12th Parliament · 1st Session
Mr. Speaker (Hon. Norman Makin) took the chair at 11 a.m., and offered prayers.
Remarksof Judge Dethridge
– Has the Prime Minister read the newspaper reports of observations made by Judge Dethridge in the Arbitration Court, in the course of which he discoursed on economic realities, and introduced the name of the Prime Minister? Will the right honorable gentleman obtain from Judge Dethridge the actual text of his observations in order that, if necessary, appropriate action may be taken by the Government?
-The newspaper reports of Judge Dethridge’s remarks vary considerably, and I am ascertainingwhat was actually said in regard to myself.
– by leave - In Smith’s Weekly, of the 7th May, ap pearedan article relating to the arrival of nine American mining experts under engagement to the Mount Isa mine, and asserting that the Acting Minister for Trade and Customs (Mr.Forde) was responsible for their admission. I desire to put the facts before the House. Those miners arrived in Sydney on the Sonoma on the 6th March without my department having any previous knowledge that they were coming to Australia. When they were interrogated by the customs officials, acting us agents for the Home Affairs Department, their replies were unsatisfactory. Some of them stated that they were tourists, but as they had in their possession not more than twenty American dollars and £10 in English money, they obviously were not touring. When the facts were communicated to me, I ordered that they should be detained on board the Sonoma pending inquiries by my department. The management of the Mount Isa mines represented that the men were shift bosses, with special knowledge of the caving and grizzly system of mining, in which they would instruct Australian workers.From my acquaintance with mining, I knew that that systemhad not been operated in Australia, but to make sure that the new arrivals were not displacing Australian miners, I communicated with Mr. Fallon, president of the Australian Workers Union in Queensland, who was thenat Mount Isa. I received from him the following reply -
Have investigated the position, and find that Australian experts are not available. I recommend that Americans on Sonoma, and referred to in your telegram of yesterday, be allowed to land. Men will be employed as experts to teach Australian miners new methods.
In view of that assurance that no Australian workers would be displaced, and that the new arrivals would teach a system of mining of which the members of the Australian Workers Union have had no experience, I issued instructions that they be allowed to land. The Acting Minister for Trade and Customs had no concern in this matter; the whole responsibility for these nine experts being allowed to land rests upon myself.
. - by leave -I much appreciate the explanation given by my colleague, the Minister for Rome Affairs. It will correct the misrepresentation that was published in Smith’s Weekly. Action was taken by the Minister for Home Affairs under the Contract Immigrants Act of1905, which is wholly administered by his department. For the sake of convenience the collectors of customs act as executive officers in administering the act and take their instructions from, and communicate direct with, the Department of Home Affairs. Neither the Minister for Trade and Customs nor the Comptroller-General of Customs has any authority to intervene in any matter covered by the act. Therefore, the statement in Smith’s Weekly regarding my responsibility in respect of the nine American experts is entirely unfounded.
– The wireless programme broadcasted from 3LO on the 30th May included a minstrel entertainment in the course of which these words were used -
We will show these Trades Hall Bolsheviks
They will have to abandon their dirty tricks.
The lines referred to preference to returned soldiers. I ask the PostmasterGeneral whether 3LO is to be permitted to ridicule a political party and engage in party propaganda?
– I had no previous knowledge of this incident, but I assure the honorable member that none of the national broadcasting stations will be allowed to abuse their licence in the manner he has indicated. I shall enquire into the matter.
– Will the PostmasterGeneral extend the same consideration to the feelings of all political parties?
– I give the Leader of the Opposition my emphatic assurance that whilst I am in charge of the Postal Department wireless broadcasting programmes will not be used to the disadvantage of any political party.
– Is the Minister for Markets and Transport yet able to announce the date of the opening of the Grafton to South Brisbane railway? As the occasion will be historic will the Minister see that it is marked by an appropriate ceremony ?
– The construction of the railway is controlled by a council representative of the States of New South Wales and Queensland, as well as the Commonwealth. I anticipate that the line will be officially opened about the 1st August, and I shall let the honorable member know the details when they are settled.
– I ask the Minister for Markets and Transport whether the War Service Homes Commission is now requiring returned soldiers on the northern coal-fields to deposit 25 per cent. of the cost of houses to be erected for them, whereas previously the deposits ranged from 10 per cent. to 15 per cent.? Will the Minister explain the reason for this increase?
– As far as is practicable regard is paid to the financial capacity of the applicant. I am not aware that the conditions have been altered recently, but I shall inquire into the matter and let the honorable member have a reply.
Telephonic Communication With Mainland
– Is the PostmasterGeneral able to explain the unconscionable delay in establishing telephonic communication between Tasmania and the mainland, having regard to the fact that wireless telephonic communication with London is already a commercial reality?
– Order ! In asking a question the honorable member must not offer comment or observations.
– I am anxious to ascertain whether the Postmaster-General is able to explain why wireless telephonic communication has not yet been established with Tasmania, seeing that a wireless telephonic service is already in operation between Australia and Great Britain ?
– Yesterday I made a very full statement of the Government’s proposals regarding a wireless telephonic service between Tasmania and the mainland.
Prices of Matches - Ikon and Steel - Galvanized Iron - Dry Cell Batteries, j
– I desire to submit a question to the right honorable the Prime Minister concerning the price of matches, and by way of explanation, quote the following from a letter I have received from a merchant in my electorate : -
Before the new duty was imposed on the imported line, the Australian-made wax matches could be purchased at 4s. Od. per gross in five case lots. I have now been informed that the lowest price for the same line is 6s. per gross, which shows an increase of 33J per cent.
Has the Prime Minister taken any action with respect to this heavy increase in price since the imposition of the new duty, and if not, will he get in touch with the manufacturers of wax matches and ascertain the reason for the increase?
– This question was raised last week by the honorable member for Calare (Mr. Gibbons), and I also received a communication on the same subject from the honorable member for Robertson (Mr. Gardner). I immediately communicated with Messrs. Bryant & May, of Melbourne, the manufacturers of the matches, concerning which the complaint had been made, and I read to the House a telegram I had received from the firm. I also intimated that I had instructed an officer of the Customs Department to accept the firm’s invitation to make an investigation of its books. The whole matter is still being investigated, and I am awaiting a report on the subject. The information which I gave to the House at the time was that there is now practically no importation of wax vestas of the description mentioned. The local manufacturers assured me that none of the articles that have been subject to increased duties have been altered in price, and that they are strictly adhering to the promise not to increase prices. The price of wax vestas was reduced to 4s. 6d. a gross in consequence of a price-cutting war between local manufacturers. Up to a year ago it was 5s. 4d. a gross, and that is the price now being charged.
– I understand it is 6s. a gross
– I am accepting the firm’s statement, and I have not yet found any information it has supplied to me to be incorrect. The Government has accepted the firm’s invitation that an officer of the Customs Department should investigate the whole of the facts concerning the cost of production, and the ruling price for such matches up to a year ago. I intend to have a full inquiry made into this and also every charge of alleged profiteering. I hope to make an announcement to the House at an early date.
– Some time ago I reported a charge made by a trader in Western Australia that iron and steel manufacturers in Australia refused to supply him under the same terms and conditions as were conceded to members of the Metal Association. A promise was made by the Prime Minister and the Minister for Trade and Customs that inquiries would be made to ascertain if any such restriction had been imposed. I should like to know if a reply to my question can be expedited?
– This is one of the subjects which are being investigated, and will be included in the report , which I intend to submit to the House.
– Will the right honorable gentleman also include in his report a statement showing why the price of galvanized iron in Queensland has been increased by 30s. a ton since the imposition of higher duties?
– That matter has already been submitted to officers of the Trade and Customs Department for report.
– Will the Prime Minister ascertain if it is a fact that since the introduction of the new tariff the Postal Department has saved £2,500 by purchasing locally manufactured dry cell batteries in preference to the imported article.
– Inquiries will be made in the direction suggested.
– Is the AttorneyGeneral aware that the management of the Labor Daily newspaper, published in Sydney, is contravening the provisions of an award of the Commonwealth Arbitration Court, by paying its employees only 90 per cent. of their salaries or wages in cash and requiring them to take the balance in shares of the company controlling the newspaper?
– Under the Standing Orders the object of a question is supposed to be to elicit, not to give, information ; but it seems to be an established fact that the information given by the honorable member in asking his question is to the satisfaction of honorable members opposite. I know nothing of the alleged facts, but if it is desired I shall make inquiries so far as the question raised involves an infringement of Commonwealth law.
– Has the Prime Minister yet received any report from the Mackay expedition to Central Australia?
– Is the Prime Minister aware that Mr. Mackay, who is making an exploratory expedition in Central Australia, is a mining prospector of many years’ experience, and is investigating the possibility of discovering gold in that locality? Will the right honorable gentleman bear this in mind in connexion with the question of gold production ?
– I have been informed that Mr. Mackay possesses considerable mining experience and that he intends to conduct an investigation in Central Australia in the hope of locating gold- bearing reefs. The latter portion of the honorable member’s question relates to a matter of policy, concerning which it is not. customary to give information in reply to questions.
asked the Prime Minister, upon notice -
How does Australia’s estimated unemployment compare numerically with that of (a) Great Britain, (b) Germany, (c) France, (d) Italy, (e) United States of America, and (f) Japan ?
– The Commonwealth Statistician and Actuary has furnished the following information : -
asked the Minister for Home Affairs, upon notice -
Willhe ascertain, in connexion with afforestation, the acreage of forests established in each of the States of the Commonwealth for each of the years 1924-25 to 1928-29?
– The area of forests planted in States during 1924-25 to 1928-29 inclusive are -
asked the Prime
Minister, upon notice -
– The answers to the honorable member’s questions are as follow : - 1, 2 and 3. I would refer the honorable member to the information published Tinder the heading, “ Oil Shale and Mineral Oil,” on pages 701-703 of the Commonwealth YearBook,No. 22, of 1929. The data available as to the extent of the shale deposits in Australia and other countries do not permit of a satisfactory comparison being made. The Shale Oil Bounty Act expired on the 31st August, 1929. Further proposals for the payment of a bounty are at present under consideration. 4 and 5. I have no information on these points.
asked the Minister for Markets and Transport, upon notice -
– The following information has been obtained from the Department of Works: -
asked the Minister for Works and Railways, upon notice-
– The answers to the honorable member’s questions are as follow : -
Credits to Associated Banks
asked the Treasurer, upon notice. -
– The Treasury is in communication with the Commonwealth Bank in regard to these questions.
asked the Minister for Defence, upon notice -
What is the respective number of (a) officers, (6) warrant and non-commissioned officers, and (c) men, giving rank and branch of service, who have been rationed in the Defence retrenchment scheme ?
– The information is being obtained, and will be made available to the honorable member as early as possible.
asked the Minister for Defence, upon notice -
– Inquiries are being made, and a reply will be furnished to the honorable . member as soon as possible.
Exemption from Tariff Embargo.
M.r. FORDE. - On the 5th June the honorable member for Cowper (Dr. Earle Page) asked the following questions, upon notice-r-
Is it a fact that Heinz American products have been exempted from the tar itf embargo?
If so, from what date did that exemption operate?
What was the total amount of Heinz products imported during 1028-29?
Has the firm agreed to build an Australian factory?
