12th Parliament · 1st Session
Mr. Speaker (Hon. Norman Makin) took the chair at 2.30 p.m., and offered prayers.
– I ask the Prime Minister whether the Government has yet come to a decision regarding the request foran amendment of the Bankruptcy Act to permit State legislatures to provide for the introduction of a moratorium?
– The AttorneyGeneral has been going into the matter; it is somewhat complicated, and no decision has yet been reached.
– Can the Prime Minister inform the House when the report of the royal commission on the sugar industry will be tabled?
– The latest advice I have is that the report will be submitted to-morrow. If I receive it in time, it will be tabled before the House adjourns for the Easter vacation.
– I ask the Minister for Markets whether the Commonwealth is represented at the International Wheat Conference now being held in Rome; if so, whether by a direct representative or merely by an observer ? Has the honorable gentleman received any report regarding the progress of the conference ?
– The Commonwealth Government is represented at the conference by Mr. F. L. MacDougall, who is the Australian representative on the Empire Marketing Boardand the Imperial Economic Committer.
-On Friday last the right honorable member for Cowper (Dr. Earle Page) said that a gold loan of £15, 000,000 at 4 per cent, was obtainable by the Commonwealth. Will the Treasurer say whether any such offer has been made to the Government? If so, by whom has it been made, and has the Government entertained it?
– About a fortnight ago a gentleman waited upon me in Sydney, stating that he was a representative of a company with a most imposing title. He said that his company could obtain for the Commonwealth Government a loan of £15,000,000 in gold at about 4 per cent, for an extended period. He did not disclose to me the names of his overseas principals, but sought from the Commonwealth Government authority to negotiate a loan on the terms he indicated, or on some other basis. The Government is extremely reluctant at all times to give authority to unaccredited persons to engage in loan negotiations, because of the risk that a proposal might bo hawked about London to the detriment of Australia’s credit. Approaches similar to that mentioned by the right honorable member for Cowper (Dr. Earle Page) have often been made by persons of ‘comparatively small standing in the business world, and I advise the right honorable member not to place too much reliance on the statement of unaccredited persons that they oan find large amounts of gold at low rates of interest at the present time.
– Has the Government explored the possibilities of borrowing gold in Paris or New York? If so, what obstacles are in the way, and what steps is tho Government taking to remove them?
– The Commonwealth’s financial adviser in London keeps closely in touch with all available money markets, and is constantly advising the Government regarding the possibility of approaching them.
– Does the- Minister for Markets propose to submit to the House the trade treaty which allegedly has been negotiated with the Dominion of Canada? If so, when; if not, why?
– The Australian portion of the negotiations is complete, but the Canadian Minister for Trade and Commerce has been ill for about a month, and has not been able to bring the business to completion. I understand that the Prime Minister of Canada is now taking up the matter on behalf of his colleague, and I expect that finality will be reached at an early date.
ELLIS ROWAN PAINTINGS. Mr. ARCHDALE PARKHILL. -
Having regard to the statement that the Ellis Rowan paintings of Australian flora, which were acquired by the Commonwealth some years ago, are depreciating through lack of care, will the Prime Minister give instructions that the collection shall receive the necessary attention until such time as it can be properly accommodated ?
– I shall make inquiries into the matter with a view to taking action in accordance with the honorable member’s suggestion.
Repatriation of Miners
– I have read in today’s newspapers, the statement that the Government has decided, at last, to distribute the £100,000 voted by Parliament for the repatriation of surplus coalminers. I ask the Assistant Minister for Industry - (1) Whether he will consider claims from individual miners with a view to granting assistance in the manner I have already suggested to his predecessor by lengthy correspondence; (2) whether he will consider the advisability of appointing a board to investigate the claims of each applicant, such board to consist of a representative of the miners, a representative of the Commonwealth Government - such a person as the Deputy Commissioner of the Repatriation Commission in Queensland - and an independent chairman as recommended by me; (3) on what basis has the Government allocated the £100,000 in the proportion of £93,000 for New South Wales, and only £7,000 for Queensland?
– Arrangements have been made for the distribution of the amount of £100,000, in accordance with the expert advice of representatives of the miners. The matter was dealt with by a special committee, which, after visiting Queensland and consulting with the miners there, recommended that £93,000 should be apportioned to New South Wales, and £7,000 to Queensland. Those amounts are in proportion to the number of miners displaced in each State. The money will be distributed through committees to be appointed in New South Wales and Queensland. I am now communicating with Mr. Rowe, the Federal Repatriation Deputy Commissioner in Brisbane, asking him to endeavour to form a committee there on the lines suggested by the honorable member for Moreton (Mr. Francis). The Government desires that the committees shall be small, so that not much money shall be absorbed in administrative costs.
– About a fortnight ago I asked the Prime Minister that a portion of the money to be made available for the relief of excess coal-miners might be allocated to Tasmania. I now ask the right honorable gentleman if Tasmania’s claims in that connexion were taken into consideration when the allocation was made to New South “Wales and Queensland ?
– The manner of the allocation of this money was submitted to a committee. Its report does not recommend the allocation of any sum to Tasmania. It recommends that the bulk of the money shall be used for the exploitation of shale deposits in New South Wales, and that the sum of £7,000 shall be granted to Queensland for the relief of the surplus coal-miners there. When the giving of relief was first suggested, we were asked to provide relief for the surplus coal-miners in districts which were at that time involved in a dispute, and only the coal-miners of New South Wales and Queensland were then affected.
– Upon what authority is it proposed to make an advance of £100,000 to the coal-miners?
– The advance is being made in pursuance of a definite promise made by the Government some twelve months ago, and follows a parliamentary appropriation.
– Is any money to be given to the miners of Wonthaggi?
– In view of the fact that the miners of Wonthaggi were also involved in the industrial dispute as a result of which the New South Wales miners are obtaining £93,000, and those of Queensland £7,000, is it intended to make any allocation to the Victorian coal-miners?
– The Wonthaggi coal-miners were not involved in that dispute.
– Mr. Justice Isaacs said that they were.
– I am the representative in this Parliament of the Wonthaggi miners.
– Then -the Minister should look after their interests.
– I am doing so. In allocating this money, the suggestions of the Shale and Coal-miners Association were taken into consideration, and that association made no suggestion that its Wonthaggi branch should share in the allocation.
– Has the Government yet considered whether it will do anything to relieve the distressed small woolgrower in Australia?
– The relieving of distressed primary producers is chiefly a matter for the State Governments. The Commonwealth Government might be able ‘to render certain assistance by making advances to them. That, of course, depends first upon the financial arrangements that the Commonwealth Government can make, and, secondly, upon Commonwealth legislation.
– In view of the near approach of winter, and the fact that an enormous number of men are tramping the roads of the country districts, will the Minister ascertain whether it is possible to make available during the cold months bell tents, blankets, and other military equipment, and place them under the control of suitable local bodies, which could make the necessary arrangements for distribution ?
– I have gone fully into the question of making tents available for the use of the unemployed, and regret that because of the large number of tents that have already been lent by the Defence Department and have not yet been returned - evidently being still in use - we are not able at the moment to provide more tents. As to blankets and clothing, I have investigated the position in all the States, and have been able to locate a certain quantity of surplus military clothing and a few. blankets in three of the States. These I propose to make available in South Australia and Victoria, through the State Governments. A condition under which we previously made military clothing available to the States was that it should be dyed before being issued. The New South Wales Government has not been prepared to take advantage of that offer, nor to accept the responsibility of dying their clothing. I have, therefore, arranged for the Secretary of the Defence Department to get into touch with the Benevolent Society of New South Wales, to ascertain whether it is prepared to undertake the distribution on an equitable basis, of surplus clothing now available for New South Wales, and any material that, may be available later.
– Has the Minister for Trade and Customs yet come to a decision in respect of a request which was made by certain spirit producers that, the fixed price for the sale of spirits should be reduced, and if so, what is his decision ?
– The decision was made, and announced to the press, that the price of spirit made from doradillo grapes, which was fixed at 5s. 3d., should apply also to spirit made from other grapes. I trust that that will meet the wishes of the various co-operative societies in which the honorable member is interested.
– Yesterday the Treasurer informed the House of the amount due in respect of overdrafts and shortdated treasury-bills in London. Will he also give the amount due in Australia in respect of overdrafts and short-dated treasury-bills, and the money that is necessary to meet payments at an early date?
– The information asked for is contained in an appendix to the report of the proceedings of the recent conference with the Premiers of the States. Does the honorable member require more up-to-date figures?
– The last figures that I saw related to a period ending in September last.
– If the honorable member requires later information, I shall endeavour to obtain it for him.
– Is the Prime Minister able to state what is the position regarding the amendments proposed by the British Government to sections 12, 13 and 15 of the Covenant of the League of Nations? I might explain that those amendments are designed - so it is claimed - to make it impossible for any States that are members of the League of Nations to actually engage in war without first having exhausted every avenue likely to lead to the peaceful settlement of a dispute.
– I hope to be able to make a statement shortly on that question, and “on a few other cognate questions.
– Is the Prime Minister in a position to state what is the attitude of the New South Wales Government regarding default, and what action does this Government propose to take?
– The matter is still under negotiation, and I hope to be able to make a statement regarding it early; probably to-morrow.
asked the Minister for Home Affairs, upon notice -
– The answers to the honorable member’s questions are as follow : -
On Mr. Lambert’s advice as disclosed by his report, which was recently tabled in this House.
asked the Minister for Home Affairs, upon notice -
Does Mr. W. J. Lambert (Chief Valuer of the Federal Land Tax Department) recommend, in connexion with the Federal Capital Territory -
– Replies to the honorable member’s questions will be furnished as soon as possible.
asked the Minister for Defence, upon notice -
– The information is being obtained, and a reply will be furnished to the honorable member as soon as possible.
asked the Treasurer, upon notice -
– The information is being obtained as far as possible.
