9th Parliament · 2nd Session
Mr. Speaker (Rt. Hon. W. A. Watt) took the chair at 3 p.m., and read prayers.
Reply to Resolution op Sympathy.
– I have received a message from the members of the family of the late Senator Barker, expressing their grateful thanks to the members of the House of Representatives for the very kind expressions of sympathy contained in the resolution of the House on the occasion of the death of their father.
Assent to the following bills reported : -
Supply Bill (No. 1) 1924-25.
MainRoads Development Bill
National Debt Sinking Fund Bill 1924.
– Is the Minister for Trade and Customs aware that there is at present a very strong demand for Australian maize in New Zealand, but that in consequence of a regulation of the Trade and Customs Department requiring the use of new bags for its export, there is some difficulty in meeting the New Zealand demand? Will the Minister, in the circumstances, permit second-handbags, if clean, to be used for thepurpose of exporting maize?
– I had an interview with the exporters concerned yesterday afternoon in Sydney, and, subject to the approval of the New Zealand Government, with which we are communicating by cable, it is proposed to allow onceused flour-bags to be filled with maize for export for fodder only. The adoption of this course will, I think, very greatly alleviate the position.
– I ask the Prime Minister whether the Government have yet arrived at a decision as to the continuance of the export bounty on frozen meat and on live cattle for the coming season ?
– I think the Government will be in a position to make an announcement on this subject to-morrow or the next day.
– I wish, sir, to ask a question of yourself. I read in the Commonwealth Gazette of the 19th June of this year the following statement: -
Appointment. - AlanGeorge Turner to be Secretary to the Speaker, Junior Clerk, on probation, as from 2nd June, 1924, with salary at £100 per annum.
I desire to know whether that appointment has been made through the Public Service Board, whether the necessary examination has been passed by the person appointed, and whether the amount of salary stated is in keeping with such a responsible position as that of Secretary to the Speaker?
– The appointment referred to has been regularly made. I shall have a memorandum prepared by the Clerk of the House of Representatives, and give it to the House for the information of honorable members generally.
– Has the Treasurer any information, beyond what has already been published in the daily press, to give to the House in respect of the meeting of. the Federal Loan Council recently in connexion with the flotation of new loans? People are anxious to know what is in the mind of the honorable gentleman in regard to this matter.
– A full statement of what transpired at the Federal Loan Council’s meeting was published in the press on Saturday and Monday, and that the honorable member has doubtless read. The present position is that the various treasurers have left to consult their cabinets, and will meet again on the 11th July.
– I ask (the Prime Minister what has been the decision of the Government with regard to the recommendations agreed to by the Goldmining conference, and submitted to the Commonwealth Treasurer some months ago?
– No decision has been arrived at.
– Is the Prime Minister in a position to answer the representations of the deputation that waited upon him some time ago in connexion with claims for skin wool ? Fellmongers in my electorate are anxious to know what the Government intend to do in the matter.
– It is no doubt within the knowledge of the honorable member that an application has been made by the trustee to the court to ascertain what action he should take with regard to the amount of money set aside to meet any claim by persons interested in skin wool. The Government is now trying to ascertain the exact significance of the application by the trustee. Until that is made clear the Government does not propose to come to any decision, or to make any statement on the matter.
Claim for Compensation
– I ask the Minister for Defence whether he has made himself familiar with the terms of a claim by the dependants of the late Seaman Ritchie, who, on board the Brisbane, met his death in tragic circumstances some months ago at the hands of a fellowseaman. If the Minister has particulars of the claimfor compensation at hand, will he be good enough to say what, if anything, has been done in the matter?
– The seaman referred to was not a married man, and under the regulations no compensation is payable in connexion with his death. But in the special circumstances of this case I am having inquiries made to ascertain whether there are any dependants or persons partially dependent on the late seaman in order that the matter may be further looked into.
– As the official file discloses that the Treasurer would have paid to the Central Wool Committee, from the Treasurer’s advance, the whole of the £275,393, will he now give an assurance that the balance of £137,696 will not be paid before the matter is submitted for parliamentary appropriation ?
– I understand that the House has already been informed that the matter will be submitted for parliamentary approval.
– Last Friday the Prime Minister placed on the table of the library the official correspondence in connexion with the claim by Bawra and the payment thereon by the Commonwealth Government. Four important documents are missing from that file. I would direct the attention of the Prime
Minister to a letter dated the 4th November, 1920, from Sir John Higgins to the then Prime Minister (Mr. Hughes), in which it is stated -
I forward herewith two copies of the following documents: -
Debit note (original), 4/11/20.
Summarized statements showing for the various dates of payment the total cost to the Imperial Government, the net realization, the amount of profit, and Australian Wool -growers’ proportion of same, with totals.
Statements giving original invoice particulars of the wool, together with London auction values.
Statement showing quotations in the United Kingdom for wool of similar types and yields to that purchased of the Colonial Combing Company during the wool season 1919-1920.
Those documents are missing from the file, andI ask the Prime Minister if he will make them available. They are very valuable, as they form the basis of the claim on which payment was made.
– I am not aware that any documents are missing from the file, but I shall have inquiries made to ascertain the facts.
– Some time ago in this House I made serious charges respecting the Repatriation Commission. Subsequently, the Treasurer was good enough to inform me that I would be furnished with a departmental reply to those charges. As I have not received such a reply, am I to infer that there is no answer to my statements ?
– The departmental file is at present on the table of the library.
– In view of the cabled information in this morning’s press, that titles are being hawked round and sold in Great Britain - knighthoods for £20,000, and peerages for £100,000- will the Prime Minister give this House an early opportunity to discuss the motion on the notice-paper, standing in the name of the honorable member for Ballarat (Mr. McGrath)-
That, in the opinion of this House, the granting of titles is contrary to the sentiment of the citizens of Australia.
– I remind the honorable gentleman that the cabled information to which he refers was a report of evidence . given in a case, and that it has not been stated that it is true. So far as Government business will permit, an opportunity will be given to discuss the motion referred to.
asked the Minister for Defence, upon notice -
Will he furnish a list showing the items of goods and articles imported from abroad by the Navy Department since 1st January, 1923. and the cost of same?
– The following naval stores have been ordered from abroad for His Majesty’s Australian Naval Service since 1st January, 1923: -
Appointments - Increments
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
Mr.F. McDONALD asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
Cost of Site
– With regard to the press report of a statement alleged to be made by the honorable member for Melbourne (Dr. Maloney) that he had been informed by the trustees of the Turn Verein that they had received only £8,500 for their property, whereas a reply by me to a question by the honorable member indicated that the cost of acquisition of the building by the Commonwealth Government was £9,516 16s. 5d., the following particulars have been obtained from the Home and Territories Department : -
– On the 25th June, the honorable member for Lilley (Mr. Mackay) asked -
I am now able to furnish the desired information as follows: -
– On the 19th June, the honorable member for Denison (Mr. O’Keefe) asked the following questions : -
I am now able to furnish the following information : - 1. (a) £116,812,029. The transactions in respect of investments of the general trust funds have been omitted, as these are not borrowings from the public. (Z>) and (c) The figures are not available.
– On the 26th June, the honorable member for Hindmarsh (Mr. Makin) requested that copies of the Commonwealth Gazette should be forwarded to all honorable members. I promised to look into the matter with a view to complying with the honorable member’s request, if possible. Arrangements have since been made for the supply of additional copies to the Parliamentary Library, and to the various party rooms. In addition, any member who so desires may have a copy forwarded to him direct by making application “ to the Government Printer.
Medical Treatment of Home .Service Forces.
– On the 26th June, the honorable member for Angas (Mr. Gabb) asked the following questions: -
Assuming that the questions refer to personnel enlisted after the armistice, in addition to the peace establishment for home service for duties in connexion with demobilization, the following are the answers : -
The following papers were- presented . -
Audit Act - Transfers of Amounts approved by the1 Governor-General in Council: - . Financial year 1923-24 - Dated 25thi June, 1924..
Lands Acquisition. Act - Land acquired at Coff’s Harbour, New South Wales - For Postal purposes.
Debate resinned’ from 2’7th June (vide page 1’729-), on- motion by Dr. EARLE Page-
That the bill be now read a second time.
Upon which Mr.. CHARLTON had moved, by way of amendment -
That all the words after the word “ That “ be omitted, with a view to the insertion of the following words in, place thereof: - “in order to preserve tile Commonwealth Bank as a national’ institution, and to extend its operations for the purpose of controlling credit and exchange, it is desirable that financial experts, to he fully employed in the service of the bank, should he appointed’ to its management, the proposal]! of the Government tat appoint persons representing squatting and. commercial interests, who axe diametrically opposed to national banking, being designed more in the interests of private financial institutions than of the- people’s bank.”
.- The introduction of this amending legislation synchronizes with, certain advances now being made by financial magnates in other continents,, particularly Europe, concerning which I shall speak later, because they have a direct relation to +Li.s bill. I recollect that you, Mr. Speaker,, in the course of a learned dissertation upon financial questions in 1922, re-  minded those who were privileged to hear you on that occasion that “ finance i3 government and government is finance.” Therefore^ the legislation now before the House is of the utmost gravity and importance,, because it may be rightly regarded as directly affecting the fundamentals of government. I view with serious concern the proposals which the Government has- submitted. Last year members of the Opposition warned the people of the possibility of the present Government seeking to destroy the eitectiveness of the Commonwealth Bank. “We reasoned that such action was to be expected from the representatives of “ big business “ and financial corporations, for, as other wealthy sections of the community had received handsome gifts from the Government, it was unlikely that the financiers would be omitted from the distribution. That prophecy is verified by the bilL now under consideration. The Commonwealth Bank was established in spite- of the uncompromising hostility of vested interests. I have familiarized myself with the debates in this Parliament in 1911, when the first Commonwealth Bank Bill was introduced by the Right Hon. Andrew Fisher, and I have read with particular interest the contributions to that debate by a number of honorable members opposite, in chiding some who are now Ministers of the Crown. I remember the grave fears and evil forebodings that were expressed by those honorable gentlemen on that occasion. They had very little sympathy with those who proposed! to establish the bank, and having a knowledge of their statements at that time, I am not surprised at the action now taken by the Government. In the light of the history of the bank, however, the Government’s action- in attempting to tamper with one of the most substantial institutions in the Commonwealth is most audacious. There appears to b» wo- limit to the extent to which, the Government is prepared to sacrifice the. interests of this country to those of its private and privileged friends. The proposal is that the Commonwealth Bank shall become an instrument of convenience to private financial interests, regardless of the- relation of such interests to the welfare of the nation. It is appropriate that I should review what the Commonwealth Bank has done for this country. Although it may not have accomplished all that was expected of it, it stands to-day as a monument to the capacity and foresight of the Labour Government that held office from 1910 to 1913, It has been of great advantage to the Commonwealth. Its operations during the war could not have been undertaken with equal advantage to Australia by any other batik. During the crises of the war years we were able to appreciate its strength. It was the chief factor in the keeping open of the doors of many of the private banks, for it enabled thorn to meet urgent obligations. It supported business enterprise, and counteracted the effects of depression. In the flotation of war and peace loans it. saved the Government, approximately £6,000,000. The average price paid to the Commonwealth Bank for the flotation of loans was 5s. 9d. per cent., while private financial institutions were charging £2 7s. per cent. for the same class of business. The bank also financed the primary producers, and assisted to solve intricate financial problems associated with the handling of primary produce. No private bank could have accomplished that work with the same degree of success. Mr. Mark B. Young, who represented the Commonwealth Bank at the first Bank Pan-Pacific Congress, in Honolulu, in October, 1922, referred to the work done by the bank in assisting to market primary produce. He stated -
Financial problems of great magnitude and intricacy arose during the war, and had to be faced and solved. The ordinary means of transporting produce had been greatly reduced, and at times almost destroyed. The necessity therefore arose of financing a. nation’s produce while it was not able to reach its customary markets.
In all these banking transactions (relating to the marketing of wheat, wool, rabbits, butter, sugar, and metals), the Commonwealth Bank played the central part. During the course of a great war, evidence of unrest and even panic might have been expected to have been shown, but at no time was there any uneasiness. This satisfactory condition is widely attributed to the existence of the Commonwealth Bank, which had happily been created just prior to the outbreak of hostilities.
So we find thai during that period the Commonwealth Bank was our financial Gibraltar. While making those great savings, and providing banking facilities at a minimum of cost, I find that the Commonwealth Bank has presented to the people a profit of £4,500,000. As I have already indicated, the bank has not accomplished all that was possible, but this is in no way due to any limitation of power in the original act introduced by the Labour party under Mr. Andrew Fisher. If all the advantages that might have accrued have not been realized, that has been due to the conservative policy of the management. There is something to be said in favour of reform in that respect, and I think that improvement can be brought about under the amendment submitted by the Leader of the Opposition (Mr. Charlton). It is suggested in this amendment that provision should be made for banking experts - employees of the Commonwealth Bank itself - to be selected to co-operate with the management in so directing the affairs of the institution as to make it of the greatest possible service to the people. We know that businesshas been refused by the bank. A person with whom I am acquainted went to the Adelaide branch and asked for accommodation to the extent of £400 upon the security of assets worth £1,200. His money was invested at the time with a private institution, and the Commonwealth Bank was not prepared to take the business out of the hands of the private bank, for it was said to be contrary to the policy of the Commonwealth Bank to do so.
– One private bank does not hesitate to take business out of the hands of another.
– That is so The Commonwealth Bank can find the necessary money to effect new business in other directions, but it withholds its hand when it has an opportunity to protect a citizen from the rapacity of the private banks. Every person who can offer reasonable security should be able to secure the accommodation he requires from the people’s bank. The Treasurer (Dr. Earle Page), in introducing the bill, said that the reason for it was that the Commonwealth Bank had not served the purpose for which the original act was introduced, and the bill was required to remedy the defect. In the course of his speechthe Treasurer stated -
When the question of a Commonwealth Bank was first mooted, it was generally expected that a truly national bank would be established - a bank of deposit, issue, discount, exchange and reserve. When the bill was introduced, however, expectations were not realized, and when the bank began to function it became perfectly clear that a national bank had not been established, but merely a governmental institution in competition with the privatebanks. The bill the Government now bring forward is designed to carry out the criminal expectation.
In the opinion of the Treasurer the Commonwealth Bank should not compete with private banking institutions. Although the Minister remarked that the basis upon which the Government justified the introduction of the bill was the fact that the bank had been in competition with the private banks, and although he said the bill was designed to give it the national character that he alleged it did not now possess, he stated a little further on in his speech -
On the whole, it will be recognized that the Commonwealth Bank has not been a serious competitor of the other banks. Indeed, it is understood that the policy of the management up to the present has been not to enter into active rivalry with the trading banks, and in pursuance of this policy the interest payable on Commonwealth Savings Bank deposits is, and has always been, lower than the interest paid by the state institutions.
Therefore, the very premises on which the Treasurer based his justification of the introduction ofthe measure were swept away by his own declaration that the national Commonwealth Bank had not been a serious competitor with the private financial institutions. In another part of his speech the Treasurer said : -
The Commonwealth Bank, however, gave assistance to the other banks in respect of seasonal demands by making advances out of existing credits. This was made possible through the co-ordination of the resources of the Treasury with those of the bank. Indeed, all the money offered was not accepted by the banks.