If so, when will- that factory be in operation? (i. Will the Minister grant exemption to all foreign firms which promise to open factories in Australia?
What amount of capital and how many employees will the Heinz factory employ?
Will all other foreign firms producing goods similar to the Heinz product De placed on an equal footing by granting them an exemption until the Heinz factory operates? !l. What protection is accorded to Australian factories producing the same type of goods?
I am now able to furnish the honorable member with the following information : -
No general exemption was made, but pending the erection of a local factory and to retain the existing good will, permission was given under certain conditions for the importation of a proportion of the products, not to exceed £50,000 in value.
From the 4th April, 1930, to 1st January, 1931.
It is not the practice of the department to disclose particulars of the transactions of any individual importer, and furthermore there is no record kept by the department of importations by individual firms.
A condition made was that the factory is to be established by January, 1931.
I am prepared to consider any applications from any source on their merits.
The intention is to build a factory costing £150,000, and employing approximately 350 hands, and, furthermore, a large number of primary producers will benefit by growing tomatoes and other products for processing purposes.
The protection accorded by tariff items 54, 70, 74, 76, 78, 79, and 82.
– On the 23rd May the honorable member for Brisbane (Mr. D. Cameron) asked the following question, upon notice -
I am now able to furnish the honorable member with the following information : -
Plan of Layout
– On the 21st May, the honorable member for Melbourne (Dr. Maloney) asked the following questions, upon notice -
With regard to the replies to the questions asked by the honorable member for Melbourne on the 30th April last, concerning Mr. J. S. Murdoch (recently one of the Federal Capital Commissioners), and the departmental “builtup “ plan for Canberra, will the Minister state -
Who was the president of the New South Wales Institute of Architects who commended the “ built-up “ plan of the departmental board?
b ) Is it a fact that 241 leading architects and engineers of Australia signed the condemnatory petition which was presented to the Prime Minister of the day?
Is it a fact that the said petition was pertinent to the issue, and so influenced the Government that the Assistant Minister for Home Affairs (the honorable W. H. Kelly) dismissed the departmental board and discarded its “built-up” plan?
Is it a fact that Mr. J. S. Murdoch was mainly responsible for the design and erection of this temporary Parliament House, which he estimated to cost £250,000, and which has actually cost over £700,000 ?
To provide the answer has necessitated reference to old records, but I am now in a position to make the following replies to the questions asked: -
There is no doubt that the signatories to the petition were influenced by the. representation that an architect of the standing and eminence of Colonel Vernon had adversely criticized the plan, and also by the use of his name in the petition itself. It should be explained, however, that Colonel Vernon not only did not sign the petition, buthe explicitly dissociated himself from it, protesting against the manner in which his name had been utilized, and the “ misrepresentation “ and “ objectionable use of his contribution “ to a periodical. Colonel Vernon had found that his criticism of the board’s plan in a published article had been made under a misapprehension, and he expressed regret at having written it.
On the 7th July, 1914, the Assistant Minister stated that Mr. Griffin’s amended plan was the accepted plan.
Mr. Murdoch had no responsibility for the work or cost of erecting the building, which was carried out by day labour, at a total cost of £597,086, including administration charges, but excluding interest, furniture, and layout of grounds. As indicated to the honorable member in answer to a question by him on the6th June, 1928, considerable alterations and elaborations were made in the scheme during construction, additional works being added and the building completed generally with a much higher degree of finish and equipment than was contemplated when the preliminary sketches were presented to the Public Works Committee.
Debate resumed from 22nd May (vide page 2046), on motion by Mr. Brennan -
That the bill be now read a second time.
.- This is a bill to amend the Bankruptcy Act. Bankruptcy is not a very cheerful or an enlivening subject ; but, at the same time, it is important that provision should be made to enable us to become bankrupt with efficiency and dispatch, should the occasion arise. I am prepared to assist the Government to achieve that desirable object.
The existing statute provides for federal jurisdiction in bankruptcy being exercised by such federal courts, if any, as the Parliament may create; and, by arrangement with the States, by State courts. Up to the present time there has been no federal court of bankruptcy, all the work having been done by the various State courts by arrangement with the States. In Queensland, New South Wales, Western Australia and Tasmania, the work has been done by the Supreme Court of the State; in Victoria by the County Court; and in South Australia by a special judge. In order to avoid the setting up of federal courts in every State, it has been necessary to make those arrangements with the different States.
It is now proposed that a federal bankruptcy court shall be constituted. That proposal will increase the expense of administration of the act, and can only be justified if there will be corresponding advantages to the public.
– Does the Commonwealth Government pay for the services that are rendered in the different States?
– At present, payments are made to the States for the services of their judicial officers. The bankruptcy staffs are Commonwealth officers, and are paid directly by the Commonwealth.
The Commonwealth is indebted to the States for the ready assistance that they have given in the administration of the provisions of the Bankruptcy Act on the judicial side. Under that system the Commonwealth has been saved a great deal of money; because, otherwise, it would have been necessary for the Commonwealth to appoint judges whose time would not have been fully occupied in any of the States. In the State of New South Wales, however, as the AttorneyGeneral has stated, and as I was aware when I was Attorney-General, the congestion has been very considerable. When I was Attorney-General I had under consideration the desirability of constituting a separate bankruptcy court in that State. The time of Mr. Justice LongInnes, who has been engaged in bankruptcy work in New South Wales, has been thus occupied to an entirely unexpected extent, and, accordingly, the complaint has been made - not in any ungenerous spirit - that his work in the equity jurisdiction has been seriously impeded. It appears to me to be not unreasonable to appoint a federal judge to do bankruptcy work in New South Wales, but I doubt very much whether it will be possible to arrange that the same judge shall act in Victoria.
– Will there be sufficient work in New South Wales to keep one judge fully occupied ?
– In New South Wales, unfortunately, I should think that there will be very nearly sufficient bankruptcy work to occupy fully the time of the judge. But the circumstances are very different in Victoria. The AttorneyGeneral, in his second-reading speech, referred in terms of praise to the work that has been done by His Honour Judge Moule, who has had wide experience in this particular jurisdiction. I had an inquiry made into the volume of work in Victoria, and1 from my recollection of the report it showed that the Bankruptcy Court sat there on only about 90 days in a year. It did not appear to me to bc justifiable to appoint a federal judge to handle that volume of work in the State. I still believe that, unless the position has greatly changed, there is no justification for the appoint.ment of a federal judge to do bankruptcy work in Victoria. I suggest that the Attorney-General should take up again the negotiations that I had brought to a certain point with the Government of Victoria, with a view to arranging that the Supreme Court, instead of the County Court, shall do the bankruptcy work. The Supreme Court sits continuously, and the provision that has been made in regard to the work in the Practice Court, I believe, would enable the bankruptcy work to be done with more dispatch than is possible under the existing circumstances. As the Attorney General has stated/ from time to time there are delays in the hearing of bankruptcy matters in Victoria, on account of the method of arranging the work in the jurisdiction of the County Court and. the Court of General Sessions. Would it not be more satisfactory if some arrangement were made to have the work done by the Supreme Court?
This bill proposes to establish a federal bankruptcy court. We have been informed that it is intended to appoint to the position of judge of that court His Honour Judge Lukin, at ? resent a member of the Arbitration Court Bench. The Attorney-General has informed the House that the work of the Arbitration Court will permit of the withdrawal of one of its judges from that, jurisdiction, and that Judge Lukin has consented to accept the position of federal judge in bankruptcy. It is my opinion that the Commonwealth is fortunate in having obtained for bankruptcy work the services of such an able, upright and fearless judge, as His Honour Judge Lukin has shown himself to be. throughout his judicial career. T am certain that he will perform the work competently and well. But, as I have already indicated, the suggestion that he shall do the work in both Sydney and Melbourne presents some difficulties. That, however, is a practical matter, upon which it is not possible to pronounce an opinion -in advance of actual experience. I suggest to the AttorneyGeneral that if, from time to time, a federal judge is introduced into Melbourne, or elsewhere in Victoria, for the purpose of discharging bankruptcy functions, it is quite possible that that State will present to the Commonwealth the ultimatum that it will have either all or none of the work, and that the .Commonwealth may thus be forced into the position of having to make an unnecessary appointment. On that account, I urge the Attorney-General to proceed with caution in the matter of allowing a federal court, as such, to operate in Victoria. The present arrangement is inconvenient to the Victorian authorities, and they could hardly be blamed if they were to seek for some excuse to get rid of it altogether.
– It is a question of finance.
– It is a question, not only of ‘ finance, but also of the convenience of the court arrangements from the point of view of not only the courts themselves, but also litigants and the public. Although the present arrangement is rather inconvenient to Victoria, that State is standing loyally by it. But if it should find that the Commonwealth is able, from time to time, to send a federal judge to that State, I am inclined to think that it will say, “Let the federal judge do everything.” One federal judge cannot do the work effectively in both Sydney and Melbourne.
– Would not the cost of the present administration in Victoria be more than sufficient to pay the salary of another judge?
– It is much less than would be required to pay a judge. The bill is remarkable in one particular; no provision has been made for the salary of the judges that may be appointed under it. It contemplates the appointment of two judges. The proposed new section 18c provides that, if a judge of an existing federal court is appointed a judge in bankruptcy, he shall be entitled to the same salary and pension as that to which he was entitled before he was so appointed. I shall not speculate as to the possible motive or object of that provision ; but I do contend that, whenever a court is constituted, effective provision ought to be made for the filling of any vacancy that may occur. This bill should contain a direct provision stating what the salary and pension rights of the judge in bankruptcy shall be. If, after the bill becomes law, a vacancy should occur while Parliament is in recess, and is unable to meet for two or three months, there will be no power to make an appointment and to pay, or to promise the payment of, any salary to a judge unless he should happen to be already a judge of an existing federal court. A judge of any existing federal court cannot be transferred to another court without his consent. The sole federal judge in bankruptcy, or one of the two, if there should be two, might resign or die; and if Parliament were not sitting, new legislation could not be brought in at once, and it would be impossible for provision to be made for carrying on the work except by agreement with the States. The Commonwealth could not reasonably ask a State to undertake the work for two or three months, thus disorganizing the. whole of its judicial arrangements, simply because the legislation of the Commonwealth had been passed in a deficient form. That, I suggest, is a real contingency that ought to be considered by the Attorney-General. It might prove disastrous to the interests of citizens if there were a vacancy in the bankruptcy jurisdiction in, say, New South Wales, and it could not be filled under existing legislation. Accordingly, I ask the Attorney-General to consider the wisdom of moving for the insertion of a new clause in this bill to provide, in the ordinary form, that the salary, pension rights, and so forth, of any judge of the Bankruptcy Court hereafter appointed, who had not been a judge of any Federal court, shall be such as are thought to be proper. I hope my suggestion will be adopted.
Bill read a second time.
Clause 1 agreed to.
Clause 2. - (Bankruptcy Courts).
.- Why is it proposed to omit sub-section 3 of section18 of the principal act? This sub-section was designed to deal with difficulties which might arise in the case of the revocation of, a proclamation which provided for the carrying on of business and any necessary transfer of business notwithstanding the revocation of the proclamation. Possibly the necessity for the sub-section has become exhausted, but we should be certain about it before we repeal it. I cannot see any necessity for omitting it. There may be some outstanding matter which the sub-section was designed to cover which is not yet completed, and it would be unfortunate if it were left inmid-air, so to speak. I suggest that the Minister should look into this point before the bill is considered in another place.