Country Party Propaganda
asked the Minister for Trade and Customs, upon notice -
– The answers to the honorable member’s questions are as follow : -
Cost of Australian Delegations
asked the Prime Minister, upon notice -
– The answers to the honorable member’s questions are as follow : -
The cost of Australia’s representation at
asked the Prime Minister, upon notice -
Mr.SCULLIN.- The answers to the honorable member’s questions are as follow: -
asked the Minister for
Home Affairs, upon notice -
– The answers to the honorable member’s questions are as follow : -
asked the Minister for Trade and Customs, upon notice -
– The highest rate of duty on fertilizers is 25 per cent. ad valorem, plus 4 per cent. primage, but certain kinds of fertilizers are already on the free list, and pay primage duty (4 per cent.) only.
asked the Minister for Home Affairs, upon notice -
– The information is being obtained, and the honorable member will be advised as soon as possible.
asked the Postmaster-General, upon notice -
– The answers to the honorable members questions are as follow : -
– On Thursday, the 19th March, the honorable member for Northern Territory (Mr. Nelson) asked the following question, upon notice: -
What are the freight rates for the carriage of boring plant, fencing wire, cement, building material, and agricultural machinery, on: - (a) Commonwealth railway from Quorn to Alice Springs: (6) Victorian railways; (c) New South Wales railways; and (d) Queensland railways?
I am now in a position to furnish the desired information -
Motion (by Mr. Scullin) agreed to -
That the House, at its rising, adjourn until 10 o’clock a.m. to-morrow.
The following papers were pre sented : -
Naval Defence Act - Regulations amended - StatutoryRules 1931, Nos. 22, 26.
Navigation Act - Regulations amended, &c. - Statutory Rules 1931, Nos. 20, 24.
Papua Act - Ordinance of 1930 - No. 3 - Police Offences.
Public Service Act - Regulations amended - Statutory Rules 1931, No. 29.
Debate resumed from the 18th March (vide page 333), on motion by Mr. Forde-
That the bill be now read a second time.
Mr.GULLETT (Henty) [2.58].-When this measure was under consideration last week, the Minister for Trade and Customs (Mr. Forde) courteously agreed to a postponement of the debate to enable some honorable members on this side of the chamber to make inquiries as to the probable effect of it. These inquires have been made, but all the replies have not yet been received. However, I shall offer no opposition to the passage of the bill through this House, though if it become necessary, representations in regard to it will be made in another place.
– I support the bill. It is a move in the right direction, as it will tend to improve the standard of our wine, particularly of our fortified wine. The best wine offered on the British market comes from Portugal, where first-class brandy is used for maturing purposes. The Australian bounty system has had a rather injurious influence upon our wine, for it has encouraged bulk production without imposing proper safeguards as to the quality of wine which may be exported. South Africa adopted a different policy from that of Australia. Wine may not be exported from that country until it has been held for three years. Our winemakers are not under any obligation to hold their wine for any period.
– I do not think it is quite accurate to say that there is no limit to the age at which wine may be exported.
– South African winemakers are definitely overhauling Australia on the British wine market. It is true that we are now making provision that-
No Australian wine, fortified with spirit of a strength of less than 30 degrees above proof, shall be removed from the control of the Customs within a period of two years after the date of its last fortification with such spirit.
In South Africa the authorities insist on wine intended for export being held for three years. In Australia our regulations are not nearly so rigid, and South Africa seems to be obtaining a stronger footing than Australia in the Home market. The British Board of Trade recently issued figures relating to the consumption of colonial wine in Great Britain, and these show that the consumption of South African wines during the year ended the 31st December last had increased by, roughly, 200,000 gallons, whereas during the same period the consumption of Australian wine decreased by about 200,000 gallons. Later figures were published in the Sydney Morning Herald of the 16th
March last, showing that a promising increase had occurred in the importation of colonial wine into Great Britain, but it was pointed out that the increase was due chiefly to South African wine. For instance, in December the importations of Australian wine increased by about 30,000 gallons, while the increase in the use of South African wine amounted to about 112,000 gallons.
The tendency to discard the Australian product in favour of the South African is shown clearly by the operations of some of the largest wine traders we have had in Australia. Burgoyne’s, for many years, were the largest shippers of wine from Australia. For a time they used to advertise Australian wines extensively; then they pushed the sale of Empire wines, and now their advertisements feature South African wines. Another big purchaser is Stephen Smith, of England, who has lately purchased large vineyards in South Africa, and, like Burgoyne’s, is shifting his operations to that country, and giving up the Australian market. The reason for this is, doubtless, that our bounty system has encouraged the production of wine in bulk rather than quality. We have encouraged the production of wine on the irrigation areas, where large quantities are produced, but where quality is lacking. I submit that, in view of this experience, it would be advisable to direct our legislation more to tightening up the regulations to secure quality in the wines that we export than to inducing the production of large quantities of lower-grade wines.
Many of the newer producers are hurrying to place their wines upon the market mainly for the purpose of collecting the bounty. A return furnished to this House last year showed that, for every £1 worth of bounty-fed wine exported from Australia, the bounty had amounted to 9s. 7d. Of course, that is a large sum to pay for our wine trade. The bounty is being paid now by the consumers of wine in Australia, who are also making a substantial contribution to the revenue. It is doubtful whether we should place this heavy impost upon the local consumers. This practice has encouraged the people to consume lowergrade wines. It is regrettable that, instead of favoring wines of the better class, the Australian public is gradually reverting to the consumption of what is generally referred to as “ pinkie.” Australia, with its excellent climate, could produce wine both in large quantities and of excellent quality. Hotelkeepers, instead of being content to sell a glass of wine for 4d., and make a profit of 100 per cent., insist on demanding 6d., and thereby make a 200 per cent. profit. The whole tendency is to keep up the price of wine, and make it so costly that good wine is not available to the public at anything like a fair price. The object of our regulations should be to ensure the holding of all wine for such a time as would make it innocuous, and we should assis , as far as possible, to make good quality wine available at a reasonable price. Both from the health point of view and from the trade aspect, it would be better for the people to consume wines than spirits.
In its strength, fortified wine is not far short of whisky. An ounce of whisky is, roughly, equivalent in alcoholic strength to two ounces of fortified wine. Since we insist on whisky being retained for two years, I see no reason why we should not demand a similar retention of wine before it is sold to the public. The evil effects of drinking immature wine are just as great as those following the consumption of bad whisky. We should not consider this subject from the point of view of either the teetotaller or the liquor man. The public will insist on its liquor, and I believe that it should be given liquor of good quality at a reasonable price. If we allow wine to be fortified with inferiorspirit, in order to meet the case of port wine, which has to be fortified with brandy to obtain the best results, we must be careful to see that wine fortified with inferior spirit is held in bond for a sufficient time to ensure its maturity.
Question resolved in the affirmative.
Bill read a second time.
Clauses 1 and 2 agreed to.
Clause 3 (Maximum strength of wine).
.- This clause contains the provisions about which certain wine-makers in South Australia expressed some misgiving, in a telegram that they sent me last week. They have not confirmed their objection, and I, therefore, have no desire to delay the measure further. I wish to express appreciation of the reasonable attitude adopted by the Minister towards the request of members on this side for a postponement so that every opportunity might be afforded for the expression of any views that might be held in relation to this new provision. If cogent reasons in opposition to the clause are subsequently received, the Minister can be approached before the bill passes another place.
Clause agreed to.
Clause 4 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Bill - by leave - read a third time.
.- I move-
That the bill be now read a second time.
This measure authorizes the Government to set up a board to make recommendations with respect to the rates of interest that may be paid upon deposits in banks or charged by banks upon loans, advances, and overdrafts, and as to the maximum discount rates that may be charged by banks on bills, drafts, and other securities.
There would have been no need for the bill had the banks met the Government in a proper spirit of co-operation in settling a monetary policy for Australia in the present difficult circumstances. During the negotiations the banks did not raise any objection to the principle that rates of interest, payable upon deposits, or chargeable against bank loans, should be reduced. Indeed, that principle apparently had their entire approval. But because the Government has not seen fit to accept their dictation as to the manner in which its budget shall be managed, no agreement could be concluded upon other points; and as the banks are not taking the initative in this matter, the Government now deems it necessary to proceed with legislation upon this subject, as well as upon other point.that are covered by its finance bills.
There is no doubt that Australia is suffering at the present time from the high interest charges, which impose a severe burden on industry and business.
– Are there not reasons for the existing high rates?
– I do not know whether it is suggested that the current rates chargeable against government overdrafts are penal rates on this Government.
– There is no justification for that conclusion. The lack of justification for the suggestion is proved by the fact that our predecessors paid the same rates upon their overdrafts.
– I do not make the suggestion.
– Other honorable members sitting behind the honorable gentleman have done so. It will be unfortunate if the consideration of this question should involve a suggestion of the possibility of the rates now chargeable by banks or payable in industry being the result of some recent action by the Government, or of the operation of a particular policy.
– That is a different question.
– I know that it is, but we ought not to be forced to consider the matter from that point of view. Surely we can discuss the need for a measure of this kind without importing bitter party spirit into the controversy.
There is no doubt that very high charges are made for capital in Australia to-day, and that, whatever may be the cause, we ought to endeavour to evolve a means that will lead to their reduction. There are certain disabilities which apply both to industry and to governments, affecting the cost of production as well as the cost of government. The various factors ought to be considered with a view to bringing about the reduction of costs. I think that every honorable member will accept that statement. It is true that the opponents of the Government consider that it ought to do more to reduce the cost of administration; they believe that wages ought to be brought still lower, but that certain factors affecting costs including the general interest charges are beyond the control of either governments or other authorities. We must, however, bring reason to bear upon the matter, to ascertain how far we can contribute towards the reduction of all the cost factors that are making conditions difficult in Australia. That is the motive which has actuated the Government. I hope that honorable members will not think that this measure is in the nature of a reprisal against the banks.
– The honorable member’s remarks suggested that.
– I shall be sorry if it is assumed by any person that the bill is intended as a reprisal against the banks. It is not so intended. There was no dispute between the representatives of the Government and the banks as to the necessity of reducing interest; the banks were in entire agreement with the Government that the rates should come down, and, indeed, tentatively agreed to a reduction of about 1 per cent, in the deposit rates, commencing with the savings banks, in an endeavour to effect a reduction of li per cent, in the advance rates.
– Under the Constitution the State Savings Banks cannot be compelled to reduce their rates.