According to the Treasurer himself, the Commonwealth Bank has been of assistance to the private banks, and has afforded them the necessary credits to enable them to meet the seasonalpayments required of them. In fact, greater credits than even they were prepared to use were available to them. It does not appear, therefore, that the Commonwealth Bank has been a serious competitor with the privately-owned banks. The provisions of this bill have been dictated to the Government by the controlling interests of private financial corporations. My justification for that remark is also a statement made by the Treasurer in his second-reading speech. He said -
During discussions which I recently have had with bankers, they made it clear that the right to get cash in case of need is of the greatest value to banking. Though some of them urged that more legal tender notes be issued, they said over and over again that all they really wanted was the right to get notes in case of need.
It is quite clear that the Treasurer consulted the private banking authorities in drafting the bill. But not he alone entered into that consultation, for a little later on in his speech he said that “in conferences which Ministers have had with the general managers of the private banks,” certain things were said. The Government has been in close touch with the very people who hope by means of this bill to strangle the Commonwealth Bank, and so make available to their own banking institutions a greater volume of business. The Commonwealth Bank, as a matter of fact, will be scientifically destroyed if Parliament passes the bill in its present form. One of the most important steps in the process of strangling the bank is to be the appointment of an unsympathetic board of directors. The gentlemen who, it is proposed, shall be given positions on the board will be more concerned with conserving the interests of private banks than with promoting the interests of the Commonwealth Bank. Several of the interests that are to be represented on the directorate have already made large and somewhat irregular demands upon the Government, which it has conceded to them in almost every case. The board of directors is to be composed of eight persons, six of whom will represent private financial, commercial, and pastoral interests, and only two of whom will care for the welfare of the general public. I think I may say justly that the only members of the board who will be greatly concerned about the future success of the bank from the point of view of the people of Australia will be its governor and the Secretary to the Treasury. Of the other directors two are to represent the commercial and industrial concerns, and two the agricultural and pastoral interests. The remaining two members are to be chosen for their special knowledge of currency. We may assume, therefore, that these two will have a very close, even if indirect, association with private banking institutions, and that they will closely identify themselves with the Government’s policy of sacrificing the bank. The next step in destroying the bank’s usefulness is also worth careful consideration. The Government proposes to load it with all the charges and interest payments connected with a loan of £6,000,000 which the Treasurer is to provide. This amount, together with the profit which the bank has in its reserve fund, is, we are told, to give the bank a capital of £10,000,000. The irony of the situation lies in the fact that tho bank at present has authority to issue debentures to the extent of £10,000,000 if it deems such a course to be necessary. Up to the present it has notused its power in that respect. To compel it to set aside a £10,000,000 reserve in the manner the Treasurer has proposed will seriously handicap it. Why should it be required to pay intereston £6,000,000 which up tothe present, has not been considered necessary to its successful functioning ? The bank is to be forced to pay half of its profits into the National Debt Sinking Fund, but it is not proposed that the Government shall give credit for this as a contra for interest due from the ‘bank to the Treasury on the proposed loan of £6,000,000.Onwhat ground can it be claimed that theCommonwealth Bank should be compelled to forgo reasonable interest onmoney which it so invests ? It should be permitted to enjoy fully the benefits of the credit balance which results from its operations. The only reason that I can give for the Government proposing the course provided for in the bill is that it wishes to ensure the success of its scientific effort to sacrifice the bank.
– It is strangling it.
– The interjection by the honorable member for Werriwa is apt. The Government undoubtedly desires to place the bank in subjection to private banking institutions and so prevent it from fulfilling the real purposes for which it was established. It is to be prevented by unsympathetic administration from functioning in the interests of the general community. That method is frequently adopted to destroy the usefulness of government-controlled institutions. Honorable members who support the Government are pleased, from time to time, to point to various government ventures which they allege tohave been unsuccessful. The principal reason why there may be room for criticism is that the institutions concerned have been subjected to totally unsympathetic administration. A flourishing enterprisecan soon be made ineffective by unsympathetic administration, and a study of the history of allegedly unsuccessful Government enterprises usually shows that they have not been as successful as their promoters hoped they would be simply because of unsympathetic administration. Why should the Commonwealth Bank be compelled to hold a reserve of £10,000,000 ? It isreally to meet the demands that private institutions may make upon it in consequence of its being made virtually aclearing bank. One would expect, however, that privatebanking institutions would be required to have credits with the national or reserve bank sufficient to meet the demands whichthey might make on it,andthattheywould notbe able to trade upon the reserves ofthenational bank. The Treasurer informed the House that thehill was framedwitha view to making theCommonwealth Bank an instution similar to the reserve bask of the South AfricanUnion. The practice in South Africa as thateach private banking institution shall place in the reserve bank of theUnionanamount of morneyequal to at least 10 per oent. of its demand liabilities,and3percent. of its time liabilities, but I find no provision in this bill to compelour private banks to lodgewith the Commonwealth Bank any security whatever. It really means that the Commonwealth Bank must provide credits for private banking institutions, whilst it is itself saddled with interest for acoommodation provided for it by the Treasurer, such as the proposed loan of £6,000,000. Finance has a serious and far-reaching influence upon the economic conditions of the people. This is admitted by the Treasurer in the following statement : -
A very great poweris exercised by banks in the creation of credit, in their control over business, and in the effect of their policy upon wages, as well as upon other conditions. Changes in franking policydisturb thewhole community.
Our people engaged in production, whether in agriculture or manufacturing industries, are affected by alterations of policy on the part of financial corporations. Those engaged in wealth production, whether in the factory or in the fluid, are being mercilessly plundered from sunrise to sunset by these institutions. The Treasurer further emphasized the way in which the economic conditions of the country are affected. He said -
The removal of the automatic cheek enabled huge credits to be built upon the war currency and the short-dated securities issued by the
Government. Then was seen abnormal increase in available purchasing units, without an increase in available commodities. Prices rose and, though wages were frequently raised, the pay of the workmen usually lagged behind the cost of living.
That is the first confession of the kind we have heard from any honorable member on the other side. They have always endeavoured to make it. appear that the demands of the worker have been in excess of the cost of living.We have at last the truth proclaimed by the Treasurer when he says that, although the wages of workmen were frequently raised, they usually lagged behind the cost of living. The worker pays in each instance. If credits are inflated it means higher cost of living, if a deflation it means unemployment. These powers are too great for private interests to hold. The honorable gentleman further said -
During this period of inflation trade was wonderfully active, because merchants and dealers continually acquired large stocks in the fondbelief that in consequence of a world shortage of goods, prices would go higher still. In the wild scramble dealers bought from each other, and ever prices rose. This speculative business could not go on indefinitely, however, and at length reaction set in.
Wefind, on the declaration of the Treasurer, that the war provided an opportunity for the money powers’ mighty hand to exercise a very effective economic control over the conditions of the people. These are the merchants of doubtful honourwho, under this bill, are to share the custodianship of the nation’s bank. It is well for us to remember that the control of currency and credit, involving, as it does, the nation’s security and the welfare of its citizens, shouldbe entirely thespecial function of government. I have said thatthere has beena concen tration ofmoney power. The Treasurer inti mated in hisspeech that, during the last 100 years in the United Kingdom, 100 banks hadpassedout of existence, and that the banking business of England and Wales is conducted now by the Bank of England, nine clearingbanks, and seven country banks. A similar concentration of money power has taken place in Australia. The Australian Insurance and Banking Record gives the information that, in 1915, there were 22 banks operating throughout Australasia, and that twenty of these were operating in Australia. In 1922 there were fifteen banks operating throughout Australasia, and fourteen of them were in Australia. So that, from 1915 to 1922, there, was a concentration of money power, and whereas twenty banks were operating in Australia in 1915, only fourteen were operating in 1922.
– And there are too many here new.
– Quite so. I find, according to the Commonwealth YearHook of 1923, that the banks to which I have referred paid dividends ranging from 7 to 20 per cent. That was the return to their shareholders. Their subscribed capital is £50,122,469. The reserve profits held by these banks now amount to £32,928,568. Although they have been paying very substantial dividends, they have this amount of undivided profits in reserve. The CommonwealthBank, under the system proposed by the bill, is to become a member of the combine. The Treasurer has admitted that in his speech. He said -
The excellent banking material which we have already should bo strengthened and coordinated in order that Australia should haw a symmetrical and well-balanced system of central banking. To this end the Government proposes that the Commonwealth Bank of Australia should become the pivot of Australian banking - a bank of issue, deposit, discount, exchange, and reserve.
Therefore, it is to become an absolute member ofthe banking combine. Let me now show how the interests of the state can be subordinated and sacrificed under unsympathetic banking commissioners. In Victoria thestate savings bank is administered by five commissioners. If I mention the names of two of these commissioners that will be sufficient for my alignment.One is Sir William McBeath, a Flinders-lane merchant, who is chairman of the institution. The other I mention is a man who has been known in connexion with Commonwealth activities because he was chairman of the royal commission on taxation; I refer to Mr. William Warren Kerr. He is directly associated with the business of insurance broking, and also with commercial activities, because he has been president of the Melbourne Chamber of
Commerce. The five commissioners who have had care of the credits of depositors in the state savings bank of Victoria have used those deposits in a way which I emphatically say has not been in keeping” with what the depositors would desire. I find that £10,500,000 of the people’s deposits in the state savings bank of Victoria are to-day invested in private banking institutions, whilst not one penny of those deposits is invested in the Commonwealth Bank, which is the people’s bank.
Dr.EarlePage. - How much is invested in government securities, Commonwealth loans, and so on?
-That does not affect my statement with regard to the investment of £10,500,000 of the money of the depositors in the state savings bank. This shows the correctness of the statement that there has been a deliberate attempt to boycott the Commonwealth Bank.
Dr.EarlePage. - Rubbish!
– We find that the war presented a very favorable opportunity for the financial institutions to make of Australia a Shylock’s paradise. According to the statement of the Treasurer, the private banks took their gold to the Treasury voluntarily. They recognized that the accommodation provided by the note issue was more easy to handle and more convenient for them. In presenting their gold to the Treasury they were given the privilege of getting three notes for every sovereign they surrendered. I recognize that they were charged 4 per cent. per annum on the notes given them in excess of the gold they presented. Three notes were issued to them for every sovereign they presented. The banks had been operating on a credit basis of £4 for every £1 they held in reserve in gold. When they secured from the Treasury the additional accommodation to which I have referred, they were able to expand their credit to a ratio of twelve to one. This proves that the private banks were prepared to make use of the position for their private advantage, even though by doing so they might risk the stability and security of the nation.
Dr.EarlePage. - To what extent did they use that right? Only to the extent of £2,000,000.
– They exercised the right as freely as they desired. It is very desirable that we should not permit such a thing to occur in the future in circumstances likely to affect the financial stability of the Commonwealth. The ruthlessness of the money-changer is well known. The grasping avarice of Shakespeare’s Shylock, the rich Jew of Venice, was but a circumstance to the rapaciousness which characterizes the money-changers of the present century. Let me consider the type of men who are likely under this bill to become members of the directorate of the Commonwealth Bank. There are two gentlemen who are almost certain to be appointed, because of their present association with the Notes Issue Board; I refer to Sir H. Y. Braddon and Mr. J. J. Garvan. There is also Mr. William Warren Kerr, who was chairman of the royal commission on taxation. He has a direct knowledge of financial matters, and we may reasonably expect that he will be included in the directorate. It is likely that the Hon. G. Swinburne and the Hon. W. L. Baillieu will also be included. I should like to place on record the position now held by these gentlemen. Sir William George McBeath is a Flinders-lane merchant. Mr. J. J. Garvan. who is on the Notes Issue Board, is managing director of the Mutual Life and Citizens Assurance Company Limited ; he is also a pastoralist, being owner of the Rochdale station in Queensland. The Hon. George Swinburne is chairman of directors of Johns and Waygood, engineers, as well as a director of the Melbourne Gas Company, the Melbourne Hydraulic Company, the Mount Lyell Mining and* Railway Company, and also the National Mutual Life Assurance Company. The Honorable Sir H. Y. Braddon, who is also on the Notes Issue Board, is superintendent of Dalgety and Company Limited, as well as a director of the British and Foreign Insurance Company, and of the Union Trustee Company. Mr. William Warren Kerr is the managing director of Richardson, Kerr Proprietary Limited, insurance brokers. During 1916-18 he was president of the Chamber of Commerce; he has also held the office of president of the Associated Chambers of Commerce. Mr. Baillieu, I think, is not unknown to you, Mr, Speaker, as he was a member of a State
Government of which you were the head; ho is also a director of a number of companies, namely, the Zinc Producers’ Association, the Copper Producers’ Association, the Broken Hill Associated Smelters, the Electrolytic Zinc Company of Australia, the North Broken Hill Company, the. Mount Morgan Gold Mining Company, the Hampden-Cloncurry Copper Mine, the Yarra Falls Spinning Mills Limited, the Herald and Weekly Time,* the Electrolytic Refining and Smelting Company, and the Melbourne Trust Limited. Banking, commercial, pastoral ist, and mining interests arc here interwoven. As these persons are likely to become the custodians of our own bank, it is useless to expect sympathy from them. They do not represent the interests of the people of Australia asa whole. The Treasurer in his speech said -
The Government believes that it is proposing allthat can be done by legislation towards bringing about atrue system of central banking, but recognizes thatthe success of the Commonwealth Bank, acting as a central bank, will depend on the skill and foresight of the new board of directors.
The Commonwealth Bank is now to be the subject of the knavish depredations of the money changer, the commercial speculator, and of vested landlordism. Those interests would barter the soul of a nation if it would improve their own balance by one shekel. They have no country, and no flag. The world is their domain. The Treasurer also said that legislation could not be provided to deal with the exchange problem, which would be a matter for the board of directors to deal with as occasion demanded. In the Melbourne Herald, of Saturday last, reference was made to the Dawes-McKenna report on the reparations question - a subject which must directly or indirectly affect the financial stability of Australia -
If put into operation, finance and banking control will be the dominant force in the government of the most important part of Europe, with authority almost undisguised. So the world enters, for a time, on a new phase - the dictatorship of finance. …. This scheme places Germany, the greatest economic domain of Europe, under control of the representatives of international finance and big business. It cannot fail to involve far-reaching consequences to society, quite apart from the payments of reparations. So much for the direct influence of governments; but the lives of plain men and women, earning their bread by toil, will bo greatly affected by it all. In Germany, and elsewhere, rigid economy will be insisted upon, and the period of national domestic reform, costing money, educational facilities, and health improvements, may have to wait. Poor people will have to wait for these things till public creditors are paid - whose influence will certainly try to encourage business enterprise by avoiding heavy direct tuxes on profits and incomes. They will not favour high wages or short hours. Public opinion will be that of the great worlds of commerce, finance, and the millionaire captains of industry. The future for the ordinary citizens of Germany and other misled peoples is to work hard for as little ns possible, and to provide most of the new wealth, and a large share of taxation fora period quite uncertain.
That will be the ultimate fate of the people of this country. They will become practically subject to the power of these money lords, who are endeavouring to destroy the only means of security that wo have had provided for us, and which is a monument to the capacity and foresight of the Labour movement of Australia. The statement of the honorable member for Macquarie (Mr. Manning) that honorable members on this side of the House are unsympathetic towards the interests of the primary producer was both uncalled for and inaccurate. Many and veal have been the benefits conferred on the primary producers of Australia by the Commonwealth Bank. Mr. Mark B. Young, a great banking authority, has stated that the Commonwealth Bank is already provided with all the powers necessary to make it a purely national bank. Those are his words -
The most important event in the banking legislation of Australia was the passing of an act by the Federal Government, assented to on the 22nd December,1911, for the establishment of the Commonwealth Bank of Australia. In many respectsthe bank is unique, and possibly, with one exception, it is the only purely national bank in the world. It was empowered, amongst other activities, to carry on generalbanking business, that is to say, the receiving of deposits on current accounts or for fixed terms, granting of advances, discounting of bills, issuing of drafts and letters of credit, and generally to transact every branch of banking business, including that of a savings bank.