.- When this bill was drafted it was considered that the subsection was no longer required; but I shall make further inquiries into the matter.
Clause agreed to.
Clause 3 -
After section eighteen of the principal act, the following sections are inserted: - “ 18a. There shall be a Federal Court of Bankruptcy, which shallbe a Court of Record, and shall consist of a Judge or Judges, not more than two in number, who may bo appointed by the GovernorGeneral by Commission. “ 1 8b. The qualification of a Judge of the Federal Court of Bankruptcy shall be as follows: - He must either be or have been a Judge of a Federal Court or of the Supreme Court of a State, orbe or havebeen a practising barrister or solicitor of the High Court or of the Supreme Court of a State, of not less than five years’ standing. “18c. - (1.) If a person appointed a Judge of the Federal Court of Bankruptcy was, immediately prior to his appointment, a Judge of a Federal Court, he shall receive the same salary as he received as a Judge of that Federal Court, and on retirement shall be entitled to the same pension as that to which he would have been entitled if his services as Judge of the Federal Court of Bankruptcy were a continuation of his service as Judge of that Federal Court. “ (2.) The said salary and pension shall be payable by virtue of this act, and the Consolidated Revenue Fund is to the necessary extent hereby appropriated accordingly.”
.- Is the Attorney-General prepared to accept the suggestion that I made in my second-reading speech that a provision should be included in the bill for the appointment of another judge in the case of an unexpected vacancy occurring in the circumstances that I described? Otherwise if a vacancy occurred at a time when Parliament was not sitting it would not be practicable to fill it expeditiously.
[11.500. - I have considered the point raised by the Leader of the Opposition (Mr. Latham), but I regret that I cannot accept his suggestion. Provision is being made for the appointment of two judges, but it is proposed to appoint only one at the moment.As the subject of salaries, pension rights, and so forth of judges needs serious and mature consideration, it is not proposed to go into it at the moment. The possibility mentioned by the Leader of the Opposition is somewhat remote, and I think that even if it arose it could be dealt with without serious difficulty.
Clause agreed to.
– I move -
That the following new clause be inserted - “ 1a. Section six of the principal act is amended by inserting in paragraph (b), after the words ‘ Insolvency Act,’, the words ‘ or instituted after the commencement of this Act in relation to any such proceedings.’ “
Section 6 of the principal act declares that the act does not affect “any proceedings pending at the commencement of this act under any State Bankruptcy or Insolvency Act.” The intention was that all sequestrations prior to the commencement of the act should continue to be dealt with under State law, and that the Commonwealth act should only apply to sequestrations under Commonwealth law. The question has arisen, however, whether the Commonwealth act applies to proceedings instituted after the commencement of the act, incidentally to a sequestration order made prior to the act. For instance, in Parsons’ case, reported in the Australian Bankruptcy Cases, at page 3, an official assignee applied, in 1928, under section 134 of the New South Wales Bankruptcy Act, for a declaration that a certain interest of the wife of the bankrupt was the property of the bankrupt. The sequestration order was made under State law before the commencement of the Commonwealth act; but the motion by the official assignee was made after the commencement of it. The question was raised whether the motion should not have been made under the Commonwealth act. In the particular case, Mr. Justice LongInnes held that the right of the official assignee had been acquired before the commencement of the Commonwealth act, and that, therefore, the proceeding was under another provision of section 6, and was not affected by the Commonwealth act. It is desired, however, to make it clear that the Commonwealth act does not affect proceedings in relation to any bankruptcies pending under State acts.
.- This provision does not appear to be unreasonable, for it is designed to remove certain doubts and difficulties that have arisen. I should have thought that the provisions of section 19 were sufficiently clear to prevent such doubts arising; but I offer no objection to the proposed new clause.
.- Seeing that the new clause is intended to make clear the intention of the original act, namely, that bankruptcy proceedings commenced before the passing of that act should be continued under the State law, I offer no objection to it, but I do not think that many honorable members had the opportunity of seeing it before the Minister moved it.
– The new clause is printed and has been circulated.
Proposed new clause agreed to.
Title agreed to.
Bill reported with an amendment; report - by leave - adopted.
Bill - by leave - read a third time.
Debate resumed from 5th June, (vide page 2540) on motion by Mr. Theodore -
That the bill be now read a secondtime.
– The proposals contained in this bill are gratifying to the supporters of the Government. The bill which has just been passed was dealt with expeditiously, and I trust that this measure will not be “chewed over,” like the Wheat Marketing Bill. The object of the bill is to alter, in some measure, the basis of the Commonwealth Bank, and no excuse need be made for its introduction. When honorable members on this side of the House were electioneering last year they drew attention to the face that the previous Government so circumscribed the activities of the Commonwealth Bank, and interfered with its functions, that they made it impossible for it to perform the services for the community that its original sponsors intended it to perform. The party opposite curtailed its functions, by preventing it. from operating in such a manner as would enable it to assist the country in a crisis such as that through which we are now passing. When the late President Wilson was elected he regarded it as one of his most important duties to see that banks and banking were controlled by governments and not by individuals. We are now experiencing an artificial financial depression, engineered by the banking institutions who benefit by it. When the Australian banks failed in 1892 they were entirely in the hands of private individuals, and, because of that, the people became suspicious as to their stability, examining pound notes to see the names of the .banks by which they were issued, just as a business man looks at the signature on a cheque. Had there been no political interference with the private banks at that time, this country would have been brought to a state of financial chaos; but, owing to the action of the late Sir George Dibbs, in New South Wales, the situation was relieved.
I do not know exactly how the proposed central reserve bank will operate; but I hope that it will function in the way the late Mr. Fisher intended the Commonwealth Bank to function, and as it did work until the clammy hand of Nationalism was put upon it. That party appointed its own particular class of directors. Talk about political interference! There could be no more detrimental political interference than picking out a millionaire to be the head of the institution. Arc millionaires the type of men who should govern our banks? We know how easy it is for them to buy up securities at half their actual value. It is rumoured that the private banks have something like £400,000,000 under their control. There is not actually that amount of money in the country, but, nominally, they have control over it. They made more profit last year than at any time in their history. Only one bank failed to obtain a record profit. Many of our industries would flourish to-day if credits were extended. When the Commonwealth Bank was established I interviewed the late Sir Denison Miller, with the result that a branch of the bank was established at Albury, and it gave to that municipality credit which the private banks had refused to grant. This was a safe investment. It enabled the town to carry out a scheme of sewerage which provided employment and benefited, the town generally. If the Commonwealth had a bank that would extend credit to other towns in that way, employment could be increased, and the residents could be provided with hygienic conditions. If the bank to be established under this bill will not alter the present financial system we should not bother about supporting the measure. It will be futile if this bank carries on in the future in the same way as the Commonwealth Bank has operated in the past. It will be reminiscent of the Irishman, who, when he became too long for his blanket, cut a piece off one end and sewed it on the other. A party with a record majority has been returned to this Parliament to carry out reforms, one of which is banking reform. The suggestion has been heard from the party opposite that £20,000,000 should ‘he made available for the relief of unemployed; but members of the Opposition, I think, desire to build up a mountain of unemployment by encouraging the influx of large numbers of foreigners, whose admission into- Aus. tralia would bring down the standard of living. When the unemployed marched to Parliament House in Sydney and asked for bread, they were met with the batons of the police. There was a similar experience in Western Australia where a Nationalist Government recently took office.
– I cannot permit the honorable member to indulge in a debate on unemployment. He must confine his remarks to the bill.
– I hope that the bank to be established under this bill will alter the financial system of the country.
– How will it?
– If it does not, it will be of no use. It is necessary for this bank to be able to give credits that will enable the country to progress by leaps and bounds. I do not wish to see any millionaires appointed to the directorate. I do not remember any private bankers having done much good for Australia, although the private companies have made big profits for their shareholders. A Governor of the Bank of England had to be bulldozed by Disraeli to make him enter into a good bargain in the interests of Britain, and Australia now needs n Disraeli who will see that the credits of this country are used for its benefit. Where is the gold now? Let us bring it to Canberra and lft us cast it into the model of a cow, like that shown at Wembley. We could charge the public ls. to inspect it, and devote the proceeds to the relief of unemployment. What is the’ use of having all the gold locked up?
– If the honorable member had gold, would he lock it up?
– If I were given £1,000 in gold to-morrow and told that I could hank it and against it draw £1,000 in cheques, would I do it? No; I should prefer to put the gold into circulation. On the other hand if I were told I could bank that gold as a basis for die issue of £4,000 in cheques, then the hank’s doors would not be open early enough in the morning to suit me. And so it is with the nation. Our predecessors in office hoarded up more gold than was necessary to meet, as a medium of exchange, all the trading and commercial activities of the nation. The problem of unemployment is too serious a matter to be sneered at by honorable members opposite, simply because a conference that recently met in Canberra had the courage to say that the position must be relieved, no matter what the cost may be. If Australia were not a gold-producing country, I would oppose the use of a gold standard, and would adopt the system of the United States of America. Paper money is good enough for me. I realize that there is danger of inflation of the cur rency; but this country has been made to suffer by the holding of more gold in the coffers of the Treasury than was necessary for o.ur needs. We have not benefited as we should by the nationalization of the currency. I am glad that the present Government lost no time in sending £17,000,000 of gold to the Old Country, thus relieving our indebtedness to some extent. Private banking institutions have been, and are, endeavouring to create an artificial depression to benefit their shareholders. Instead of extending overdrafts to individuals they are restricting credit and purchasing securities at a depreciation of 30 per cent, or 40 per cent. Naturally they do not wish to see the Government’s proposal for a central bank accepted. They do not wish to see established a national bank which will make credits available to industries to give that financial aid so necessary to increase the volume of employment and make Australia prosperous. If sufficient money is not in circulation the working classes must suffer because of the reduction in employment. It has been estimated that if those at present out of work in Australia could be given remunerative employment they would create an asset worth at least £40,000,000 a year. I believe that this Government, following the lead of the Labour government which appointed Sir Denison Miller as the first Governor of the Commonwealth Bank, will be wise in its selection of the persons to control the proposed central bank. We do not wish to see millionaires in such a position of responsibility, as in America where, so we are informed, there are eleven persons whose incomes exceed £1,000,000 per annum, and where also there is an army of 3,000,000 of unemployed persons. We desire ‘that the government in power will establish a national hanking institution which will make much needed credits available to industry to develop the potential wealth of this country and increase its prosperity. We all deeply regret the present depression which is responsible for an unemployment problem unprecedented in the history of Au*tralia. Much of the trouble is due to the legislative follies of the preceding Government, which favoured the introduction to this country of Jugo-Slavs and other foreigners for the purpose of lovering the Australian standard of living. We want to change all that. I hope this proposed new reserve bank will be a means to that end, and that soon the national credit will be put to a useful purpose.
– The honorable member, I [j resume, would not like to see Fairfax on the board.