– Under the Constitution we cannot control any State banking institution so far as its business is confined within the State boundaries. But in our consultations with the banks we had a wider field to cover. There could have been voluntary action on the part of the banks, in agreement with the Government, for reducing deposit rates and advance rates. But the banks have not seen fit to agree to this Government’s financial proposals, and have not taken the initiative in this matter, nor given any indication that they are likely to do so. Therefore, the Government is in duty bound to consider it.
The interest rates payable by primary producers, secondary industries and all kinds of businesses constitute one of the most important elements in the cost of production. Recently, I received a letter from a business man in Melbourne who has extensive dealings with primary producers. In it he has expressed a very generally held opinion, in the following terms : -
While there has been an outcry for a reduction of wages as a solution of unemployment, and as a means of reducing the cost of production, and incidentally the cost of living, little has been said of the main burden under which the primary producer and the secondary industries are staggering
This burden is the high cost of capital.
The real wealth of a country is in its primary products, and, as an example, the wheat-grower is paying to-day the same or more for the use of borrowed money as he did a year or so ago, when the result of that money, plus labour, was returning him twice as much as it does to-day; and the woolgrower is paying to-day more on borrowed money with wool at 8d. per lb. than he did when he received ls. 8d. per lb. for his wool.
Therefore, to me, it seems obvious that this position is wrong, and that the first thing to attack is the rate of interest.
I do not think that any one can seriously deny that. If we are to have rehabilitation and readjustment in order to meet the very difficult economic circumstances of the world, we cannot overlook the special element of interest, and, if the banks will not take the initiative, surely it is the responsibility of Parliament to deal with the matter. Bank loans constitute a particular kind of fixed charge which does not become lighter when times are hard, but, on the contrary, tends to increase as financial stress becomes more acute; as deflation takes place and price levels come down, the relative weight of the interest burden increases automatically.
– Prices rise as commodities become scarce.
– Surely the honorable member does not assume that this is the only factor which causes a variation in price levels? General price levels are influenced by entirely different agencies. The interest charges for overdrafts, bank loans, and advances automatically become relatively heavier as financial stress becomes more acute, and in Australia, in addition to the automatic increase in the relative burden, we have had the experience of bank rates actually being increased by the direct action of the banks during a period of financial stress.
– The Treasurer is aware that the credit foncier department of the State Savings Bank of Victoria has reduced its interest rates.
– I am aware of that. It is a good example that might well have been generally followed. Had it been followed there would have been no need for this bill.
– There is no need for it now.
– Had the other banking institutions followed that example, or declared that they intended to alter the rates and to ease the interest burden, there would be less necessity for the bill. I am merely trying to provide machinery that can be put into operation in the event of the banks failing to do what obviously it is their duty to do in this matter.
– Is there any precedent for this legislation?
– I cannot answer the question offhand. In January, 1930, the trading banks increased the deposit rates by i per cent., and the advance rates were correspondingly increased. The Commonwealth Bank did not follow that movement, but maintained the advance rates at the old level. At the present time it charges 6J per cent, upon overdrafts and advances. In 1913 the advance rate charged by the trading banks ranged from per cent, to 7 per cent., and in 1924 from 6£ per cent, to 8 per cent. At present the rate is from 7 per cent, to 8 per cent. On government overdrafts the Commonwealth Bank charged in 1914 4-£ per cent., and in 1922 5 per cent. Shortly afterwards the rate rose to 5$ per cent., and has remained at that figure ever since. The trading banks charge 6£ per cent, on government overdrafts.
– They have to pay 4 per cent, on money on fixed deposits, so there is not much margin of profit.
– They are not obliged to pay any particular amount of interest on fixed deposits; the rate is arbitrarily fixed by them. The representatives of the Government, in discussions with the bankers, suggested that the deposit rate should be reduced all round to enable the banks to reduce the advance rate. That is part of the schematic whole. The following table shows the interest rates paid on fixed deposits by the banks at intervals since 1914: -
In 1914 the Commonwealth Savings Bank allowed 3 per cent, on deposits up to £300. In 1920 the rate was altered to 3£ per cent, on the first £1,000, and 3 per cent, on a further £300. In 1930 the State savings banks of New South Wales and Victoria allowed 4 per cent, on deposits up to £1,000. South Australia allowed 4^ per cent, to £500, and 4§ per cent, from £501 to £1,000. Western Australia allowed 4 per cent, to £500, 3$ per cent, from £501 to £1,000, and 3 per cent, in excess of £1,000. These increases, although they do not appear to be great, have advanced the co3t of money obtainable through other institutions. The rate of interest allowed on deposits in savings banks and trading banks governs the interest which the banks must charge for accommodation furnished to industry, and it would not be financially practicable for the banks to reduce the advance rate to any considerable extent without reducing the deposit rate as well. This bill, therefore, deals with both classes of interest.
– Does the Treasurer think that this Parliament has power to fix the rate of interest to be charged by State savings banks?
– The Commonwealth has no control over State financial institutions.
– Then the State savings banks will have an advantage. Money will flow to them from the other banks.
– In normal circumstances, where the other elements of competition are equal, the State savings banks would have an advantage over the Commonwealth institution if they were paying a higher rate of interest; but now the Commonwealth Bank covers a very wide field, and in some of the States the Commonwealth Savings Bank is the only savings bank. In Queensland, for instance, and I believe in Tasmania also, there is no State Savings Bank.
– Tasmania has institutions which are equivalent to State savings banks.
– It is doubtful whether they would be treated as State savings banks and be exempt from the control which this bill proposes. In considering the controlling of interest we have to take into account what contributes to that enormous burden of fixed money claims which heretofore has been the subject of special protection during periods of economic stress. There are certain claims and obligations which do not respond to financial stringency in the same way as others. Interest paid on government securities is specially protected, and cannot in the ordinary way be made to contribute its fair share to the sacrifice of the nation. Interest on fixed deposits in banks, and income from long-term leases and debentures and preference share issues in industrial concerns, enjoy in these times a special protection at the expense of the whole community, and of other classes of investment. Therefore, in considering the rehabilitation of the economic conditions of the Commonwealth, we must take into account the fixed money claims, and the relationship they bear to the national income. In 1928-29, when Australia’s income reached its maximum, computed by economists at £663,000,000, the fixed money claims were a little greater than they are to-day. They have not varied to any extent, but the national income has; it has declined so much as to be estimated at only £470,000,000 for 1930-31. The internal fixed money claims are roughly computed by economists at between £70,000,000 and £80,000,000, and they include interest paid on government securities, interest on bank deposits, rent from long-term leases, and various other similar forms of income. In addition, there are external obligations on the part of the Commonwealth amounting to about £36,000,000. If we add the exchange rate for remitting money abroad, the total fixed money claims of the Commonwealth may be estimated at £120,000,000 a year, and that amount has to to be found from a diminished national income. These claims represent about 25 per cent, of the national income, whereas in 1928-29 the proportion was only 16 per cent. I mention these figures to show how the relative burden of fixed money claims has altered during the last few years. With the great diminution of national income these fixed incomes have become an almost intolerable load, and that is the justification for this Parliament attempting to deal with every controllable element that affects financial policy. The interest charges by trading banks and other financial institutions may be computed at £20,000,000 a year. If by a reduction of the rate of interest on deposits we could reduce the advance rate all round by an average of 1£ per cent., we would save industry in Australia about £4,000,000 a year, or 20 per cent, of its present interest burden. Such a saving is not negligible, and, therefore, the House should give serious consideration to the bill. It is not reasonable to assume that under this measure injustice will be done to the banks. Although it may be possible to reduce the margin between what the banks pay for money and what they charge for it, the intention is not to exploit them in that way. The board which will be constituted .under the bill will take into account the past practice with regard to the margin between the interest payable on deposits and that charged on advances, and will, no doubt, make a recommendation conforming with the economic necessities of the country.
– The board of five which will be appointed will then be the sole arbiters as to the rates of interest.
– No. The board can only make a recommendation. The Governor-General in Council must make the final decision.
– What will be the use of the board if the Government does not accept its recommendation?
– The purpose of the board will be to make investigations as experts, and to make recommendations on which the Government may act. The final responsibility in matters of this kind must be borne by the Government, which is answerable to Parliament. If Parliament vested in a board appointed for five years the power to make the final determination, that board would be answerable to no one except the consciences of its members.
– Then the board will act merely in an advisory capacity?
– Exactly. The bill provides that the Commonwealth, the associated banks, and the Treasury shall be represented on the board, and that there shall be two other members. It is the intention of the Government that one of these shall be a representative of the agricultural and pastoral interests, and the other a representative of commercial interests. I consider that a board of that nature can safeguard the interests, not only of the banks, but also of the whole community.
The bill also makes some reference to the control of discount rates. That provision has been inserted in order to provide what may be necessary with regard to the control of discounts. At present, bill discounting is not a very important function of our banks, as we have not a very highly organized bill market in Australia. The only important discounting at present done here is that of treasury-bills, in order to make good ways and means shortages of government in Australia.
– The clause deals with general exchange.
– Clause 9 reads-
The board may make recommendations . . as to . . the maximum discount rates which should he charged by banks on bills, drafts and other securities.
– Which includes in terms all external exchange.
– It is not intended to include external exchange. If it is thought that that is too great a power to place in the hands of the board or the Government, I am prepared to accept an amendment in order that the provision may be made more clear. It is intended to relate only to internal bills.
– I read that provision as intended to carry out a scheme of control of foreign exchange generally which had been indicated as a possible procedure of the Government.
– That may be the correct interpretation of its phraseology, but is not the intention of the Government. If the Government sought additional powers, or desired to put into operation a different method of controlling external exchange, its proposals would be embodied in a separate measure. Any attempt to obtain better control of exchange, which would be done through a system of licensing of export in conjunction with the Customs, would not be proceeded with except after consultation with the banks, and after an acknowledged breakdown of the present exchange pooling arrangements.
In those countries where bill discounting operates on a large scale, discount rates are fixed principally by the central reserve banks of the country concerned.
The central reserve bank publicly announces the rate at which it is prepared to discount first-rate bills for approved customers. Under the Commonwealth Bank Act, the Commonwealth Bank Board is authorized to fix the discount rates from time to time, but so far that board has not felt called upon to operate that power.
