the banking system of Australia to-day, namely, the problem of ensuring that credit is available and diverted into avenues where it will do the most good. For that reason the members of the Australian Democratic Labour party will vote against the legislation.
Before proceeding to the reasons for that -decision, I shall refer to two minor matters which have been raised previously in this chamber and to which some reply should be made. Some honorable senators have complained that this second-reading debate is rather belated, that it should have been held in December. I would say that it would have been held in December had the Government given a pair to a senator who was seriously ill at that time. My party would have voted for a second-reading debate if the Government had granted that pair. As the matter has been raised by a number of senators, including Senator Marriott, I merely say that my experiences of the last three years have shown me that politics is a very tough game, but I do not think that it should be played as tough as it was played last December.
Not only can it be said that this debate is belated; it can also be said that the legislation itself is rather belated. After all, the Government has taken virtue to itself today from the fact that it promised in its 1949 policy speech the action contemplated in this legislation. The Government had a majority in both Houses from the middle of 1951 until 30th June, 1956, but it took no action in that time to implement its promise. Having failed to act to implement its promise when it could put through the legislation, the Government blames the Opposition for adopting a certain stand when the legislation is introduced at a time when the Government has not got the numbers. The Government knew on 9th January 1956, when the result of the Senate election in Victoria was declared, that in six months’ time it would cease to have the numbers in the Senate. It might have been misled by the statements that were made in Victoria during the course of that election by the party of which Dr. Evatt is the leader, to the effect that if I were elected, I would be the paid hireling of the private banks and the capitalistic class. If the Government wanted to be sure of the passage of this vital legislation in order to prevent the on-rush of socialism, why did it not act during those six months? I say that if anyone should be blamed if this legislation is not passed, the Opposition will accept a share of the blame, but only a share, because a considerable share of the blame will be due to the protagonists of this legislation in this chamber to-day.
Why was no action taken? Obviously, there was a reason. A suggestion has been made in the press, which has not been contested very vigorously, that the Government did not act because senior Ministers, including the Prime Minister and the Treasurer, saw no reason to act. A further suggestion has been made - and it has not been denied very vigorously - that the Country party, which owes its origin to the fact that it was claimed that such a party was needed so that the primary producers would receive a reasonable share of the credit resources of the country, did not want this action to be taken. That party stands for wide powers in the central bank so that rural development will not be hampered. It was also claimed that in a period of inflation such as the period between 1950 and 1955, it would be dangerous for the Government, through the Commonwealth Bank, to surrender any of its control over credit. If it was dangerous during a period of inflation for the Government, through the Commonwealth Bank, to relinquish any part of its control over credit, how much more dangerous would it be to do so now when, unless wise measures are taken, we may be plunged into a depression, and when unemployment is already a threat so serious that it is causing grave concern to the people of this country. When we look at the strange failure of the Government to take any action to implement its 1949 election promise, we can only come to the conclusion that the Government did not want to act, and that its collective arm was twisted by a pressure group among its own backbenchers, who apparently had more backing or more influence in achieving what they wanted than the similar pressure group is having in relation to defence reforms.
The Government claims that there is a great public demand for this legislation. The Minister for National Development has stated in his second-reading speech that the private banks are gravely apprehensive. This at a time when the Government that they support has the biggest majority in its history and when the Opposition is so split and divided that any prospect of its being elected to office seems almost hopeless!
It has been said that the customers of the private banks feel that there is something unsatisfactory about the present system. It is not for me to deny a statement made by a senior Minister, but I can at least say that as 1 have moved about the community, in my estimation there is little or no concern on the part of people of Australia concerning the activities of the Commonwealth Bank, but there is very grave concern about the activities of the private banks. If there were anything wrong with the set-up from ihe Government’s point of view, reference would have been made to it by the Governor-General. Surely there has been no suggestion for years past of anything radically wrong in the set-up as far as ‘the central bank - the Commonwealth Bank - is
I concerned, and surely the Treasurer would know, as has been pointed out repeatedly, that in that period business has been booming, investment has been flourishing, and there has been over-full employment. How could anyone say that there was something wrong which was causing grave concern, about the central banking institution, when the Treasurer himself has repeatedly claimed that things were never better with the economy.
I again ask: Why did the Government take no action to honour its 1949 election I promise until the present time when it has ! not the numbers? T think the solution may well be found in the speeches that were delivered by the Prime Minister and the Treasurer in 1953, when banking legislation of a somewhat similar character was introduced. On that occasion the Prime Minister stated - and I ask honorable senators particularly to consider these words in relation to the 1953 legislation -
It will place beyond doubt the continued operation of the Australian banking system in fair and open competition within the framework of central bank policy.
Sir Arthur Fadden said ;
The sole purpose of the bill is to remove the central bank’s excess powers, which clearly go far beyond those it needs in order to exercise proper bank control.
In other words, we have the authority of the Prime Minister and the Treasurer for saying thai the job which this legislation is supposed to do was done in 1953. I have not the slightest doubt that when they were approached to bring in this new legislation they were unwilling to comply with the request because they knew that the job was done effectively five years ago. I fail to see the necessity to experiment with the control of bank credit at a time when we are gravely concerned about unemployment and when, in the United States of America and Great Britain, a recession is coming which could have an undoubted effect on the economy of this country. Moreover, we have not yet felt the full effects of the fall - first, in primary production and, secondly, in the prices gained for our primary products - which has taken place in the last twelve months- I see no reason for experimenting at such a time - especially when, in the opinion of the Government, the banking system has obviously been functioning more than reasonably well in recent years.
I am also concerned that so much attention is being given to the central bank though no attention is being given to the very grave problem which has arisen as a result of the spread of hire purchase. Both side of this chamber agree that the Government must have reasonable control of the issue of credit, but what a situation has arisen in this country today! Already 28 per cent, of all credit is extended through hire purchase - and there appears to be no form of government control over it whatever.
Who has let the people down in recent years in this country? Has it been the Commonwealth Bank? My answer is, “ No “. Nor has it been the State savings banks. They have provided more than their share of the money needed for housing and development. The institutions which have let the people down in these fields have been the private banks. Therefore, this legislation goes in the wrong direction. Anyone who looks at the present situation will conclude at once that if there is a need for reform it is in the direction, not of the Commonwealth Bank or the State banks, but of the private banks themselves. This legislation has been brought down at a time when an economic crisis could well occur in this country. Apparently only one section - the private banking institutions - has been consulted about this legislation, which could be very dangerous legislation indeed. It should be withdrawn and the Government should seize the opportunity to consult all sections of the community upon it. All banking knowledge does not reside in the hands of the private banks. If all sections of the community were consulted legislation which would have a much greater appeal for most of us might be produced.
It has been suggested that, above all others, there is one main and urgent reason for the introduction of this legislation - the need to secure the banking institutions against nationalization. Indeed, that suggestion has been expressed by a Government spokesman in this way -
We want to remove the possibility that, under the administration of a government with socialistic aims, the Commonwealth Bank could be used as a weapon for unfair attack on the private banks.
This Parliament is sovereign, within the limits of the Constitution, and what the Parliament can do in regard to legislation such as this, it can also undo. I do not accept for a moment the suggestion that the sole purpose of this legislation is the prevention of bank nationalization. It simply could not achieve that purpose. The private banks’ real safeguard is favourable public opinion, expressed through the ballot box. I think Government supporters will agree that if the private banks give service to the community and are prepared to team with the central banking system and devote their resources to the development of the country in the proper way, they will not be nationalized. I would point out that the only big move to nationalize them occurred after a depression in which their activities certainly did not contribute to the well-being of most Australians. Their own actions will decide whether or not they are nationalized. If they do a good job they will not be nationalized. Personally, I do not support the nationalization of banking because my party is opposed to monoply, whether public or private, but any institution that wishes to avoid nationalization should rely not upon legislation of this kind but upon conciliatory action, and upon proving to the people that it can do the job for which it has been designed.
The efficacy of this legislation for the prevention of nationalization is open to grave doubt. Honorable senators have discussed it around the House and though, of course, I do not intend to mention names, I have had the unique experience of being told, by Government supporters, “This legislation will make it easier to nationalize the banks. It is more in line with Labour policy than previous legislation, and therefore you ought to vote for it.” On the same day other Government supporters have said to me, “Your party is opposed to monopoly and nationalization. Therefore, you ought to vote for the bill.” If that is the situation among Government supporters - that half of them are under the impression that the legislation will facilitate nationalization, and the other half are under the impression that it will prevent it - the sooner it is withdrawn and they make up their minds about the story the better.
What is the actual position in relation to nationalization? The financial editor of the “ Sydney Morning Herald “ sums it up pretty well in these words -
The net result is that if Parliament passes this legislation … a hostile board on the Central Bank could NOT wipe out the trading banks in 24 hours.
It would have to give 45 days’ notice.
Such an odd number is an obvious sign of a compromise.
The private banks tried to get a 90 days’, or three months’, breathing space.
Apparently some one said, “ Let us split the difference.” The article continues -
It seems like shadow-sparring, because, after the 1949 debacle, surely no government would dare another attempt to nationalise the banks unless it had the people behind it.
And if it had the people behind it, what’s. 45 days’?
According to this financial authority, the Government’s proposals would allow the central bank to call up 25 per cent, of the trading banks’ deposits on one day’s notice, and any further sum after 45 days. The article concludes - in that period it could call up the lot - more than it can now.
Yet we are asked to vote for this legislation on the ground that it would prevent the nationalization of the trading banks! Sometimes measures do not always achieve the purposes for which they have been passed by parliaments. Years ago, in New South Wales, the Liberal party established the Legislative Council on a basis which, it thought, would prevent Labour from ever gaining control.
Sitting suspended from 5.45 to 8 p.m.
– Prior to the suspension of the sitting, I had made two points. The first point was that the true safeguard of the private banks against nationalization, if they required one, lay, not in legislation, but rather in the will of the people as expressed through the ballot box. My second point was that attempts to manipulate great public institutions with the ostensible purpose of safeguarding the country against socialization do not always have the anticipated effect. In the ‘thirties, the New South Wales Legislative Council was manipulated in a certain way and the people of New South Wales were told that that was being done to ensure that the Council would be a safeguard against socialization in New South Wales. I merely refer to the present state of that body and ask the Government whether it thinks that that move was successful.
I now wish to discuss the reasons for the proposals put forward by the Government. The Leader of the Opposition, I think, asked whether it is contended that the Commonwealth Bank thus far has acted unfairly in its relations with the private banks. So far, there has been no suggestion other than that its attitude has been perfectly correct. I think that most people will agree that the attitude of those controlling the Commonwealth Bank in this matter has been entirely correct over recent years. On the question whether the private banks have done all that they should, I contend emphatically that they have not done everything they should in the interests of the people of this country. I regret that the healthy person - the Commonwealth Bank - is to be operated on under this legislation, whereas the unhealthy person is to be left unattended.