– Certainly not. If I had my way I should reduce his capital to such an extent that a job like mine in this Parliament would appeal to him. 3 am convinced that the necessary wealth for the development of this country is in Australia. All we need is a banking system that will make it available, instead of allowing it to lie idle and become mouldy in the vaults of our financial institutions. I do not believe in printing more notes. We have more now than the commercial activities of Australia require. If one goes into a bank to-day one is nearly suffocated by the smell of stagnant currency. Let us get that money out; let us make credit available and put more cash into circulation. [Quorum formed.’]
– Those who have studied this bill and the debate on it must have been impressed by two outstanding features. One is that no reason has been advanced by the Treasurer or by Government supporters for its introduction at the present juncture, because, as the honorable member for EdenMonaro (Mr. Cusack) has just observed, none of its provisions will enable the proposed central bank to discharge the functions of central banking more efficiently than is being done by the existing institution. The second outstanding feature is the lack of enthusiasm on all sides in connexion with the bill. The private banking institutions, in whose interest it 13 allegedly being introduced, show no enthusiasm for it. Overseas investors and the financial critics declare that it is being introduced at a most inopportune time, and there is no enthusiasm for it even on the part of the Labour party itself. The honorable member for Adelaide (Mr. Yates), speaking last night, said that it left him “ stone cold,” and apparently the Government has But little warmth of feeling for it since, although it was declared to be an urgent need for the community, it has been allowed to remain on the notice-paper for a month without any effort to expedite its passage through the House. One reason for the Government’s rather chilly attitude towards the bill may be that it does not regard it as its own son, but rather as a step-sou. There is soma ground for the belief that the Government is not anxious to push it through because, to some extent, members of the Ministry and their supporters will be obliged to swallow certain principles for which they stood six years ago when I introduced a bill to amend the Commonwealth Bank Act, with a view to provide for a central bank. As we all know, the swallowing of political principles, like the swallowing of any unpleasant draught, is apt to nauseate the patient. This, I suggest, may be one reason for the indifference of the Government towards the proposal.
Time usually brings its revenges. I well remember the Labour party’s fierce opposition to the measure which I introduced six years ago. Members of that party, including the present Prime Minister (Mr. Scullin) fiercely attacked my proposal to place on the directorate of the bank representatives of the manufacturing, agricultural and commercial interests. They made a tremendous onslaught upon that very principle which we now find embodied in the bill before the House. The present Treasurer, it would appear, is willing to go even further than I contemplated going six years ago in the direction of outside control of central banking. After I had moved the second reading of the bill to which I refer the then Leader of the Opposition (Mr. Charlton) submitted the following amendment : -
That all the words after “ That “ be omitted with a view to the insertion of the following words in, lieu thereof: - “in. order to preserve the Common weallth 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 be fully employed in the service of the bank, should be appointed to its management, the proposal of the Government to appoint persons representing squatting and commercial interests, who are diametrically opposed to national hanking, being designed more in the interests of private financial institutions than of the people’? bank “.
I invite honorable members to read the debate on that measure. It is not necessary for me to do so because, so vigorous was the Labour party’s attack upon the Government’s scheme to appoint to the directorate representatives of the pastoral and commercial interests who, opponents of the -bill declared, were diametrically opposed to a national banking system, that their views were indelibly impressed upon my memory. The whole of the forces now at the disposal of the present Government were employed to prevent the proposal contained in the 1924 bill from being carried. The present Prime Minister (Mr. Scullin) said this of the scheme -
If the Govern ment appoints the board of directors from the representatives of private interests, the bank will not operate in the best interests of the people.
Mr. Anstey, who at that time was Deputy Leader of the Opposition, pointed out that the principle to which he objected, so strongly was the fact that some portion of the profits earned by the Commonwealth Bank were to be utilized as capital for the proposed new bank, which would be under the control of a directorate that included representatives of outside interests. The honorable member for Bourke went on to declare that it was monstrous that private persons should he allowed to handle the capital provided in that way for a government financial institution. This is what the honorable member said -
In all other countries the great body of capitalists provide the capital of the central bank which the nation supervises, but here it is proposed by the Government that the nation shall provide the capital and that private individuals shall supervise and utilize it.
The honorable member for Bourke described as a monstrosity the proposal which I had included in the bill. It is interesting to note that the “monstrosity “, as it was then called, is now incorporated in this measure. We may take it, therefore, that it is the considered financial policy of the Labour party, and we may assume that principles to which the Labour party objected six years ago are now cardinal planks in its national financial platform.
I offer no objection to the proposal, and I do not retreat one step from the position which, as
Treasurer, I took up in 1924. But I would say to the present Government, and especially to the Treasurer, that, having already swallowed so great a proportion of the financial principles against which they stood six years ago, they should go a little further and, instead of presenting us with a hybrid mixture of finance and politics, make certain that this proposed central bank, which is capable of conferring incalculable benefit upon the community as a whole, is so constituted so as to he of real service to the community. Let them take politics out of the bill, and so recast its provisions as to insure the creation of a purely central banking institution - something which the’ nation will appreciate and something which will enhance the reputation of the Treasurer. If the Treasurer really has the interest of Australia at heart, I urge him to take this further step. He has already taken a great step forward. Apparently, also, the attitude of the Labour party to-day is entirely different from the attitude of the party of six years ago. The bill has all the appearance of a hybrid, due, as I have suggested, to the mating of politics and banking. Hybrids, as we all know, are usually sterile, the most notable example among them being the mule. The mule, however, is famed for its kick. I am afraid that this hybrid measure may, like the quadruped mentioned, not only be sterile, but have a kick in it that may injure the community. I therefore urge the Treasurer to adopt the advice given last night by the honorable member for Corangamite (Mr. Crouch) and so amend the bill as to provide for the establishment of a purely central banking institution.
Those honorable members who were in this Parliament six years ago will recall how members of the Labour party howled at the then Government, how they fought its proposal day after day and night after night, until eventually it was necessary to apply the guillotine to get it through. They opposed the bill hecause, so they said, it would emasculate the Commonwealth Bank and destroy our banking system, as we urged the Parliament to make legislative provision for the co-ordination of the activities of the financial institutions of Australia. But how time and experience have belied their prophecies! On the 30th June, 1924, the general banking section of the Commonwealth Bank disclosed liabilities to the extent of £39,000,000 - deposits of the public at the disposal of the institution. At the same time deposits in the savings bank section amounted to £41,071,000. Five years later, on the 30th June, 1929, the deposits of the general banking section amounted to £55,122,778, an increase of over £16,000,000, while those of the savings bank section stood at £52,635,368, or an increase of more than £11,500,000 on those of 1924.
– There has been a considerable increase in population in the interim.
– The ratio of the population increase is not comparable with that of the increase of the bank’s deposits during the period. Those figures illustrate the results obtained by this socalled emasculated institution. The results of the change made by the late Government completely give the lie to all the calamity howlers of 1924. Now let me deal with the profits of the bank for the two periods. In 1923-24 its profits amounted to £250,000. The Bruce-Page Government then effected this change in administration, and for the year 1924-25 the profits leaped to £450,000 - an increase of practically 100 per cent, for the year ! The next year they had risen to £4/79,000, the following year to £673,000, and in the succeeding year to £740,000 while, I believe, last year showed a further increase of £50,000 in the profits. . How effectively those figures demonstrate the growth of this national institution, allegedly crucified and emasculated by the Bruce-Page Government, despite the prophecies of the dismal Jeremiahs of 1924.
– What would it have been bad the right honorable gentleman not hit it with a shoe?
– What would the honorable member have been had he been born a woman? That is the whole trend of the argument of honorable members opposite: “If I had been born a woman I should not be a man “. When we show that as the result of the action taken by the Bruce-Page Government in 1924, the
Commonwealth Bank has handled infinitely more business, made greater profits, and so become more prosperous, honorable members opposite weakly reply that if that action had not been taken the bank would have grown at twice the rate it has ! Previous to that change did it grow at twice the rate that it has since developed? Let me quote the figures for 1916, when the last Labour Government was in office, and those for 1924, when this action Was taken. On the 30th June, 1916, the liabilities of the Commonwealth Bank amounted to £32,200000, while in 1924 they were £39,000,000, a difference of about £6,250,000, an improvement of not even 25 per cent. Despite the inflation that took place during the war period, and the fact that from 1916 to 1920 the value of money declined’ and nominal wages and so on increased enormously, the increase in the banking activities of this institution was nothing like as great as it has been since the Bruce-Page Government amended the Commonwealth Bank Bill in 1924.
That completely disposes of the argument of supporters of the present Government. The amending bill passed by the Bruce-Page Government was opposed by the Labour party on the ground that the Commonwealth Bank could not do this work properly, and the present Treasurer brings down this measure because he says that this institution, which is recognized by the banking authorities of the world to be performing a very valuable central banking function, is hot a central bank at all. The honorable gentleman is introducing a measure which he says will be a panacea for all our financial ills. Even the honorable member for Eden-Monaro (Mr. Cusack) appears to be sceptical on the subject, and I shall demonstrate in two or three minutes how little will be the difference in. the operation of the new bank in comparison with that of the institution as it now stands. The present Minister for Health (Mi-. Anstey), who in 1924 was Deputy Leader of the Opposition, then said -
Only by a bank of the nation holding the gold reserves, emitting currency and controlling foreign exchange could national finance and the economic system be consistently developed.
The honorable gentleman declared on that occasion that the innovation of the Bruce-Page Government would do nothing along those lines, that the hank would never be of any value in the direction desired, and would never have any influence as a central bank. Yet almost within a month . after the Commonwealth Bank had been newly constituted it was able to tide Australia over a financial crisis that
Occurred in connexion with the marketing of our wool clip. That illustrates how distorted were the misrepresentations of members of the Labour party in regard to the action of the late Government. It will be remembered that on that occasion, in August, 1924, it was threatened that no , wool sales would be held in Australia because the private trading’ banks found themselves without sufficient currency to handle so big a transaction. The Commonwealth Bank, however, came to the rescue, and, in September, intimated that it was willing to make advances to the extent of £15,000,000 for a period limited to nine months. The money had to come hack by that time in order to prevent inflation. As a result the wool sales were resumed, and our wool that year realized a higher price than had previously been obtained in. Australia. That was the direct outcome of the Commonwealth Bank functioning as a central bank. Misrepresentations of what was then done are continually being made by our opponents, who suggest that it conferred an advantage on the private banks; but the present Treasurer will admit that that is precisely the sort of function that the new central bank will discharge if it is to do its job properly. Previously the Commonwealth Bank was never able to deal with the business of clearing the transactions of the private banks in a proper way.
Provision is being made in this bill to bring under the control of the central reserve bank a certain percentage of the resources of the private banks - a propor tion of their deposits, both on time and demand. At the present time, although one of the private banks is transacting very little of its clearing business with the Commonwealth Bank, the private banks have deposits with it amounting to no less a sum than £13,500,000. If the high percentage of deposits proposed by the Treasurer is insisted upon, that amount will be increased to, probably, £24,000,000. If the percentage is reduced, to 7 per cent, and 3 per cent., to which I hope the Treasurer will agree, the amount will be £14,000,000.
– Then what becomes of the argument against the provision that requires . the banks to deposit 10 per cent, of their demand and time liabilities ?
– The Treasurer will recognize I have no destructive criticism to offer to the bill. All my criticism will be constructive, and I hope that it will be accepted in that sense by the honorable gentleman. I desire to see party issues kept out of this debate. The banking of this country is too important to become a bone of contention in party politics. I hope that we shall evolve a measure that will materially help to restore our credit position oversea. .