I desire also to quote from the London Bankers’ Magazine -
As its first governor, Mr. Miller is respon sible for the organization of the bank, and. from itsinception until the present time, he has laboured to make it what it is todayan institution of great power, soundness, and increasing strength, of incalculable advantage to Australia, and a worthy addition to the finance system of the Empire.”
In view of those statements as to the all-embracing nature of the powers conferred on the Commonwealth Bank, it is evident that this legislation is not intro,duced with the idea of endeavouring to make the institution of greater service to the public of Australia, but is conceived for the purpose of assisting the private banking institutions. These greedy, grasping interests are not satisfied with what the Government has already done for them, but are crying out for more. They desire that the Commonwealth Bank shall be subordinated to the interests of private institutions in the Commonwealth and elsewhere. It would be interesting to know the experiences upon the Notes Issue Board of the Governor and the Secretary to the Treasury. I believe that it is because they endeavoured to stand against the private interests represented by the other members on the. board that this measure has been introduced. I hope that this House will see the wisdom of rejecting, the government’s proposals, and will support the amendment submitted by the Leader of the Opposition (Mr. Charlton). In. conclusion, it is evident that the shambles of Europe Lave not saved the world for democracy, but have provided another opportunity for the financial vultures to fatten on the sacrifice, suffering, and sorrow of a cruelly deceived world. This legislation, conceived with the same design, emanating from the same dominating power, brings the people of this country into subjection, and claims as ransom Australia’s only institution of financial prestige and security. The time is certainly coming when an incensed world will overturn the tables of the money changers, declaring that the earth which, with all its wonderful possibilities for peace, prosperity and comfort, has been the refuge of thieves, shall in the future prove the rightful heritage of all the eons and daughters- of a- beneficent and bountiful Creator.
.- I desire to congratulate the Treasurer for having introduced this measure.. It is. one of the most important that has- been brought before us, and one which is likely in the future to have a. far-reaching effect on the finances and- the economics of this country. I am not sure’, however, that it will immediately effect any of the changes which are expected. Perhaps the best feature of the bill is its cautious adventure into ground in advance of the field which the bank has hitherto occupied It is well to go slowly, and to advance with caution. That the bill proposes to do. The change proposed is not so much in the functions of the bank as in the method of exercising those functions; at the same time, the bank is to be given power to extend as experience may warrant. That shows wise foresight, and a clear perception- of what is required of the bank. These remarks apply especially to the provisions relating to- discounting. Experience alone will disclose how far the discounting provisions will be effective in achieving the ends desired. The functions of the bank cannot be greatly changed or extended except by making it entirely a. reserve bank. I and. many others would prefer it to partake more of that character, but we have to recognize the facts as they are, and, unfortunately, owing to the- narrow lines, upon which the bank was originally established, it has become an ordinary trading bank to such ain extent that -its evacuation of that field would probably completely dislocate the finances of the country. Therefore, the Commonwealth Bank cannot be made purely a reserve bank, and, in the circumstances, the best possible compromise is that contained in the bill. The Leader of the Opposition (Mr. Charlton) said that both in respect of its past operations and its future conduct as proposed in this bill, the bank is not sufficiently a national institution. Other honorable members opposite spoke as if the bank should be a people’s bank. Only by an examination of the various statements they have made can one get a cl ear idea of what they mean. For instance,, the Leader of the Opposition read, ant a> large number of figures regarding the present position of the private banks,, and said that the- wonderfully safe position they occupy justifies intervention by the Commonwealth Bank. He said, also, that the Commonwealth Bank was not in keen enough competition1 with the- private banks. It is apparent that he and his followers desire that the Commonwealth Bank shall take possession of the1 whole field of private banking, ultimately displacing the private banks entirely. The honorable member for Hindmarsh (Mr. Makin) to-day complained that the bank has had to refuse business from’ certain individuals, whereas a national, or people’s, bank,, could not do that. It is clearly the honorable member’s conception of the national bank that it should absorb the entire banking business of the country. Private financial institutions like the banks, which the Leader of the Opposition admitted to be safe and successful, should, according to the views of honorable members opposite, be incontinently destroyed. Yet the Leader of the Opposition proceeded to say that the finances of the Commonwealth should be as sound as the rock of Gibraltar.Surely he has gravely misconceived how best to keep the finances of the country sound and safe as the rock of Gibraltar if he believes that every financial institution which is successfully doing its work should be destroyedby the competition of the Commonwealth Bank, backed by the Government. In the opinion of a great many people, including myself, the Commonwealth Bank has already competed too much in some spheres of finance : I allude particularly to its unjustified intrusion into the domain of savings banking, thereby causing considerable mischief, and financial difficulties to some of the state governments.
– It was a very good thing for the people.
– I entirely fail to understand the logic of the honorable member if he says that when a government financed by the people, gets into monetary difficulties, it is good for the people. Some honorable members seem to consider the Government as something apart from the people, whereas in reality the Government cannot suffer without the people suffering in like measure. I am unable to understand how a purely trading government bank canbe a national bank to any greater extentthan can any private trading bank. In fact, if a government bank has other functions which enable it to stabilize, strengthen, and regulate “banking finance and practice, it is much more likely to give service of a national character. The bill proposes to confer such functions upon the Commonwealth Bank, and so enable it to be of greater national benefit than if it werecontinuedasa purely trading institution. The Leader ofthe Oppositionsaid thatthere was no necessity to appoint somanymembers to the board of directors. Most of the criticismswhichhave been (levelled at the past operations ofthebank - land I say this without intending to reflect upon anyindividual - havebeendue chiefly tothe autocratic one-man control which ‘has hitherto existed. Objection was also taken by the Leader of the Opposition to the proposal to appoint the Governor and Deputy Governor for a period of seven years. Be argued that it would be necessary to try out a man before we could know withcertainty whether or not he was fit for his position . I cannot refrain from asking myself why seven years was not considered too long a term for which to appoint the late Governor of the Commonwealth Bank? That appointment was made by a Labour Government, and it seems that a term of seven years is all right if proposed by honorable members opposite, but all wrong when proposed “by their political opponents. With the bill as a whole I am very well satisfied, but I would suggest to the Treasurer two or three minor alterations, and I ask him to show me special courtesy in this matter, because, owing to my departure for Western Australia to-morrow, I shall be unable to make these suggestions during the committee stage. With regard to the constitution of the executive committee as proposed in clause15e,I think it would be advisable to obviate the possibility of this body becoming a mere departmentalboard ofcontrol. That could bedoneby providingthat it shall include at least one of the directors mentioned in clause 11, sub-clause 2, paragraphsb and c. I presume that the ‘Governor and Secretaryto the Treasury will be membersofthe executive committee, and I shouldprefer that the third member should be one ofthedirectors representing industry andcommercerather than one of thecurrencyexperts.By clause60c thebankistobegivenpower to issue notes toitself. With the (safeguards providedin thebill that power is not likely to be abused,butitdoes appear that the bank is being , given rather special powers ‘which it will be able to exercise for itsown benefit,and, perhaps, rather unfairly. Therefore, it would be well to provide that its issue of notes to itself shallbeconditionalupon the approval of the Treasurer.The only other alteration Iwould suggest is in regard to the returnswhichwill have to be made from time to time.The returns at present received from the banks are not as satisfactory as theymightbe. The quarterly returnsincludeonlythe figures concerning the bank’sbusiness within the Commonwealth, and the bill proposes to reenact that requirement. The entire assets of the banks are shown only once every twelve months in their balancesheets. Unfortunately, these balancesheets are made up at different times of the year, and consequently the balancesheets of the different banks do not synchronize, and do not enable a complete survey of the banking position to bo made at any one time. The result is that it is impossible to obtain accurate figures as to the banks’ business outside and inside the Commonwealth up to a certain date. I suggest to the Treasurer that the banks, in addition to furnishing quarterly returns giving figures relating to balances within the Commonwealth, should be compelled to give accounts of their business outside the Commonwealth, including, at least accounts of their London balances. That would prevent “ window dressing ‘.’ between banks and banks, which is said to occur when it is necessary to make up financial statements, and this information is necessary to enable the board of the Commonwealth Bank to form definite opinions regarding the regulation of exchange. In all fairness the Commonwealth Bank should be required to make exactly similar returns, which should be published in the Commonwealth Ca-i-ttc. There would then be no differential treatment as between one bank and another, and we should have statements setting out all the information required for arriving at a correct opinion concerning exchange. There is no doubt, that difficulties arise to-day be-, cause we have no figures that disclose the actual factors in the exchange trouble, or that indicate how long the position is likely to continue The Treasurer dealt with that trouble at considerable length, and I should like to take this opportunity of warmly congratulating him upon the preparation and presentation of his statement on a very intricate and difficult matter. That statement should be of great use to honorable members, for it is very informative, and extremely sound and accurate. . It is based on sound principles, and is spoken of in the highest terms of approbation by all who know anything about the subject.
– Because it suits them.
– It suits every one except those who have an obsession for the destruction of everything successful. There is no doubt that consideration of the problem of exchange is inextricably mixed up with the bill, for every one considers that tho arrangements made for carrying on the business of the Commonwealth Bank must affect exchange and oilier financial questions.
– How does it affect exchange ?
– The exchange and discount rates must work together. Several suggestions have been made to meet the trouble. The Minister for Trade and Customs (Mr. Pratten) recently favoured the House with a long speech on the subject.. He suggested that tho exchange difficulty was due to some fault in our banking system, and that ‘ certain somewhat. drastic remedies should be applied by the Government. He went so far as to say that it was time Australia developed its own economic system, independently of international finance. While the difficulty that this would cause in buying goods from abroad had no terrors for the honorable member, it was difficult to sec how, when we wanted to sell our goods in other countries, we could reconcile this desire with such a formula. To talk of having our own economic system independently of the world’s finance, is to talk of learning to breathe without using the atmosphere. The exchange difficult)’ is due entirely to tho balance of trade. Many statements have been made about the condition of our trade, which has been attributed to the large amount of importation; but it is wrong to consider such matters from the point of view of only a twelve-months’ period. It is, in fact, quite impossible to do so, because the period of importation and exportation may not come within the same financial year. The only accurate way to get a proper view of that matter is to work out the figures over a long period. Many of our exports of years ago have only recently brought a return to the Commonwealth. If. instead of a twelve-month, we take n ten-year. period, we find the figures rather astonishing. During the last ten year- our total visible exports show an excess over imports of £92,800,000. In addition there are invisible exports, which include such things as increase of debts and interest payments. When these arc included we find that the balance swings back somewhat, but not so far as most people imagine. There was an excess of invisible imports over exports of £85,800,000. When the one figure is subtracted from the other, the exports are still in excess of the imports by £8,500,000. These figures do not include other invisible exports and imports, such ae services and private loans. We have no means of ascertaining these. As a matter of fact it is very doubtful whether the figures for our exports are not misstated. Let me give one instance of how that may happen. Suppose an exporter is sending fruit to England, and, on the basis of what he thinks the fruit will realize, declares the value to the Customs Department at 10s. or 12a. a case. Instead of realizing 10s. or 12s. a case, the fruit may sell for 15s. or 20s. a case.
– Or for 5s.
– That is so, and a discrepancy arises in either case. I am explaining how the figures relating to exports may be inaccurate. I am aware of no means by which the amount actually obtained for the fruit in England is brought to account to correct the figures of exports. Therefore, we are working on very unreliable figures. The same argument applies to our exports of butter, and all other products. It is therefore impossible to obtain any reliable figures.
– People who go from Australia to England take money with them from this country.