Let us consider the matter of housing, which is, of course, one of the greatest issues and problems in this country today. The Commonwealth Bank and the State banks have a splendid record for making money available for housing within the limits of their resources. The Prime Minister himself has given testimony to the fact that that is not the case with other bodies - particularly the private banks and insurance companies. Only the other day he said that if only those traditional lenders, the banks and the insurance companies, would put their resources into the housing field things would be different. That was his view of what is being done at the present time by these bodies. I do not think I need to labour the point further than to say that figures show that the housing advances of the private banks for the year that ended in June, 1955, amounted to £105,000,000, and that in the year that ended in June, 1957, they had dropped to £86,000,000 - and this in a country where the population is steadily increasing.
I now come to a very serious issue, with which I regret the Government has made no attempt to grapple. It is a far more serious issue than the ones raised in this bill. I refer to what is happening in relation to hire purchase - one of the main reasons why the party to which I belong is opposed to the Government’s attitude to banking. We have no objection to hire purchase if it is regulated, and if the rates of interest charged are reasonable. As I said on another occasion, I do not know how young people starting out on married life could furnish a home to-day if it were not for hire purchase, but I regret that in Australia to-day the hire-purchase system is unregulated and that rates of interest charged in many cases amount to usury. The latest figures available show that advances made by banks were £878,000,000 in one year. In the same year, hire-purchase advances reached the level of £265,000,000. That means that 28 per cent, of the credit issued in this country to-day is issued without any form of control.
When the Government itself admits that there is a need for some reasonable control of credit through a central bank, can we look with equanimity upon a system which permits 28 per cent. of the credit to be issued under circumstances where there is no form of control and where the percentage is steadily rising from day to day? All of the banks are now in hire purchase, and for one reason. Under the law at the present time, banks are not permitted to offer more than3½ per cent. on long-term deposits, nor can they make advances at more than 6 per cent., but if they enter the hire purchase field they can obtain for their money 15 per cent., 16 per cent. and 18 per cent. In some cases hire-purchase companies are charging up to 20 per cent. In spite of those extortionate rates of interest, during the last year hire-purchase business increased by 15 per cent.
It has been creditably stated that that increase was due to two factors, firstly, new business, and secondly, the failure of a large number of people who owe money to hire-purchase companies to meet their instalments, because of unemployment, loss of overtime or other factors. I regard the hire-purchase situation as a grave danger to the future economic welfare of this country. That view is supported by a number of authorities. Recently a prominent figure in the British” retail trade came to Australia to. investigate the possibility of entering into that field here. He went back to England without arriving at a decision and announced publicly that he regarded with grave concern the unhealthy situation that in Australia it was possible, under hirepurchase, for people to enter into contracts to buy expensive goods without paying any deposit. He said that that appeared to him to be a very dangerous situation.
– How would you control the situation?
– I shall tell the honorable senator in a minute. Recently we had the spectacle in Brisbane of a representative of the Young Women’s Christian Association and, later, a judge saying that in their opinion one big factor contributing to child delinquency was that hire-purchase companies were able to entice young people to get into debt by inducing them to enter into hire-purchase contracts which frequently they found they could not honour.
– That is just an opinion.
– Is the opinion of two responsible public personages. Loans floated by the State Electricity Commission in Victoria have been regularly filled in the past, but the last one was undersubscribed to the extent of £1,000,000, although offered at what were reasonably attractive terms in other days. The rate of interest offered was53/4 per cent. People throughout Victoria will tell you that it is difficult to get first mortgage money for housing at 8 per cent. and that it is almost impossible to get second mortgage money at 10 per cent. In the case of primary producers, last year one of their representatives commented on the fact that they could not get bank credit but were offered hirepurchase credit at extortionate interest rates.
I should like to quote again a statement which has been quoted elsewhere. It appeared in the “ Sydney Morning Herald “ under the headline “ The Countryman and Hire Purchase “. It reads as follows: -
A Dubbo farmer was relating how he had gone to his bank for an increase in his overdraft.
He planned improvement to his property and potential output which required expenditure mostly on new equipment.
After listening the bank manager made these points -
It was a good plan.
Unfortunately the credit squeeze had left him without funds to give the farmer an overdraft, but
if the farmer moved down the counter where the bank’s hire purchase associated business was conducted it would probably have the funds.
This Dubbo farmer was advised that he could get the money to buy new plant and machinery in order to increase production, not at the overdraft interest rate of5½ per cent, or 6 per cent., but at the hire-purchase interest rate of 15 per cent., from the hire-purchase section of the bank conducted in the same building as that in which its banking activities were conducted.
I have had cases of that kind referred tome by farmers in my own State. When that state of affairs exists, I fail to see why the Government, having left a big section of the credit resources of the country unregulated, proposes to discard some of the control it has at present. Look at what is happening in the hire purchase field. This is becoming the South Sea Bubble of the 20th century. Take this quotation from the “Financial Review” of 13th March 1958 about one happy day -
Hire purchase business is still expanding. Last night’s announcement of a large new share issue by General Credits climaxed a week of developments in this field.
The E. S. and A. Bank - Esanda - raised £1.8 million for its current issue of unsecured notes, and will accept further contributions.
Reid Murray made an issue of shares and deposits to finance its hire purchase business.
Pacific Acceptance raised £200,000 in 9 per cent, notes.
That is just one day’s work!
– Why do you say the
Government proposes to relinquish some of the control it now has.
– I believe the Government is relinquishing some of its control. That is what it has told us. I shall deal with that matter later. The position now is that we have unhealthy, unregulated expansion of the issue of credit through hire purchase, about which nothing is being done. If we have a depression, if we have people out of work, if overtime is cut out, then the thousands of people who have entered into hire purchase contracts on the basis of little or no deposit will be faced with the loss of what they have paid under hire purchase agreement1!, and a very serious situation will arise. When all is said and done, is not that a contributing factor to unemployment? Take the working man who proposes to buy a television set on hire purchase. Usually, the payments take £4 a week of his wages. That is £4 a week out of the family income, or £4 a week less spent on food and clothing, and when less is spent on food and clothing there are more workers out of employment. That is one of the factors contributing to what is happening today in an area in which, in any newspaper, one may see advertisements costing £60, £80, or even £100, appealing for funds for hire purchase companies at 7 per cent., 9 per cent., 10 per cent., and, as was the case in one instance in Victoria, 12 per cent. If nothing is done about that, the consequences will be grave.
– Now tell us how we can control it.
– 1 come to the point that has been troubling Senator Scott. What can be done about this situation? For one thing, the Government could authorize or arrange for the Commonwealth Bank to compete with the private banks in the hire purchase field at reasonable rates of interest. The second thing that the Government could do is endeavour to exercise some restraint over matters which are likely to contribute to the spread of hire purchase. This Government claims it can do nothing about hire purchase, but at the same time it says. “ We propose to extend television to every State.” If that is not a contradiction, I should like to know what is.
The Government says that the control of hire purchase is a matter for the States. Why does it not go to the States, discuss the matter with them and point out to them that the amount of hire purchase credit being raised at the present time is a threat to the ability of the Commonwealth to raise the loans it needs for development?
– The Government has already done so.
– If it has already done so, then it seems to have made a ghastly failure of its efforts. The Government has been very persistent in other matters. It ought to be persistent in connexion with this matter. For instance, it could force the private banks out of the field of hire purchase by telling them that their charters will be withdrawn if they do not get out of the field. The Government has power to do that, even if it does not have other powers.
Further, realizing how serious this unregulated credit position is, the Government could seek constitutional power by referendum to cover this field, for if ever there was a field that ought to be under Commonwealth control, it is this.
Having said that, I want to say that 1 do not throw on the Government all the responsibility for dealing with hire purchase. 1 1 think that the trade unions of this country could do a great deal in this field. In the United States of America, and in Great Britain, the trade unions, by establishing co-operative credit unions, have been able to provide these services for their members at reasonable rates of interest and under much better conditions. I hope the day will shortly come when the Australian trade unions will be doing the same thing.
I realize that one factor which has prevented many unions from doing this is that the Australian unionist wants his unionism on the cheap. If he is prepared to pay more money by way of union fees, it will be possible for the unions to employ people who will be able to provide these services in the unions. While the Australian unions have a great record for fighting for the interests of the workers, their record compares most unfavourably with that of trade unions in other countries in respect of the services they provide. Of course, the secret is that the unionist elsewhere is prepared to pay more in dues in return for those services. 1 come now to the general question of the arrangements proposed under this bill for dividing up the present administration of the Commonwealth Bank. As I have said before, I have been unable to see that the bank has been a failure under the present system or that those associated with it, or the private banks in their relationship with it, have laboured under grave disabilities. Reluctantly - because I have tried to see another explanation - I have come to the conclusion that the Government’s purpose in separating so many sections of the present bank is to scramble the eggs so effectively that they can never be unscrambled.
I believe that there are unsatisfactory features connected with the administration proposals set out in this legislation. Many of those proposals will depend to a large extent upon the nature of the board of control that is appointed. I feel that there are dangers in that because boards of control sometimes tend to follow certain lines, and we arrive at a situation at which one government will try to stack the boards with people sympathetic to its point of view while an opposing party, when it becomes a government, will attempt to do the same thing. My own opinion is that it would be a good idea to leave the administration largely as it is.
I do not see in the bill sufficient provision to ensure that the trading bank will have all the capital that it ought to have for the purposes for which it is designed. I think that good arguments can be adduced for the retention of the present arrangement. I feel that the association between the central bank and the trading bank is a good one because it accords the officers of the central bank an opportunity of obtaining valuable information and experience of general banking trends in the community.
As to some of the other provisions, I think that the proposed Development Bank is in many ways a good feature but I regret some of the strings that are tied to it. I refer, for example, to the limitation of £2,000,000 on the amount it can borrow from the Reserve Bank. The job this bank is supposed to do has not been sufficiently explained to us, but at the same time I think that, so far as the idea of development is concerned, the proposal is in many ways a good one. I do not say, however, that it is necessary to have a separate bank. By a simple amendment of the powers of one of the Commonwealth Bank departments that is doing much of this work today, everything that the Government says the Development Bank is designed to do could be done.
We have been told that the Government looks upon the proposal for the Development Bank as being inextricably bound up with other sections of the bank, and that it cannot be separated from the other proposals. If that is so, it is regrettable, but as I see it, with all the strings that have been tied to the proposed new bank, it is an unsatisfactory feature of the bill. I am confident that if the Government introduced a straight out measure for a development bank it would not have much difficulty in obtaining the required support. I believe, therefore, that this bill is designed to achieve purposes which are not really so important in this country today as are other purposes. Instead of fiddling around with the Commonwealth Bank, we should be seeking ways and means to direct credit effectively to the essential needs of Australia. What we need to do is to direct or divert money for homes and for development generally. Until we are doing that we cannot say that we have the effective banking system we should have. So far as I and my party are concerned, we believe, of course, that as long as the private banks carry out their part fairly, as long as they do not exploit the people, then the people themselves will see to it that the banks are given their place in the sun.
The final thing I want to say is that I regret that the introduction of this legislation has been made the occasion, in some quarters, for an attack on the Senate and on the powers of the Senate. There has been an attempt to lay a smoke screen by suggesting that the Senate in this Parliament has been uniformly obstructive, and that it has been a drag on the legislation of the country. Let me point out that this Government has been in office for two years and that the Senate has passed every measure that the Government has brought forward, with the exception of the banking legislation, without, so far as I know, one amendment being forced on it. I should say that in a house where the numbers are even, the Government has nothing at all about’ which to complain in regard to the deal that it has had from the Senate as at present constituted. I regret, therefore, suggestions that have been made that the Senate has been obstructive in regard to this matter. I also say, subject of course to discussion with other members of my party, that I would be opposed to suggestions that, because of this or any other legislation, we should endeavour to detract from the powers of the Senate, powers which were made a condition by the States on their entering into the Commonwealth 57 years ago.