– It is a pity that the right honorable member did not frame such a measure when he had the ‘ opportunity to do so.
– I took the only step that was practicable at that time. Last December, when speaking on the subject, I urged that a specific institution should deal with this matter of central banking and the control of our gold reserves. I am prepared to throw my whole weight behind an effort to assist the Government to pass the bill in such a form that it will confer some real benefit on the community, and make the present Treasurer’s name remembered when probably every other action of his will have been forgotten.
In his second-reading speech the Treasurer said that he blamed the lack of means for the mobilization of our credit resources for our failure to prevent the contraction of credit, and the deflation that has recently occurred. I do not think that the honorable gentleman meant what is conveyed by his words as reported in Hansard. I believe that the honorable gentleman appreciates as much as anybody in the community that even if the Government succeeds in having £24,000,00, of the money of the private banks . placed in the central reserve bank there cannot be any significant expansion of the credit of this country as a result. Practically every private bank is at present giving as much credit as it can in consonance with sound principles and in proportion to its deposits. Last year there was an increase of some £33,200,000 in the advances made by the banks, whereas the increases in deposits amounted to about £200,000. Over a period of two years there had been an increase of £12,000,000. in deposits, and £40,000,000 in advances. The accepted proportion of deposits to advances is £10 to every £S. Undoubtedly every bank in Australia is feeling the financial strain. The mere fact of placing more money into the reserves of the central bank will not enable a greater proportion of advances to be made than at present, as the credit fabric pf this country has been strained to its absolute limit.
– When the right honorable member speaks of deposits, does he refer to fixed deposits or to deposits generally?
– To deposits generally.
– Does the right honorable member think that the money has been well placed?
– That is a matter’ of opinion.
A statement has been made to the effect that the action of the Commonwealth Bank has been inimical to the interests of the primary producers. That, of course, is not so. There can be no question that when the gold standard was restored in 1925, the exchange was very much’ improved from the point of view of primary production. In 1928-29 the Directors of the Commonwealth Bank pointed out that their policy in regard to London exchange had been as far as practicable so to influence it as to benefit the primary producers as much as possible.
– The failure at that time helped to bring about the present position.
– Later I shall discuss the effect of a government trading bank on interest rates generally, and of its not being able to bring to a sufficiently sharp stop the refusal to give credit. But that is entirely another matter from that which I am now discussing. There is no substance in the statement that the directors of the Commonwealth Bank have ever done anything, inimical to the great producing and exporting interests of Australia. They have kept the buying rate at a premium to enable the maximum amount to be obtained from the sale of our produce overseas.
Sitting suspended from 1245 to 2.15 p.m.
– At the luncheon adjournment I was pointing out how the Commonwealth Bank had prospered under its new constitution, how it had grown, how it had carried out many central banking functions, and how it had helped the primary producers of this country. In addition, it has been able to bring about the concentration of gold as a result of the action taken by this Government in December last. During the last six years the relations between the Commonwealth Bank and the other banks have become better and better, and the banks and the people at large now trust the Commonwealth Bank Board to the fullest degree. The Treasurer, when he brought down his proposal to take charge of the whole of the gold of the banks, did so on the advice of the board, and he received a letter from it to that effect. It will be remembered that, in 1927, when we suggested taking certain action in connexion with banking, the Treasurer, then a private member, insisted upon getting the board’s advice. I should now like to ask him whether, on this occasion, he is acting on the advice of the board, because that has- always been the best card of his long suit.
Previously the Labour party scoffed at the idea of a bankers’ bank. At election time it was always dragged out by them as something which we wished to institute in order to bolster up private interests. But now we find that the Treasurer, in his .speech, described the central banking system as the panacea for all our evils. He states that there are no central banks in Australia, the Argentine, or Canada, and that in those places there is acute depression. He seems to see some relationship between the absence of a central banking system and the existence of depression. It is generally conceded throughout the whole of the world, except by the Treasurer, that there 13 functioning in Australia a central banking system, and the proof of that is contained in Kisch and Elkin’s classic book on central banking. In that work one of the first banking constitutions described is that of the Commonwealth Bank of Australia, which it is stated, is run on the lines of a central banking system. It is also pointed out that Canada and the Argentine have no central banking system; so that it seems to me that the statement of the Treasurer that Australia in common with Canada and the Argentine is suffering a depression because of the absence of a central banking system, is rather disingenuous. The mere existence of a central banking system is no provision against depression or against crises., > because, at the present time, as every one knows, there are violent . crises throughout the whole world. The United States , of America is suffering an acute depression at the present time, and yet it has a well developed central reserve banking system. New Zealand has no central banking system, and yet at present it happens to be prosperous. Therefore, there is no direct relationship between a central banking system and prosperity. We read in yesterday’s newspapers that Germany is suffering from an acute economic depression. Yet that country . has an effective and efficient central banking system.
– Germany has recovered from the war very quickly.
– That may be so, and I have no doubt that its central banking system materially helped it. The present depression in Australia is due not to the absence of a central banking system, hut to the deflation that was inevitable when the price of wool dropped materially and it was impossible for us to ‘borrow at the previous rate of borrowing. The Treasurer suggested that a central hanking system in Australia would have prevented the contraction of credit and the deflation that has taken place during the last few months in this country. But I would point out that the function of a central banking system is not to make, but to circulate money. Money ultimately must depend on the production of wealth, and our present depression is due largely to the fact that our costs of production are higher than in many other parts of the world, so that our production has been impeded.
I have already indicated that the financial trend of a country can be seen, in its banking figures. A study of the latest statistics shows clearly that the mere assembling together in a central bank in Australia of any percentage of the banking reserves will not enable an expansion of credit to take place at the present, because the banks have already done as much as they can to assist the country. The best’ indication of the position is that usually, after December, we find deposits increasing and advances decreasing, because money is coming to us from the sale of our produce overseas. The deposits tend to increase for at least three or. four months. But during the last three or four months advances have decreased by £3,000,000, and the deposits have also decreased by £5,000,000, although at this time of the year they usually increase. The present downward trend of banking business is due, first, to the fact that we are getting less for our wool, and, secondly, to the fact that we have not yet sold all our wheat. There is still a great deal of money to come from the sale of our wheat overseas.
Whether the members of the Labour party are new converts or not to the central banking idea, I am pleased indeed to welcome them to the ranks of those who desire , to see a sound central banking system operating in Australia, and had we not .had experience of their aspirations I should welcome them still more and accept their assurances at face value. But we know that the policy of the Labour party has always been the nationalization of credit through a Government bank monopoly on the basis of an irredeemable paper currency.
– That is not so. Where does the honorable member get that statement?
– That statement is repeatedly made by the Minister for Health (Mr. Anstey) in his work relating to the money power and so on. If there were no suggestion on the part of honorable members supporting the Government as to their ability to create a fictitious prosperity by (he mere issue of notes, we should look with some equanimity upon the Government’s proposals under this hill, but, apart altogether from any consideration of the Labour party’s past history, it would still be incumbent upon this House to provide safeguards in respect of the central banking system so as to permit of no future Government interfering in the direction of bringing about an undue inflation of the currency of this country. We should make certain that our currency and banking system, as far as possible, are preserved inviolate from political influences. If our present deflation, which has been engendered because of the lower value of our goods, were lifted by artificial means, we might possibly have a short period of easy money and better times, but we would ultimately have a much greater depression and depth of deflation subsequently. The real cure for our present position is the expansion of our production, and particularly the diversification of our products which are sold, overseas, so that, if the price of one product should fall, we would still be able to maintain our position because of the prices of our other products being high. As a consequence, Australia would be in a much sounder position than it is in at present.
A central bank, whatever means are used to bring it into being, is, after all, simply a piece of banking machinery, and, like other pieces of machinery, its value depends, first of all, on its construction, and, secondly, on its operation. I have shown clearly that there is no immediate urgency for this measure. What we should first seek to do is to make certain that the bill, when it passes this chamber, provides for the best machinery possible so that the most efficient use can be made of it when it is in operation. If we are to change the form of our banking system let us make certain that the change is for the better and not for the worse. Let us make certain as well that this change is in accordance with the accepted principles of past experience, not merely of Australia, but of the whole world.
The functions of a central bank are to maintain the monetary standard of the country and to control its .credit. This involves the control of the currency of the country, the concentration of the banking reserves and the maintenance of a reserve against the note issue. The bank is really to act as a reservoir in which our assets will be kept as liquid as possible, so that in case of sudden emergency the financial resources of this country can be used to prevent disaster to the community at large. Such machinery is particularly important at a time like this when Australia is off the gold standard. The gold standard, when it is the currency of the country, provides an automatic check on inflation. Last December this Government made our currency inconvertible by banning the export of gold. In those circumstances, it is essential that we should provide as far as possible against any errors of judgment in the mismanagement of our currency and any foolish policies which might possibly destroy the well-being of every member of the community, and the welfare of every class of industry. We cannot exercise too much care in ensuring the soundness of our currency. We have only to look at the condition of Germany four or five years ago to see what may happen. At that time general ruin was brought about in that country as a result of no provision being made to safeguard the central banking system and currency from political pressure and to maintain confidence in the currency of the country among the financiers overseas. If, at this time, when we are ofl the gold standard, we do not deal with this problem in accordance with the best traditions of central banking, we shall tend to put Australia in a wrong light in the eyes of the other parts of the world, and thus destroy outside confidence at a time when confidence in our methods and position is essential.
Confidence in the central banking system depends on three essentials - first the management; secondly, the quality of the reserve provided against the note issue; and thirdly, the character of the limitations upon business, which will keep the assets of the central bank absolutely liquid. It is no use having frozen assets. I remember during the war, in France, we used in the winter time to carry water in small frozen sections on a stretcher, and, naturally, we did not get the quantity of water that we would have obtained had it been brought by a pipe from a reservoir. The position is somewhat analogous to-day in a faultily-run banking reservoir. We do not want to have frozen assets. We want assets that are readily at our disposal, and, therefore, we must have something which will keep them absolutely liquid. If the bill before the Houseis examined it will be seen that there are three alterations to be made if it is to measure up to the best standards. First of all, under the bill, the management is completely under the Government’s thumb. The Treasurer said that he is willing to alter that to some degree. Secondly, the gold reserves that are being provided for can be materially less than they are at present, and, thirdly, the limitations on the business that can be carried on by a central bank are not such as to ensure that the assets of the bank will he kept sufficiently liquid. T shall deal with these points in detail.
The first is the questi on of mau agemen t. The bill, as drawn, provides fo:the whole of the outside directors being appointed for three years. For all the directors to go out of office at one and the same moment seems to me to be putting the control of the bank absolutely in the hands of the government of the day.
– I. thought I had indicated that the Government intended to amend the bill so that the retirement of the directors will be in rotation.
– I am glad to have the Treasurer’s assurance that he sees the difficulty to which attention has been drawn. Is it his intention to make the- period of office five years ?
– It will probably be that.
– I hope so at I least, because if that is done it will help materially to dissipate the objections to the management as now provided for in the bill.