– Will not this bill bring about the pegging of exchange with the Old Country?
– If the honorable member can demonstrate that its provisions will have any effect on external exchange, I shall have the matter dealt with in committee. It must be left to the discretion of the board to investigate discount rates on bills, and make any recommendations in the matter. This measure does not provide that matters shall be specially referred to the board for consideration, and it is unlikely that the board will investigate and make recommendations upon matters that do not call for investigation and recommendation.
There is a growing opinion in Australia, which is fairly general, that a bill market should be developed here in order to make the money market more flexible and more convenient for meeting the requirements of merchants and traders. The chief reason why a bill market has not been developed in Australia is that comparatively heavy stamp duties are chargeable upon such bills. That has operated as a barrier to bill discounting here.
– After reading the honorable gentleman’s article in the Mining Standard, one would assume that he wanted to obtain control of exchange, by pegging rates.
– I stated, in another speech in this chamber, that while present exchange arrangements are operating satisfactorily and sufficient funds are made available in London on reasonable terms, this Government has no intention to alter the existing system. But if that system proves inadequate, we shall have to seek other means to make the necessary finance available in London.
– That can be done by encouraging primary production, not by destroying it.
– The exchange position will improve for us as the volume of our exportable products is increased. The Government will not do anything to prejudice that.
– What does the honorable gentleman consider to be reasonable terms of exchange?
– The first essential is that we shall have the amount that we need, that is about £3,000,000 a month, to meet Australian requirements in London, and that that amount shall be provided at rates of exchange that are fair as between this and foreign countries. A fair rate of exchange is that which approximates the disparity of the price levels of the two countries concerned. If the exchange rate is higher than the disparity between the price levels of the two countries concerned, it is at a fictitiously high level; if lower, it is at a fictitiously low level.
– Should not supply and demand be the factors?
– The disparity of the price levels of two countries immediately reacts in .the matter of supply and demand. Whether a person who has a money claim in Australia exercises that, claim or not depends on what the value of the money will be when the claim is discharged. That is governed by the price levels. I know that there are other factors which operate, in addition to price levels. One that has been operating in recent months has been the panic desire, on the part of certain persons, to realize on their securities, and transfer their money abroad. That is an unpatriotic action, which has tended to put up the exchange rates, as has been acknowledged by the banks themselves. lt was because of that pressure upon the exchange market that some of the banks had tentatively to notify the Government recently that they would no longer be able to meet the requirements of the Government in the exchange pool. Three months notice is required from the banks if they intend to depart from the existing pooling agreement. As a result of the recent conference between the governments and the banks in Melbourne, it was agreed that that tentative notice should be withdrawn, and that the present arrangement should continue. It was recognized by the banks that if the existing pooling arrangement broke down, some other form of government control would have to be set up to provide for the Government having sufficient funds available iu London to meet its urgent requirements there. The Government will not alter the present system or inaugurate a more drastic control of exchanges except after consultation with, and so far as is practicable, upon the advice of the banks.
I do not know that I can add very much to what I have said in explanation of the bill. I emphasize again that the measure is not to be regarded as a punitive measure against the banks. It has been brought down because of a desire to carry out a complete scheme that will relieve industry of burdens that have become more and more onerous because the financial stress has become more and more acute.
.- I move -
That the debate be now adjourned.
– May I give notice of an amendment, Mr. Speaker?
– Not at this stage. There can be no debate upon a motion for the adjournment of the discussion of the bill.
Motion agreed to; debate adjourned.
Debate resumed from the 24th March (vide page 557) on motion by Mr. Theodore -
That the bill be now read a second time.
.- I have listened most carefully to the debate on this measure, and my object now is to give some reasons why it should be supported. The vitally important one is that Australia is at the moment confronted with a crisis that involves the right to live of some hundreds of thousands of people in and around our cities. Particularly am I concerned about the hard-working populace of the nation, and that most deserving class engaged in our primary industries, people who are practically threatened with obliteration. This Government has made endeavours to obtain money, but has been thwarted in its attempt by the Commonwealth Bank and other authorities.
The people of Australia are looking to this Parliament to do something for them. We on this side of the House take the view that, orthodox methods having failed, it is necessary to adopt what may be regarded as unorthodox proposals. This bill represents part of the Government’s plan but, as we expected, it is being bitterly opposed by honorable gentlemen opposite. They ignore the fact that for many years Great Britain has had a fiduciary issue of £260,000,000. It is suggested that the assets behind the fiduciary issue in the Mother Country are of greater value than the securities which will be the backing for the proposed Commonwealth issue of £18,000,000? In June of last year, according to figures to be found in the Commonwealth Year-Book. Australians owned in Australia, Federal and State debentures to the amount of £626,000,000 ; and bank and savings bank deposits totalling £563,000,000, on which the yearly interest was £55,000,000. The Statistician’s estimate of the private wealth of Australia at that date was £3,073,444,000, or £487 per head of population, and the national income was £649,000,000 per annum. Australia possesses enormous assets in public works and State instrumentalities, as well as a vast area of unalienated Crown land. Daily the situation is becoming more serious, and daily all sections of the community are urging the Commonwealth Government to bring forward legislative proposals to meet our difficulties. Honorable members opposite suggest as an alternative to the Government’s policy, a definite cut in salaries, wages and social services. They overlook apparently the fact that already there has been a considerable cut in governmental expenditure, much of which does not meet with my approval. Honorable gentlemen opposite also favour the plan recommended by Treasury experts a few months ago. That scheme, I remind the House, involves a further cut in Public Service salaries. The honorable member for Gippsland (Mr. Paterson) gave it his hearty endorsement, and declared his willingness to cut all controllable expenditure, including wages, old-age pensions, war pensions, anc maternity allowances.
– Do not misrepresent me.
– The honorable member said definitely that he favoured a cut in all controllable expenditure, including war pensions, by 20 per cent. and, if necessary, 30 per cent.
– That statement is an absolute misrepresentation of my remarks.
– Reference to the Hansard report of the honorable member’s speech will disclose the accuracy of my statement. He was directing his remarks particularly to the possibility of reducing wages and pensions when I interjected, saying, “You are the only candid member on that side of the House “. The Leader of the Opposition (Mr. Latham) also approves of the recommendations made by the Treasury officials. He and other honorable members opposite have endeavoured to show that this Government has made no effort to meet the situation. The Prime Minister (Mr. Scullin) ha3 declared emphatically that all pensions and social services must stand. Money is not available. This bill will authorize the issue of additional currency. For this proposal we have the precedent established by the British Government which, as I have stated, passed legislation authorizing the issue of fiduciary notes to the amount of £260,000,000. Of the £18,000,000 proposed to be raised under this bill, £12,000,000 will be set aside for expenditure on reproductive public works to relieve unemployment, and £6,000,000 will be earmarked for the assistance of our wheat-growers. My one regret is that the bill does not provide for £112,000,000. Much of the present trouble is due to the fact that this year the Loan Council cut down loan expenditure from £43,000,000 to £14,000,000. Even the Deputy Leader of the Opposition (Mr. Gullett) believes that this reduction was too drastic.
The Government of the United States of America, towards the end of last year, dealt expeditiously with its economic problem. In the Sydney Sun of the 23rd December, 1930, there appeared the following: -
Millions for Workless.
President Hoover will Spend £140,000,000.
Washington, Monday. - For the relief of national distress President Hoover has at his* disposal more funds that he asked Congress to provide.
There will be £140,000,000 available for public works and expenditures of all sorts during the coming year, compared with £19,000.000 spent in 1928.
Most of the allocutions will be spent on highways, river and harbour improvements and public buildings.
Contrast that with the modest proposal of this Government which, last year, made a grant of £1,000,000 for the relief of unemployment in the several States. Even that grant was objected to by honorable members opposite. Let us compare our position with that in the United States of America. In this country we have an army of unemployed totalling about 300,000; loan expenditure has been reduced from £43,000,000 to £14,000,000, and the Government last year made a grant of £1,000,000 for the relief of unemployment. In the United States of America between 6,000,000 and 7,000,000 persons are out of work, and President Hoover in December last authorized a grant of £140,000,000 to relieve unemployment. It should be noted also that, in the United States, the relief measures referred to were passed by Congress in one week. In Australia we have been fooling about for six or eight months endeavouring to pass a measure for a fiduciary issue of £18,000,000.
Honorable members opposite raise the objection that the Government’s proposals are unsound and unorthodox. If only they knew it, they are providing us with the most effective electioneering weapon that has ever been placed in our hands. Their opposition to these measures and their advocacy of cuts in social services will be noted by the people when next an appeal is made to them. This class of domestic legislation will be most helpful to Labour, win, lose, or draw.
The workers of this country have already made a substantial contribution towards making good the heavy loss of our national income. Statistical returns show that the wage-earners have already suffered to the extent of £44,000,000 a year. An unfair burden has been placed upon them through the judiciary. The manner in which this was done is one of the blackest incidents in the industrial life of Australia. The Arbitration Court, for the first time in its history, circumscribed the area of the investigation into the basic wage problem. Wages will not stand a further cut. Despite the declaration of Chief Judge Dethridge that a reduction in wages of 10 per cent, would mean more employment, I defy any honorable member opposite to point to one industry in which there has been any marked increase in employment. On the contrary, there have been further dismissals, and an extension of the principle of rationing.