– We have just listened to a thoughtful speech on a subject which, previous speakers have said, is regarded with some degree of apathy in this country. As I approach this subject to-night, I want to remind the Senate that this issue was one which so disturbed the spirit of the nation as to reveal an enthusiasm of political thought the equal of which cannot be recalled in thi lifetime of any honorable senator in .this chamber. It was Labour’s threat to the intergrity and efficacy of the Australian banking system that so aroused the resentment of the Australian customers of the banking system that they demonstrated their political decision in a manner which has relegated the Labour party to the Opposition benches for nine years. The great danger on this occasion is that there will be cohesion and that certain elements of the Labour party will rejoin the ranks under the leader ship of Dr. Evatt. It is difficult to dissociate oneself from a lifetime of political philosophy.
On this occasion, I join with Senator McManus in the sentiments expressed by him in his concluding remarks. I agree that we are privileged to speak as representatives of the people in this Senate, where no one should take the role of an echo of someone in the other place. 1 know that that sense of privilege is shared by the representatives of the Australian Democratic Labour party and the Queensland Labour party to a great degree, and with more intense feeling than I could express. I should imagine that if argument could demonstrate that the leadership of Dr. Evatt was misleading on this occasion, this chamber could reveal itself as a chamber of purposeful deliberation. If we liked, we could take this bill into consideration in committee for a month or two months, and with all the professional advice, together with the expert advice of the Governor of the bank and his officers, that the Senate cared to call, we could mould it into an instrument which would express the. purposes that those independent spirits in the Senate felt were necessary for the achievement of the interests of the Australian people.
Surely, Mr. President, we are not going to allow this matter to be pre-judged before argument is heard on it! There are some people who have blamed the Opposition for voting, in December last, against the first reading of the bills. I reserve to myself th>: view that the members of the Opposition were justified and that the procedures by which the measures were then presented to the .chamber are a matter of regret; but, Mr President, time heals many things, and now, in the fulness of time, we are confronted with the opportunity - due, I imagine, to the decision of Senator Byrne and the senators of the Democratic Labour party - for a full discussion of these measures at the second-reading stage. That poses the question: are we right in rejecting the measures on the second reading? Despite all the arguments put forward by Senator McManus, to which I listened with the greatest of interest and, in respect of several of them, not without acceptance, I say to the Senate that the second-reading debate should convince us that in this legislation we now have an opportunity to mould legislation of national importance that may endure, if not for the century, then for the greater part of it.
With this regimentation of party under the heel of a rigid Caucus,, than which there is no greater exponent than Dr. Evatt, this chamber is likely to be deprived of the responsibilities that Senator McManus has put before us as the proper responsibilities and authority of the Senate. That may be so unless, while we have in the Opposition men who are rebellious against that Caucus control, we take the opportunity that is presented to us. When will another opportunity the like of this occur again for those of the Democratic Labour party and those who, after a demonstration of the prostitution of parliamentary government when the caucus challenged Parliament, emerged from the fiasco in Queensland as the Queensland Labour party? These are matters for the individual judgment of all honorable senators who are concerned in this matter I will brook no denial from any honorable senator to-night when I affirm that we have an opportunity, the like of which may never recur, to give independent consideration to these measures, and to mould legislation which will be, by concession of everybody, an embodiment of the basic principles for the proper structure of the Australian banking system. If we renounce the opportunity to go into committee and frame the legislation as an expression of the views of the Senate - the result when it is presented down below will be the responsibility of another place - we do so at our own risk. I feel that, when the matter is examined impartially and from the viewpoint of the interests, not of politics, but of purposeful working people, no man in this place is justified in refusing these measures a second reading and a consideration in committee.
I submit to the Senate that the cardinal purpose of this legislation is to create a Reserve Bank of Australia as an essentially central bank having, not the province of dealing with the day to day affairs of individual customers, but the responsibility of formulating policy for the guidance of the banking institutions - the banks themselves. This is a development that has been in existence, in Australia at all events, since 1936. It had no acceptance in the early ‘thirties, as the political history of this country shows. The present system was developed in the exigencies of war, and the socialist party of the day abused the opportunity that was presented in post-war reconstruc- tion by fastening on to the banking system of Australia its shibboleth the nationalization of banking. Senator McManus, to whom we listened with interest, although not particularly when he was referring to past sentiments of other political figures in this Parliament, whether it be in 1936, 1953 or 1950, will recall taking some part in the campaign for the nationalization of banks in 1947 and 1949.
We are all privileged, if we have the spirit to learn by experience - the experience of Senator McManus has been bitter and hard - to put that experience at the disposal of the people. But having won the opportunity to do so, let us not again see the occasion when we commit the banking system of Australia to the direction of the Evatt Labour party and its purpose of nationalization. Even before that party had the dictatorial character Kennelly in its numbers, it was capable of framing a measure which, let us remind ourselves, sought to acquire compulsorily the shares of all shareholders in the private banks of Australia whether here or abroad. Be it remembered, Mr. President, that, realizing that the Constitution required them to pay just terms of compensation, the best the members of that party could do was to create a specially framed court of claims from which they declared there should be no appeal to the constitutional tribunal of the Commonwealth - the High Court.
By that special artifice and device, in which Senator McKenna confessed this afternoon that he had no inconsiderable share, they sought to undermine the just rights of those people who had invested in the banking system. That is the predicament that Labour found itself equal to in 1947. If we move around to the occasion when, due to some mischance, Labour again comes to office, with all the development that has gone on from the advice of Sir Stafford Cripps and other arch socialists as to how the Constitution can be mismanaged, I warn those in the Labour party who have dedicated their lives to democracy that we will have a more rigid system of nationalization foisted on to the country, not directly while section 92 of the Constitution remains, but as an indirect filching of the substance of the banking system, of which Senator McKenna revealed this afternoon that he was only too well aware. But let us have more of that later.
We now have the chance to establish a truly national reserve bank. What is the objection to it? I have listened with interest to what the Leader of the Opposition and Senator McManus have said. Senator McKenna said that the Government was stripping the Reserve Bank of its listening post, of its direct contact with the business transactions of the banking system, by enforcing a separation between the Reserve Bank and the Commonwealth Trading Bank. That is a view which is respectable; I say that ungrudingly on this occasion. It is a view that has been put forward and pondered for twenty years, and there are those who are generous enough and elevated enough in their arguments to say that in the composite position that the Commonwealth Bank has held over the years no misuse has been made of the position it has occupied as a Reserve Bank and as a trader in competition with the private banking institutions that it controlled.
But, Mr. President, we need to be real in our appraisal of this matter. Nobody with the slightest acquaintance with busines over the last ten years could have been so blind as not to see a trend, on some occasions unconscious and on others deliberate, of business after business being diverted to customership with the Commonwealth Bank because that bank was not restricted in extending credit and was not subject to supervision in the individual overdraft accommodation of its customers. Nobody who examined with alarm and intelligence the incipient trends of 1955 and early 1956 could fail to detect in the want of confidence that was engendered between the central bank and its trading bank competitors the ingredients which made for that inflationary spiral. The Trading Bank cannot go to the governor in full confidence that its clients will not be pinched - in the full confidence that there will not be unwarranted interference with overdraft accommodation and completely equitable treatment of the community by every trading bank, be it Government or private. The Government, in saying there should be a completely separate Reserve Bank, takes account of all those considerations and “asks “ Why have all these activities combined in a joint institution in Australia ?” Looking back over the history of the development of the Commonwealth Bank they obviously were not thrown together as bedfellows as a result of a reasoned approached. It was merely one of the casual accidents of history because, ir> the political circumstances in which the various steps have been taken in the development of the Commonwealth Bank, it has not been deemed politic, on the part of the governments concerned at that stage, to enforce a separation.
The reason why separation is imperative springs from the instincts which are basic to every individual in this chamber. Central banking requires that the Government should established a supervisory institution which will not merely issue edicts to the banking instrumentalities and institutions, but also follow them by action. In other words, we shall create a Reserve Bank Board that will formulate policy and issue directives, and enforce any noncompliance with direct action. That being its executive authority and power, it is most important that the board exercising control over all the trading banks in Australia should, in reality, be completely equitable and fair.
I do not care in what role one spends his life, something in the spirit of man rebels against his competitor gaining control over him through the good offices of the government of the day. The only way in which one can obtain an effective instrument of control is to have a Reserve Bank free from the imputation and the embarrassment that it will use its controlling authority over its competitors for the purpose of making a trading gain at their expense.
So far from Dr. Coombs labouring under the half-expressed suggestion of Senator McKenna that he repudiates this reform, I should think that Dr. Coombs, as a man of integrity, as a man with a purposeful conception of the functions of the banking system of Australia, and as a man conscious of the great opportunity which he has in this postwar period of guiding the chief agency of that banking system, would be the first to say “ Thank God, I am in a position in which my directives to every unit of the banking system, whether it be government or private, may be issued without the slightest suggestion or suspicion that they are motivated by a desire to advance the Commonwealth Trading Bank in its competition with the private trading banks “.
Any man who wishes to see his institution succeed, particularly a man entrusted with the responsibility of controlling the whole banking system of Australia, would be at pains to see that institution rid of the imputation that its control may be governed by bias.
– Who implies that?
– Nobody can escape the implications. If a person accepts the duty, first - in the terms of the legislation, through the agency of the Commonwealth Trading Bank - of developing the bank and expanding its business in competition with the trading banks, and secondly, the duty of dealing fairly with the units of the banking system, that person cannot escape the imputation - an imputation which undermines confidence in the Reserve Bank. Most honorable senators have lived through economic experiences that convince them that confidence in the ultimate centre of the banking system really makes the whole economy throb.
I suggest, therefore, that the argument that emanates from Senator McKenna as to the advantage to this adjunct of the Commonwealth Trading Bank as a listening post and a contact with the daily affairs of banking, pales into insignificance when one realizes the imperative need to put the centre of our banking system beyond the reproach of those over whom it has authority.
– Why did not the
Government separate the functions of the bank in 1953? These facts must have been known to Government supporters then.
– Let me be quite frank on these matters. I am the last person to claim for this Government, or its predecessor, a complete monopoly of wisdom on the introduction of all its measures.
– Government supporters have realized those things only since 1953.
– Let us be fair about these things. A policy of such major national importance as banking is surely a matter of gradual development, and experience in Government, even over a comparatively brief terms of eight years, is such that some intelligences would not deny themselves the opportunity of learning. Honorable senators remember the economic disturbance in 1953. A step forward was taken, and I suggest the Government’s policy has now reached a fairly complete maturity.
As I mentioned previously - and do not wish to repeat - if a mature measure such as this goes into committee I shall have some suggestions to make concerning its improvement. But simply because this measure was not introduced in 1953, do not let honorable senators, even Senator Hendrickson, do themselves the discredit of not taking the opportunity in 1958 which they refused to take in 1953.