All other countries have taken steps to make the management of central reserve banks absolutely independent of the government, and non-political. That was how the last Government viewed the matter. Just before it went out of office the need for the appointment of a direc tor to the Commonwealth Bank cropped up, and the appointment would have been made.. except for an official oversight in connexion with an Executive Council minute, before the vote was taken in the House in September last on which the Government went to the country. The appointment could still have been made; but Ministers were anxious to keep the whole question of the administration of the Commonwealth Bank absolutely independent of party discussions and turmoil, and they held over the appointment so that no argument or discussion on the matter of political control of the bank could take place.
Precautions are taken in every country to see that the management of central reserve banks is, as far as possible, independent of the government of the day. The reason, for this is that practically all the crashes of the past have been duc to government interference and pressure. There are instances of this interference in the case of the Bank of Spain in the latter part of the last century, the Bank of France - the Leader of the Opposition (Mr. Latham) drew attention to it in his speech - the Reichsbank just after the war, and the Bank of England during the Napoleonic wars, because of pressure put upon it by Pitt to carry on some very extraordinary financial operations. There is no question that complete government control, or even a control not hedged in by sufficient restrictions, opens the way to all sorts of difficulties, and especially to the intrigues of powerful interests.
– In each case cited there was statutory provision against government interference.
– In the case of the Bank of France the statutory provision in regard to the measure of accommodation the bank was to provide for the government was the means by which the franc was depreciated.
– At the time of Pitt the Bank of England was entirely independent of government control.
– The point I am making is that it is necessary to make a central hank as independent as possible, because nearly all the crashes of the past were due to political interference and government pressure ; and that is apropos to the question I shall later on raise as to the limitation that should be imposed upon the amount of government business the bank can do. When a central bank or any bank is under the control of a government or subject to political interference, the powerful interests of the country can intrigue and get something done for themselves, but the ordinary man in the street can get nothing done for himself. For instance, at the last election the moving picture interests by reason of their power were able to get something done by the Labour party in the way of relief from taxation, whereas the poor people of the community were able to get nothing done for them in the way of relief from taxation. Political interference with the bank may benefit powerful interests in the community but never the interests of the smaller people.
In order to secure independence from the Government of the day to the greatest possible degree several methods have been adopted in other countries. One is to ensure that the central banking system shall be entirely privately owned, that its capital shall be subscribed from outside and not from government sources and that a large part of the board of management or directors shall be elected by shareholders. Another is to appoint directors for long terms and for differing periods. For instance, under the present Australian system six outside directors are appointed for seven years, and each retires in a different year. That system first of all preserves the independence of the board from the Government of the day and secondly secures continuity of policy. In the United States of America the Federal Reserve Board is appointed by the President with the consent of the Senate. There are five members of the board. Each is appointed for ten years and a member of the board retires every second year. That system gives the appointees the maximum amount of independence. Another method by which the temptation of a government to interfere with the management of a bank is prevented is by a strict limitation on the accommodation it may give to the State. I shall quote a few examples of how the central banks are limited in this respect, especially in countries which have suffered very materially from the results of inflation during the last few years.
In Sweden the chairman of the board of the bank is chosen by the King and the remainder of the board is elected by the Parliament. The board is responsible, not directly to the Government, but to a parliamentary committee on banking, and when a member of the Government discusses any matter with the board, provision is made that no decision shall be arrived at in his presence. There is, therefore, absolute certainty of independence and secrecy in regard to the decisions of the board. It seems to me that Australia is entitled to a board equally independent from the Government in regard to financial operations that mean so much to the welfare and well-being of the people. Surely we are as entitled to have as good a banking system as is to be found in such countries as Bulgaria, Chile, or Greece, whose people we do not seem extraordinarily anxious to allow to come into this country and compete with our own people. Czecho-Slovakia whose central bank has been established since the war has limited the capital of the bank to twelve million dollars, one-third of which is held by the State. The management of the bank is conducted by a governor and a board of nine or ten members. There are auditing committees of five members and a general meeting of shareholders elects six directors every six years. Three directors are appointed by the government for six years. The business the bank can do is to discount bills maturing within 90 days. It may not acquire State bonds on its own account and it is not allowed to give any credit to the State except that one-half of the reserve funds must be invested in State bonds. There is, therefore, a definite veto on any possibility of government interference with the resources of the bank.
Esthonia was given a central bank in 1927. The capital was originally taken up by the government but with the proviso that it must he disposed of within two years. The latest information I have is dated 1929 and indicates that one-third of the shares V.ave already been disposed of to the public. Control is vested in a president, two members of a board of management nominated by the president, and other members elected for three years by a general meeting of all shareholders and eligible for re-election. Their names are proposed by bodies which represent various big industries and interests. The bank may advance for fixed periods not exceeding six months on State bonds and bills guaranteed by the Esthonian Government, up to 80 per cent, of the current market value, and may make advances to the government for budget purposes to one-sixth of the general revenue, but that must be repaid within three months of the end of the year. It may invest an amount not exceeding the capital of the bank in securities of the government which have a maturity of not more than five years, but it may not advance to the government except as I have said, nor may it directly or indirectly make advances to local authorities or to other public bodies. It cannot make unsecured loans or advances.
The central bank in .Bulgaria which has also been created since the war mav grant advances for a period not exceeding three months against gold, coin or bullion, State guaranteed bonds quoted on the Sofia stock exchange up to 80 per cent, of their market value and to an amount not exceeding 20 per cent, of the paid-up capital and reserves in State or State guaranteed bonds quoted on the stock exchange, but may not make advances to the State except as I have said, nor make advances to departments, municipalities or other similar bodies, nor make unsecured loans or advances.
The central reserve bank in Greece was established in 1927. The capital was also taken up by the government originally but had to be sold to the public within two years. After that the State must not hold more .than one-tenth of the total capital. The management consists of a board of directors, appointed for three years, elected by a general meeting, with a governor and deputy governor elected for five years and approved by the government. It may grant advances for periods not exceeding six months on bonds of the government, but no advance can exceed 80 per cent, of the market value of ordinary bonds or 70 per cent, of the market value of treasury-bills, and the aggregate of discounts and advances must not exceed one-tenth of the estimated receipts of the ordinary budget for the current financial year.
The Reichsbank may make advances not exceeding three months on the security of bearer bonds maturing within one year of the Reich, German States or municipalities. Its advances are to be on bonds of known solvency and only up to three-fourths of the value of securities. The Austrian National Bank also has been provided with private capital. It is managed by a board of directors consisting of a chairman and thirteen members. The chairman is appointed by the Federal Government, and the members are elected by ballot, at a general meeting. Their term of office is five years. Neither the confederation nor the provinces directly or indirectly can have recourse for their own purposes to the resources of the bank, unless they have first paid in gold or foreign values the equivalent of the notes they receive. The position of the Central Bank of Chile is very similar.
In all the countries I have mentioned there is a definite limitation of the accommodation which the bank may give to the State, and if this bill is to be brought up to date, and give confidence to the banking institutions and the financiers of the world, similar safeguards must be inserted. Clause 8 places no limitation on the currency to date of maturity of State debentures and bonds upon which advances may be made, and in respect of municipal securities only those which are not issued by capital cities are excluded from a maturity more than two years distant. Any one who has had to do with the sale of large masses of stock knows how difficult it is to sell even Commonwealth Government stock, which is the best security in. Australia, in large amounts. One bank took nearly two years to get rid of £500,000 worth of Commonwealth stock, and a similar amount of stock issued by the City of Melbourne or the City of Sydney would be just as frozen as any other municipal stock if the holder wanted to convert to cash. I trust that in committee amendments will be accepted to place a definite limit on the amount of accommodation that can be given to the Government, especially the advances that may be made for current expenditure. -In no circumstances should unsecured loans to the Government be made. Other countries have fixed from one-tenth to one-fourth of the total annual revenue as the maximum of the advance that may be made to the State. A similar limitation should be placed in this bill.
The bank is to be allowed to do other things which are contrary to the best central banking practice. Mr. Clegg, who was appointed Governor of the Central Bank of South Africa, is highly esteemed throughout the world for his knowledge of banking procedure, and his views should be of great value to us because the conditions in South Africa and Australia are similar. In a recent communication to the Economic Record he said that three essential maxims of a central bank were that it must pay no interest on deposits; it must not lend on fixed properties such as houses and landed estates, and it must not make unsecured loans in any form. The bill proposes to violate those three maxims. It provides that interest shall be paid on Government deposits. What is the need for this provision ? The Commonwealth Bank does not pay interest on them, and with the present machinery provided by the Loan Council for regulating the borrowing of the Commonwealth and the States, the amount lying to the credit of the Government can be reduced to a minimum. There are other ways by which Government credits can be utilized more advantageously than by compelling the central reserve bank to make a profit out of its general transactions in order to pay interest on Government deposits. The first consideration of the central ‘bank should be to ensure that its position is so sound that it can weather any storm. It should not worry about profits, but if it has to pay interest on deposits it may have to devise means of using its resources which will be outside the ordinary scope of a central bank. If the bank is to he allowed to purchase securities of the city municipalities and make unsecured loans to the Government without any time limit as to liquidation, and to buy securities without regard to the date of maturity, it will he utilizing its funds in a manner just as reprehensible as the making of advances on fixed mortgage. Those securities will be just as frozen as fixed mortgages; often they may be more so because the market for them is’ limited. Therefore, I hope that in committee the
Government will adopt the suggestions I shall make for removing from the bill these flaws.
I turn now to the quality of the reserve to be provided against the note issue. The first objective of a central reserve bank must he to prevent inflation and the inconvertibility of currency that automatically results therefrom. The. original bill introduced by the Labour party provided for a 25 per cent, gold reserve against the first £7,000,000 worth of notes, and a sovereign for every note issued beyond that sum. That was altered later to provide for a gold reserve equivalent to 25 per cent, of the whole issue, the balance to be held in securities.
– That amendment was made by Sir Joseph Cook.
– I was under the impression that it was made ‘by a Labour Government. At any rate the Labour party must have been satisfied with that provision or it would have altered it. [Extension of lime granted.] One of the worst features of the bill, and one which will cause a great deal of concern to those who desire that Australia’s financial position shall be stabilized, is that it provides for a. reduction of the amount of gold to be maintained as a reserve against notes. Clause 48 makes it possible for the gold reserve to be reduced to 12£ per cent, of the value of the notes issued. At the present time the issue is about £44,000,000, and that requires under the existing law a gold reserve of £11,000,000. The amount of gold actually held is about £18,000,000. If the balances which the banks have to keep at the central reserve bank should amount to £20,000,000 the total of notes and deposits would be £64,000,000. That would require a total reserve of £16,000,000. But sub-clause 5 of clause 48 provides -
Such portion of the reserve .as- is held in the . Commonwealth of Australia, not being less than fifty per centum of the total reserve, shall consist entirely of gold coin and bullion.
If it were decided to take full advantage of that provision and hold half of the balance of the reserve in Australia and the balance overseas, it would be necessary to hold in gold only £8,000,000. Sub-clause 4 reads -
The reserve shall consist of gold coin and bullion, or partly of gold coin and ‘bullion, and partly of securities of the Government of Great Britain and first-class Trade Bills, such securities and Trade Bills having a currency not exceeding one hundred and twenty days.
Of the 50 per cent. of the reserve that may be held in London no portion need bein gold. With £44,000,000 worth of notes issued and £20,000,000 worth of deposits in the central reserve bank only £8,000,000 worth of gold need be held in reserve, whereas under the present law £11,000,000 worth of gold would be necessary. The bill involves a whittling away of the gold reserve, which I think is very unwise at this time.