– People who go from Australia to ‘England do not take money with them. That is one of the extraordinary fallacies held by some people. The exchange rate to-day is a very great boon to the man who wants to go to England, for if he deposits £97 with a bank in Australia, it will give him the right to spend £100 when he gets to London. He does not take money with him, but by depositing money with a bank in Australia, .and spending money in London, he assists to correct the exchange trouble while reaping a benefit himself. ~No definite information is obtainable as to the credit balance existing in London. We must infer that there is a credit balance in London, but probably it is not so large as is stated. Some people say that it is £50,000,000, but any such statement is more or less a guess. The figure cannot be stated accurately until we compel the banks to supply the informa tion in their returns. A credit, however, must be there to account for the condition of the exchanges. It has always been the practice of the banks in Australia to keep balances at short call in London for financing their business transactions. The important consideration for a bank is not so much to have tho money on the spot, as to have it readily available in case of need. In the old days, when we were working on a free gold basis, the banks kept balances ‘in London to meet their requirements. Those balances earned interest even for short periods, and did not embarrass tha banks’ operations in Australia, because they were readily available if required, and could be transferred here at very short notice. Since wo have departed from, the free gold basis, that cannot be done. There is only one way of actually transferring the money or its equivalent to this country, and that is by importing goods. This has become increasingly difficult for two reasons. In the first place, our protective policy tends all the time to force one-way trade. It tends to force exports and stop imports, and that is one reason why it is difficult to transfer money or its equivalent from London to Australia. The other reason is - and I shall speak more on this matter later - that the purchasing power of the people of this country has probably diminished. If these difficulties cannot be removed, if it is not possible to give greater facilities for the importation of goods, or if it is not possible to increase .the purchasing power of the people here so that they can buy in spite of the tariff, then the only way to rectify the trouble is by the exchanges. This remedy is now being applied, and it is being shown that the banks are anxious to replace their balances in London by balances hero. The money cannot be brought out to Australia, for the reasons I have mentioned; but by means of the exchanges we can replace a balance in London by a balance here. The banks are forced to do that. They are compelled to apply the mechanism of exchange, even though they do it by a process that encourages imports and discourages exports. The banks are not operating, as has been alleged, in a definite conspiracy against our fiscal policy. The fiscal policy has forced them to take these measures, irrespective: of the effect on them of that policy. Unfortunately, this, is particularly hard on one section of the community - the primary producers - - and! in the end it hits, the whole community because only toy time- exchange of the products of our primary producers in the world’s markets: can; new wealth he brought to this country. Our secondary industries are very largely non-exporting, because they do not make goods at a price at which they can lie sold- in open competition in markets outside Australia. Therefore they are not bringing into Australia any new wealth by exchange, but they are maintained’ by the wealth which the people- contribute: te, their upkeep. It has already been, demonstrated ia this House, by the- honorable member for. Swan (Mr. Gregory)” that the amount required to maintain those industries is- probably somewhere about £120,000,000 per annum. This suggests a. further reason for the present stringency, of the; money market,, and for the desire- of the banks, as shown by the exchange- rates, to get rid of their London ‘balances and replace them by cash reserves in Australia. Let me say, in passing, that one fallacy must be avoided, for it should be remembered that the interests of the banker and’ the interests of the merchant - T use- the term ‘ “ merchant “’ in the widest sense - are- not always identical ; in fact, sometimes it is im< the interests, and’ the duty, of. the banker to cheek the merchant. It is’ a common mistake to speak of the two sets of interests as- identical. Time banker must sometimes act towards; the merchant as a governor acts in regulating the, supply of steam t,0, an. engine. The1 trader may desire to speculate of- enter upon industries of doubtful expediency, and the banker’s, duty is to discourage him.. Information is urgently required on one point, but it cannot be obtained without, I” think, the intervention of a royal commission ; I refer to information as to the nature and’ proportion of the advances made by the- banks- to’ different classes of industries. It is highly probable that if that information were- available, it would be found that the proportion, of advances made by the banks to secondary industries, as compared with those made to primary industries, is large and increas-nig. Of course, it is impossible to obtain definite figures on the point, since they are not disclosed by the banks; but I find that in 1911 the industrial workers engaged in the Commonwealth in primary industries represented. 29’. 9 per- cent, of the total number of breadwinners,, and those employed in other industrial activities represented 28.7 per cent..’ of the total. In 1921, ten years later, the number engaged in primary industries was 25.8 per cent, of the total number of breadwinners, while those engaged in industrial enterprises formed 31.2 per cent, of the total. In other words-,, 6 per cent, more were then engaged in secondary than in primary industries,, and that was the first year, in which such a condition had obtained. Evidently the secondary industries are on the increase, and in my view they are increasing at the expense of the primary industries’! Another important fact which tends support to my contention is the tremendous1 segregation of population- in our city areas’. However one looks at the matter he is forced to- the conclusion that! the present position is attributable to: the und’ue deve- lopment of secondary industries in the metropolitan areas-. If the increase in these industries is> accompanied by ami increased; advance’ of bauds credit ton them, one. must, conclude- tha-il this method of employing- credit requires -aery careful examination If, am, I haw said, secondary industries are being maintained by artificially, created prices,, if their cost, to Australia amounts to. the huge sum of £120,000,000’ per annum, and if in addition, to that, as shown by the statistical records; the productive- activity of labour in Australia- has fa-Hen- in- the fast ten years from 1,000’ to 877, the fact must be that these industries are- not relatively such remunerative channels for bank advances as- may be> supposed:. These- advances tend’ to become- permanent or to increase- the loans from the banks-, and thus, tie up credit resources, rendering bank credit less mobile *ion seasonal fluctuations of trade, and diminishing’ the ratio ai& reserves- to liabilities. This- view isi borne- out by a study of the banking figures-. The, bankers, by the exchange: rates:, ane- trying! with. all their skill and expedience to* rectify the matter, but, so* long as this Parliament continues- to impose artificial, obstacles to” the natural working of economic laws-,, the. task of the bankers willi be rendered more difficult than it is> at present, and the cost to the people of Australia must be increased. Much has been said of the result of borrowing. The effect on the exchanges is obvious and deplorable, but I confess that it is very difficult to find a. remedy. We are told to. cease borrowing. Even in connexion with our immigration policy many people contend that the British Government should help us more than it does. In response to representations to the British authorities large grants in aid of immigration have lately been offered. Nobody questions the need for immigration, but these grants will affect the exchange position just as much as loans do. Even if we stopped borrowing altogether and depended on grants from the Imperial Government we should still be faced with the difficulty of bringing money into Australia. The cessation of borrowing would mean the stoppage of developmental works and immigration. We cannot raise much more money than we have already borrowed in Australia, for it is not available. This is shown by the imcrease in interest rates, and money is not available, largelybecause of the diversion ofinternallyproduced wealth to bolster rapexotic industries. If the economical use of this money is left to the people, there will not be. the need for borrowing abroad that now. exists.. By the policy we are adopting we are forcing the Government to borrow abroad:. I. do not refer only toextravagant schemes, which, undoubtedly, ought to be stopped, but to essential works for which it is now impossible to borrow money other than abroad. So long as we tie up our internallyproduced wealth in an uneconomic direction, the people will have a diminished purchasing power. I feel convinced that something muchlike a purchasers’ strike is now proceeding in Australia, and, erelongfurther evidence of it willbeseen. One notices it when he goes among themerchants. There is auincreasing and positivedetermination on the part of the people not tobuy,be- cause they consider that the prices charged are exorbitant.. Borrowing can be diminished if self-denial is exercised in the matter of public requirements, but borrowing, cannot be abolished unless we call a halt for a time to schemes of development or unlessthe craze for secondary industries isrelinguished. I do not propose to deal with some of the suggestions that have been made for Government intervention to devise schemes for transferring credits, for it is evident from the statement of the Treasurer that such schemes do not meet with the approval of the Government, and are not likely to be adoptedby it. For that I am devoutly thankful. I refer to the floating of loans and the issue of notes on the strength of the credits existing in London. Even if such schemes were practicable they would not be beneficial, but would probably be harmful, to the country. I am glad, therefore, to know that the Treasurer does not intend to support any such proposal.
Now, I come to the question of the note issue and the Note Issue Board. I know that I shall probably be in a minority on this subject when I say that the board,, in the past, has done absolutely right. I have no criticism to offer on the work of the board, which has, I believe, been actuated by sound principles, and has acted in the best interest’s of the Commonwearth. The honorable member for Macquarie (Mr. Manning) referred last week to an instance which he said showed that the- board had acted wrongly. It was the case of certain Japanese wool purchasers, who wished to deposit 200,000 sovereigns, and obtain 200,000 notes in return. One of the banks was willing to undertake the transaction, but. ithad not the necessary notes on hand, and it referred the Japanese to the Note Issue Board, which declined to grant their request on- the ground that to do so would cause inflation. The honorable member for Macquarie said that inflation could; not result so long as gold was behind the notes. Letmedisabuse the minds ofhonorable members of that idea. The addition of gold will not decrease inflation.. The statement made by the honorable member for Macquarie, and many other honorable members, shows that they are under the impression that the financial position is still controlledby the gold reserve. But our notes are inconvertible gold is no longer the basis of value. It is simply an article of merchandise, and additions to the gold reserve will not in any way diminish inflation.. The test by which we may judge whether or not there is depreciation of currency is the price of gold bullion and thestate offoreign exchanges, and the only way to correct depreciation is’ to reduce currency relatively to the production of the country. TheNote Issue Board acted rightly in trying to decrease inflation. “We should bend all our efforts to getting back to the basis of free gold as soon as possible. Increasing our note issue indefinitelywill never attain that end.
– We cannot get back to a gold basis until England does so.
– Thatis so, but we arc getting near it; and I think we should aim at restoring it as soon as England can do so. One means to that end will bo to control our note issue with the object of decreasing instead of increasing it. The difficulty referred to by the honorable member for Macquarie is capable of being met. It is quite probable that sufficient notes are already in circulation for our currency needs. Honorable members may ask where they are. They do not leave the country, so they must be here somewhere. Inquiry would probably reveal that some of the hanks, and possibly the Commonwealth Bank, arc holding notes to help them to obtain business under our competitive system, rather than allowing the notes to be used co form what may bo called a pool of currency to meet a crisis ofthe kind we are now facing. I suggest that it is the duty of the banks to try to get some measure of co-operation among themselves rather than to carry the spirit of competition too far.
Mr.Manning. - There is no competition at present.
– That is probably so. But if a certain bank is unable to secure for itself the business it has in mind, the notes should be available for use byanother bank. That is much preferable to issuing new notes to a bank, as it often wishes, in order to enable it to increase its own. business. If the already issued notes were available instead of being locked up, they could be used for trading as opportunity arose. As a matter of fact, very little currency is required to conduct a large volume of business. By way of illustration, let us suppose that A owes B £13, and that B owes A £10.The amount of currency required to meet that situation will vary according to the method of payment adopted. If A sends B £13 and B sends A £10 simultaneously, £23 of currency is required. If B sends A £10 and A sends back to B the same £10 with another. £3, £13 of currency is required. If, however, A and B get together and cancel the £10 of mutual debt and A pays B £3, only £3 of currency is required. It will be well worth inquiring whether the Commonwealth Bank is withholding notes from circulation. I do not propose to go into that question now, but some such arrangement as I have suggested should be possible under the provisions of this bill, because the Notes Issue Board will be working in co-operation with the board of directors of the bank. The disposition of the currency will then be. so well known that it will be possible to utilize it to give the maximum benefit to the interests concerned. If our currency resources are pooled for general service as part of a definite central policy to get back to the gold basis as soon as possible, it will be altogether to the advantage of the country and we shall be in the right way to escape from our present troubles. In discussing financial matters recently, the honorable member for Barton (Mr. P. McDonald) went so far as to say that the Government was responsible for the unsatisfactory exchange position. This Government is no more responsible for it than any preceding Government, including the Labour Government. The honorable member for Martin (Mr. Pratten), in a speech he made lately on our financial outlook, demanded government action to remedy the situation. He said : “ The Government must do something.” But he made his demand in a curious way. He reminded me of a patient who said to his doctor: “I do not know what is wrong with me, but I want you to find out and to do everything necessary to cure me. I make one stipulation, however. There must be no operation. I will not submit to one.’’’ The honorable member for Martin requested the Government to act, but said that it must not interfere with our policy of protection. Government interference is quite unwarranted, I think, except to provide machinery by which the best experience of the past can bebrought to bear on the situation, and to modify any public policy which is inimical to the public welfare. No Government has yet conferred much benefit upon its people by placing restrictions upon them. The most beneficial acts of government have always been those which removed restrictions and increased liberty. That applies to problems of trade and exchange also. I desire to read to honorable members some remarks made by Sir Henry Strakosch, chairman of the Financial Committee of the League of Nations, who, I believe, was responsible for the establishment of the South African Reserve Bank. He said : -
There are no countries except those in the most primitive state of civilization which can becalled self-contained.
Thin highly complex economic organization ofthe worldhasbeenbuilt up by a gradual and almost imperceptible process of evolution. Everything had in that processadjusted itself to the progro$3 as it was gradually achieved, . so that to-day that organization cannot exist without the essential elements that have built it up, namely,the possibility of a free and un- hindered exchange of goodsand servicesthe world over.
The lack of this freedom of exchange is one of the root causes of the present disjointed condition ofthe world and one of the outstand ing causes of the instability of the exchanges. And yet there are people who doubtthe necessity of international co-operation when, asI have tried to show, the very life of a vast proportion ofthe population of this globe could notbe sustained for any length oftime without the closest international co-operation.
It: has been said that our present position is unprecedented, and is an extraordinary outcome of the great war, and that as we have no guide from history we must evolve a solution for ourselves. There is nothing new under the sun, and those that say that this situation is new only do so because they are ignorant of the past. Circumstances exactly similar to those in which we now find ourselves faced England at the close of the Napoleonic wars. Any one who will take the trouble to read the history of banking will find that a situation existed then which was exactly like this one. If certain dates and names were altered that history could be made to apply in Australia. The famous Bullion Committee of 1819 was appointed to inquire into the subject of currency. In its report it laid down the principles which have governed sound banking practice ever since. If we think that wo are wiser than those who preceded us, or that we can afford to ignore the past and throw aside the accumulated experience of the years, we shall act very foolishly. We shall certainly suffer if we neglect to heedthe lessons of history and set out to make experiments. The principles laid down by the Bullion
Committee, which are the basis of the exchange practices and sound banking principles of to-day. are also the foundation of this bill.
Mr.Fenton. - I thought it was an antiquated thing !
– We shall be both weak and foolish if we allow the argument that because a thing is old it is useless to cause us to neglect to profit bythe lessons of the past, andtry to guide our course by our own limited experience. That will not discover for us a way out of our difficulties. The Government has adopted a sound and absolutely right course in placing before honorable membersthe proposals contained in this bill. It does not suggest any foolish experiments, and I am glad that it has been strong enough to refuse to be misled into adopting suggestions which would only accentuate our troubles. By passing the bill, Parliament will act wisely, and do a great deal to stabilize commerce, and remove many of the difficulties which facethe business world. If the principles which underlie the bill are adopted, and supported by a sound and economic fiscal policy, they will help everybranch of trade and commerce.