A terrific accession of strength will flow to the Reserve Bank by a complete separation from the trading interests of the Commonwealth Trading Bank so that it will rise supreme and exercise control over all the units of the trading bank system, government and private, without the suggestion that it is being motivated in its actions by trading interests. May I dwell for just a minute on a reference to these functions in relation to the special accounts. It is now accepted by everybody in public life that 1 have had the chance to meet that executive control over all the banking companies of Australia, including the Commonwealth Bank, takes a particular form. When we come to reflect, we see that it is a form of a most special character whereby the central bank can say to the private banks, “ Of the deposits that you hold to-day you must place with me 20 per cent. “. The day will come, if we will permit ourselves to go forward in the interests of the people as distinct from political propaganda, when that position will be re-examined. The power of the Reserve Bank to call up those special accounts, or 25 per cent, of the deposits of the customers, sterilize them or use them, and pay one-half of 1 per cent, interest in respect of them, is a matter which, in due course, will have to be re-examined. Even the Labour Opposition will see that there are some obvious disadvantages in a progressive, expanding economy such as ours in sterilizing, as a matter of settled policy, deposits which now amount to £330,000,000 or £340,000,000. I know that a very delicate balance has to be found in these things and I shall not contest that question of policy to-night. I have mentioned the matter because the money involved is that which customers have placed in the banks on current account or, 1 think fixed deposit, a proportion of which the central bank is entitled to call up.
At the present time, this is limited only by the formula of October, 1952, and threequarters of the subsequent accretions to deposits. The Leader of the Opposition argues that one of the respects in which the central bank is being weakened is that this measure will reduce the legal powers of the Reserve Bank. He says that when it is desired to call up more than 25 per cent, of the deposits, the trading banks must be given 45 days’ notice, and that this is a weakness. Honorable senators can see how these arbitrary bones, the ghosts of 1947, still rattle through the chamber. Banking is done in millions, yet the Leader of the Opposition expects a trading bank to adjust its accounts in less than 45 days! What a degree of arbitrariness is implicit in that! But I shall let that one pass.
The next thing that Senator McKenna said, in pursuance of this argument, was that we are stripping the Reserve Bank of its effective legal powers. He said, forsooth, that there is no limit to the amount of the trading banks’ deposits that the Reserve Bank may call up. It is an interesting development of an argument that we are reducing the legal powers of the Reserve Bank. He went on with a casuistry that I think would have done Sir Stafford Cripps, the socialist academician, great credit. He said a roof is being erected to shelter the trading banks and that the provision in relation to 45 days’ notice is given to enable them to issue their writs and take out their injunctions. I have heard of a fixation - a mental condition - in other connexions, but that reminds me of a certain remarkably rigid mental fixation. I refer to what the High Court did so magnificently in 1947 with no longer delay than 24 hours. Now, private banks are to get 45 days. So, in relation to the statutory reserve deposits, it should be obvious to anybody who gives the matter even transient consideration that the Reserve Bank is being given ample power - indeed, Senator McKenna fears excessive power - for the purpose of regulating the banking system.
I challenge anybody in this chamber to demonstrate that there is a weakness in the control of the special accounts, or as they are to be called, the statutory reserve deposits. I submit that even if the matter rested wholly upon my first argument regarding the creation of an independent reserve bank with complete powers and now with complete integrity, unembarrassed by the possibility of interest in the trading interests of the Commonwealth Bank, that would be sufficient justification for supporting the motion for the second reading.
I go on to make my second main argument. When the Reserve Bank is separated under this measure from the trading bank, the government banking institution left with the responsibility of competing against the private banks will not be eviscerated. What does this measure do? The legislation brings together under one Commonwealth Banking Corporation the Commonwealth Trading Bank and the Commonwealth Savings Bank. Each institution, in its own right, possesses terrific assets and enjoys the confidence of the trading and savings community of Australia. The Commonwealth Savings Bank with its assets of £700,000,000 and the Commonwealth Trading Bank with its assets of £300,000,000 or £400,000,000 - correct me if I am wrong in the latter figure - are able to struggle for existence without any help from the Opposition. But we go further. We realize that we are building a fabric of banking institutions for Australia and not for Egypt. We realize that this country has its own peculiar economic circumstances, the major one of which is the two-level economy as between the agriculturists and the industrialists of the cities. I, though not privileged to be a member of the Country party, have gained the credit of always defending this situation in this chamber. Honorable senators will recall that, for the last three or four years, I have been advocating the establishment of a bank specially adapted to the driving needs of the farming community, which is so dependent upon overseas prices for its commodities, yet is forced to pay Australian costs of production. The farming community, too, is exceptionally liable to suffer from drought and flood, lt requires finance to carry out its pioneering work - but on a long-term, and not a daytoday overdraft, basis.
– Labour has provided for all that under present banking arrangements.
– Whether that is so or not, why can we not let the Senate share the honour of providing these advantages for the countryman? We have before us a proposal to establish, as an adjunct to the Commonwealth Trading Bank and the Commonwealth Savings Bank, a new organ of banking which, according to its charter, is specially designed to assist borrowers, but not on the ordinary basis-
– That is the bait. It i3 the gilt on the very unpalatable gingerbread.
– I had hoped that I was making myself understood by the more thoughtful minds in the chamber and 1 beg honorable senators - even Senator Toohey - to consider seriously the special and peculiar interests of agricultural development in Australia. We are now offered a banking institution with a charter sufficiently wide to enable it to meet the special requirements of a farming community subject to the particular economic and local circumstances which I have just described. In the days when my father went out into the bush, politicians could stand up and say with pride, “ Go into the country and you may depend upon the Parliament to send all your requirements after you “. Honorable senators who are looking to the vote of the organized industrial unions are all too apt to lose sight of the special interests of the country folk. There is a great responsibility upon the Government now, just as there was 50 or 60 years ago, to foster agricultural development. The first requisite for such development is the provision of adequate finance.
Senator McManus said that the legislation was deficient in that it did nothing to help provide housing finance. Housing, and the demands that it is making on public finance in the post-war period will be a matter for very thoughtful discussion in 10 or 15 years’ time, but I do not propose to go into the subject deeply to-night. However, in meeting Senator McManus’ argument upon the same basis - one of genuine interest - I point out that Part VI. of the Commonwealth Banks Bill makes provision, in a way that we have never known before in Australian banking legislation - for the financing of home ownership - a magnificent purpose. Housing loans are dealt with in a special part of the bill and the Commonwealth Trading Bank and the Commonwealth Savings Bank are specifically permitted to make loans to building societies and individuals for the erection or purchase of homes, or for the discharging of mortgages on homes. This is an attempt to buck off the back of the Australian citizen the bugbear who charges exorbitant interest rates. Loans for this purpose will be made either from the £700,000,000 in the Commonwealth Savings Bank or the £300,000,000 in the Commonwealth Trading Bank. The legislation specially provides that preference shall be given to loans for the erection of new homes. Surely, those provisions carry conviction to any one who is reasonable and genuinely anxious to help the man who wishes to obtain finance for home building.
I come now to the matter of hire purchase, which took up so much of Senator McManus’ time. I hope I may be forgiven for not traversing such fields as television. I suggest that the future of that industry depends not upon the present banking legislation, but upon Government policy. I may be somewhat misguided, but I think that those who cry out against the extension of television facilities are very much like King Canute. I would not deny to a man who has been working all day the relaxation afforded by a television programme, which seems to me to be one of the privileges of modern living. One cannot think of all television programmes in that light, but that is a subject for discussion at some other time. As an old fossil from the country, I think there is much to be said for having in the home such modern entertainment, the privilege of hearing the news and so on. Senator McManus will not have failed to notice - but I intend to bring it forcibly to his attention - the fact that special reference is made to competition in the field of hire purchase as being one of the provinces of the Development Bank. The statutory charter that we are discussing requires that bank to lend to the farmer by way of hire purchase - something with which, across the dividing gap in this chamber, I may say that I agree - and I join hands with any one who is anxious to bring hire purchase finance back on to a reasonable and economic basis. If the existing provision is not ample, let us get busy in committee and make it the subject of a specific section.
– We will have a vote on the second reading, and see how you go then.
– We take our responsibilities seriously. If the Senate thinks the provision is inadequate we can amend it. I am not pointing to the fact that already there is a skeleton, and that to it we can. if necessary, add substance.
– Under what section does hire purchase become a function of the Development Bank?
– I shall get it for you later.
– Is it clause 72? But how does that control hire purchase?
– There is specific power there, but at present I am dealing only with the point raised by Senator McManus. The Development Bank, by means of active competition, may be able to bring interest rates down for this type of finance. On reflective consideration of this position, can Senator McManus, or any other member of the Opposition, point to a provision in the present banking legislation that denies or qualifies the power of the Governor of the present Commonwealth Bank to issue a policy directive on the overdraft accommodation which banking institutions may afford to hire-purchase companies?
– The Commonwealth Bank caters for the problem already through its industrial department.
– I know it does, but only to a limited degree. I am trying to make another point. I am trying to make the point that the Commonwealth Bank to-day has complete control of the financial accommodation which hire-purchase companies need from the banking system. Not one of those companies could maintain its turnover without banking accommodation. A policy directive from the present Commonwealth Bank could bring that field of finance for hire purchase under regulation and control.
– You say that the Government has power over hire purchase?
– I say that the Government, through its banking power, has the power to issue a banking policy directive that would control the supply of finance from the banking system to the hirepurchase companies.
– The Government denies that.
– No, it does not, if you will pardon me. The hire-purchase companies say that the banking power does not permit this Parliament to legislate directly in relation to hire-purchase companies. That is a loop-hole of escape which all distrusted forms of control create. It is biased control, control in which there is no confidence, that has caused these banks to create their subsidiary hire-purchase companies, so as to move them beyond the ambit of banking control.
– That is true.
– There is nobody who does not agree that in order to control the banking system, you must have control over the complete credit resources of the banks. So far as constitutional power is wanting, give us credit for the fact that, although tardily, a committee is working on that subject at present.
– A committee of what?
– The committee which is considering constitutional reform. I am sure it will be conceded, even by my leader (Senator O’sullivan) that I am not divulging the secrets of the committee when I say that.
I have presented these arguments, possibly feebly, because I believe that this legislation, by creating a completely independent reserve bank, will give to that bank a terrific accession of strength. 1 believe that by establishing the new Commonwealth Trading Bank and then by going out of its way to create the new Development Bank, the Government is demonstrating, not a desire to sell out the Government bank, or to destroy or undermine it, but a desire to develop and foster it. With regard to the criticisms relating to the imbalance of the economy, some of the difficulties arise from constitutional limitations, but most of them arise from a lack of confidence in the present incongruous union of the reserve bank with a competitor of the trading banks. The Senate has a unique opportunity to consider this Legislation in committee and produce measures for which all sections of the community - particularly those seeking homes, the primary producers and the industrial workers - will be eternally thankful.