– What is the objection to the proposal that part of the reserve held in London may consist of securities of the British Government?
– They may be extraordinarily valuable and readily convertible, but if they were as good as money no one would ask for a gold reserve to be maintained. There are other countries closer to the principal money markets of the world than we are but no other country proposes to reduce its gold reserve to as low as 12½ per cent. or anything approaching that figure. Under the bill as it stands, having depreciated our currency, as was clone by putting an embargo on the export of gold, last December, and placing our notes on an inconvertible basis, we tell the rest of the world that we are going to reduce the amount of gold held in reserve against our note issue to a point lower than that which any other country will tolerate. I shall quote a few figures to demonstrate the actual position. Bulgaria, for instance, which has nothing approaching the external trade of Australia, and is only about onehalf the size of Victoria-
– Bulgaria has a population of approximately 6,000,000.
– Bulgaria, although only half the size of Victoria, is a very compact country, and its population is about the same as Australia. Despite the fact that, as I have said, its external trade in no way approaches that of Australia, it insists on a gold reserve, not of 12½ per cent., but of 33½ per cent. The Bank of England does what Australia was doing in 1911. It has a fiduciary issue of £260,000,000 and above that £1 for £1 in gold. The United States of America, a country closer to the money markets of the world than Australia, and with a tremendous money market of its own, insists on 40 per cent. of the federal reserve notes in circulation being covered by gold, and a gold backing of 35 per cent. in respect of deposits. In Norway and Japan the position is similar to what it was in Australia. There is a fiduciary issue fixed by law and the balance is covered by 100 per cent. of gold. In Germany there is a reserve of 40 per cent. of gold to cover the note issue; in Italy 40 per cent. is held against the note issue and other obligations, and in Chile 50 per cent. of gold is held against notes and deposits. The proposal in this bill suggests that the Commonwealth is descending lower in the scale than other countries, and at the same time will not allow the people of those countries to come to Australia.
– What is the position in Canada ?
– There is no central reserve bank in that dominion.
– No, and all its gold is in New York - in another country.
– I do not say that we should not have gold in London. If the Government would provide in the bill for a certain proportion of its London reserves to be held in gold, I should be satisfied.
– Does the right honorable gentleman say we should be more secure, if, instead of having British consols or some other form of security of that sort in London, we had gold ?
– We should have more gold as a reserve against the note issue and deposits.
– The right honorable member does not regard such a security as the equivalent of gold for this purpose ?
– If the Treasurer thinks that such a security is as good as gold, there is no excuse for having gold here.
– There is.
– If those securities are as good as gold, why mention gold at all?
– We cannot have a like security to a British security on the market.
– It seems to me that the Government is embodying in this measure something which will net materially improve our position in other parts of the world. If we brought our gold reserve nearer to the gold reserves of other countries it would be to our advantage, but the fact is that we are getting further back.
– The Bank of France has no statutory gold reserve whatever.
– The Bank of France is an unfortunate illustration. Four or five years ago it allowed itself to be so used as to bring about a tremendous inflation of credit in that country - an inflation that destroyed many of its institutions and inflicted great hardship, particularly on the poorer people. .
It should be the policy of the Government to restrict the possibilities of any inflation of the note issue. Whatever the Government’s intention may be, it will be incumbent upon Parliament to see that the machinery provided in the form of a central reserve bank is such as to prevent it from being used as a means of inflating the note issue. It should not provide in this measure for that which undoubtedly is retrogressive instead of progressive. We should at least have as substantial a reserve of gold against our note issue and deposits as at present, and one that is greater than in many other countries. If the Government will not increase the proportion of gold that is now being held against the note issue, I trust it will at least take steps to place Australia on the same basis as it’ was originally. We should have a fiduciary issue of £20,000,000 to £30,000,000, and above that a £1 for £1 gold basis. Let the Treasurer obtain advice as to what would be a reasonable proposition so that we may have some security against unnecessary inflation. This is especially necessary since wc have prevented the export of gold, and so have an inconvertible currency. At this critical period we cannot afford to tamper with what is really at the base of our currency.
Finally, I urge the Government on the question of the quality of the reserves, on the question of the limitation of the bank’s business, and particularly in regard to making the management of the bank inde pendent of politics, to give this measure further consideration. Let it so amend the bill as to ensure for this central reserve bank the unanimous support of every interest in this country, and at the same time enhance the prestige of Australia in the eyes of other nations. If it does that it will be entitled to the praise of every one in the community. In committee we shall, not offer any factious opposition. It will be our endeavour to put forward constructive proposals based on Australian experience, and that of other countries, in order to make this measure one which will commend itself, not merely to the supporters of the Government, but to the people generally.
.- This measure must be judged, not so much by its provisions, as by the manner in which it will be administered. Until it is in operation - until we see the effect of its administration - we cannot say to what extent it will carry out, the Labour party’s policy, which provides for the national control of credit and finance. Generally speaking we should not require a central reserve banking system, because the Commonwealth itself would have to become bankrupt before anything serious could happen to the Commonwealth Bank. If an ordinary hanking institution indulges in unsound business practices, as sometimes happens, serious internal troubles may result, but nothing of that nature could occur in connexion with the Commonwealth Bank, which has the whole of the’ resources of the Commonwealth behind it. To me it appears that private banking institutions are getting more than their share of consideration under this measure. Honorable members opposite, particularly the Leader of the Opposition (Mr. Latham), and I think the Leader of the Country party (Dr. Earle Page), referred to the planks of the Labour party’s platform, and have persistently trotted out their objections to the national control of finance. No one on this side of the chamber wishes to avoid that issue. A copy of the Labour party’s platform can be obtained for 6d., and our policy with respect to national finance was set out in our platform when the Labour party came into power.
– It was “well under the seat” during election time.
– The press which supports the honorable member for Warringah (Mr. Archdale Parkhill) gave great publicity to certain planks of our platform during the last election campaign, and in that way it was extensively advertised. The first plank of the party’s platform is the national control of finance and credit, and I shall never cease endeavouring to educate the people on the advantages of such a policy.
– Is this measure in conformity with the financial policy of the Labour party?
– I shall deal with that point later, and I am sure that the honorable member will be quite satisfied when I* am finished. Nothing short of the total elimination of private capitalistic finance would satisfy me, as a member of the Labour movement, who has always adhered to and advocated its principles. Every member of the Labour movement is obliged to subscribe to that objective. To say that that can be done in one fell swoop would be stupid in the extreme. Not even those in the Labour movement who are termed “ reds “ are so stupid as to say that a reform of that character can be brought about by a magic waving of a wand. Any person who made that statement would be either a knave or a fool; if the former, he should not be in politics ; and if the latter, he should be in a lunatic asylum. I repeat that if, under certain circumstances and conditions, the administration of this measure does not carry us as far as possible towards that goal, it will be meaningless. It is not possible to legislate for the idealism that is wrapped up in the Labour movement; that idealism can be given practical effect only by the administration and operation of legislation. Not even a broomstick can be socialized by means of an act of Parliament. If the honorable member for Warringah (Mr. Archdale Parkhill) has the courage to stand up to his convictions, I am prepared to meet him anywhere in his electorate and debate this question, the public to decide which of us is the fool.
The Labour movement has always been open and frank; it has always proclaimed its policy to the world, and declared the means by which it hopes to achieve it. It has no need- to resort to the methods that are adopted by the capitalists, and those who wish to maintain the capitalistic system with all its chicanery and fraud. The right honorable member for Cowper (Dr. Earle Page) has said that the bill is half politics and half banking. I shall deal with that phase of the question in a moment. The Labour movement has never, by either the written or the spoken word, advocated a departure from the wellestablished and well-tried principles of banking practice in operation in different countries. What we suggest, and what we intend to fight to obtain, is the application of the principles of banking by the nation for the development of the nation and the welfare of the people themselves, instead of for the purpose of making profits for a few individuals who, by an exercise of the power they possess, can retard a nation’s development, say whose interests shall be served and whose shall not, who shall have credit and who shall not, which industry shall be developed and which not. We believe that it is in the interests of all the people thai a power so overwhelming in its incidence should be in the hands of the people themselves.
The suggestion that the credit of the ‘ nation should be used through national institutions for the benefit of the nation itself is always met with the cry of “inflation.” That cry is as old as the hills. Those who use it are willing to allow the private banker to inflate and deflate at his own sweet will, to falsify the currency of a nation as it is being falsified to-day. I shall prove out of the mouths of persons who are in control of some of the largest banking institutions in the British Empire that that is what is being done. Members of this party are accused of wishing to inflate the currency, and thus raise prices to the detriment of the workers. The right honorable member for Cowper (Dr. Earle Page) has referred to the note issue in Germany. I would fight as tenaciously as he would to prevent the repetition in Australia of what happened in Germany. The financiers were concerned about the inflation in Germany, not because it caused industrial depression and brought hunger upon the workers, but because Germany used it deliberately as an instrument for the repudiation of her national debt, and . by that method repudiated her debt much more effectively than Russia did by direct action. The financier is afraid that he may have taken from him the right to levy toll on future generations. I wish to quote the opinions of prominent economists in regard to the much abused term “ inflation.” One description is as follows: - “ Inflation “ is a fire-breathing demon. Many bankers and cock-sure economists have mct it frequently, and know all about it; have written much about it, but no two can go into the box and give a similar description. On the contrary, they frequently contradict each other.
Professor Cassel defined “ inflation “ as “ the actual creation of artificial purchasing power.” Professor A. C. Pigou said it was “The quantitative aspects of the situation, that is to say, the number of bank notes existing at a given time in comparison with something else.” Professor Schumpeter ‘ said it was “ the disturbance of the relation between the stream of consumable goods and money incomes per unit of account.” J. M. Keynes said, “ Price level becomes under all circumstances the measure of inflation.” Lansing Dulles said, “Inflation is a dynamic phenomenon.” He further defined “ inflation “ as “ deliberate increases of the means of payment made mainly by the government.” Sir Arthur Salter said, “ Inflation is the inevitable complement of loans after these pass a certain proportion of the annual taxable capacity of a country.” R. G. Hawtrey, in Trade and Credit, said “ The more they define inflation, the more they become clogged.” The theory is that the value of money changes with the quantity; that, if there is twice as much money to-morrow as there was yesterday, boots will be twice as dear, and that, if the quantity of money falls by one-half, boots will be cheaper by one-half. In short, prices rise and fall with the volume of money in existence. The Encyclopaedia Britannica says -
The controversies to which this theory has given rise arc amongst the most celebrated in political economy.
There is a pre-war quantity theory represented by Irving Fisher in his Purchasing Power of Money. This was blown to pieces by the war, and the economists have put up a new quantity theory, which is represented by Keynes, and by Hawtrey in his Trade and Credit. The new theory asserts that the pre-war theory was a fake Messiah, and that its indisputable truths are falsities based on reasons disproved by actual practice. The Encyclopaedia Britannica asserts that the only difference between the new and old theory is that, in the new theory, there are more “ ifs “ and “ suppositions.” It rests upon the assumption of “ al] other things being equal “ ; that is to say, all the other factors of economic existence must move in the same direction, with the same momentum, and at the same time, when it is well-known that in the world of reality all other things are never equal. The Encyclopaedia Britannica goes on to say -
It must be pointed out that the quantity theory cannot be established by any appeal to facts.