Australia has a colossal interest bill to meet. It is almost beyond the capacity of the nation to bear. But it will be met as long as this Government is in charge of the Treasury bench. The Labour movement does not stand for repudiation in any shape or form. This bill is the first of the Government’s proposals to provide liquid currency to set the wheels of industry going again. I am firmly convinced that if this and other corollary proposals are adopted, industry will revive and, in the near future will absorb at least 50,000 additional men. In any scheme for the industrial rehabilitation of this country, wages, and social services should be the last to suffer. In this crisis our slogan should be - “ Balance budgets by keeping men in work, not by dismissing them.” The primary producers are bombarding this and every other legislature for the adoption of proposals to assist them. This measure will at least provide them with £6,000,000 to help them. Opposition to it is not warranted. To put the position baldly, the previous Government, during a period of six or seven years, obtained £34,000,000 of loan money for both Commonwealth and State purposes. This Government cannot, and is not likely to, raise one penny. The world’s money lenders will not lend to Australia as they did in days gone by, and for that we are thankful. Within the last few months it has frequently been suggested by members of the Opposition, and other persons in association with them, that the various Governments of Australia should balance their budgets in one year, but since then that has been shown to be impossible. It is now suggested that we should adopt a three-years’ or five-years’ plan, in an effort to rehabilitate the finances of this country. We have been criticized by honorable members opposite for not having adopted the Niemeyer plan; but they now admit that any plan which proposes to balance the budget in one year is hopeless. To-day, this nation is looking for some relief from this Parliament. The Leader of the Opposition (Mr. Latham) has continually stated that unemployment has increased under the regime of this Government. I do not suggest that he is pleased that unemployment has increased; but I suggest that his attitude is so bitter to this Government that he loses no opportunity on behalf of his party to make political capital out of the misery of the people. This Government has to proceed with its job of giving effect to this and other financial reforms which it has already indicated to honorable members. Whether we win, lose, or draw on this issue, the people now know that this Government is making a determined effort, despite its handicaps, despite the overwhelming majority in another place, and the unprecedented slump in industry, to place this nation on a sound financial basis. The bill should have a speedy passage, so that supplementary measures may be proceeded with. The tide of public opinion is at the moment with this Government, because it is making an honest effort to carry out the policy of the Labour party, so far as that is possible under present conditions. I support the bill in the hope that it will be passed, and afford the people some relief.
– The honorable member for Bendigo (Mr. Keane) has let the cat out of the bag so far as the bona fides of this Government are concerned with respect to this measure. He stated definitely, and with a certain amount of glee, that he considered it the finest electioneering weapon that had ever been forged by his party. He invited honorable members on this side to go to the country on this measure, so that we might be politically annihilated. I am not accustomed to attribute bad motives even to . my political enemies; but I must say that, after hearing the speech of the honorable member for Bendigo, it would be impossible on this issue for any one to attribute any other motive to him and to his party. The Government’s proposal has no outstanding merit from a nation-saving view-point, but, undoubtedly, in the opinion of its supporters, and to some extent, I agree with them, it does seem to be an alluring proposition. If it is an undoubted election winner, honorable members on that side should be pleased that honorable members on this side are opposing this measure so strenuously. They should say to themselves, “ Once more the Opposition has delivered itself into our hands.” They should admire our courage in so heroically sacrificing ourselves on the altar of our country. But we on this side of the House are prepared to take a grave risk in order to do our duty to this country by warning it against the hideous fallacy underlying this proposal. There is not the slightest doubt from the Treasurer’s statement, which is the only authoritative statement made on behalf of the Ministry, that at the back of this legislation is a definite determination on the part of the Labour party to abandon the gold standard. “We must accept, as a settled conclusion, that honorable members on that side of the House have at last, after many years of theorizing, taken their courage in their hands and said, “Now, here is a splendid opportunity to declare for the abandonment of the gold standard.” They do not propose the adoption of any other standard, nor do they canvass this important feature that no other country has gone to the length of proposing to abandon the gold standard without having in its mind the substitution of some other standard of currency. “We have the absolute and definite suggestion of this Government that Australia is to depend henceforth upon a currency that has no backing whatever other than the credit of the nation - a purely fiduciary currency. No other country has gone to that extreme.
– A number of countries have adopted the silver standard.
– At all events, they have some standard, but no other country has gone to the length of proposing a fiduciary issue which has no backing other than the credit of the nation. We can, therefore, say definitely that, if this measure is adopted by the people of this country, either now or after a general election, it will mean the beginning of an entirely new currency in Australia. The supporters of the Government seem to be quite satisfied that it will be a safe experiment. Honorable mem bers on this side of the House consider that it will unquestionably be the beginning of a rapid process of economic deterioration, leading to an inevitable and terrific financial crash in this country.
Let us examine the alleged merits of this proposal. I admit that, after hearing the speech of the honorable member for Bendigo (Mr. Keane), there are certain facts which we cannot ignore. We cannot ignore the fact that this Government and the State Governments have no money; that unemployment is rife and increasing; that business is bad.
– The honorable member has mentioned money. Is he referring to gold?
– I am speaking of currency generally?
– Does the honorable member mean gold?
– We have no gold in circulation. What little gold we have is being held in reserve to maintain the fast dwindling credit of Australia overseas. The Treasurer has indicated that, if necessary, the last sovereign will be sent out of this country, to meet our liabilities abroad. What are the alleged merits of this proposal? The honorable member for Bendigo has said that the position is so bad that he cannot see any way out of our difficulty other than this venture into the realms of inflation. I remind him of the curious fact that the Treasurer, who is the only sound authority on the Government side on the subject of currency, has stated that this fiduciary issue is not unorthodox. And yet almost every other speaker on that side, including the Prime Minister himself, has said or indicated that it is unorthodox. There is, therefore, a definite difference of opinion among Government supporters. The Treasurer has said that there is no need to be alarmed, that the fiduciary issue is not dangerous or unorthodox, yet his supporters, including the honorable member for Werriwa (Mr. Lazzarini), who, next to the Treasurer, is the recognized authority on currency on that side of the House, say otherwise.
– Who is the next authority?
– The honorable member for Adelaide (Mr. Yates), and then the honorable member for Eden-
Monaro (Mr. Cusack). All those honorable members, especially the honorable member for Werriwa, have insisted that the fiduciary issue is absolutely unorthodox, and they glory in that fact. They say that we should abandon our old paths to prosperity, because they have become too dangerous, and seek new ones. I admit that if, by merely issuing £18,000,000 worth of notes, we disposed of all our problems, we should be doing it cheaply, indeed. If this proposal consisted of printing only £18,000,000 worth of notes in order to restore the credit of Australia, with no danger in the process of inflation or the dislocation of the general business activities of this country, it would be the finest proposition ever put up by the Government; but I ask honorable members generally whether they think for one moment that the issue of £18,000,000 worth of notes will enable Australia to overcome its difficulties. Does the honorable member for Bendigo suggest that that issue would relieve unemployment and business depression?
– It would give a start to the absorption of our unemployed.
– We have the assurance of the Treasurer that this fiduciary issue is to be the last.
– The Treasurer should know.
– Whom are we to believe? The Treasurer has said that the fiduciary issue is to be controlled. I had not the privilege of hearing his speech, but I have carefully studied it. He admits that inflation is undoubtedly dangerous unless it is controlled, and to that end he has inserted provisions in the measure to ensure that the issue shall be safe and controllable. Then the honorable member for Bendigo has said that this issue is a start.
– It is a start to absorb some of the unemployed.
– The honorable member cannot have it both ways. He must conform to some standard of logic. If this issue is but a start it is evident that it is not intended that it should be controlled. Once the £18,000,000 of notes is issued, everything will be all right for a time. The Government, like the man who takes his first two whiskys and soda, will feel very well. If we could be sure that the inflation policy which the passage of this bill would set in operation could be controlled, and that it would be controlled by the proper authorities, it would be all right; but we cannot be sure of that. The fact of the matter is that while we have regard for honorable members opposite personally we are not prepared to trust them politically. We do not think that the inflation process which they desire to put into operation would stop where they say it would stop. A measure of inflation controlled by the proper currency controlling authority as distinct from a political machine would be no more objectionable than such inflationary measures as the issue, some years ago, of a credit of £9,000,000 to assist the woolgrower, or the issue last Christmas of a credit of £6,000,000 to stimulate general business. Even though the Treasurer (Mr. Theodore) may be quite sincere in his desire to limit this proposed inflation to £18,000,000, we should not be justified in assuming that if the scheme were successful to that extent his followers would not force him to carry it still further.
If honorable members on this side of the chamber could be sure that there would be no risk involved in making this proposed fiduciary issue, and that the making of it would get us out of our difficulties, they would agree to the proposal ; but unfortunately the Government, in proposing this scheme, has overlooked or ignored the vital consideration that it cannot control the actions of the State legislatures. It is facing this proposal in utter disregard of the serious repudiation issue which is to-day beclouding the political sky in New South Wales. Four members of this Parliament, who support that repudiation policy, are remaining as quiet as mice in the corner opposite while this debate is proceeding. They have no enthusiasm whatever for this proposal, for they regard it as foolish trifling with the situation. Their policy is to refuse flatly to pay interest. They are following the Premier of New South Wales, Mr. Lang, in this respect.
– Mr. Lang has stated that he intends to reduce interest rates for two years.
– It is just as bad, from many points of view, to rob a man for two years as to rob him for ever.
It is claimed by the Government that the adoption of this policy will result in the relief of unemployment, and in the balancing of budgets; but neither the Treasurer nor the Prime Minister (Mr. Scullin), who so cheerily declared that on these grounds alone this was a desirable measure, gave any indication of when the great bulk of the people would be put into useful employment, or when the budgets of the nation would be balanced. The fact is that while we continue our present methods it will be impossible to balance budgets. The Government’s promises in this connexion are totally unreliable. If the £12,000,000 of this fiduciary issue, which would remain after £6,000,000 had been devoted to the relief of the farmers, were applied to the balancing of the Commonwealth budget it would just about meet our needs, and leave nothing to assist in the relief of unemployment or to balance the budgets of the States.
It has been stated in the press that the deficit in the Commonwealth accounts this year will be £12,000,000. Mr. Stevens, the ex- Treasurer of New South Wales, has declared that the aggregate deficit in Commonwealth and State Government accounts at the 30th June next will be £35,000,000. That gentleman should know something about the subject. This enormous figure does not take into account the accumulated deficits of past years. If these were added the aggregate deficit in the public accounts of the Commonwealth and States this year would be £50,000,000. Of what use is it, therefore, to suggest that an issue of £18,000,000 in fiduciary notes can possibly balance our budgets? The Government’s attempt to justify this bill on that ground is utterly ridiculous.
It may be argued that this fiduciary issue would balance budgets by the indirect process of a general revival in trade. But how long would it take to achieve the end by these means ?
– Three years.