.- 1 want to say in reference to the bill itself, to which I shall not devote much of my attention, that, like many other measures introduced bythe Government, it is intended in the first place, as the Treasurer (Dr. Earle Page) has told us, to stabilize the money trust of Australia, and,in the second place, to provide some very good jobs for friends of the Government. In introducing the measure the Treasurer was strictly orthodox. He has made no attempt to substitute somebetter system for one that has broken down throughout the world. For any such purpose this bill is useless. We are told that the Commonwealth Bank is to be made a banker’s bank in order to stabilize banking, but the one provision which might have helped to make it effective even on those lines has been left out of this bill by the Treasurer. The Bank of England is a banker’s bank and a private institution. It is intended for the protection of bankers, but under the law it is impossible for any financial institution in Great Britain to draw upon the reserves of the Bank of England. We have been told by the Treasurer that under the scheme proposed in this bill we must depend upon the goodwill of the bankers in this matter. As one who has read something of the banking systems of the world, I say that without a compulsory provision such as I have referred to this measure will fail, even considered as a bill for the establishment of a banker’s bank. I want to deal with the speech delivered by the Treasurer mainly for the reason that the bill proposes the appointment of a board to manage the Commonwealth Bank, and it may be expected that the members of the board will look for light and guidance to what is termed the intention of Parliament in passing this measure. In doing so, I have no doubt that the Treasurer’s speech on the second reading of the bill will be the text-book of the board, and upon that account I regard the speech as full of danger to the Commonwealth. The honorable gentleman’s speech was devoted . entirely to financial and commercial interests. There was not one word in it about rural credits or of the intention to use. the Commonwealth Bank to assistthe people by establishing rural credits for the benefit of the man on the land, about whom honorable members in the Country party’s corner prate so much. I suppose that plums given to Country party supporters were necessary to allow the Treasurer to. side-step his election promises. I remember speeches which he deliveredinwhich he said that the Commonwealth Bank should be extended to provide rural credits. It was not only to develop primary industries, but, in the honorable gentleman’s words, to take the secondary industries to the primary industries. But there is not a word about this in the bill. As a fulfilment of the Treasurer’s promises to his constituents and the country, the bill is amookery and a hollow sham. The honorable gentleman told us that he will not subscribe to restricting public borrowing, and that it is his intention to float loans abroad. I remember thespeeches made on this subject by the honorable member for Martin (Mr. Pratten), who is now Minister for Trade andCustoms. On two occasions when he sat opposite as a private member,he lectured this House very learnedly.He told us that borrowing abroad was to the detriment of this country, and he showed us clearly and definitely why that was so. But what have wefound ? Thehonorable member sat in his place in this Houseas a private member, and listened to the Treasurer makingthe pronouncement that he was going to float loans abroad, and two hours after the Treasurer’s speech was made, the honorable member took his place side by side with the Treasurer as a minister in thesame cabinet. If this is political morality, I should like some one to tell me what is political immorality. We have been told that there is to be aboardof experts to advise the managementof the bank. I suppose theywill be of the same type as the experts who advised the Government when the war broke out., and who Jaughed to scorn the idea that thiscountry could raise more than £4,000;000 internally for war purposes. Now, as the Treasurer wants to borrow abroad, andwould pawn this countryto the money-lenders outside of Australia, I suppose the expertshe has referred towill be after his own heart, and will certainly advise him to go to London or somewhere else to the Jew money-lenders, and tie up this country in the hands ofthe international money trust. TheTreasurer is going to float loans abroad, and the Minister for Trade and Customs now says, “ All right, Mr, Treasurer, float loans abroad. I am a member of the Government to-day, and away go the splendid principles Ianunciated a few days ago. I am now handinhand with the Government,, prepared to bind Australia, to cripple her secondary industries, and tie her up hand and foot by floatingloans abroad,” In his dissertation on currencies, ‘the Treasurer talked aboutmoney being tight, which is the most absurd statement that could be made. In 1914 there was £35,385,924 of legal currency in the banks of Australia. Assuming that there was half that amount, or £1 7, 692, 362, which is aliberal estimate, inthe hands of the people, there was £53,000,000 of legal currency in Australia in1914 atthe beginning ofthewar period. Ontop of that, the private banks ‘expanded credit approximately to theextent of £300,000,000. Creditwasexpanded to makeprovision for secondary industries andtoallowwar-timeindustries to be developed, and inmany other ways. This was all done on a legal currency of £53,000.000. Yet we are now told that we cannot float loans internally because there would be inflation. TheTreasurer spoke of inflation repeatedly -during his speech. He told us that the Government cannot (perform a miracle, .and we know that it cannot. The mentality of the Treasurer -is .capable of :seeing only one way out of tire entanglement. He says, and his ‘statement has been endorsed by the honorable member for Perth (Mr. Mann), that we must go back to something which they worship with the superstitious abandon of the most primitive savage, and that is the gold basis. I want to show honorable members tho -stupendous miracle which this thing called gold is to be called upon to perform. If the country is .to go hack to the gold basis day by day the miracle to be performed will .be come increasingly difficult. The Treasurer talked of paper currency, the green hacks of America, and the assignats of France, and I tell him that any attempt to .go back to-day to .the gold basis may precipitate a financial crisis compared to which those in America and Jran.ee, iso meet which paper currency was resorted to, were insignificant. Here are the figures which have to be considered if we are going back to a gold ‘basis. ‘Commonwealth notes, £t>B,’556,69S; savings bank deposits, -£162,’273.,,2’8’3; in banks at call, £123,319,184. ‘These figures give a total of £33’9,649,«50. The total -in gold coin in the Treasury and in .gold, silver, and other metals in the banks, amounts to £45,249,85’0,, or only 13 per cent, of the claims which .could The made upon it. If we .attempted to get back to the gold basis, every depositor in .a savings bank, or in a private -bank, would -be as much entitled as any bank manager to demand from the Treasurer gold to the amount of his .deposit. We have 13 per cent, in gold to meet the claims set out, which might be made .against it, and if we add the amount of the fixed deposits in banks - £164,,72-5,.978 which would also have to be paid in gold, we should have a total possible demand .of over £503,000,000, for which we should have only 8 per cent, in gold. That is to say, we have only £8 in gold for every £100. of credit built upon it. Our credit is a huge pyramid balanced on its apex instead -of its base. To talk of getting .hack to the gold basis is the height of stupidity. The Treasurer must know that it cannot be done. There is .something sinister about the -proposal The figures quoted by the honorable gentleman prove the correctness of those I have quoted. All this talk of getting back .tothe gold basis and deflation is (Only the talk of those interested in the scheme of. deflation throughout the world to-day in the interests of the financiers. The gold basis is a theory only. It is referred to as something tangible, although it has never existed in the last 100 .years.. The honorable member for ‘Perth has talked about the “bullion committee .and the banking business that was built upon it. Talk about the ,gold basis was responsible for the colossal stupidity of Peel’s Bank Act of 1844. Every time the British nation has struck a crisis that act ‘has had to “be suspended. ‘The ‘Treasurer has talked of -deflation, and in tearful tones lias told us about the widow and the orphan. I do not ‘know whether the Treasurer realized that what “he was doing was done by the money masters ‘hi America and in France. It is -what -was done after the Napoleonic wars. Those interested talked about, deflation, “tho widow, the orphan, and -£he wage-earner, and used their poverty to ma’ke them poorer still. Right throughout the Treasurer’s speech there is the cry of deflation, and I say that if the money power as -allowed to “bring about deflation to-day, it will be the greatest crime .a .sodden financial autocracy could commit. Loans were floated when money -was cheap, and, apparently, the old process is to be repeated now. ‘We talk of the .gold basis, and are going to try to deflate, with the result that the bond-holders will be able to double and treble their .strangle-hold on the nation. If we deflate .by 50 .per cent, we shall increase the national debt ‘by 50 per cent. I take the matronal debt at £400,000, Q00, ‘because that figure is easy to use, and I say that if we deflate by 50 pei- cent., we shall increase the :national debt to £60Q,000.,000. In America the deflation of the currency by contracting hack .to a gold basis .doubled the national debt, and if we- deflate the currency by 100 per -Gent., w,e shall give the bondholders -of the .country ££2^000,^0.0.0 .for every £1,000,000 they hold today Oft is. (suggested that this is the kind of thing <we have to do in the interests of the country and to save ‘it (from financial ruin Credits wane extended .in -the time of war.,, to save the country, and now we must deflate and double the national debt, again to save tho country. Verily, Br. Johnson was right in his da)’, as ho would he right to-day, when he said that tho plea of patriotism was the last refuge of the scoundrel. The Treasurer told us that, in 1920, money was tight. Of course if was tight. Who made it tight? It was the banks who did so. It was the same scheme all the time. The bankers are. talking in this way, yet they say, “ Let us get a few more notes.” If notes to the value of an additional £6,000,000 are issued, they will extend credit to the extent of £1S,000,000, and will’ charge 9 per cent, interest on advances. It will be the primary and secondary industries that will be squeezed. I was astounded to hear the Treasurer say that the Commonwealth note was the only paper currency in Australia. Those notes are only fill money. Cheque pounds comprise 90 per cent, of tho paper currency in Australia and in every British country. My statement may bo questioned, but I. shall quote, an authority whom no honorable .member will attempt fo dispute - Arthur Kitson, a well-known financial writer. lie put. the position clearly when -he .said. -
It is only »s a commodity Unit money is capable of being exploited. ]t is in this capacity alone that money-brokers and bankers arc able to extort interest. Money is a source of profit to those who dead in it only so far as it is controlled by the 1/ of supply and demand.
Over 30 years ago Dunning McLeod, an authority on finance and economics, said -
Paper money has had incomparably more influence in the world than all the gold and silver. Credit and paper money now form tho great circulating medium or currency of the world, and amounts to at least 50 times the quantity of specie in this country (England), and in the United States of America lit least 98 per cent.
The gold standard providing, as it does, a shortage in legal currency, plays right into the hands of these Shylock institutions. Their continual cry is, “Let us get back to the gold standard.” But suf ficient gold has never yet been available to meet the currency needs of any nation. By a spurious currency private bankers extend credit, and make up the deficiency of currency. In the process they reap great benefits for themselves. By using cheque pounds they are issuing counterfeit currency, just as the ordinary criminal does who forges a £5 note.
– That, is a strong statement to make.
– It is illegal currency. These people have no right to usurp the functions of the Government. They provide 98 per cent, of the paper currency of this country ; and it is illegal. Some honorable members may argue against Mr. McLeod, but I challenge them to quote any financial writer, worthy of consideration, who contends that a cheque is not currency. Let me, for the purpose of illustration, take two people - one a goldsmith, and the other a farmer. The goldsmith turns gold into trinkets and ornaments, and, while he may not be of much use in a country, he manufactures articles which give pleasure to a number of people. Let us assume that, because: of a falling off in trade, ho requires currency with which to pay his debts. He takes from his stock articles containing gold to the value of, say, £500, which he carries to the mint. He receives in return 500 sovereigns, with which he is able to pay his debts. Now let us consider the position of the farmer. He has. perhaps, a few hundred pounds to his credit, but is overtaken by a drought. His stock dies, and his machinery wants attention, and ho soon finds that his small amount of ready money is exhausted. The next year there is promise of a good season. His assets may be worth £5,000, but instead of going to the Government and obtaining a satisfactory medium for paying his way. free of any Shylock interest, ho has to take his assets to a bank manager. After a lot of talk he obtains an overdraft of £2,000 on assets worth £5,000, the title to which he has to deposit with the banker in the form of the deeds of his property. He thou .obtains a cheque-book, and by tendering cheques buys what he wants and puts in his crop. Will any man outside a lunatic asylum say that those cheques are not currency? The farmer has to pay to the Shylock institutions 7 per cent, or S per cent, for the liquifying of some of his assets. When one finds rural production stifled, and men who are supposed to be hero in the interests of the primary producer standing behind a Government which is responsible for the introduction of this measure, one is tempted to misquote the well-known hymn -
When wilt Thou save the farmer, Oh God of Mercy, when?
I defy any financial expert to show us the lino of demarcation between safety and inflation. With banking institutions issuing overdrafts and cheques today, and withdrawing and cancelling them to-morrow, it is impossible to say to what extent there is inflation; but a rough idea can be obtained from their clearing-house returns. In 1914 tho clearing-house returns for the Commonwealth amounted to £807,692,000. In 1922- tho latest figures obtainable - the amount had increased to £1,745,862,000. Those figures apply only to the five chief cities of the Commonwealth, as the interchanges and credit instruments for the country do not go through the clearinghouse. I repeat that the everincreasing requirements of the people for currency can, under present conditions, only bo satisfied by increasing the spurious currency by means of illegal cheque pounds. The Treasurer told us of the methods which were adopted to finance the Avar loans. The banking institutions extended credit to the extent of £300,000,000 on a legal currency of £53,000,000. In doing so, the private banks did not forego tho interest on their money. Let me give an instance from my own experience. At one time I conducted a small business. I had property worth probably £1,200, but was in need of £100 or £200 ready money. When I applied for an overdraft I was informed that I could not get it, as money was very tight. But when the war loan was floated, I could have obtained credit for the full £1,200. The Treasurer also referred to the war gratuity loan. He told us that £6,000,000 had to be raised to meet necessitous cases among soldiers and their dependants, and that the banks had agreed to find the money on the understanding that they would bo able to get notes again at the same rate of interest as was paid on the bonds. At that time we on this side of the House argued that the Government could just as easily give that £6,000,000 to the soldiers free of interest. The same thing is true concerning the wheat pools. When Sir Joseph Cook was Treasurer, I pointed out that wheat created its own credit, and that all that was necessary was for credit to be given for the time being. Sir J Joseph Cook admitted that I was right, but added that he did not know where the money was coming from. We were told that the farmers could only get 2s. 6d. per bushel for their wheat at the time, and . that a certificate would be issued in six months’ time for the balance of the 5s. Immediately those certificates were issued, they were cashed by the banks at considerable profit to themselves. The members of the Country party, who claim to be here in the interests of the primary producer, are supporting a Government which is standing behind institutions which are bleeding the farmer. The Treasurer, in referring to the creation of security to meet the deflation of currency, used the arguments of Law and the French assignats, and the greenbacks of America. The assignats failed because an attempt was made to make them conform to a gold standard. Further, the inflation did not take place in France, but in England, where the printing presses were kept going day and night printing counterfeit notes, which were smuggled into France by the hundred million. Similarly, the American greenbacks did not depreciate until they were repudiated by the Government.
– They won the Civil War.
– The same process of deflation went on. The loans for the Civil War were floated in the American dollar. They adopted the same system as is proposed here. They decided that there must be a reversion to the gold basis, and ?100 worth of bonds, owing to inflation, was reckoned to be worth §60 in gold. After the process of deflation back to a gold basis had taken place, these bonds were worth ?100 in gold. The national debt was thus increased 40 per cent. But the American greenbacks never depreciated until they were repudiated by the Government, which refused to accept them in payment of dues and taxes, and even after that happened they circulated at par freely throughout America for a number of years. . Any attempt in Australia to deflate currency down to a gold basis will be attended by the same woes and distress as characterized Lawism in France and the deflation of the greenbacks in America. It can only result in enslaving the masses of the people by giving economic domination to the largo bondholders. The Treasurer referred also to Russia and America, but those who urge a reform in our currency advocate somethingmore sensible than the turning out of notes likesausagesfroma machine. Listening to the Treasurerand the honorablemember for Perth (Mr.. Mann) talking about getting back to a gold basis, one would think that that basis was. a real standard, that it was like the foot-rule or the pound weight and never varied ; but ProfessorJevons states that the value of gold fell 46 per cent, between 1789 and 1809, that from 1809 to 1849 it appreciated 145 per cent., whilst between 1849 and 1874,, it fell again at least 20 per cent. It is the age-long superstition in regard to the invariable value of gold that enables the moneylender to work the thimble and pea trick on the people all’ the time. Imagine a tradesman with an elastic yardstick, which is 70 incheslong when he buys, and 30 incheslong when he sell’s, or using in his scales a leaden weight when he buys and a wooden weight when he sells. Would he not become wealthy ? Yet financiers resort to similar tricks in the manipulation of currency. They lend money and talk loudly about their patriotism. They stretch their elastic yardstick to its fullest extent so that the credit they lend is measured at 70 inches-; then they advocate a. return to a gold basis, and’ so contract the yardstick to35 inches, and thus get back twice as much as they lent. That is the motiveunderlying this bill,it is designed to assist thefinancial groups to deflateourcurrencyand thus double thenational debt. Itisthe pre- rogative ofgovernment toprovide not onlysomecurrency, but a sufficiency of currency to meet the needs of the nation. Currency is thename given tosomething, be it gold or anything else, that performs a definite economic function, namely, the effecting of exchanges. Anything that effects- exchanges in a.general sense is currency.If I can exchange a. piece of blotting paper for some of the economic needs’ of life, that blotting paper becomes currency. No Government can supply currency to the nation in sufficientQuan- tities unless that currency consists of something that is readily obtainable-. If there were2,000,000 menin Australia, and only 1,500,000 hats available,, there would be 500, 000 heads uncovered. Similarly, if £50,000,000isrequired to effect economic exchanges,and only £30,000,000 isavailable, weimmediately experience retrogression, with unemployment and all its attendant evils. Hence the only safe method is to have a scientifically controlled paper currency. All the physical scienceshave made wonderful progress, because therehavealways been definite invariable standardsor units to which everything could be lowered or raised. Should we have a. science of mathematics if the Government could say to-day that 2 and 2. make 4 and tomorrow that 2 and 2 make 5 or only 3½ ? A government which attempted to do that would be laughed out of existence. But that is precisely what is bein done when the Government attempts to get currency back to the gold’ standard. That is why the so-called science of economics is just a jumble of loose ideas. We have no definite unit of value or standard, and we never can have one while we use as a standard something that is ever rising and fallinglike the ocean tides. History proves this only too well. We have distress; one: man says it is- because of overproduction, andanother says it is because of under-consumsption. Both causes may be operating. To-day thecountry may be. enjoying a little prosperity, and industries are buoyant and employment fairly plentiful; then like a bolt from the; blue come depression andstagnation, followed by unemploymentand misery. Before we can have a scientific economic arrangement, we must have a definite invariable unit or standard. In all the sciences, the great.problem is to trace the cause of known effects. The honorable member for Calare (Sir Neville Howse)., speaking in regard to cancer, said, “ Tell us the cause,, and we shall betwo-thirds of our way towards thediscovery of the cure,.” So it is with economic diseases;, even a fifth-class scholar can state the effects of currency manipulation, viz., too much currency, high prices : too little currency, low prices. These effects are known to us all, but because of the pagan superstition regarding the gold standard, we have never been able to create any other scientific basis or standard. It is clear that to have steady progress in the affairs of man, we must have an invariable unit for economic measurements. Whatever the standard be, there must be always sufficient currency circulating tomaintain it. When private individuals areallowed toinflateor contract currency as they please, we can never have anything but ashortage. Let us then have a food basis for our currency. Food is invaluable, yet it gives a value to. everything else. A starving man will yieldall his worldly possessions for one meal. Therefore, food should be our basis for the fixation of a currency standard. I do not wish to be accused of advocating the issue of currency against foodstuffs. Such a proposal would be ridiculous; but we can get a definite invariable unit on the basis of some staple food. Take wheat, for instance. We could ascertain scientifically what is a reasonable price for the grower to receive. Suppose, for the sake of argument, that that price is 5s. per bushel. A committee of experts mayadvise that “with a population of6,000,000 people, £50,000,000 of currency is required’ to strictly maintain that price. The wheat pricewill belike a barometer, showing the state of the currency. For instance, an increase of populationwill be followed by a rise in the price of wheat, and an increase of currency willlogically follow unless somebody is to go short. Again, as the people’s economicposition improves!,and they are able to use currency forthepurchase ofmoreofthe comforts andpleasures of life, thebarometer will indicate the- need forstillmorecurrency more. The price of wheat wounds bemaintained, but the cost of thepeople’s food would neverrise because anytendency to high prices would be automaticallycountered by the issueofmorecurrency. In this way an invariable unitwould beestab- lished, andthecurrency wouldneverde- preciate ; it could never be inflated or deflatedexpect by the Government. The nation must control allcurrency, banking, and credit. It was theprerogative of ddespotic kings to issuecurrency, andveryoften they debased the currency to suit their ownends. Since thenwe have gonefrom despotisms and monarchies to democracy. The power thatonce belongedto theCrown has become the prerogative ofdemocratic governments. Somewise, butnot necessarilyjust,rulers in the pasthave jea lously guardedthispower, but the presentday governments of the. world have given it away for private institutions to play ducksanddrakeswith. Iwish to deal, in conclusion, with two othermatters. Currency is thecontrolling, the impelling, force in thenation. It permits the people to apply their energies to primary and secondary industries. Currency is the electric current, the motive power, of the nation. I carenot how many motor cars a man. may have if I control the supply of petrol”. I care not what expensive factoryormachinery a company or an individual mayownifI control the motive power thatdrivesit. I care not how wealthy a1 nation1 may be, how great its potentialities, or how extensive its natural resources-, if a small body of men have such a tight gripn on it that they can control its expansion. Such a body of men control that natron just as the people who supply electric current decide whether a factory shall operate or not. Those who have this tight grip upon our finances to-day are able to say whether our wonderful’ natural resources shall be developed, and whetherwe shall be forced tobuy goods from abroad. They decide whether we shall become a selfreliant nation or be tied to theapron-strings of nations in Europe or elsewhere. They control absolutely the economic policy of the country, and they act inaccordance only with their owninterests. The Treasurertold us that theCommonwealth Bank would publish the exchange and discount rates. That presumably is part of the deflation, scheme.The Commonwealth Bank, in short, is to operate like the Bank of England.. As, he talked so much about the gold basis, I presumed that he anticipated that the discount rate would rise and fall according to the amount of the gold reserve. In this connexion I issue a ward of warning. This practice of the Bank of England, was the outcomeofthe wonderful Bullion report, upon which a bill was passed by Sir Robert Peel in 1844’. Because the Bank of England raises orlowers the discount rate according tothe gold reserve, the Treasurer says the same system should beintroduced here. I invite him to consider thefollowingextract from a financial journal: -
Some years ago, during a period of some weeks,agroupof American financiers drew fromthe Bank of England sums equal in all to £11,000,000 in gold, and shipped it to New York. Prior to this operation thegamblers sold British securities heavily, and bought United. States; bondsandshearest. This transfer of £11,000,000 of gold caused a heavy fall’ in 325 of British representative securities, equivalentto £115,000,000, while the absorptionof goldin America causedacorresponding rise in American securities..