Any attempt to use the national credit to lift us out of the depression in which we are at the present time would imply not inflation but purely an endeavour to use the power of the nation to check deliberate deflation by private bankers^ whose object is to bring down wages and prices, so that there will he a corresponding increase in the value of the bonds that they hold. It is admitted freely to-day that the greatest cause of the depression that exists in Great Britain, and the cause of its economic and financial troubles, is the fact that she has to pay back inflated loans at deflated prices. Australia is now passing through the same experience that Great Britain passed through years ago, and, as a matter of fact, is still passing through. She is endeavouring to meet inflated loans and commitments with a deflated currency. The more the operations of the capitalistic financiers are examined the more clearly do we realize the need for an independent control of the currency. When governments need money for developmental works or other purposes, these capitalistic institutions expand the currency to provide it. They are enabled to do this by the terms of their hanking charters; and they are the only authorities which can create the necessary currency to fill the currency vacuums caused by our stupid endeavour to maintain our currency on a gold basis. Every one should realize by this time - that the supply of gold is much too limited to provide a proper basis for the currency. The endeavour to make it serve this purpose has resulted in the creation of huge currency vacuums which have been filled by the counterfeit cheque-pounds of the private banks. This system has resulted in the private banking institutions inflating the currency to provide money for developmental works of all kinds. The trouble is that they charge governments and other borrowing authorities -i per cent, or 5 per cent, for the money they lend. But these institutions depend for their stability upon the stability of the country. I do not care what their balancesheets show or what their assets are supposed to be; they depend for their very existence upon the soundness of the countries in which they operate. Governments pay them 5 per cent, for the money they lend, and in twenty years, though they have repaid as much as they originally borrowed, they still paradoxically enough, owe just as much! Would it not be far wiser for the governments themselves to expand the credit of the nation to provide them with the money they need, and pay 5 per cent, into a sinking fund, which would, in twenty years, liquidate the credit they- had given themselves, and leave them the undisputed owners of the roads, railways, weirs and other public works which they had constructed? The object of this bill is to bring a little nearer the attainment of that desirable objective.
The Leader of the Opposition (Mr. Latham) had a good deal to say about the old financial laws of France. He spoke of the assignats; I do not know why he did not tell us something about the old “ greenbacks “ of America. But the honorable gentleman did not tell us that the breakdown of the paper money system cf France was due, not to any operations that were carried on in France, but to the action of the British in keeping printing presses going day and night for the purpose of counterfeiting the French currency. Enormous quantities of these counterfeit notes were sent to France. The “ greenbacks “ of America proved to be worthless, not because the credit of the country failed, but because the Government of the United
States of America, repudiated them. In the final analysis both the French notes and the American “ greenbacks “ failed because the respective governments of those countries tried to maintain them on a gold basis, which was impossible. This country, and in fact our whole civilization, will be brought to ruin and destruction if we persist in attempting to achieve such an utterly impossible task.
Every time an attack is made upon the thieving practices of capitalistic financiers,, we are told that it is impossible to maintain a sound currency, except on a gold basis. The right honorable member for Cowper (Dr. Earle Page) had a lot to say to-day about the necessity for having a gold reserve behind our notes. One would think, to listen to the right honorable gentleman, that we were a lot of schoolboys. He talked about, the necessity for our notes- having 70 per cent, of gold behind ‘them; but he must know that to-day * they have not 5 per cent, of gold behind them. He must also know that the currency of Australia, like the currency of all other countries, depends not upon the gold backing, nor even upon the notes that havebeen issued, but upon the cheque-pounds of the private banks. We have £2S0,000,000 deposited in savings banks within the Commonwealth, although we have not 40,000,000 sovereigns all told in the country. Seeing that we cannot back even the deposits in the savings banks with gold, of what use is it for us to talk about a gold backing in the wider sphere? Gold and notes ceased to be the real basis of the currency very many years ago. I do not desire honorable members to accept my word for this, but I refer them to Mulhall, the eminent and world-renowned British statistician, who said, as long ago as 18S7, that 97 per cent, of all the payments in Great Britain were made by cheques, and not more than 3 per cent, of them were made by coins and banknotes. Sir Edward Holden, one of the directors of the London and Midland Bank, which is one of the greatest banking institutions of the British Empire, has said in works that he. has published on banking, that currency is money and that money consists mainly of cheques. He has also made it quite clear that, in his opinion, banknotes are only a fraction of the total currency. Let me quote another eminent authority, for I recognize that, although honorable members opposite may not be prepared to accept me as an authority on these subjects, they are forced to accept as authorities the gentlemen whose remarks I am quoting. Sir Reginald McKenna, a former Chancellor of the British Exchequer, who is also a director of the London and Midland Bank, said, in addressing the shareholders of that institution -
The amount of money in existence varies only with the action of the banks in increasing or diminishing deposits. Every bank loan creates a deposit. The repayment of a loan destroys a deposit or money. … In June, 1914, the banks (in England) held £75,000,000 of currency. Last month (December, 1919) this figure stood at £191,000,000. The banks, therefore, held more currency to the amount of £116,000,000, and to this extent the increase in the aggregate of bank deposits is accounted for by payments in of currency. But it is estimated that, since June, 1914, bank deposits have risen by £1,230,000,000. If £116,000,000, of this amount are accounted for by payments of currency into the banks, there remains £1,114,000,000 which we must attribute to bank loans. To whom have these loans been made? It is impossible to give precise figures, but my estimate is that of the total, £800,000,000, including treasury bills, have been lent to the State.
That shows that in Great Britain £800,000,000 of the national debt is due to faked currency, created, as McLeod says, in his Theory of Credit, out of thin air. Until this system is altered it is useless to expect Australia to make much progress. I ask leave to continue my remarks.
Leave granted; debate adjourned.
Message recommending appropriation reported.
Message recommending appropriation reported.
Debate on Tariff - Public Service and Arbitration Awards - Alleged Black List.
Motion (by Mr. Scullin) proposed -
That the House do now adjourn.
.- Some time ago I asked the Prime Minister (Mr. Scullin) when the House would be given an opportunity to discuss the new tariff schedules. He did not give a definite reply, but I should like to know if he is now able to tell us when the tariff debate will be commenced.
.- On Wednesday evening the honorable member for Corangamite (Mr. Crouch) drew attention to certain remarks made by me at Caulfield on Monday, and said that my statement that the Government was blacklisting public servants was a figment of my imagination. I take little notice of the remarks of the honorable member, because his fantastic speeches are no doubt as astonishing to his electors as they are to members of his own party ; but, unfortunately, the Prime Minister made some remarks to the same effect. My statement at Caulfield was as follows : -
The Scullin Ministry had done a lot in an insidious and dangerous way since it had come into office. Although it had turned a somersault regarding the abolition of preference to returned soldiers it was forcing all members of the civil service of the Commonwealth to join trade unions. If they did not do so they would be debarred from benefits under awards of the federal public service arbitrator. It was an iniquitous and tyrannous act. These men were employed for the service of the Commonwealth, not for the service of the Trades Hall. The Ministry also intended to keep a “ black list “ of the civil service. There was no necessity for civil servants to be in any organization, yet the Labour Ministry had sent out a circular letter to say that all officers must join unions, or they would suffer when there was retrenchment. This action was one which he would not have thought possible anywhere outside ofRussia.
That is a report published in the Argus of 3rd June, of what I said and it is more or less correct. Now, regarding the circular, had the honorable member not been absent from the House or asleep he would have remembered that the honorable the Leader of the Opposition (Mr. Latham) brought up this matter on the occasion of the adjournment of the House recently. It appears on page 2109 of Hansard, which I shall read -
– An honorable member may not quote from Hansard of the current session.
– Then I shall quote the circular memorandum itself. It was issued by the Public Service Board on 22nd April, 1930, and reads as follows : -
I am directed to inform you that the Government has directed that, on and from the 1st June, 1930, application of the provisions of the various public service arbitration awards and determinations shall be restricted to members of the public service organizations concerned.
Action is accordingly being taken for the repeal of Public Service Regulations 74b and 85.
The board suggests that the decision of the Government should be made generally known throughout the department and that steps be taken immediately to obtain and record particulars as to the membership of the various organizations in order that the decision may be applied from the date fixed. It will also be necessary to make arrangements for receipt regularly of particulars as to employees subsequently joining, or ceasing to be members of, organizations.
If that is not blacklisting the Public Service, I should like to know what it is. If the Prime Minister so prefers he may call it a victimization register. Another memorandum, issued under the authority of the Prime Minister, has been circulated in the Postmaster-General’s department. It is headed “ Preference to Unionists “, and states -
An intimation has been received from the Prime Minister that in regard to the retention of officers in periods of retrenchment, the policy of the Government is preference to unionists.
This intimation might be specially noted, and perhaps you will kindly arrange for the policy to be applied when dispensing with the services of temporary or exempt employees.
I thank the honorable member for Corangamite for giving me an opportunity of again quoting those circulars. We all remember how, on another occasion when they were mentioned, the Prime Minister turned on his fierce elocution in an endeavour to explain them away. I have no more to say. I rose to correct any misapprehension that might have been created in the minds of honorable members by the remarks of the honorable member for Corangamite and the Prime Minister.
.- I thank the honorable member for Balaclava for his gratitude and I accept his apology. I regret I did not hear all that he said. I should like to know if he read the report that appeared in the Melbourne Argus of the 3rd June of his speech at Caulfield. This is what the honorable member is reported to have said, inter alia -
The Ministry also intended to keep a “ black list “ of the civil service. There was no necessity for civil servants to be in any organization, yet the Labour Ministry had sent out a circular letter to say that all officers must join unions, or they would suffer when there was retrenchment. This action was one which he would not have thought possible anywhere outside of Russia.
– The honorable member was asleep when I read that report of my speech.
– The honorable member for Balaclava did not read that report, or anything like it.
– I was not asleep. I simply did not hear the honorable member, because his voice was not audible to me. I may add that, on some occasions when he is speaking, I would be wise to be asleep, particularly when he makes attacks which, in my opinion, are not only unjustified, but are grossly inaccurate.
– In reply to the honorable member for Swan (Mr. Gregory), it is difficult to fix a date for the debate on the Tariff. After we dispose of the Central Reserve Bank Bill and the Arbitration Bill, we hope to be able to commence the discussion on the Tariff. I shall certainly endeavour to give honorable members at least a week’s notice. With regard to the honorable member for Balaclava (Mr. White) all I can say is that his remarks this afternoon are a complete answer to his allegations. He simply read extracts from the report of his speech in which he declared it was the deliberate policy of this Government to prepare a black list of public servants, and that they were told they would be victimized if they did not join a union. I repeat that that is absolutely a figment of the imagination. Not only has the honorable member drawn upon his imagination, but he has displayed considerable ingenuity in attempting to get in on the adjournment, a speech which he attempted, but failed to deliver the other day.
Question resolved in the affirmative.
House adjourned at 3.54 p.m.
Cite as: Australia, House of Representatives, Debates, 6 June 1930, viewed 22 October 2017, <http://historichansard.net/hofreps/1930/19300606_reps_12_124/>.