– The honorable member is far too optimistic. The Government has also urged honorable members to support the bill because it will provide a means of assisting the farmers. I represent many thousands of wheatgrowers, and I should be delighted tq find some means of assisting them. Many of these men were encouraged to put a larger area under crop last season by the promise of the Prime Minister that if they did so the Government would assist them market their product. In my opinion, the farmers were hoodwinked by this promise, although I do not suggest that the Prime Minister deliberately deceived them. The right honorable gentleman made a bona fide promise, but he made it on insufficient knowledge. His information about the economic situation of Australia and the world wheat position was far too limited to entitle him to give the undertakings that he did to the farmers, many of whom were led to believe that if they followed his advice their fortunes would be made. If I were convinced that the farmers could be assisted only in the way proposed by the Government, and that no risk would be incurred by adopting this proposal, I should be prepared to support it; but I am not satisfied on either point. The Country party has a much sounder proposal than this one for helping the farmers, and it is not prepared to allow primary production to be used as a stalking horse for inflation. The Government is acting most unfairly in making the plight of farmers an excuse for proposing an inflation of the currency. In my opinion, it is doing so Principally to provide itself with some good electioneering material for use in country districts.
It is unfair also that the proposal for the issue of £6,000,000 in fiduciary notes for the assistance of the farmers should be linked with a proposal for the issue of £12,000,000 in such notes for other purposes; yet the two proposals must stand or fall together.
– We are prepared to assist the honorable member to get the £6,000,000 for the farmers if he will help us to get £12,000,000 to help the starving working people of Australia.
– We should be prepared to agree to a reasonable policy for the issue of additional credit if the operation of it were in the hands of proper authorities, such as the Commonwealth Bank Board, which would be responsible for the liquidation of the issue in due course.
– Does not the honorable member think that Parliament should have control of the finances of the country ?
– It is the duty of Parliament to set up proper authorities to do work of this kind, but those authorities should not be subject to continual interference by Parliament for political reasons.
– It is the duty of Parliament to do something to help the starving women and children of Australia.
– It is true that we have an obligation to see that our people, are not allowed to starve. As a matter of fact, one section of our people are being bled whi te to-day by special taxation to ensure that their fellow countrymen shall not starve. But I do not accept the statement that the people of Australia are starving. An honorable member opposite has interjected that there are starving men in Canberra. If that is so, it is a lasting disgrace to the Minister for Home Affairs (Mr. Blakeley). In New South Wales, £3,000,000 is being spent annually in doles to unemployed people to prevent them from starving. No return whatever is being obtained for this expenditure. The money is being wrung out of the people who are in work. But surely the functions of Parliament are not limited to the provision of food for starving people ! We should set to work to devise a constructive policy which will revive employment and stimulate industry. It has been said by honorable members opposite that the issue of £1S,000,000 in fiduciary notes, as proposed, will provide work for only 40,000 people a year. We have 400,000 people out of work in Australia. Can it be argued that we are meeting the position reasonably by providing one man in ten with work? That policy would still leave the great majority of unemployed unprovided fo-.1.
– The creation of work for 40,000 men on government undertakings would provide work indirectly >r at least 80,000 other men.
– That is a mere opinion, and a super-optimistic opinion at that. No evidence has been produced to support it, and it has not been borne out by practical experience in New South Wales. We have no warrant for assuming that if we put one man into a job we shall speedily create jobs for two others. I do not think that that is economically defensible. It is purely an assertion, with perhaps a little bit of guess work about it. I am not denying that the country will benefit if 40,000 men are provided with work; but I cannot see how honorable members can sustain their claim that this bill will solve the problem of unemployment. It will do nothing of the kind if only one man in ten is to be given a job.
I make these two objections against the bill. First, that it will not relieve unemployment - it will provide work for only one in ten, which is not a sufficient proportion in the present circumstances of Australia, and certainly does not fulfill the promise that practically every one would be restored to employment again; and secondly, that it will not help the Commonwealth or State governments to balance their budgets. That claim cannot be substantiated. On the contrary, at the end of this financial year budgets will be just as unbalanced as ever, and if in the meantime drastic action is not taken by the seven governments it is possible that at the end of 1932 we shall be faced with another aggregate deficit of £35,000,000. Australia cannot go on piling up deficits of £35,000,000 a year for very long.
– How would the honorable member deal with the problem.
– I am glad that I have so thoroughly intrigued the honorable member that he wants to hear the finish of the story.
A further claim has been made that if this bill becomes law, there will be a release of credit; that immediately £1,000,000 is made available to the States, there will be such a lifting of the load of depression on business and industry, that the banks will retract from their present policy and make credit available. But the Treasurer has not explained why the banks should do it then, if they cannot do it now. He said in his speech that one of the advantages of his proposal was that the banks would be encouraged to release credits, which they are not now doing. I know that they are not doing it. They say they have not the money to do it, and the Treasurer does not, under this scheme, propose to give them money.
– Will there not be an increase of bank deposits?
– Does the honorable member mean that this fiduciary issue of £18,000,000 is to be handed to the banks to enable them to release credits? The bill does not say so. It provides that £12,000,000 is to be paid to the States to be spent by them in any way they like, and £6,000,000 is to go to the wheat-growers. Most of the £6,000,000 will be used by the farmers to pay their debts, not one £1 note will be handed by the Commonwealth Government to the banks to enable them to release credits, and the third claim made by the Treasurer must, therefore, fall to the ground, and be regarded as mere guess work. Indeed, it is disposed of by the Treasurer’s own declaration that he was never one to say that the banks had millions which they were not prepared to make available to the public.
– I was then referring to the individual trading banks.
– The Treasurer, when replying to the criticism that the banks were withholding advances, although they had money in their vaults, said that he was never one to subscribe to that idea, because he knew that the banks had made advances far in excess of their deposits.
– That is so in the case of the trading banks.
– Does the Treasurer mean that the Commonwealth Bank is not playing its part?
– When I said that the banks could make credit available, I was referring to the whole banking position, and not to individual trading banks.
– I gathered from the Treasurer’s speech that he definitely repudiated the statement repeatedly made made by honorable members opposite, particularly in New South Wales, that the banks were literally bursting with money, but for political or selfish reasons would not make it available to the public.
– That is a mistaken interpretation of the Treasurer’s remarks.
– They are definitely in the Treasurer’s speech.
– The honorable member could not have read my speech correctly. What I said was that the banking organizations, including central institutions, and not the trading banks alone, had the power to give an extension of credit. At no time did I suggest that the trading banks, as such, had millions which they would not use.
– I am afraid that I cannot see the relevancy of the Treasurer’s correction, because after all we know that the trading banks are being blamed by members of the Labour party for not having made credits available, and if the honorable member’s reference had any value at all, it must have applied mainly to them. In another part of his speech, the Treasurer indicated that a fiduciary issue of £18,000,000 would enable the banks to make credits available. Seeing that they are not to be made the recipients of these notes, how can they make funds available?
– From what source do the banks derive their funds now ?
– The Treasurer has admitted that the advances made by the trading banks have already exceeded their deposits.
– This issue will increase their deposits.
– If every pound of the £18,000,000 were deposited with the banks within the next twelve months, the total credit extension power of the trading banks of Australia would not be increased by more than £18,000,000.
– It would be increased by £48,000,000. The banks now work on a reserve of from 16 per cent, to 18 per cent.
– The Treasurer says that the advances made by the trading banks already exceed their deposits, so that if the whole of the £18,000,000 were put in the banks within the next twelve months, the credit extension power of those institutions would not be extended by more than £1S,000,000. Such an addition to their deposits would not solve Australia’s financial problems. I have in mind the case of a man who bought 1,500 sheep at £1 a head. The market value of those sheep to-day is only 5s. a head, and the man is bankrupt. The banks cannot possibly come to his rescue. Yet honorable members opposite would say that, under the Treasurer’s proposal, the banks should do so - that they should give him an extension of credit to enable him to remain on the land. Under no circumstances, even, under this scheme, can the banks or other financial institutions be called upon to make good disasters brought about by over speculation. A. great deal of the trouble from which this country is suffering to-day is due to over speculation and, no doubt, it has been encouraged by the banks, although I do not know that we can altogether blame them for advancing money in normal times, when transactions appear to be quite safe. Wor do I think that we can blame them for drawing in their horns now that the bottom seems to have fallen out of everything, and they themselves are in danger of smashing. Their first duty is to maintain their own stability. If we adopt a policy of forcing them to extend credits by lending their last penny to people whose assets have disappeared, for causes over’ which” the banks and the people themselves have no control, obviously, we are expecting them to fill the role of modern alchemists, capable of transmitting base metals into gold. We are expecting them to create wealth out of nothing in order to give people something to which they are not entitled. If a man has been foolish enough to put £50,000 into the purchase of a property in the expectation that he will make £100,000 out of it, and as the result of circumstances, he finds that the property is not worth more than £25,000, surely we are not to expect him to be reimbursed by the banks. He alone should accept the loss, and it is the element of risk attaching to all private enterprise and investments which is being lost sight of during this debate. Certainly the banks are the basis of most of these risks. They enable them to be taken by their clients; but if they and not the clients are to be expected to put up with all the consequences, obviously, it means the end of all banking and commercial stability.
– In those circumstances, private enterprise would be prepared to take any risk.
– Quite; so. The scheme put forward by honorable members in support of the Treasurer’s proposal falls to the ground when subjected to any logical test. Apart from theories, I have heard no argument in its favour, except what has been said by the Trea- surer, who, clearly, is the man who has been entrusted by Labour to make out the case which will have to be submitted’ to the people. It is impossible to pay heed to theories. We can deal with this matter only by an examination of what looks to be the nearest approach to substance, and that is the Treasurer’s argument that the bill should be supported on three grounds - that unemployment will be relieved, that governmental budgets will be balanced, and that there will be a vast extension of credit throughout the country. I contend, however, that not one of these grounds has been sustained either by the Treasurer or by his supporters.