It was computed that the natural resources of England were worth £20,000,000,000. Because of the “ wise “ provision referred to by the honorable member for Perth (Mr. Mann), the removal by a few American gamblers of £11,000,000 from- a country possessing such immense resources caused a financial crisis, and 325 of British representative securities fell in value. The crisis caused unemployment and depression of trade. Why? If that £11,000,000 had been represented by goods, by the products of British factories, the result would have been buoyancy in Great Britain; it would have added to employment in that colin- try, and increased the output of its factories. But because the export was of gold, the effect was different. That is what a gold standard controlled by a few people does for the world. Many people speak of the necessity for maintaining the longestablished gold standard. When was it established ? Gold has been an international standard only since 1870. Before that it was purely a British currency. Great Britain had a gold basis of currency, and Franco a bi -metal basis. Bismarck, when Germany received her indemnity of £400,000,000 from France, turned the German basis of currency from silver to gold, and Italy and the United States of America followed shortly after. The argument that the gold basis is very old, and must for that reason be retained, does not affect me, because I know that the world managed very well without it. Between 1840 and 1870 the increase in the industrial development in Great Britain amounted to about 600 per cent. That was when there was no international gold standard. From 1870 to 1905, when the international standard was gold, there was relatively almost no progress. The worship of gold certainly gees back to pagan days, and while we continue to worship it we shall have the undesirable economic conditions found in pagan countries. On the one side we shall have those who are economically secure, and on the other those who are economic slaves.
Sitting suspended from 6.27 to 8 p.m.
– This bill is one of tho most important, measures that could be submitted to Parliament, and I hope that the Government will not regard the criticisms I am about to offer as indicative of a desire to embarrass Ministers, for I realize that, unless honorable mem bers can induce the Government to give my view something in the nature of favorable consideration, the interests for which I desire to speak are unlikely to receive the attention to which they are entitled. My keen desire is that the Government may reconsider their proposal, so far as the note issue is concerned, or, at any rate, try to obtain evidence as to what, the effect of the bill is likely to be on the trade and commerce of Australia. It is all very well for the Treasurer or his officials to endeavour to get information on the banking question, but it would bo far more satisfactory in the public interests if we appointed a select committee of this chamber to ascertain how Parliament could best legislate on banking so as to aid trade and commerce. Rather than indulge in patchwork legislation, due more or less to party differences, the desire of every honorable member should be to help develop the industries of the country, and we should call to our assistance the keenest intellects in Australia. One matter on which I desire to reproach the Government - and many previous governments are equally blameworthy - is the fact that once legislation lias been passed at the instance of what I might call a Socialistic party, no effort is made to repeal it, even when it is found to operate against the best interests of Australia. Believing that the note issue, as it is at present, is a grave menace to the future of this country, there is great danger in not repealing its objectionable features. Other statutes, such as the Arbitration and Navigation Acts, are open to similar objection. Notwithstanding any threat that may be made by the Leader of the Opposition (Mr. Charlton), Parliament should, without fear or favour, repeal legislation found to be opposed to the country’s best interests. I do not blame the Leader of the Opposition for threatening what he would do if he were entrusted with the reins of government, and if honorable members on this side of the Houe think any particular legislation bad their first duty is to repeal it.
– The honorable member is not game to repeal this measure.
– I am, in parts. Section 60p of the principal act empowers the Governor-General in Council to supersede the Notes Issue Board, and that power is retained in the present bill I invite honorable members to consider the position that might arise if unemployment were rife, and the Treasurer, desiring to make finance easy, in- structed the board to issue a large number of notes to the various states, or he supersededthe Board. . Such athing is quite feasible. If wo were legislating for war conditions, Parliament could be called together, and the necessary power could be obtained ; but at the present time there is no need for such a provision on the statute-book. The Notes Issue Board should have supreme power if we are to continue the present form of issue.
One of the first points that occurred to me in looking over the bill was the designation of” capital.” The bank is to have a capital of £4,000,000, with an additional £6,000,000 which may be obtained by loan raised by the Government. I cannot understand how money raised by way of loan can be classed as capital. Surely money borrowed by the Crown for the purpose of being lent to the bank must be a liability until the debt is discharged. “Mr.Maxwell. - Capital is always a liability to the shareholders.
– There is a difference between the £4,000,000 and the loan money that would have to be repaid.
– It is all capital so far the bank is concerned.
– I contend that it is not capital. That, however, is a matter that can be more appropriately dealt with in the committee than in the secondreading stage. Then comes the proposal to appoint a board of directors and this should commend itself to all honorable members. No matter how skilful or brilliant, or how versed in finance a man may be, there is always a danger, in one-man control, of the frailties that beset every human being exercising an influence which may be far frombeneficial to the community. The extraordinary manner in which the Commonwealth Bank was built up reflects the utmost credit upon the late governor, Sir Denison Miller; but even if he were alive to-day, and in full possession of his faculties, the need for a board of directors would still exist. Provision is required For a continuity of policy in the work of (he bank. Under the bill it is to remain a trading bank, although I believe it would have been better if, in the initial stages, it had been made a reserve bank. Seeing that it has come to stay as a trading bank, our duty is to legislate to the best of our ability to make it an institution worthy of the Commonwealth. With one-man control we might have a governor or director whose convictions urged him to foster, as much as lay in his power, primary production. On his retirement, however, there might be a director with a solid belief that the future of Australia depended on the building up of city interests, with the result that advances might be withdrawn from farming and pastoral pursuits and used in support of industrial enterprises. I am quite satisfied that it is essential to have a board of directors that will provide the continuity of policy necessary for t he best development of the industries of Australia. The Treasurer (Dr.Earle Page), in introducing the measure, pointed out that the act under which the Commonwealth Bank was constituted was designed to create a truly national bank. We have heard the expressions “ a national bank “ and “ a people’s bank “ : but we have had no clear explanation of what honorable members opposite really desire. I believe that their wish is that the Government shall, by legislation, place the control of bankingunder one government institution, thereby socializing the whole of the banking institutions of Australia, and conducting them under one head. If that is the desire of our friends opposite, the sooner we know it the better.We could well class the Commonwealth Bank as a national one if it were a reserve bank. I do not know how it can be claimed that the present institution is a people’s bank. There may be some members of Parliament and some newspapers who would class it as such, but. I do notknow of any substantial opinion amongst the general trading community of Australia that the Commonwealth Bank has assisted, up to the present, in developing the industries of this country to the same extent as have the leading private banks. Although I admire the splendid work of the late Sir Denison Miller, Iknow of nothing done by the Commonwealth Bank up to the present time which would justify one in describing it as a people’s bank, and I see nothing in the present bill calculated to make it a national bank.How does the Leader of the Opposition (Mr. Charlton!) , by his amendment, propose to make it , a people’s hank? Is itintended to get such control over theprivate institutions that one bank alone will control thewhole of the trade and commerce of Australia? mr.anstey. - The honorable member; before asking others to give him explanations, should explain what he means when he saysthat he wants tomake the Commonwealth Bank areservebank.
– I shall cometo that point later ; but if the honorable member looks at that portion of the Treasurer’s speech which deals withSouth African legislation, he willfindwhat a reserve bankmeans. The Treasurer said that the original intentionwastomakethe Commonwealth Bank a purely national bank, andthat the acthadfailed inthat purpose, : but that theamendments he proposedwouldenableit to achieve that end, and thus the bank -would ‘be the keystone of thefinancialare of Australia. “I have carefullyperused theBill. Beyondthe factthat thebank is tohavea board of directors,which will controlthe note issue,replacing the existing Notes Issue Board,andthat the Commonwealth Bank is to publishtherates at which the bank will discount bills,and theclause compellingthe trading banks to settle their balances through theCommonwealth Bank, I see nothing inthebill to inspire -thethoughtthatwhenit is passed the trading andcommercialconditions of the peopleof Australiaare likely tobe improved,or that a nationalbankwill be created.We shallprobablybehelpwig to build up atradingbank. Beforewereach the committee stage I hope tobe enlightened as to the desire of honorable membersin connexion with the proposal to make the CommonwealthBank a national or a people’s bank. Ithank the Treasurer for his lucid speech, andmoreparticularly for his summary ofbankingconditions in otherparts of the world. A careful studyof this should makehonorablemembers realize that the tradeand commerceofother countries whose bankinginstitutions deal with hundredsofthousands of pounds Whereour banks deal withhundreds of pounds,have beenbuilt up without political control orinterference. I am not referring to war periods. We can always have special legislation when there is danger of war ‘ There is no such need at the present time, andour legislation should be directed, not tomeet special emergencies, bat to stimulate our industries and bring about the development of Australia. What do we find from a study of the history ofbanking in other countries? Is theBank of England a government concern, or controlled by theGovernment?
– Yes, it is, in -war time.
– I am not talking of war time, when possibly we are justified in taking any risk, and may commit many blunders. We are now dealing with peace conditions.
Mr.West, - If government control of the Bank of England was good enough in war time, it ought to be good enough in peace time.
– That is where the honorable member makes a mistake.
– Why did the honorablemember for East Sydney ‘(Mr. West) ask for the repeal of all war-time restrictions’?
– The honorable member for Bass reminds me of the fact that the honorable member for East Sydney was most prominent in asking for the repeal of theWar Precautions Emulations. He did not want them unless they suited him. I am one of those who assume thatpeople with a business and commercialtraining know a little more abouttheir own businessesthan a parliament is likely to do. My longexperience in parliament andin administration has led me to believe that people outside parliament canconduct their businesses ten thousand times better than members of Parliament could conduct them for them, and that parliamentary interference in tradingconcerns leads to the depreciation and consequent ruin of those concerns.Nobank has a greater reputation than lias theBank of England. Although Great Britain haspassed through most severe financial tribulations owing to the heavy war expenditure, no attempt has been made to deprive that hank of any of itsgreatpowers.Itstillstands supreme asa hanking institution, and although GreatBritain’s debt is soenormous, and although the tradeof thecountryismarvelous incomparisonwithours,no suggestion hasbeen madefor putting the bankunder governmentcontrol.. There isa certainamount of government control over the Bank ofFrance, so far as the directors and censors are concerned, but it is a private institution, and is one of the great banking corporations of the world. The Reichsbank was a private bank until the recent war, when members of Parliament like my friends opposite secured control, with disastrous results such aswould surelyfollow if some of my friends opposite were in control of the Australian notes issueat a time when there was an insistent demand to provide employment for the unemployed; that is to say, there would be an issue of notes such as there has recently been in Germany and Russia. There is a national reserve bank in the United States of America, but the other banks are entirely free from government control. I hold the Treasurer a little to blame for the fact that he did not deal to the same extent with the banking institutions’ of countries whose conditions are similar to those of Australia. As a member of the Country party, whose keendesire it is that the interests of the primary producers shall be conserved, I think that the legislation he should endeavour to bring before this Parliament should be on the lines of that of Canada, or New Zealand,whose conditions are similar to tthoseof Australia. I shall endeavour to show how the banks of Canada function to meet the requirements1 of commerce and trade, and how they have proved of benefit to the industries of the dominion. Like Australia, Canada has special seasonal currency requirements for the disposal of her produce, and her banking laws are framed with an elasticity that enables the banks to finance with their note issue the exportof the country’s’ produce. I have surprising- charts showing the extraordinary seasonal demands upon the Canadian banks’. I do not propose to go fully into the details of the Canadian system-, which has already been exhaustively explained’ by the Treasurer, but I want to- impress on honorable members the fact that, under the Canadian law, both the dominion and the banks issue notes The banks must hold 40 percent. of their cash reserve in dominion notes, but they may also issue their own notes up to the amount of their unimpaired reserves, and’ also to the value of’ the dominion notes and gold they hold’, and upon which they pay taxation. If the suggestion I am about to make be carried out, there will be no loss of revenue to the Commonwealth. Absolute protection will be afforded to the public: by strict legislation, but at the same time there will be that elasticityof finance which is essential to thecommerce of the country. Mr. JosephF.Johnston,oftheNew York University SchoolofTradesand Accounts, a recognized authorityin the United States of America, has written a book on the Canadian banking system, from which I have copied a chart which shows the seasonal requirements of the people of Cauada in connexion with their banks’ note issue. The period covered is fourteen years old,, but I believe that the position to-day is exactly the same as it was then. The chart shows with marvellous exactitude each year the extraordinary seasonal demands which occur in Canada as to an equal, if not greater, extent in Australia. There is an almost normal note circulation from January to July in each year. In August, there- is a large issue of notes; for the. purpose of financing, the wheat harvest, but in nearly every instance these notes are returned and cancelled in January of. the following year. In 1900,. the paid-up capital of the;banks inCanada was $63,000,000.. In July of. the following year the note circulation was$48,000,000, in October it was $57,000,000, and in the following January $49,000,000. In 1902, the note circulation was $52,000,000 in July; $60,000,000 in October, and’in the following January $55,000,000. In the next year, the figures for the respective months were: $57,000-000; $65,000,000 and$56,000,000. In 1908, when the capital of the banks had increased to$96,000,000, the note circulation was as follows: - July, $67,000,000; October, $84,000,000 January, 1909,$66,000,000. The Canadian conditions are almost identical with ours, and it is highly desirable that we should: have similar elasticity of currency to meet outs seasonaltrade and commerce: requirements. The Note Issue Board’s; policy shows that the board has not realized what theAustraLian seasonal requirements really are. I trust that honorable members’ will examine the chart I have prepared, and that the Treasurer will’ also give some attention to it. In almost every year the note circulation of Canada varies f rom July to October, butbecomes normal in January. A slight inflation is bound to occur at certain periods of the year, but the banks may be trusted to sec that it is not serious, for they are required to pay taxation on the notes they issue. They take all possible steps to cancel the extra notes as soon as possible after they are issued.