.- In making my contribution to the debate on this important measure, I think I should advert in the first place to the circumstances under which previously, as one on this side of the Senate, I joined in refusing debate in the circumstances that then prevailed, to the series of bills now before the chamber. I was pleased to hear the statement by Senator Wright that, although he did noi express himself publicly at that time, he did not condone the action that was taken then by those who were in charge of the measures. I said at the time that the Government’s action was merely a concession to the forms of democracy and a denial of the spirit of democracy.
The bills have been represented, but now circumstances have changed. I thank God that the senators who were ill, have recovered. One honorable senator who is so popular and well regarded has made a great recovery of his health. That being so. it would be equally a denial of democracy to refuse a debate on these bills now, at least at the second reading stage. To some extent, I may have contributed to the presentation of this debate. I trust that honorable senators will take advantage of the occasion and discuss the bills in a spirit of recollection, and make a logical and reasoned approach to the problems which they pose. That is the type of approach that Senator Wright suggested should be made. Strangely enough, it was the type of approach that I contemplated in circumstances which I shall detail in a few moments.
This series of bills contains four major and ten subsidiary measures. The first measure seeks to establish a reserve bank, which is the Commonwealth central bank in a new form. The Commonwealth Banks Bill seeks to establish the Commonwealth Rankins: Corporation, with its subsidiary instrumentalities. This is important and significant legislation. That cannot he denied. 1 think it is now common ground from the speeches that have been made that, distilled down, three major principles emerge - the separation of the Trading Bank from the central bank, or, in its proposed new form, the reserve bank; the provision for the substitution of statutory reserves for the special accounts which operate under existing legislation; and the provision for a new banking institution under the title of the Development Bank. I suppose that most speakers will direct their remarks to those major points.
The history of banking in relation to the Commonwealth Bank has been a chequered one. The reason is that it has been regarded firmly and strongly by both sides of the Senate. The Australian Labour party has pursued the idea of Government banking with a persistence which has seldom slackened. Theories have been expressed from time to time, from day to day and from year to year which ultimately, in fairness to those who espoused them, have been translated into practical banking administration and the banking pattern. As these theories were presented - this is now part of the history of banking in the Commonwealth - they often met objection and resentment from those who to-day, or in other days, sat on the government side of the Senate; but as those theories have been translated into banking practice, they have found acceptors and even defenders amongst the ranks of those who, initially, were most violent in their opposition. The Treasurer said in his speech in another place, when dealing with the Reserve Bank Bill-
We should perhaps remember that many past judgments and beliefs on the subject were formed in contexts far different from those of today and often on the basis of abstract principle rather than of experience.
It is obvious to me, therefore, that I am debating this matter between two schools of thought, as it were, between two systems of theory, between two bodies of theoreticians. Whatever might be said for the very explicit theories expressed by members of the Australian Labour party, the Government also espouses a school of banking theory perhaps completely different from that held by the official Opposition in the Senate, but nevertheless a school of banking theory of its own. It is a school which, possibly, in broad terms says that all private banking is good, as against the school of the official Opposition which says, virtually, that private banking may be bad. Between the two schools, I find myself poised and taking my attitude on this legislation to-night.
The one thing I have to be careful about in the legislation, and why I bring to it that rather meticulous examination that Senator Wright has suggested it deserves, is the fact that these bills’, as presented, are no less the projection of banking theoreticians than were the proposals put forward in 1947, which were criticized so much by Senator Wright to-night and which were publicly acknowledged to be in pursuance of a school of theory on private banking in relation to government and central banking.
Therefore, as against what might be the completely a priori approach of the Government, I think it is my duty tonight to try to apply a pragmatic theory and assess the banking system of the future and the present banking system in the light of known experience. I shall examine the proposals of the Government in the light of the public statements of the responsible members of the Government not so much in this place on this occasion - few of them other than Senator Spooner who introduced the bill have had the opportunity to do so - but more particularly in another place where substantially the same speeches were made and where the arguments in support of the banking proposals were presented and debated for days and days, and even weeks on two occasions.
Therefore. I start my examination of the proposal by a reference to a speech delivered by the Treasurer in the House of Representatives on 24th October last year. I quoted the first part of the speech in my earlier remarks. He said -
We should perhaps remember that many past judgments and beliefs on the subject were formed in contexts very different from that of today and often on the basis of abstract principle rather than of experience. The Government, on the other hand, has had to judge the matter as a strictly practical, present day issue, and it has done so in the light of the very considerable experience we have now had.
It is easy to say that the approach of the Government in presenting these bills is going to be anything but abstract, is going to be anything but theoretical, is going to be completely practical and is going to be in the light of the experience that the Government has had. I should expect, if that is the approach, ample evidence to support it.
I repeat a statement which I made when I debated banking legislation in 1953 -
I do not think it is the province of this Parliament to interest itself in a legislative way in hypothetical situations and attempt to anticipate what might happen and to legislate in advance.
I think that is completely wrong. I think it is bad parliamentary practice and bad constitutional practice. If that type of thing goes on, one never knows where it will finish and we could be here interminably, with a government providing for all sorts of conceived situations, none of which might ever arise.
Later, I may try to make the point that I have stated - here I thank Senator Wright for his kindly reference - for the preeminence of Parliament and the fact that it should not be by-passed in particular circumstances which arose last year. The allegation is made by the Government that the official Opposition is attempting, has attempted in the past, and may attempt in the future, by purely political administrative action, to by-pass the standing legislation of the Parliament. If that were done, it would be a process with which I could not agree. If Parliament has legislated, then the word and spirit of the legislation must be carried out. But it is not a principle that I would deny on one side and accept on the other.
When I read this legislation, and when I hear the references to what might happen, I am led to the conclusion that the approach of the Government, knowing that there is no act of this Parliament that cannot be repealed, may be summed up in this way. If a banking structure is erected in this form, no matter what party might ultimately become the government, the form and the pattern will be there virtually indestructible, and because it is, practically indisturbable
If such an idea is behind the actions of the Government in this matter it is as reprehensible as any suggestion of contrary action to nationalize the banks against standing legislation and by administrative action. I would condemn the government that would create a structure of this character, with the intent that come what might, any future government would have something there that would virtually remain immutable and indestructible, whatever the view of the government might be, because of the fantastic administrative problems that would arise in trying to disentangle the pattern that had been created. I am afraid I see that implicit in the approach of many honorable senators on the Government side.
– Except by legislative approach.
– Exactly. As 1 say, the Government must recognize that no act in this Parliament cannot be repealed by a subsequent government unless it comes to something in the nature of an amendment to the Constitution, which can only be done by sanction of a referendum.
So, when I examine this matter, and at the risk of presenting items that have been presented by other speakers during this debate, and which may be presented in future, I feel it my duty to present the accumulated case for the present banking structure which is now to be disturbed, and then to examine whether, on the views expressed by Government spokesmen, within the Parliament, and on the views of Ministers, a case has been made to disturb it. I think that that would be a fair approach. 1 have said that I do not come from either school of theoreticians, or with any a priori approach. I am trying to approach the matter on a purely pragmatic basis, having in mind that the banks have no inherent natural rights. They are not one of the natural units of society, like the family. They must be assessed according to the practical terms under which they operate, and according to the contribution they make to society; they must be assessed like any other temporal institution, like any organization that falls into a pattern of monopoly and operates against the community. The community is entitled to step in, if necessary, and to destroy them. They must justify that they are not acting contrary to the public welfare and, in fact, that they are harmonizing with it. They are private trading enterprises. That is the pattern, and I am sure that that is the attitude that honorable senators, even on the Government side, would adopt in their approach to any private trading enterprise - that if it once commenced to operate contrary to the public interest, the power that resides in a State or Commonwealth Government under the Constitution should be exercised.
I now propose to refer to public statements that were made by Ministers of this Government, particularly during the passage of the 1953 banking legislation through the Parliament. I shall not occupy too much of the time of the Senate in doing so. First, I take some extracts from a speech by the Prime Minister (Mr. Menzies). The right honorable gentleman said -
I said before that the Commonwealth Trading Bank will be managed by a general manager who will work under the Governor of the Commonwealth Bank. I know that there are some people who believe quite strongly that the Governor of the Commonwealth Bank should be unrelated lo the affairs of the Commonwealth Trading Bank. The Government does not share that view. The Government believes that the most efficient management of this new banking organization will be achieved if we have a proper order of authority. The Governor of the Commonwealth Bank is a very important officer and he is chairman of the Commonwealth Bank Board.
When speaking during the debate on the Commonwealth Bank Bill in the same year, the Prime Minister said -
If the amendments proposed in this bill are considered in conjunction with the amendments to the succeeding measure, the Banking Bill 1953, they will, we believe, place beyond doubt the continued operation of the Australian banking system in fair and open competition within the framework of central bank policy. We believe that that policy and central bank authority are of great importance. I shall have something more to say about that matter in speaking on the other bill. The general trading activities that are now carried on by the Commonwealth Bank will be entrusted to a separate institution, which, in the matter of central bank control, will be placed in a position no more favorable and no less favorable than the private trading banks. If this is so, as we believe it to be, then we will have produced, in this measure and the other, a scheme which reconciles the proper formulation and administration of central banking policy with true, genuine competition between the banks which attend to what I shall call the retail side of banking.
I shall read further extracts from the speeches made on that occasion, but at this stage I advert to the proposition put forward by Senator Wright, that after alL, people change; that experience mellows them, re-directs their attention and changes their ideas. But when statements of the character of those to which I am referring are made it is not merely sufficient for individual people to say, “ We have changed “.
It is necessary for those who stand in particular relation to the things which are going to be altered to put up a case, which may be conclusive, cogent and compelling, before there is any warrant or justification for the things to be altered. The statements that have been made and to which I am referring are strong, firm and determined statements of adherence to a situation, and of belief in what it can provide.
– They are. of course, five years old.
– I know that.
– The world moves on.
– 1 know that, too. As I said before, I appreciate the point made by Senator Wright that the world moves on; but at least, those who are listening to the arguments presented are entitled to be told, and expect to be told so that they may discharge their responsibilities, where these charges have now occurred which warrant an alteration in the basic legislation and in the basic statutes.
The Minister for National Development (Senator Spooner), when speaking in the Senate in 1953, said -
For this reason we have given the most careful consideration to the structure of the Commonwealth Bank. Our purpose has been to obviate the possibility that the Commonwealth Bank, at the command of a socialist government, could place its own trading activities in a privileged position under the unfair use of its centra? banking powers. The conclusion which has emerged from this study is that the General Banking Division of the Commonwealth Bank should be separately incorporated as the Commonwealth Trading Bank of Australia, and that for the purposes of central bank control the new institution should, by force of law, be treated as though it were a private trading bank. Taken in conjunction with the amendments proposed to the Banking Act 1945, these changes in the structure of the Commonwealth Bank will, in our opinion, remove grounds for the fear that the private trading banks could be victimized at some time in the future.
I feel, Mr. Deputy President, that possibly that still remains as a valid statement of the position, and that the judgment expressed therein by the Minister - that it would remove the possibility of victimization - has been proved in fact and’ in the light of experience.
– Which Minister said that?
– The Minister for National Development. The Minister continued -
At the same time, the proposals will nol interfere with the trading activities now being conducted by the Commonwealth Bank.