I have been asked by the honorable member for Bendigo (Mr. Keane) what I would suggest as a remedy, but when such recognized financial authorities as the honorable member for Werriwa (Mr. Lazzarini) and the honorable member for Adelaide (Mr. Yates) and others have failed to indicate reliable remedies which are based on substance and not merely on theories, I for one am not presumptous enough to say that I can indicate a remedy likely to be superior to any other that has been put forward. It is impossible, under any scheme of currency manipulation, to s,ave Australia from the calamity towards which it is heading, unless there is definite cooperation between the Commonwealth and State Governments. This Parliament is now legislating without regard to the interests of the States, while the States, on the other hand, are passing measures without concern for the welfare of the Commonwealth. This Parliament may bring down a taxation bill to-day, and a State Parliament may pass an identical measure next day. A bill supplementary to that now before us, to tax government bonds to the extent of 3s. 6d. in the £1, is to be submitted, and a similar proposal has been placed before the New South Wales Government by a special trades hall economic committee. If those two proposals are carried, the income guaranteed to the bondholders by contract will be reduced to the extent of 7s. in the £1, which, in a roundabout way, would amount to repudiation.
The more I consider the present financial position, the more I am satisfied that the outstanding need to-day is to tell the people that the affairs of the nation are in such a hopeless mess that it is desirable, by arrangement with the Commonwealth Parliament and the Parliaments of the six States, to appoint a national finance commission, composed of the best men available, whether inside or outside the political arena. Such a body should be placed in charge of the finances of Australia, at least for a definite period. We should let the people know that we have given up muddling with a problem that is too big for us. The seven Parliaments cannot overcome the difficulty by competitive legislation. Such action would do more to lift the depression than would the passing of such experimental legislation as the present bill. What is most troubling the people to-day is not that they are being hurt - they are quite accustomed to that - but they have an impression that the elected representatives of Australia are hopelessly incapable of coping with the present situation. They believe that the. further parliamentarians go in the matter, the more chaotic becomes the position of the country. The people are not such fools as some are prone to think them. They form their conclusions, as honorable members opposite will realize when they next go before them. Quite a different atmosphere from that experienced eighteen months ago will be found. The people are much more critical than they were then, and, therefore, I warn honorable members opposite not to imagine that they can again stampede the electors as they did on the arbitration issue in 1929. Instead of hoping for a great party victory, it would be more patriotic for honorable members opposite to admit that the Labour party alone cannot extricate Australia from its predicament. lt should accept the offer made by the Opposition some time ago to co-operate with them, for the good of Australia, by appointing a commission, to be under parliamentary supervision, and composed of the best financial and economic brains available. No matter what that body recommended, we should be prepared to support it. If we did that, the depression would immediately begin to lift.
One of the main, if not the principal, causes of the inability of the State Go- vernments to balance their budgets is the stupendous losses that they have sustained on their railways. I do not believe that any State railway system is making financial headway. In New South Wales, the railway deficit this year will probably be £5,000,000. Last year the aggregate deficits amounted to £8,000,000, and this year they will probably reach £16,000,000, or nearly half the total deficit of the seven governments of Australia. After studying the report of the Commonwealth Railways Commismissioner, I am convinced that the only way to solve the problem of railway finance is to institute national control immediately.
– Another way would be to sell the railways, and let private enterprise, run them.
– Nobody would be willing to buy them; they could hardly be given away. If we set up a national railways corn-mission that would work in conjunction with a finance commission, and take over the control of the railways of Australia for a period, I think that progress would be made. The worldwide experience since the late war is that, where the railways of a country have got into a hopeless financial condition, a. scheme of national control has always succeeded. I mention Canada, India, South Africa, the United States of America, and Great Britain. Even the privately-owned railways have had financial trouble, and it has been found necessary by the parliaments of Great Britain and the United States of America to legislate for amalgamation of control, and standardization of rolling-stock and gauges. Six years ago, the railways of Canada, and less than ten years ago, the railways of India and South Africa, were converted from non-paying propositions to magnificent financial and developmental successes.
My final suggestion is that all sections in the House should drop party warfare and unite in a non-party effort, although it may cost us a good deal of personal sacrifice, to solve some of the problems that are absolutely insoluble under the present political conditions in Australia.
.- I purpose alluding only to one portion of the speech of the honorable member for
New England (Mr. Thompson).’ He suggested that the honorable member for Bendigo (Mr. Keane) had indicated that the present bill represented a plank of the platform of the Labour party on which we were going out to fight, and on which we hoped to win the votes of our fellow citizens. On the contrary, the fighting planks of our platform are printed as plainly as the Ten Commandments, and nobody can show that the adoption of any one of those planks would injure man, woman, or child. I feel sure that honorable members opposite would support a number of those planks. I might mention the following: - Restriction of public borrowing; initiative and referendum ; abolition of State Legislative Councils ; abolition of State governors ; abolition of Senate; amendment of the Workmens Compensation Act; national monopoly of insurance, including sick, accident, life, and unemployment; motherhood and child endowment; amendment of Defence Act; nationalization of banking and insurance; nationalization of monopolies; and navigation laws. r intend to support the present bill as a step in the direction of the nationalization of banking. It is described as “ a bill for an act relating to the issue of a fiduciary currency”. According to Webster, “ fiduciary “ means “ Held or founded in trust”. Another definition of the word is “ Involving confidence in trust “. Still a further, is “ Resting on public confidence for value or currency I ask those members who intend to vote against the bill to consider their decision well. I should like to see Parliament passing a measure similar to this, with the endorsement of both sides of the House, for God knows that this loved Australia of ours is in a sad plight. Never has unemployment been so terrible as now ; there are cases on record of death through starvation due to unemployment. I do not believe for a moment that any honorable member, by his vote, would wish to do anything that would increase unemployment. Cursed and damnable as war is, yet in that terrible holocaust of murder called war, when we were fighting for supposed freedom, when our young men were sacrificing their lives, there was not so much misery in Australia as is found here today. Next to war the greatest curse that can befall a country is unemployment, with the inevitable loss of wages, which are the lifeblood of trade and commerce in our cities. Another dire effect of unemployment i3 a fall in rents, which are dropping in all the capital cities. In Sydney, they have fallen to the extent of as much as 50 per cent. The misery which at present is so prevalent is due to our endeavour to adhere to the gold standard. In introducing an amending Commonwealth Bank Bill yesterday, the Treasurer (Mr. Theodore) gave a very clear and interesting explanation of the situation with which we are confronted. Mr. John Strachey, who is well known to all economists, in his Revolution by Reason. says -
The great twin ills of destitution and compulsory idleness stare us in the face as the only things that really matter in the public life to-day.
I am not concerned if the bulk of the world’s gold supplies are held by the United States of America and France. I admire the policy adopted by France of leaving, as she did, the old and cursed financial road with all its obstructions. When the people of Great Britain were concerned as to the volume of paper money in circulation the British Parliament provided in an act of 1920 that the silver contents of the silver coinage should be reduced from 925 to 500 parts. I am not blaming Great Britain for the course which was then taken, as it was thought that when silver was selling at 7s. 6d. an ounce the coinage would be melted and sold at a profit. One ounce of silver provides only 5s. 6d. worth of silver coinage, and, as I have said, there are now only 500 instead of 925 parts of silver in British silver coins. Mr. J. M. Keynes, whose name has been mentioned in The Age of Plenty, from which I quote, said -
Deflation . . . involves a transference of wealth from the rest of the community to the rentier class, and to all holders of titles to money. In particular it involves a transference from all borrowers … to lenders.
Lord Milner, himself a banker, was not blind to this aspect of the matter when he stated in Problems of the Hour that -
Just as productive industry welcomes rising prices the moneyed interests must always be in favour of falling prices because they render its own wares - money - more valuable.
Ex-President Wilson, of the United States of America, once said that the difficulty of modern finance was that too much power was placed in the hands of a few men. World finance, he contended, could not he handled in the interests of thb community by only a few men. On page 119 of this volume I find the following concerning the Right Honorable Montague Norman -
The Right Honorable Montague Collet Norman, with regard to whom an American financial paper, The Wall Street Journal, of 11th March, 1927, gives the following testimony: - Who is this mysterious Mr. Norman? The ‘New York Times, of 3rd April, prints a long article about him in which all the writer (Clair Price) is able to tell is that he is a bachelor in the middle fifties, that he was unknown in financial London until he was first elected Governor of the Bank of England in 1920, and that his firm was Brown Shipley and Company, an American bank, better known in New York than in London. However, few and second-hand as those facts are, they are significant enough to merit repetition. They all go to reinforce our contention that Mr. Norman was Wall Street’s choice of a deflation agent to inaugurate and supervise Britain’s compulsory return to the gold standard.
The value of the gold at present held by the Commonwealth Bank as a backing for our paper currency is approximately £15,000,000, although according to the act £60,000,000 worth of notes may be in circulation. I understand that the Commonwealth Bank Board will not issue notes to that value although it has the statutory authority to do so. The members of that board, who are able to enjoy all the comforts of life, disregard entirely the misery and suffering of thousands of our people. According to the Banker’s Magazine there may be some danger - I do not think there is - in sending further gold shipments from Australia to Great Britain. It would appear that a recent statement of the Prime Minister to the effect that the last sovereign will be shipped to England before Australia repudiates her liabilities is almost a re-echo of the late Mr. Andrew Fisher’s famous words “ The last man and the last shilling “. I feel confident that the last sovereign held in Australia will be shipped to Great Britain before the Commonwealth will repudiate her liabilities. I hate the thought of repudiation as I do the thought of hell. I wish this Parliament would state its hatred of repudiation ; but if the overseas bondholders demand gold they will be paid as long as we can pay it. But we grow wheat, wool, and we produce butter, gold, silver, iron, copper, and we ask the bondholders to accept these commodities in payment of our debts. We can then cease borrowing from overseas, as I hope we shall. Unfortunately, Australia is in the hands of a few overseas financiers, who are unnecessarily pressing us merely to satisfy their own base desires. Mr. Arthur Kitson’s interesting treatise, entitled A Fraudulent Standard, contains the following statements : -
Some years ago the Hankers’ Magazine gave a most startling instance of the effect gold exports upon the prices of our gilt-edged securities. During a period of ten weeks a certain group of American financiers drew from the Bank of England sums equal in all to fi 1,000,000 in gold, and shipped it to New York. Prior to this operation these gamblers sold British securities heavily, and bought United States bonds and shares. The transfer of the gold caused a fall in prices of 325 of our representative securities equivalent to £115,500,000, whilst the absorption of this gold caused a corresponding rise in Americans. This illustration explains why a relatively small addition of legal tender can sometimes seriously affect the price level. It is not due so much to the increase in legal tender, but to the disproportionate amount of bank credit based upon it. This fact also explains the reason why the values of commodities have become so easily the sport of speculators. The sudden creation or withdrawal of credit, the export of gold from one country to another, is sufficient to ensure certain profits to the cosmopolitan gamblers in finance.