Mr.Maxwell. - It is practically an automatic arrangement.
– That is so. I regret that I have not been able to obtain definite particulars ofthe variations that have occurred in the Canadian note circulation since 1910, but the regularity of l.he variations in the years that are shown on my chart is remarkable. I recommendhonorable members to obtain that book fromthe library and read it. Canada’s note circulation has shown an increase each year which corresponds with the increase in her trade and commerce. That, of course, ought naturally to occur. Which policy is most likely to be favorable to the country, placing the note issue underthe control of a government bank, a semi-political institution, or under trained experts ? I obtained recently from the Commonwealth Statistician a return showing the population and the imports and exports of Australia, New Zealand, and Canada, and also of the notes in circulationon 30th June, over a period of years. In considering these figures, honorable members should recollect that the figures for Canada, which are given in pounds sterling, are for the period when the note issuewas normal, and not when it reached its apex in October or November. In 1900, when Australia had a population of 3,740,665, and a trade of £87,845,000, the notes in circulation totalled £3,762,286, or £1 0s.1d. per head ofthe population. In the same year, New Zealand had a population of 763,594, a trade of £23,892,257, and a note circulation of £1,361,355, or £1 15s. 3d. per head. The Canadian figures that year were : - Population, 5,322,000 ; trade, £73,129,464; note circulation, £9,570,362, or £1 16s. per head. In 1910, Australia had a population of 4,367,405, a trade of £134,505,501, and a note circulation of £4,563,907, or £1 0s.11d. per head. The note circulation per head of the popula tion of . New Zealand in that year was £1 12s.6d., and of Canada, £2 8s.10d. Those were the days of gold currency. I shall now quote some figures which relate to the post-war period when notes were legal tender. In 1920 Australia hada population of 5,360,462, her trade was valued at £24,797,801, and her note circulation was £21,627,117, or £4 0s. 8d. per head. The figures for New Zealand for that year are: - Population, 1,192,620; trade, £108,037,774; note circulation, £7,890,418; or £6 12s. 4d. per head.The Canadian figures are: - Population, 8,631,475; trade, £523,649,628; note circulation, £50,959,768; or £5 18s.1d. per head, as against Australia’s £4 0s. 8d. per head. I stress those figureson account of complaints that have been made ofthe inflation of our currency. There may have been some inflation but it has not been of a serious nature. As the trade and commerce of a country grows its note issue should expand. That has been the experience of practically all countries. Canada, in 1900, had trade worth £73,129,464, and a note circulation of £9,570,362; in 1910, when her trade had grown to £137,485,538, her note circulation totalled £16,874,390 ; and in 1920 the respective figures were £523,649,628 and £50,959,768. It is customary in almost overy country to expand the note circulation as trade increases, but Australia has not adopted that principle. I should like to know why she has not done so. I think all honorable members agree that we should get back as speedily as possible to the basis of a gold currency. We require security against undue inflation or deflation of currency; provision for its increase to meet expanding trade; elasticity to meet seasonal requirements, and strict legislative provision to secure its stability. Will these result from the passing of this bill? It seems impossible for us to consider at present a return to the gold standard. Until Great Britain and a majority of the other leading countries of the world are in a position to return to it we cannot. Gold is at a premium now, and we cannot afford to allow it to go out of Australia until other countries will reciprocate. For some time to come a gold currency will be impossible, and we must consider other means to obtain a stable and anelastic currency which will ensure safety to the public. The Treasurer would be well advised to take expert advice as to whether it would be desirable for the Government to purchase all the gold produced in Australia. I shall not express an opinion on the matter, but it is well worth considering whether such a policy would assist to relieve the exchange position and tend to develop the country. There is just as much danger from inflation as from deflation of currency, and we ought to take what steps wo can to prevent undue variation. Are we more likely to get a stable currency by placing the note issue in the hands of a Government-controlled or semi-politically controlled board than by giving it to people who thoroughly understand financial affairs? I consider that we shall be acting wisely if we adopt a system similar to that of Canada, provided that the Government has sufficient safeguards to meet any emergency that may arise. If the issue of notes is left to the private banks, subject to a suitable measure of official control, the progress of the country will be more satisfactory than it has been Section 60p of the original act should, in my opinion, be repealed immediately. It gives power to the Government to issue a proclamation by which it may supersede the Note Issue Board and take full control of the note issue. I am sure that the Treasurer (Dr. Earle Page) will not misunderstand me or think for amoment that I am casting any reflection on him when I say that there may be Treasurers who, in a time of stress, would take advantage of that provision. If the Note Issue Board, in such a circumstance, would not issue as many notes as a Treasurer desired, possibly to relieve unemployment, or to assist some of the states to carry out a public works policy, he might cause the Government to issue a proclamation to remove control of the notes from the board and proceed immediately to inflate the currency. The provision which makes that possible should be repealed without delay, and if a crisis occurred in the affairs of the country Parliament could bo asked for, and, I am sure, would grant, power to meet it. We have had inflation of currency in the past. When the war started a huge issue of notes was made to provide large sums of money for the states. If honorable members will refer to last year’s budget statements they will find that an issue of £17,000,000 was made to the states. At that time £22,000,000 worth of notes was issued, as a direct result of political influence. That may have caused an inflation of prices. There was then ample scope for the employment of every ablebodied man, and there should not have been any necessity to make unemployment doles. That £22,000,000 was loaned to the states and to the Commonwealth. If honorable members peruse last year’s budget they will find that in the funds of the Commonwealth there is an item of £3,000,000, which is classed as a credit. I admit, of course, that the present Treasurer (Dr. Earle Page) was not responsible for that action. Still, it furnishes ample proof of what can be done when political influence is exerted upon those whocontrol the issue of notes. Honorable members are aware of what has happened in Germany and Russia. We do not want to have the experience of those countries. I want to make it impossible for such conditions -to be brought about in Australia. Subsequent to the issue of those notes, great depression was felt in trade. In1920 Australia’s trade amounted to £248,700,000, while the note circulation was £21,600,000- £8.2 per cent., or £4.8 per capita. In Canada in that year the trade amounted to £523,000,000. while the notes in circulation totalled £51,000,000, a percentage of 9.34. In New Zealand the trade amounted to £108,000,000, and the note circulation to £7,900,000, a percentage of 7.3. In 1921 Australia’s trade increased to £295,000,000, while the notes in circulation showed an advance to £23,924,000. The following figures will show that there has been undue deflation in the note issue, considering the increase in trade : -
It will thus be seen that whereas in 1920, with a trade totalling £248,000,000, the note issue amounted to £57,000,000, in 1923, with a trade amounting to £249.000,000, the note issue was £5,000,000 less. Let us deal with the matter on another basis. In 1915 the deposits in our bank totalled £169,000,000, white the notes in the hands of the banks amountedto£29,000,000, a ratio of 17.9. In 1922 the deposits totalled £249,000,000, butthe notes amounted to only £24,000,000, a ratio of9.9. In that period the deposits increased by £79,750,000, while the notes decreased by £4,240,000, or 8 per cent. That, to my mind, indicatesundue deflation inthe last few years. I make no reflections on the Note Issue (Board. I believe that the members ofthat board consider that they are acting in the bestinterests of Australia, and thatthey are keenly desirous of getting back to a gold standard. We must,however, recognize firstthe impossibility of doing that at once, and, secondly, the very grave danger there is of anundue deflation. Those whohavelarge accumulations of war bonds maymakean undue profit if deflation is brought about by the withdrawalofnotesfrom (circulation. Wehaveto consider means for getting back gradually totheold conditions.; the processmust beaslowand acareful one. A suddendeflation would result in un- paralleled losses tothecommunity. A big inflation, theother hand., would bring about acorresponding increase in the prices of allcommodities, and that would bedetrimental to the best interests of the Gauntry and to the poorer classes especially.
Mr.Gabb.. -Does the honorable member wish the position to be as it was in 1921?
– ‘No ; but if we had had the same note issue as we had in 1921 the difficulties which confronted us last year probably would nothave been encountered. ‘My duty is to see that the interests of the primary producers are conserved. Theyhave to compete in the marketsof the would., and it is necessary to ensure that as far as possible reasonable conditions shall apply when they are marketing their produce. At present the primary producer hasto “bear an export dutyof (from . 3 to3½ per cent. onthe produce he sends to markets outside Australia, becauseof theadverse exchange. This legislation will not affect the matter of exchange. The adverse conditions operating against Australia,Ibelieve, are largely due to the borrowing that “has been indulged in. Year after year, we have referred to the grave danger of both the States and the Commonwealthbor rowing such large sums of money.This billdoesnotdealwith exchange ; but we can,nevertheless,try to afford some protection totheprimary producer, so that overseabuyerswhocome to Australia with good letters of creditcan go on the marketand purchase our products. I shall quote instances of traders who have come here preparedto purchase our products, andhave been unable to do so. Theyhavehad first class letters of credit, but thebanks could not finance them because of the shortage ofnotes. No definite arrangement has yet beau made for a commencement with this year’s wool sales. if believe that thoseconcerned are waiting for a pronouncementof the Government’s intentions regarding finance. Several Japanese wool buyers were compelledtostand aside from the February wool sales. They had letters of credit amounting to £200,000. One of the chartered banks offered to lodge £200,000 in gold if the Notes Issue Board would advance £200,000 in notes, on the condition that when the notes were returned the gold would be handed back. In other words, that bank was willing to give gold as security in order to finance the buyers.
Mr.E.Riley.- -Where was the gold ?
Mr.GREGORY.- It was offered from San Francisco throughthe Bank of New South Wales.
– Why could the bank not do business if it had the gold ?
Ma-. GREGORY. -Gold then was at a premium in the market.; £100 worth of gold was worth £113 in notes. The issue of this £200,000 worth of notes would not have had an adverse effect. When they were returned to the board they could have been cancelled. The same experience befell the Trench buyers. I could quote from the press reports stating that certain wool buyers from Prance desired to do business, but were unable to obtainthe necessary credit. Notes which I have extracted from financial journals show that the last wool sales at Brisbane dropped 10 per cent., because some buyers could not negotiate credit, eventhough ‘they had excellent backing from London.Isit an extraordinary thing that when we are endeavouring tomarketour products weare unable toprocurenotes to negotiate sales, although the credits furnished arenot opento question? The chartered banks are prepared to accept credits from Great
Britain, France, United States of America, New Zealand, and Japan, but they are prevented from doing so.
– That does not speak well for private enterprise.
– This was not the work of private enterprise. The honorable member is making a stupid blunder, and just the blunder made by the semipolitical ‘body at present controlling the note issue. I have given statistics showing that although deposits increased by millions the percentage of notes decreased to -an enormous extent. The banks must retain a certain quantity of notes and of gold to meet -calls which may be made upon “them by their depositors. In the cases to -.which I ‘have referred those for whom the banks wished to do business had undoubted credit, and it is an extraordinary thing that the business which outsiders wane prepared to do with Australian producers was prevented! by the action of the Notes Issue Board. My time is -drawing to la close, or I would quote what has been said in .regard to these matters by Mr. Watson, a great banking authority .of New ‘Zealand. We cannot .ask for legislation in this country such .as has been enacted in New Zealand, because the hanks there issue their own notes. We have the Commonwealth Bank here, and a Commonwealth note issue, and that .is a position which we must recognize. But we could adopt the Canadian system. We could issue notes similar to the -Canadian Government issue - that is up to 40 per cent, of the capital of the banks - and leave the whole question of the extent of the issue of additional currency to the banking corporations, subject to the most careful restrictions that could be devised by this Parliament, to secure the elasticity necessary for the purpose of financing the industries of the country. There is not the slightest doubt that political pressure induced the Notes Issue Board to issue £4,200,000 of notes recently, which greatly relieved the position. I do not think that .it is wise that the Treasury should be given such .a power. T suggest that the Government should reconsider the whole question. It might, agree to the appointment of a select committee of this House to go into it. The information which the Treasurer receives from his department is different from that which he would get if he asked for evidence, not from bankers alone but from the commercial men of Australia. We should get the best brains we can command -to advise what it is best to do for the purpose -of building up the (resources of this .country. I am sure that honorable members opposite would be -glad to see the industries of Australia progressing. The question is whether it is better that the note issue should be controlled by the Government or by a semi-political board, -or that the practice of .other countries should -be adopted, and the note issue controlled by the banks. We should take evidence on (that question, .and consider -whether the best interests .of the country would not be served by a .drastic change in the present policy. I .hope that legislation will] be introduced it© give effect to such a change.
.- I. want to ask honorable members to go back to the bill, the intention of the ‘Government in introducing it, and the amendment submitted by the Leader of tho Opposition (Mr. ‘Charlton). The Government has introduced a measure to amend the Commonwealth ‘Bank Act. Although so far as I have been able to judge there is very little fault ‘to ‘be ‘found with the provisions of the -existing act, tho Government proposes to alter the management of the bank. This is the most serious proposal ever submitted in connexion -with banking ‘in ‘this country, and it is fraught with serious consequences to the future of the ‘Commonwealth Bank. Those who established that -bank -have, so far, reason to be proud -of their <work. That view is held by the people generally. The intention in the minds of those who introduced the -existing Commonwealth Bank Act -was to create -a national bank. If the bank is not now all that the people would desire, and the existing act does mot contain all ‘the machinery necessary to make it a Teal national bank, the fault lies with this (Parliament. W-hen the Commonwealth Bank was established the -private bank system was in operation. In the early days private ‘ banks may, perhaps, ha-ve been in a position to meet the requirements of the people, but when it was proposed to -establish the Commonwealth Bank, all who took an interest in banking institutions were agreed that the time had arrived for an alteration in ou-r banking system. The alteration was made by the establishment of the ‘Commonwealth Bank. The object of the Government and their supporters seems to be to minimize the importance of the Commonwealth Bank and to injure it in every possible way. The provisions in this bill for the appointment of a board of management for the bank are really the crux of the measure. If they are proposed with the object of putting the national bank into the hands of men whose concern will be, not the interests of the people but their private interests and the interests of their friends, no better means could be devised for the purpose. The Government proposes a board of management to consist of two persons associated with manufacturing industries or commerce, two associated with agricultural, pastoral, or other primary industries, and two having a knowledge of currency, and declared by the Governor-General to bechosen because of that knowledge. What that knowledge is it would puzzle aPhiladelphian lawyer to explain. I do not think any person is likely to live on this globe who will be able to say what it really means. So far the Treasurer has said nothing to justify confidence in the board which, under this bill, it is proposed shall in future manage the Commonwealth Bank. The exercise of the banking power may make or break a nation. It may reduce men, women, and children to a deplorable condition, and may retard’ the progress of any country. This parliament is charged with the conduct of national affairs, and I believe that if we properly look after its financial affairs we may in Australia lay thefoundation of a nation whose prosperity will be without parallel since the world began. That is an ambition which can be achieved, but I do not believe for a moment that it will be achieved if we put the national bank into the hands of people who will have no higher ambition than to serve their own private interests. The Leader of the Opposition has submitted an amendment in which he proposes that the management of the Commonwealth Bank shall be placed in the hands of men who understand banking, who will be removed from outside influences, and whose salaries will be paid to them to watch the interests of the bankand its expansion as a national bank, such as it was intended to be. 1 do not know how any honorable member on the other side can find fault with the amendment. It may be that they are now so ashamed of their conception of what the managementof the Commonwealth Bank should be thatthey are- afraid to admit the mistake they have made, and would penalize the people of Australia rather than confess their stupidity.