The Minister stated, in the course of the debate on the Commonwealth Bank Bill of 1953 -
The Government subscribes to the view that was expressed by the Royal Commission on Monetary and Banking Systems, that the use of trading banking activities as an adjunct to central banking policy is in keeping with the Commonwealth Bank’s central bank functions and is to be approved.
I have heard arguments advanced here that because the report of the royal commission was made way back in the thirties-
– In 1936.
– It is 22 years since the royal commission made its report, but only five years ago the Minister made the statement I have just read. There is very little difference in fact between seventeen years and 22 years; certainly not sufficient to make acceptance of the report of the royal commission reasonably valid in 1953 and its abandonment to-day equally justifiable. At least, I think that that argument cannot be sustained.
The Minister for National Development, when speaking on the Commonwealth Bank Bill in 1953 also said-
I have already mentioned that, for central banking purposes, the Commonwealth Trading Bank will be dealt with in precisely the same way as the private trading banks. The provisions to give effect to this are contained in the Banking Bill.
I could go on quoting extracts. There are numerous other references in which the Minister definitely stated that the legislation, as then projected, undoubtedly would provide for fair competition between the banks and deal with victimization of the private trading banks. The Government then was acting in pursuance of recommendations of the Royal Commission on Monetary and Banking Systems. To-day, in debate at least, those arguments are abandoned.
We have, therefore, this spate of statements by Ministers both at the present time and, on another occasion, in 1953. We have the Royal Commission on Monetary and Banking Systems making a statement which then received acceptance, we have statements from the 1952 report of the Commonwealth Bank, and we have this controversial statement of Dr. Coombs, made two or three years ago. The report of the Commonwealth Bank of 1952 spoke with approbation of the system of integration of association which is now condemned and which, will be departed from. The report stated -
This concentration of activities under the control of the central bank is unique in central banking but affords strength to the central bank. Through the trading departments, the central bank has been able to maintain contact with business and to give its staff a wide and diversified banking training. Further, through the direct lending operations of these departments and through the Commonwealth Savings Bank the central bank is able to exercise a positive influence on the economic situation.
That was a statement made, not in 1936, but in 1952. All along the evidence has been building up of a certain situation and of a certain approach on this . important question of integration of association.
Then, of course, we have that important and significant statement of Dr. Coombs, which should be discussed and which must inevitably play a big part in this debate. It is all right for the Government to express an idea in legislation and for its supporters to defend it in their speeches, but we still look at the very firm and decisive opinion of Dr. Coombs. He said -
It is important to realize that, by the direct influence which the Commonwealth Bank exercises over the family of banks of which it is the head, it is able, within limits imposed by their commercial (and, in the case of the Commonwealth Trading Bank, competitive) character, to influence their policy so that they contribute directly to the achievement of the objectives of central bank policy. . . .
There can be little doubt that this direct link gives to the Commonwealth Bank a source of strength which can be of particular value in times when the economy is threatened with declining activity and employment.
That is a tremendously important and significant statement by the present Governor of the Commonwealth Bank, and one which was made comparatively recently. Surely, if the Government intends to ask the Parliament to disturb an association which receives such support and which obviously is so significant in the minds of the Governor of the bank and the existing board, which was a creation of the present Government, that statement of Dr. Coombs must be abandoned, qualified, or explained.
Surely this Parliament is not to be asked to disturb legislation when statements like that by those who have the particular responsibility of administering the great Commonwealth Bank structure, which is to be, to some extent, emasculated by this legislation, stand in the way. If the statement by Dr. Coombs is no longer valid and no longer expresses the viewpoint of the Commonwealth Bank, surely the voice of the bank must be heard. It might be suggested that it is not the usual practice for men in such positions to be directly heard in relation to legislation. But, if I speak with accuracy and with a correct resolution of what has happened in the past, there have been occasions on which Ministers, when presenting bills, have indicated that it was because of the view of a department or for reasons which a department had offered that certain remedial measures were being taken or certain adjustments were being made. But in this case, as far as my researches have been able to establish the point, no mention has been made in either chamber of the opinion of the Commonwealth Bank. In that statement of Dr. Coombs we have a tremendous body of evidence.
So far as I am asked to assess the position and so far as Senator Wright suggests that this bill should be read a second time and be considered in committee, I should expect much more than the inconclusive and, in my opinion, completely inadequate prima facie case which has been presented in the official uttterances of Ministers both here and in another place.
Leaving on one side that standing body of cogent opinion - the statements of Ministers themselves, the attitude of the Commonwealth Bank board and the views of the Governor of the bank - I turn to such evidence as is offered by the Government to destroy it. The suggestion has been made that there is a lack of confidence, a feeling of uncertainty, between the private banks and the central bank. Therefore, I have regard to what obviously is a paraphrase of what the trading banks themselves have presented to the Government. T refer to the following statement by the Treasurer in the House of Representatives last year when he was speaking to the Reserve Bank Bill -
Since there will no doubt be a great deal said about the attitude of the private banks, I think I should state explicitly the point of view they have put to the Government. It is this -
they recognise the need for a strong central bank and they say that, if it functions as a true central bank, they are prepared to accept its leadership;
they do not object to the competition of the Commonwealth Trading Bank as long as it is fair competition;
they do, however, consider the Trading
Bank to gain unfair advantages from its connexion with the central bank and they fear the use that might be made of a trading bank, so linked with the central bank, if a government hostile to their interests came to power.
I do not know whether the Parliament is completely entitled to take that kind of representation or persuasion into consideration. We could have representations from all kinds of bodies in the Commonwealth which might fear this or might fear that.
– Surely the test of the security of the institution is whether it can be undermined by governments of either persuasion.
– But the banks, of course, do not stand in a particular position in relation to that. There are many institutions and many other things that might be challenged or destroyed by either government action or private action. If the Parliament were to advert to the real, imaginary or exaggerated fears of sections of the community, I fail to see why we would not have repeated representations and not be called upon repeatedly to legislate in hypothetical situations. The Treasurer further said last year -
The private banks have made it plain that they do not criticize the way in which the central bank has used the powers and functions it has under present legislation. On the contrary, they have been at pains to commend the competency, integrity and impartiality of the central bank.
That is a magnificent tribute to the central bank. As Senator Wright said when he examined this problem - I was hoping he would have produced specific instances, facts, or charges - it was contra naturam, something that almost violated human nature, that a person should be competing in the one field and be subject to control quite unfairly against his competitors. But obviously, according to the statement of the private banks themselves, that has not happened.
Again, I do not know whether we can take into account what might be the completely unreal fears of the private banks. I know Senator Wright will suggest that, in the light of history, those fears may be real, but that could go for so many other things that would demand the legislative attention of this Parliament. The Treasurer went on to say -
They say that their complaint is simply and solely against the banking legislation as it stands, and that their fears relate wholly to the wrong uses that might be made of that legislation.
I feel that no government can legislate on that basis. Neither the Government nor the private banks have been able to bring forward, apparently in the least degree, any example of violation of trust or of distortion of the relationship which the banking legislation of 1945 and 1953 attempted to create. In those circumstances, can we take cognisance of this kind of approach and legislate as the Parliament is now asked to legislate?
When we examine the case advanced by the Government, we find that it constantly falls down on this question of fear - on the question of hypotheses. No facts have been produced, and no charges have been levelled against the central bank. If there were levelled against the central bank a charge which was completely substantiated, and which proved quite conclusivelythat the existing legislation had not worked in either word or spirit as intended, I am sure that, irrespective of party differences, the Parliament would immediately legislate to rectify the situation. I have no doubt about that. To ask a Parliament to do what is now being suggested is, in some sense, a reflection on the administration of the Commonwealth Bank Board and the Government. It indicates that in the hands of another government the members of the board would be parties, not merely to the implementation of a policy in which they may or may not concur, but to a violation of trust and a breach of confidence. That is an unfortunate implication which, I am sure, is not intended by the Minister but which, nevertheless, may be read into the reply of the private banks when compared with the authority and responsible position of trust of the Governor of the Commonwealth Bank.
– Just as governments may change, so the constitution of the board may be changed.
– That may be true, too. I turn now to a further statement by Sir Arthur Fadden which reads -
Although they emphasize they have no criticism of the manner in which the central bank has exercised its powers in the past, they are most concerned about the scope they see in the provisions for unfair attack on them.
If only I could obtain some evidence or facts to show that the existing system will not work in the future because it has not worked in the past, that trust cannot be expected in the future because it has been violated in the past, then I, and I am sure members of this Parliament, would have completely different views.
I could continue with these citations one after the other, each accentuating the same position, each putting the same point of view and each providing a complete inadequacy of evidence, to my mind, as to the necessity for this legislation.
– But the evidence is contained in the bills themselves.
– The evidence is not contained in the bills themselves. One must first establish, as a matter of logic, that the existing system is not operating fairly and effectively. Whatever may be the allegations or hypotheses that it is not, there is no evidence to that effect, and no person, even one most intimately connected with the measures or even one most unfair, has dared to allege that any action by anyone in the past has amounted to a violation of the trust contemplated in the existing legislation. The furthest anyone can go is to suggest that the possibilities are present. But the possibilities have been present since 1953.
Senator McManus made the point that the Government could have rectified this position at some time since 1953 with complete confidence as to the successful passage of the bills. If that is so, I think the Government deserves the most severe criticism from those who see the danger of changing the existing set-up.
– On the other hand, the honorable senator now has the opportunity to share in the honours.
– T do not say that position exists. I say merely that the evidence does not convince me at all. In a case where Ministers have committed themselves to a system, I would expect to find the most cogent and compelling evidence to warrant a departure from that system, but there is virtually a complete absence of evidence from any source to show the necessity for £. departure.
I shall quote now from a statement by the Minister for Primary Industry (Mr. McMahon) -
I am not for one moment saying that competition from the Commonwealth Bank has been too severe during the last seven or eight years, but there have been reasons why the banks might have had fears.
Can honorable senators imagine anything more uncertain than that? Here we have a double hypothesis. It is extraordinary situation that the Parliament should be asked to legislate on hypotheses of that nature.
I could continue giving honorable senators example after example. Sir Arthur Fadden, when introducing the Reserve Bank Bill 1957, stated-
They say that their complaint is simply and solely against the banking legislation as it stands, and that their fears relate wholly to the wrong uses that might be made of that legislation.
No evidence has been offered by any responsible Minister in either chamber that would convince me that a change should be made. Such evidence should be produced if it is available.
– The honorable senator simply picks out sentences and quotes them out of their context.
– In fairness to myself I must reply that that is not a charge that could be reasonably levelled against me. That is not my intention now and it has never been my practice in the past. I do not intend to make a departure from my practice in this case. I come now to the statement made by Dr. Coombs. To any trained man it is obvious that the statement, as it stands, is an insuperable obstacle to the successful presentation of the Government’s case. It was obvious to a man in another place whom I might have expected to realize its complete significance, the honorable member for Balaclava (Mr. Joske). He realized the significance of that statement and in a brave attempt, as Senator Wright made a brave attempt to-night, he set out to explain or explain away the legislation in these terms -
His reasons expressed in 1954 for maintaining the old set-up - because it is some years ago since the statement which has been quoted was made by him - are reasons partly of sentiment - we have always had sentiment in this country - and partly of minor convenience. I do not think that sentiment can be allowed to stand in the way when a system is completely outmoded.
Could the statement by the Governor of the Commonwealth Bank regarding the important functions of the banking structure, in any conceivable circumstances be explained or explained away or dismissed as sentiment? Apart from Senator Wright, the honorable member for Balaclava made the only attempt, in the course of these debates, to explain it away. Only the Commonwealth Bank Board or the Governor himself could say whether that remains the considered opinion of that important functionary - a most significant functionary - in relation to the bills now before the chamber.
I move on to other matters. I shall deal now with the question whether this legislation in fact will effect what it attempts to effect. Does the legislation in fact achieve within the structure of the Commonwealth Banking Corporation that degree of separation which the espousers of the legislation claim for it? Ministers here and in another place have said that within the Commonwealth Banking Corporation there will be three institutions, each under a Commonwealth Banking Corporation Board, each with an executive committee under a managing director, and each with a general manager. Ministers said that those bodies would be completely independent and separate, highly competitive, building up their own loyalties and traditions. I mention this matter, not because the objectives in the legislation may not be achieved, but because of the query raised by Senator McManus as to whether the intention of the Government, so far at it might lie against proposed nationalization of banking, has in fact been achieved in this legislation or, on the contrary, whether the possibility exists of it being accentuated. In other words, have these bills been produced and are they being defended on grounds which are not tenable while behind them lurks a body of men and a banking theory, justifiable to those who espouse it. but nevertheless not in accordance with the real purpose and intent of the legislation. Those are matters which I, in my position, must consider. I quote again from Sir Arthur Fadden -
These arrangements are designed to achieve a balancing of interests and to ensure that, while working together, each institution will be able to pursue its own well marked purposes without the risk of becoming merged with or being dominated by another.
That does not operate as far as I assess the Commonwealth Banks Bill. There is to be a common board at the top. There will be three executive committees. The Secretary to the Treasury will be precluded from serving on two of them. There are to be eight ordinary members of the board, of whom four will sit on each executive committee. There is not one on which, by sheer mathematical calculation, you can avoid overlapping - one man sitting on at least two executive committees. Therefore, if the bill purports to effect a complete cleavage and separation in the very machinery that it is to handle, the economy of the banks will defeat this very purpose.
– Of course it will! I admit there will not be a complete separation, and a building up of loyalty to one institution when there will be a member common to the executive committees of two different banks. Honorable senators may say that this is a small point. I think it is, but so far as it is claimed that this legislation will achieve certain things, matters of that nature show that the intention is not being carried out.
– Only the separation of the Reserve Bank from the Trading Bank?
– I am speaking of the separation of institutions within the Banking Corporation itself. That is the reference. Then there is the question of overlapping and integration of staff. Here, the approach is extraordinarily practical, but indicates that the Government could be almost appalled at the consequences of its own legislative action. In a complete separation, such as we have been talking about, the staff arrangements would be tremendous. It is foolish to claim a separation of functions and of activities and of conflicts in business when, in fact, there will be virtually complete overlapping from the executive committees down to the lowest clerk.
– Nobody has ever suggested that there will be complete separation between the trading bank, the savings bank and the development bank.
– Sir Arthur Fadden stated -
These arrangements are designed to achieve a balancing of interests and to ensure that, while working together, each institution will be able to pursue its own well-marked purposes without the risk of becoming merged with or being dominated by another.
That is a reference, complete as 1 understand it, to the three institutions within the Commonwealth Banking Corporation and not to the severance of those three institutions from the central bank.
I turn now to the question of hire purchase, which has been magnificently dealt with by Senator McManus. I agree with Senator Wright’s observation on this subject. I shall, however, place certain considerations before the Senate. I think that this Parliament may have been careless or recreant in 1953. In the 1945 act, if I read it correctly, and if section 28 is to be given the meaning which I am prepared to give it, there was a prohibition on the private banks. That section provides -
A bank specified in Part I. of the First Schedule shall not, except with the consent in writing of the Commonwealth Bank, purchase or subscribe to -
securities of the Commonwealth or of a State, or of any authority of the Commonwealth or of a State;
securities of any local governing body in Australia; or
securities listed on a Stock Exchange in Australia.
I presume that while that was originally a war-time measure, it was introduced for the purpose of preventing the private banks from purchasing unduly on the bond market, and things of that nature. While that section stood, it precluded the private banks from floating hire purchase organizations or from buying into hire purchase organizations listed on a stock exchange. I think that that would be a fair meaning to give to that section. When the Government proposed to delete that section in 1953, it was adverted to by the Prime Minister, and I think that Senator Spooner adverted to it equally. In another reference, the honorable senator made this com ment which, I think, is completely accurate and adequately sums up the position -
My reply to that criticism is that it portrays a lack of knowledge of the fundamental principles of banking practice. Alternatively, it is criticism made with tongue in cheek. The trading activities of a bank are determined, not by its capital resources, but by the level of its deposits.
I think that was a completely valid statement. The point I am making is that while the capital structure of a bank does not determine the level of its activities, it obviously determines the nature of its activities and whether in the circumstances which have occurred it may proceed with and persist in some activity outside the banking structure. I feel that the full significance of section 28 was not manifest to anybody in the Parliament at the time it was deleted. I think that the citation from Senator Spooner, speaking inanother connexion, indicates that he himself was not adverting to the opportunity that may be seized by those who had their eye on it when section 28 was deleted. I feel, therefore, that while this Parliament may have winked its eye, slept and nodded during the passage of the amending legislation in 1953, the banks took full opportunity and full advantage of the deletion of that section. That, possibly, was the gate which opened to enable them to purchase securities that were listed on a stock exchange and to float other ventures. I am only suggesting that, and I do not want particularly to debate it because my time is limited. But I do want to say that the grave danger, the grave menace, of the banks operating in the field of hire purchase is that they are creating a definite empire within an empire, not subject to the control which this Parliament has insisted shall be exercised over the banking system and which it would, perhaps, like to exercise over that part of the banking system if it had the constitutional power to do so.
Let us not delude ourselves that the hirepurchase companies are confining their commercial activities strictly to the type of transaction that is known as hire purchase. To-day, the hire-purchase companies and some of the credit corporations are operating purely as bankers. They are lending money for purposes quite unrelated to hire purchase, as the transaction is termed in law and by commercial practice. I had an example the other day of a person being offered financial accommodation up to £60,000 by one of the credit corporations.
– At what rate of interest?
– I do not know, but the rate would certainly be high. The point I am making is that at the moment we have the Commonwealth banks, and the private banks; and we have also this new type of financial institution, subject to no control, able to innate the economy, able to determine the direction of credit as it likes, able to snap its fingers at this Parliament and at other parliaments, and subject only to control at the instance of State parliaments which may, at the other end of the ladder, determine and regulate its interest rates.
– What percentage of hire-purchase money do you think comes directly from the banks?
– 1 do not think it is a question of quantum. There are operating under licence financial institutions which arc virtually in the nature of monopolies. Not everybody can get a banking licence. Neither I, nor any other honorable senator, could undertake the business of banking without complying with the regulations and statutory requirements.
– Are you saying that these hire-purchase companies are unlicensed bankers?
– Exactly; and we have the bankers, just like a licensed victualler, who operates with a monopoly licence in a geographical area; the banks operate on a type of monopoly licence within a certain commercial sphere. The banks have that privilege. The opportunity is not generally available, and it is now only rarely given to others. 1 think it is required of them that they shall primarily exercise and discharge the business of banking only. Unfortunately, they are so lacking in a sense of responsibility in terms of their authority that they have moved out into a completely new field which is not subject to the overall national control of credit. Conceivably, as this colossus grows bigger and bigger, it could be a tremendous danger to the whole community. 1 come now to the Development Bank. A consideration of statutory reserve deposits provokes tremendous conflict and variation of opinion. It is a highly technical subject and no one can say that any one system - the ratio system, the special accounts system or the statutory reserve system - is immeasurably better than any other. Experts tell us that, whichever system is adopted, it should vary from place to place; that whether you have a bank rate, or free money, operating, and a thousand and one other considerations, will determine which side you will come down on in fixing upon a system of credit control for the private banks.
I leave that for the moment and say, in relation to the Development Bank, that here the Government has conceived something of significance and importance. However, it is completely unfair to present it to this chamber and say, “ If you want the Development Bank, you will have to accept the rest of the legislation also “. During the debate on the Address-in-Reply I took the opportunity to put my views on the matter so that the Minister, or the Government, might indicate, in reply to the question that I then asked, whether the Development Bank was in law, and in commercial and banking practice, inseparable from the rest of the system envisaged. In asking whether it could be severed I hoped that the Minister might, in the course of his second-reading speech, have adverted to that aspect. My question was asked in good faith, but the Minister did not reply to it. So far as I am able to say, there is nothing at all in the principle of the Development Bank, in the means by which its capital structure would be created, in the powers that would devolve upon it, or in the limitations imposed by the legislation, that could not be given either to the existing Industrial Finance Department of the Commonwealth Bank or - if that were either impracticable or undesirable - by way of a special bill creating a particular institution for that purpose.
– The honorable senator can obtain the information he seeks at the committee stage.
– It is all very well for Senator Wright to say that, but at the moment I am dealing with the unfair alternative presented by the Government. The
Development Bank is an excellent idea, but apparently we cannot accept it without also accepting the rest of the legislation. No one can fairly say that that kind of proposition ought to be put to the Parliament. The same sort of proposal was criticized when it was made in relation to constitutional amendments which were suggested here many years ago. Each was acceptable only if the rest were also acceptable. Conversely, if any were not acceptable all must be rejected. That was considered quite unfair, and I put the present proposal in the same category.
There is talk - possibly not without some basis in fact - within the Parliament to the effect that the Australian Country party, though somewhat reluctant to agree to the introduction of this legislation, was nevertheless prepared to support it provided - and it is not a kind of bargain that I condemn because if it has force in one direction it has a compensating force in the other - the Development Bank concept, which extended to rural industry advantages now extended to small businesses in secondary industry, was presented to the Parliament and accepted by it. Whatever the fate of these bills may be, the members of the Australian Country party cannot escape their responsibility. If this particular piece of legislation goes no further it will be their duty to see that a similar provision is brought in by way of amendment to the existing banking legislation, or by the creation of a special piece of legislation. They cannot escape their responsibility merely because I, or any other honorable senator, feel that in the balance of advantage we cannot accept the Development Bank and, at the same time, accept the other proposals also.
On that note I close. There is a vast and compelling body of opinion against these bills, and for the banking structure in its present form. The Government has not to my satisfaction, or to the satisfaction of the Parliament, discharged the onus of establishing that the position has materially altered, or that the fears which it expresses are other than groundless and irrational. It has presented the Development Bank proposal in an objectionable way. Moreover, the banks, in the general context of the national economy, have been unable to complain of victimization under present legislation. For all these reasons, I oppose the legislation.