Mr.Gabb. - I call attention to the state of the House. [Quorum formed.’]
– The board of directors of the Commonwealth Bank, as proposed by the Government, will be composed of financially interested persons. The appointment of financial experts to the board as proposed in the amendment moved by the Leader of the Opposition, however disagreeable it may be to the Government, shouldbe agreed to by honorable members on both sides. Wiser men than those of the Ministry have acknowledged their mistakes, but unfortunately for Australia this Government, having agreed to a certain course of action, intends to pursue it to the bitter end, no matter what disaster may result to this country. If I were to submit the amendment moved bythe Leader of the Opposition to a meeting of electors in the Sydney Town Hall, I am quite satisfied that, excepting a. few outside cranks supporting the Government, the whole audience would be in favour of it. Sydney contains more people who understand the difficult question of finance than does any other city in the world. Not one largo institution dealing in commerce, banking, or insurance, not even the Colonial Sugar Refining Company, is managed other than by one man, who, in turn, is dependent upon experts in charge of its operations. The Colonial Sugar Refining Company is managed by Mr. Knox, and the experts employed by that company to further its interests are not even allowed to mix with the experts of other commercial houses. The late Sir Thomas Dibbs was manager of the Commercial Banking Company, Sydney, for over 50 years, and if one of the directors of the bank had attempted to interfere with his administration he would have been politely shown out of the front door of the institution. Sir Charles McKellar, M.L.C., one of the members of the board of directors of the Bank of New South Wales, would not interfere with the management of that institution. On one occasion I questioned him concerning the raising of money in Great Britain, and he told me to interview the manager, since he had nothing whatever to do with the operations of the bank. Sir Alfred Meeks went to England to establish a branch of the Australian Mutual Provident Society in Thread.needlestreet. London. As a member of the board of directors he refrained from interfering with the operations of the society. The late Sir Denison Miller, when in control of the Commonwealth Bank, was very fortunate to have tho support of an excellent staff to instruct him in the management of the bank. Tho Treasurer himself is dependent upon the staff of the Treasury, who frame his speeches and compile the tables of figures that are from time to time placed before this House. Tho members of the Ministry are incompetent to administer the affairs of this country. Their actions are hampered by outside influence, and Australia is consequently in a sorry position. However, I am confident that a change of government will soon take place. The Queensland National Bank, at one time, was in straitened circumstances, but recovered, owing to the determined efforts of the manager, Mr. Ralston. One gentleman, who was a director of the Bank of New South Wales, the Colonial Sugar Refining Company, the Australian Mutual Provident Society, Burns, Philp and Company, tho Sydney and Suburban Hydraulic Power Company Limited, and other companies, while on a visit to England for twelve months, was also a senator of the Commonwealth of Australia. One can imagine tho control he must have exercised in the management of those institutions. Let me explain why directors of companies are called guinea pigs. If a person wished to float a company for the manufacture of patent pills, in reality made of rubbish, he would obtain the consent of well-known men to be appointed to the board of directors, at a fee of, say, £2 2s. per sitting. In the aggregate they would receive £400 or £500 per annum in return for the privilege of publishing their names as directors of the concern. That was the usual practice resorted to when floating gold mines and other ventures. Sir Charles McKellar is a director of the Bank of “New South Wales, the Colonial Sugar Refining Company, and tho Australian Mutual Provident Society. Persons appointed to a board of directors, although ornaments, are very useful individuals to their friends. I am not making this accusation against the persons whose mimes I have mentioned. Sir Thomas Hughes wa3 interested in a brewery, an hotel, an insurance company, a newspaper, and two banks. It is proposed that such persons as I have mentioned should be appointed to the board of directors of the Commonwealth Bank. The honorable member for Macquarie (Mr. Manning) stated last Friday that he knew all about the banking business owing to information received by him from a director of n certain bank. The honorable member for Perth (Mr. Mann) said practically the same thing, and no doubt he supports the Government in its action, because he will be able to interview members of the board in order to further the interests of his friends. We should permit nothing of this sort to occur. The men controlling the operations of the Commonwealth Bank should be in the same position as is the Secretary to the Treasury. He is a Crown servant, with tho interests of the Crown at heart. How can any man serve the interests of both the bank and a private institution ? If a man is the chairman of directors of an insurance company, drawing, say, £4,000 u year, he will serve the interests of that company rather than those of the bank. It is only reasonable to expect that. My object is to prevent men from being placed in a position where they will have the opportunity to serve their own interests. Men with banking experience should have charge of the bank’s operations. There will be plenty of work for them to do. Wo are all interested in the success of the bank, because we are all shareholders in it. I want to see the bank so managed that every shareholder will reap some benefit from its operations. Credit is essential to commerce. Because of that, the system of payment by cheque was inaugurated. Prior to the introduction of that system, silver was taken from London to ‘pay for goods purchased in tho East. Large firms, such as Anthony Hordern’s, or Farmer’s, in Sydney, or similar big establishments in Melbourne, do not invite outsiders to their board meetings. And in the conduct of the Commonwealth Bank we should not permit merchants and others to become acquainted with the details of its operations. Every one of these persons, if possessed of any ability at all, would be able to make a fortune in three year,?. Do honorable members think that they would attend the board meetings, and acquire information, and yet not take advantage of it ins their own interests ? In any case, what do some of these men,, who are likely to be appointed, to’ the board, know about banking:’ A. person who.’ wishes to have a tooth, drawn does not go to a stonemason, hut. tot a dentist. And in appointing directons to control the Commonwealth Bank,, we. should obtain men. connected with banking- institutions. Men like Mr. Kell, the present acting manager, should be placed in- charge of the institution, and they should be removed from any possibility of dishonesty. Tho apathy of some honorable members towards this important matter is deplorable If’ it i& necessary to borrow, money in: Loudoun-, that business should be conducted through the Commonwealth Bank. Instead,, it is done through- some firm of stockbrokers.. In course of time,, these brokers become influential, and possibly some of them receive- knighthoods. When, in 192.1,. a. loan, of £5,000,000 was floated in London, it was floated at £95- instead of ail; par. Tho cost of flotation was £166,303. We received £.4,75-0,000, whereas at the expiration of the’ term of the loan - forty years - we shall have paid £11,000^000 in interest and principal. Surely the tune- has arrived when this method of conducting business- should cease. The State- Government of Victoria has dome its utmost to prevent the Commonwealth Bank from having anything to. do- with its financial transactions. Nor isi the- business of the New South Wales Government conducted through that institution.. The1 whole of the savings^ bank operations: of Australia should be conducted by the national bank. To-day, there- are’ fourteen trading banks in Australia1, with fourteen- head’ offices, besides- branches in- different towns. In one fair-sized1 town in; New South Wales, which I visited- recently, I saw three banking- establishments ©lie of them was- a magnificent building, which1 I thOT.Tgh.lj was an archbishop’s palace. I crossed the1 road, and found a building of the size of Menzies’’ H’otel!, in Melbourne. It was another bank The offices of the third bank were almost as big as– the Commonwealth offices in Melbourne. Expenditure- of that nature is unnecessary. If there were but one bank, there would not be necessity for the heavy expenditure now incurred, the people would be able to conduct their banking business to greater advantage, while better use could be made of their money, and we would not have to borrow in London. Since 1913, no Canadian loan has been floated abroad. During the war Canada raised £400,000,000 within her own territory, and lent £250,000,000 to the British Government. The interest on that £250,000,000 will pay the interest on her war debt. Australia had the same opportunity, but failed to avail herself of it. One-third of Great Britain’s war expenditure was met out of revenue, but not one penny of Australia’s war expenditure was met in that way. It all’ came from loan. Over £80,000,000 of borrowed money was spent in Australia in less than one year; and because of that expenditure there are many wealthy men to-day in this country. The time is coming when there must be an alteration in our- banking system. I want, if possible-, to impress on- members of the Government .the error’ of their present proposals. I do not charge them with having introduced the measure for party purposes, but I understand that on the 26th Judy there will be a meeting of the Country party;-
– Order ! There is no reference to that matter in the bill.
– No, Mr. Speaker, but I want to point to, the possibilities arising out of the Government, proposal.
– I must ask the honorable member to confine- his remarks to the motion and the amendment…
– The- amendment is- intended to prevent those who will’ take- part in the conference from having anythIng to do with the control of the bank.
– >That has nothing whatever to do with the question before the Chair.
– I have endeavoured to keep within the scope of the bill, and I have not discussed the pros and cons of the economic position and its relation to our banking system. The Government proposal’s will not meet with the approbation of the people. Amongst other communications on this question I have received a letter- from a gentleman- prominently associated with shipping and finance. Referring to the constitution of the proposed board, he says it must be apparent that if men engaged in competitive pursuits are appointed, the knowledge they gain of their competitors’ affairs must necessarily give them an unfair advantage in the conduct of their own businesses. For that reason, he submits that the Government proposal for the constitution of the board should be abandoned. I am quite sure that the people would prefer to do business with our national bank if they were assured that it was controlled by men who understood banking, and who were exclusively engaged in the service of the bank. A good deal has been said during the debate upon the note issue. I well remember how honorable members representing tho interests of the parties now supporting tho Government ridiculed the proposals of the Fisher Government, suggesting that the output of notes would be almost as mechanical as the production of sausages, and with what dismay they viewed the prospect of a Labour government ever having control of the note issue. By no stretch of the imagination could the proposals then made by the Fisher Government be compared with the intention of tho present Government with regard to the note issue. I am not wedded to the idea of the control of the note issue by a board. The Government has not attempted to deal with the question of exchange in a satisfactory manner. In tho course of an address delivered recently, the honorable member for Martin (Mr. Pratten), who has lately become Minister for Trade and Customs, advocated tho cessation of borrowing abroad in order to improve the financial position of the Commonwealth. Subsequently in conversation I told him that there would be no alteration in our financial policy until wo had a change of government. At that time this bill had not been brought forward, and in view of its many defects, 1 say now that the Government must take full responsibility for the measure, which, I feel confident, will not do what is expected of it. The Treasurer (Dr. Earle Page) had a good deal to say about tho banking arrangements in other countries. He quoted the systems adopted in Great Britain, Canada, Africa, and many other countries. Is he net aware that the Labour party was the first party to advocate the establishment of a national bank? We do not want to follow any other country in this matter. 
We ourselves created a precedent in this matter many years ago, and we should now go further in the ‘ development of our national bank. The reserve bank in the United States of America is a valuable institution, differing in many respects from our own system, which merely relieves private banking institutions of the necessity to keep in reserve large holdings of liquid assets. A great deal more could be done in the way of developing our primary and secondary industries by the application of commonsense methods to the operations of our national bank, and could be done without in any way creating a panic. By intelligent handling of our national debt out liabilities could be reduced. Thus our friends in the corner, representing country interests, would be assisted in all the ramifications of their business as primary producers, and at the same time we could extend valuable aid to our secondary industries. In Germany prior to the war, trading or manufacturing concerns whose credit was temporarily lowered, were able to obtain financial help from tho Government, on the basis of goods sold on bills of exchange. Under our present system of banking it is not possible to render the same assistance in Australia, but I trust that some action will be taken to improve the position. The appointment of a board of management will not necessarily safeguard the interests of the people. Many years ago, the directors of a Glasgow bank were gaoled for having substituted lead washers for bullion in their strong-room. A great deal of misery was caused through the failure of -that bank. We have had the same evidence of imprudence in banking methods in Australia. I remember in 1903 travelling, with a man interested in finance, through Grafton, the district now represented in this House by the Treasurer (Dr. Earle Page). My companion, who was charged with the duty of inquiring into the banking position there, found that his bank had advanced as much as £42,000 on certain properties which actually were not then worth £42. The amendment submitted by my leader (Mr. Charlton) should remove that danger, because the directors would be required to devote the whole of their time to the business of the bank, and, therefore, to the interests of the country. The Government proposal will not bear investigation. There is nothing in history to justify the Government’s proposal. I know that the Government is haunted by the thought that this bank was established by the Labour party, and it is anxious to take from us the credit that is due to us on that account; but nil the ingenuity of honorable members opposite will not blind the people to the fact that the Labour party created the bank, and that if it had. been enlarged as we intended, it would be lo-day a bank of reserve, and a still greater credit to Australia. It would function for the general benefit of tho Commonwealth, and the exchange difficulties could be tackled in a way that is not possible under present conditions. If the Commonwealth Bank were given charge of exchange operations in London the people of the Old Country would’ applaud us for conducting our business in such . a sensible way. My criticisms have no destructive aim; they are intended to be helpful and constructive’, and if honorable members opposite will place the welfare of the nation first, they will realize that this bill is fraught with a great deal of danger. Nothing would give greater pleasure to the Leader of the Opposition and his supporters than that they should have the opportunity of assisting to give to the bank a truly national character so that it would be better able to ensure better control of the finances of the Commonwealth. We are opposed to placing the management of the bank in the hands of private persons, for history warns us against what may be expected from such a policy. The House is called upon to make a most important decision in regard to this bill, for upon the future operations of the Commonwealth Bank depends the relief of the position in which Australia has been placed by the mismanagement of those who held the reins of government during the war. No other country in the world has greater productive capacities and possibilities of prosperity than has Australia. All that it needs is that its finances be placed upon a sound basis, and if the Government will not adopt the suggestion of the Leader of the Opposition, God help the country The creation of a bank of reserve and other extensions are minor considerations compared with tho necessity for placing Mr. West. the control of the bank in the hands of independent men who will realize an-d promote its national aim. I have appealed to honorable members to realize the seriousness of the position, and if I have failed to impress them, I have at least the satisfaction of knowing that I have done my duty. If they neglect their responsibility the people will eventually punish them, but in the meantime serious damage may be done. Over £405,000,000 of money is earning nothing. At the same time some of the states are appealing to this Parliament for financial assistance ; yet no attempt is being made by the Government to enable the bank to become the national institution which the Labour party has always intended it to be. We never contemplated that any Government would attempt to emasculate the bank in the cruel fashion that this bill proposes. I hope the Government will agree to some of the alterations I have advocated, and I assure honorable members opposite of the cordial assistance of honorable members on this side in any endeavour to place the bank upon a broader and sounder basis, so that it may play its proper part in furthering the prosperity of the Commonwealth.
Debate (on motion by Mr. Whitsitt) adjourned.
NORTHERN TERRITORY CROWN LANDS BILL.
Bill read a third time.
House adjourned at 10.12 p.m.
Cite as: Australia, House of Representatives, Debates, 2 July 1924, viewed 22 October 2017, <http://historichansard.net/hofreps/1924/19240702_reps_9_107/>.