– Senator Byrne’s arguments seem to me to amount to the fact that, because he has not been completely satisfied by the speeches of my colleagues, and by information given outside of the measure - that these bills are completely necessary and in all ways an improvement - he will vote against them at the second-reading stage. Senator Wright asked the honorable senator, and other Opposition senators, to allow the bills to go into the committee stage. I want to add my voice to his, because I think that it is a perfectly reasonable proposition. Some of the remarks made by the honorable senators opposite would lead one to believe that they had not even read the bills before us. The answers to many of their arguments are to be found in the legislation itself. How can anyone, as honorable senators opposite have attempted to do, dismiss the measures in a brief general statement. I appeal to Senator Byrne to consider the matter carefully before he votes against the second reading. The Government, as always, has said that it has* prepared these bills with great care and does not want them to be altered. However, bills do not always go forward in their original form. Those before us have already been amended once in another place. It is quite possible that, in committee, Senator Byrne or Senator McManus - or any other honorable senator - might put forward a reasoned argument for some slight alteration - though not the complete emasculation of the bills - which would be acceptable.
– You would have to refer it to the banks first!
– I will deal with that sort of interjection later. People who have no argument to offer - and there are a number on the other side of the chamber - are always ready to make insinuations. I wish, first, to deal with the remarks of Senator McManus and Senator Byrne, who spoke with some degree of moderation and not too much bias. Certainly they were not guilty of making foul insinuations, but they were both a little over-imaginative when referring to the relationship between hire purchase and these bills. In doing that they were drawing a herring across the trail. Hire purchase cannot be curbed by the passage of any one measure. There are, perhaps, certain things that a federal government can do, but in the main it is a State matter. The best thing that we could do is to set an example, and if it is true, as we have heard in the polemics against these bills, that the private banks are departing from traditional and proper custom and making hire purchase one of their main functions rather than a sideline, it must also be true that they are leaving to the Commonwealth Bank part of the field which they formerly occupied. That can only harm the private banking system.
There is another point I wish to urge in opposition to Senator Byrne’s contention. He, as does every honorable senator, knows perfectly well that banking is a very delicate matter and that it would be unwise, indeed irresponsible, for any Government spokesman to tell the public - which means to tell the world - that the Government was gravely dissatisfied with the existing banking structure, lt would be criminal for the Government to say that it had no confidence in the officers that it had allowed to govern the system. When I say to Senator Byrne that the evidence is here and that we should consider it, I say that with all sincerity and with complete knowledge. Surprising as it may seem, I have read these bills. The dog-eared condition in which you see them is evidence that someone has read them and re-read them. If you read the clauses carefully, you will find that many of the arguments that have been advanced from the other side of the Senate have been answered already.
Somebody said that we consulted only the private bankers. That is not true. These bills - particularly the Banking Bill and the Banking (Transitional Provisions) Bill - show that the bank officers’ associations certainly have been consulted - the officers’ associations of both the Commonwealth Bank and the private banks. Why should we not consult the private bankers? Honorable senators opposite would think it infamous to introduce a bill which concerned trade unions without having obtained the opinions of trade unionists. That, of course, should be done. It has always been the custom for a responsible government to hear the opinions of people whose interests are affected. But to go from there to the vulgar and untrue sneers that it is because of constant pressure, and only because of that, from the private banks that these bills have been brought forward is to move into the realm of fiction. 1 know that there have been differences of opinion on this side. I know that already two attempts have been made to carry out what were called the pledges of 1949. Both of those attempts were made in good faith. The Government had two bills passed, one in 1951, after the double dissolution, and another in 1953. Some of us accepted those bills as instalments. Every honorable senator on this side knows that we accepted them as instalments. I am one of those who has never varied in his opinion that the central bank should be completely distinct from the Commonwealth Trading Bank, but I have not been widely excited about it. 1 have not been urging the Government forward into precipitate action.
I have considered carefully the measures that have been brought forward and I understand the reasons for the delay. Until we received the bills I do not think many of us realized the colossal task that faced the Government. When the Government did determine to bring in the bills, it made a thorough job of them. I know that for months consultations were going on, not only with the private bankers but also with people representing the Commonwealth public banking system and with people representing every point of view. I think the number of consultations with the private bankers was small. These bills are masterpieces of draftsmanship. I have gone through them and I have discussed them with lawyers, with my colleagues and with the draftsmen themselves. Many of the opinions I formed at first as to the worth and validity of particular clauses were altered after those discussions. All that is proof of the fact that the Senate has no right to reject something of this nature, against which there is a completely phoney case, and also a respectable case, such as we have just heard. The respectable case simply amounts to the contention that the bills may not be necessary because the Commonwealth Bank is functioning reasonably well as it is. It is functioning reasonably well. But the Commonwealth Bank is something which has grown. In the development and growth of the Commonwealth Bank, something has been done by all parties in this Parliament, something has been done by legislation and a great deal has been done by the very growth of the institution itself.
Let me briefly trace the history of the bank from the beginning. We are often told by the Opposition that the Commonwealth Bank is the special child of Labour - that it is Labour’s creation and that nobody else had anything to do with it. That fiction or myth might win over uninformed electors, but we know perfectly well that the bank that the Fisher Government founded was just an ordinary trading bank. It was not intended to be a central bank even by the Treasurer who established it, the draftsmen who framed the legislation, or the Parliament which passed that legislation. It was an ordinary trading bank. It lacked the elementary function of a central bank. It could not control the note issue. Of course, the control of the note issue in those days, when gold currency was still regarded as the normal thing, was not quite what it is to-day, but that lack of control of the note issue was a fundamental weakness if you wanted to consider the Commonwealth Bank as a central bank. The great work that Mr. King O’Malley did was to insist that it should be a bank. He was not a socialist. He was one of the shrewdest businessmen that ever sat in either of these chambers. 1 have been told by a former officer of the Senate that he sold insurance to everybody in the two Houses, from the President of the Senate to the messenger boys. We had small boys as messengers in those days.
Mr. King O’Malley’s ideas about banking were formed in a totally different climate of opinion from that which we have to-day, in a totally different business atmosphere. There is some dispute as to whether he was a Canadian or an American. His own story is that he was born in Canada about 20 yards from the American frontier, but he grew up in the United States. There were some unkind people who constantly suggested he was not a naturalized British subject and, therefore, had no right to sit in this Parliament. If that is true, it is all of a piece with some of his other marvellous escapades. There was no one who got things done better than he when he wanted them done. He grew up in one of the worst banking systems that ever existed. The old banking system of America during the last century, right up to the time when Woodrow Wilson reformed it with his great series of bills - including one to set up a reserve bank similar to this one - was one of the worst systems in the world. Before that time the American system - if you can call it a system - was a chaos of small competing banks, some of them without capital, some of them without credit, and most of them without branches. Almost every small town had its bank. When there was a great economic blizzard - the United States has had many of them - bank after bank failed. It was in that atmosphere that Mr. King O’Malley formed his ideas. He hated what he called the private banks. He wanted a government bank because he thought that there, and there only, could you get security. Remember, too, that the old original Bank of the United States was one of the earliest institutions founded by that country. It was a great institution. Democrats, men with the opinions of O’Malley, looked back to it.
Then came the great banker, Sir Denison Miller. He developed the Commonwealth Bank. Then came the World War of 1914-18 and, because it was a government bank, the Commonwealth Bank was compelled to take on new functions. It became the mainstay of the Government and was forced into the position of being, in some sense, looked on as a leading bank. But the man who began the process of making it a central bank was Sir Earle Page. The development of the bank owes a great deal to him.
The PRESIDENT (Senator the Hon. Sir Alister McMullin). - Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -
That the Senate do now adjourn.
– I desire to direct the attention of the Senate to the proposed action of the Department of the Interior in a certain matter. I feel that I would not discharge my duty to the people of the area concerned if I did not say something on the matter. It is the action which the Department of the Interior proposes to take in connexion with the disposal of what was formerly a migrant centre in the Cowra district. The area was first taken up during the war for military purposes. When it was no longer required for a military camp, it was handed over to the immigration authorities for use as a migrant centre. When it was no longer required for that purpose, it was handed back to the Department of the Interior.
The total area involved is 450 acres. The land was originally part of a property owned toy a Mr. Emery. While it was occupied as a military camp and later as a migrant centre, the Commonwealth Government expended over £200,000 on constructing roads, subdividing the area, and supplying water, sewerage, electric light and telephonic facilities. The Department of the Interior now proposes to hand the whole area back to the original landowner, and places no value on those improvements which cost the taxpayers that considerable sum of money. The Municipal Council of Cowra, which provided the water and electricity for the area, has suggested to the Department of the Interior that it be allowed to purchase this land at a price to be agreed upon and to subdivide it into farmlets of from five to ten acres. All the improvements necessary for that purpose are already installed. For some reason which I am unable to understand, the department has refused the council’s request. According to the information which I have, the Minister has not yet been able to give the council one valid reason for objecting to the proposal, although he has offered to hand over to the council an area of approximately 150 acres. The council has given this matter most mature consideration and argues that as the area is sewered and fully reticulated with water and electricity, its greatest value lies in rural subdivision rather than a reversion to grazing.
The department’s proposed action is creating a most adverse reaction to the Government in the area. The honorable member for Calare (Mr. Howse), in whose electorate this land lies, has had the matter in hand for some time but has been unable to convince the Minister for the Interior <Mr. Fairhall) that the council’s proposal is reasonable and just.
This matter has been examined by every organization that has any interest in the district and all are unanimous that the council’s proposal should be accepted by the department. The federal head of the Liberal party has approved of it, the State head of the Liberal party has approved of it, and the regional conference of the party held recently at Orange also gave its approval to the proposal. Despite all this, I understand that the Minister for the Interior is determined to hand the area back to the original owner.
– Is that an area of 150 acres?
– The council wants the whole area of 450 acres. It proposes sub dividing the 450 acres into farmlets of from 5 to 10 acres.
– What is the Minister’s proposal?
– To hand over 150 acres to the council. The council wants the whole 450 acres. This would not have any effect at all on the original owner’s livelihood. The area in question is only part of a property in the Cowra district which this man owns, but upon which he does not live. His main source of livelihood is a property not situated in the district. I repeat that the people of the Cowra area are hostile towards the Government. They feel that the Government is not standing up to its policy of rural development if it allows this land to revert to the original owner. The residents of the district consider that this property should be divided into farmlets instead of wasting an expenditure of approximately £200,000.
I mention this matter for I fear that if the council’s proposal is not accepted the reaction to the Government in the area will be hostile and a mistake that we will probably regret in the very near future will be made.
– I have listened to the honorable senator with very great interest because I do not think that I have ever before heard him speak on the adjournment in all the time I have been a member of the Senate. For that reason, I feel that he must be deeply interested indeed in this proposal. I know nothing about it, but I have been long enough in politics to know that one cannot judge these matters merely on what one hears. I shall certainly ask the Minister for the Interior to let me know the facts relating to the matter. Sometimes a case which at first glance appears to be good is not quite so good once the facts are known.
– You will not take Senator Reid’s word?
– I do not say that, but I do say that I like to hear both sides of the case before giving judgment. I shall certainly bring to the Minister’s notice every word the honorable senator has uttered, and I shall ask the Minister to let me have the facts of the case.
Question resolved in the affirmative.
Senate adjourned at 10.38 p.m.
Cite as: Australia, Senate, Debates, 25 March 1958, viewed 22 October 2017, <http://historichansard.net/senate/1958/19580325_senate_22_s12/>.