I am amused when I read on the Australian -notes in circulation to-day the promise to pay gold on demand, seeing that any person who so obtains gold must on demand immediately return it to the bank. It is base hypocrisy to say that we are operating on a gold standard. When visiting South Africa some years ago, I was informed that though South Africa was exporting annually £40,000,000 worth of gold to England, yet the financial heads there charged 2£ per cent for transferring credit back to South Africa. The Government which was led by Mr. Hertzog became tired of the system, and authorized the minting of £500,000 worth of sovereigns in Pretoria, and thereby the expense incurred in packing the gold in specie boxes, insurance, special freight, and an exchange of 2^ per cent, was dispensed with. As an ex-banker, I contend that the banks have power to destroy credit, ruin hundreds of thousands and bring misery and wretchedness to the people. I am not criticizing the action of our trading banks, which, under the present trying circumstances, have done their best; but at present they can, by calling up overdrafts at a moment’s notice, inflict unnecessary hardship upon their clients, and indirectly upon the community. The managers of banks are informing customers who have overdrafts that instructions have been received from the head office to call in overdrafts. When such a request has been made to me I have never endeavoured to repudiate rny liability, but have explained my position to the manager, and made an offer such as any honorable man would do, which has been accepted. When a person is doing liis best, it cannot be said that he is repudiating his liability. That was the basis of the motion moved in caucus by the honorable member for Bourke (Mr. Anstey). When an authority has power it can order, but when it has not it can make only a request. Mr. Anstey’s resolution might have been more politely worded; but in asking bondholders to wait a year he was asking only for what the great United States of America in their magnificent kindness did for Great Britain and European countries, which by giving 60 days’ notice were allowed to postpone payments for two years. The currency of the United States of America when Cleveland was elected President in 1892, was principally paper and silver. An act had been passed under a former republican administration, authorizing the Government to purchase 6,000,000 dollars worth of silver a month, and to coin it or to issue paper notes against it. [t was desired to wipe out the silver minting, and the following confidential circular was sent to every national banker throughout the United States of America -
The interests of national bankers require immediate financial legislation by Congress. Silver, certificates and treasury-notes must be retired and the National Bank notes upon a gold basis made the only money. This requires the authorization of from $500,000,000 to $1,000,000,000 of new bonds as a basis of circulation. You will at once retire one-third your circulation and call in one-half your loans. Be careful to make a money stringency felt among your patrons, especially among influential business men. Advocate an extra session of Congress for the repeal of the purchase clause of the Sherman law; and act with the other banks of your city in securing a large petition to Congress for its unconditional repeal, as per accompanying form. Use personal influence with Congressmen; and particularly let your wishes be known to your Senators. The future life of National Banks as fixed and safe investments depends upon immediate action, as there is an increasing sentiment in favour of governmental legal tender notes and silver coinage.
I make that quotation from a work entitled, “The Age of Plenty,” by C. Marshall Hattersley, the comment of whom upon i.t is as follows: -
The conspiracy - one of the cruellest and most scandalous in the history of theRepublic - was successful. Credit, upon which industry is built, was shaken, and the public - ignorant of these questions particularly such an abstruse one as the currency - accepted the reasons offered by the press, and demanded their Congressmen to vote for the repeal of the bill. In the autumn of 1803 the Silver Purchasing Bill was repealed.
Australian banks have informed their creditors that they must reduce their overdrafts. Why should that be done ? Will any honorable member deny that when the aborigines owned Australia it contained approximately £700,000,000 worth of gold in excess of what we have to-day? If each £1,000,000 weighed7½ tons, 5,250 drays would be needed to transport the total amount. But will any honorable member say that Australia is poorer to-day, with its private wealth estimated at £2,836,000,000, and its public wealth at £1,300,000,000? That wealth has been created by a civilized white race, which has built noble cities, and has constructed harbours, railways, and other improvements. Why, then, can no credit be made available? Can it be argued that property is less valuable today than it was two years ago ? I have in mind a property in Fitzroy-street, St. Kilda, which two years ago was valued at and could easily have been sold for, from £9,000 to £10,000. It was sold compulsorily early this year, and realized only £4,000. Would any honorable member say that it was not just as good when it was sold as when it was valued at £9,000 or £10,000 ? All our ports and harbours, and other valuable improvements, should have a standard value. I may not live to see the day when that is the case, for my years are many; but the younger members of this Parliament may be still alivewhen every house and every farm throughout the country possesses a settled value, dischargeable upon demand by either fiduciary or other bank-notes. I hope that when such a system is in operation it will be as simple, as expeditious, and as businesslike as the granting of a loan upon a policy by a life insurance company.
Has there been deflation in Australia? I contend that there has been. In 1926 there were in circulation over 24,000,000 notes of a value of £53,890,000. In 1929 the value had decreased to £42,258,000, a deflation of the currency, which is the life blood of our trade and commerce, by no less than £11,632,000. I maintain that, from the moment when that currency was withdrawn, the terrible evil from which we are all suffering commenced to operate.
Honorable members may recall that during the visit to Australia of Sir Otto Niemeyer, I had some newspaper correspondence with him. I found him to be a courteous gentleman, although we differed in our views. I thought that Great Britain ought to be as generous to Australia as the United States of America had been to her. The United States of America borrowed, by means of liberty bonds, at interest rates of4½ per cent. and 5 per cent., which enabled her to lend to England at a rate of 3 per cent. for ten years, and3½ per cent. thereafter. Great Britain had nothing wiped off her loan ; she maintained her splendid selfdependence. I am the son of an English mother, and love the country and the people from which she sprang. If the opinion of the people of England were sought by a referendum, an overwhelming majority would vote to allow Australia to be treated as generously as they have been treated. I am proud to say that we have, in our Parliamentary Library, the comlbined reports of the World War Foreign Debt Commission. I give the United States my meed of praise for having generously funded Italy’s debt to her. That is what we are asking to have done in our case. Knowing that Italy was poor at the time, the United States charged her nothing for five years, 2s. 6d. per cent. for the next ten years, 5s. per cent. for the next ten years, 10s. per cent. for the next ten years, 15s. per cent. for the next ten years, £1 per cent. for the next ten years, and £2 per cent. for the last seven years.
In a work entitled, Commercial Crises of the 19th Century, that wonderful socialist, H. M. Hyndman, discusses great financial experts, including Lord Revelstoke, the managing director of Baring Bros. and Co., the financial house that on more than one occasion succeeded against the influential Rothschilds in securing the underwriting of loans for different countries. This is what he says -
Messrs. Baringhad just floated Messrs. Guinness’s brewery as a limited company with extraordinary success and profit to thefirm, and had taken the place of Messrs. Rothschild in the matter of financing the Manchester Ship Canal. Their mercantile business brought them in enormous profits yearly, and their name and credit were at this time the first in the world.
A fall of stocks occurred, and the Bank of England was reported to be holding £4,000,000 worth of the Barings’ acceptances. The author goes on to say -
Then it was that the Governor of the Bank of England, having assured himself of State support in case of need, adopted that plan of bolstering up rottenness, in the interest of the higher grade of financiers, of which the French had already given us more than one instance.
A guarantee fund was formed, in which the Bank of England took the lead, and every bank or firm of any note in the city joined, to ensure the meeting of the acceptances of Baring Brothers and Company to the extent of £21,000,000; gold to the amount of £3,000,000 was borrowed by the Bank of England through the Rothschilds from the Bank of France, and more was obtained from Russia.
That was the fourth time that the Bank of England was assisted by the Bank of France. It has also been assisted from Germany and Russia. The publication from which I have already quoted continues -
Several other important firms went into a sort of limited liquidation. It was all thought to be n great stroke of genius, at the time, and Mr. Lidderdale particularly received the thanks of the Government, and was presented with the freedom of the city of London. The general opinion is not quite so favorable now, and it is quite possible that, when the circumstances come to be reviewed in the dry light of history, the Baring crisis of 1890, and the way in which it was met, will be cited as an example of the break-down of capitalism in the department of high finance. That the whole crisis will be a permanent record of the imbecility of English investors there can already be no doubt whatever . . . Not a single bondholder or shareholder was represented on this great committee, of which Lord Rothschild was the chairman, and the whole affair was arranged to the ruin of the investors so as to suit the pockets of those who sat with him round the table.
There is the record, of what Lord Revelstoke, Mr. Liddervale, Governor of thu Bank of England, and Lord Rothschild, these three kings of finance - if I may use the term - did. Mr. Henry Giles Turner, of the Commercial Bank, whom I knew personally many years ago when gaining banking experience, and whom I much appreciated later as a friend - a financial expert who went down in the crash which followed the land boom - once said that there were different means of providing credit. One of those means I have advocated for many years. I should like the Government to make a pool of all the wheat grown in Australia and guarantee 3s. a bushel for it, and then issue a number of notes promising to pay on demand the value of 3$ bushels of wheat as the equivalent of 10s. and 6& bushels of wheat as the equivalent of fi. Working on that basis, we arrive at a standard of 400 lb. of wheat to the £1, which in times of dearth and famine would be more valuable than any gold, because from it any capable housewife, with an ordinary coffee mill, could make the finest porridge in the world. Cakes made from the whole meal on a grid iron would be not only palatable but nutritious and would cost very little. I have discussed with the honorable member for Echuca (Mr. Hill) the keeping qualities of wheat. He has informed me that much depends on the manner in which the wheat is stored. In scientifically constructed silos wheat will keep in perfect condition from ten to twenty years. Wool could also be used as the basis of currency, because wool can be kept indefinitely so long as it is kept free from certain insects. With either wheat or wool as the basis of our currency we should be able to balance our budgets more easily than by using a paper currency with gold backing. In ancient days, when, man’s intellect raised in Greece a civilization that we, with all our knowledge, cannot surpass in some respects, a wise old Greek - I think it was Plato - said that it was impossible to have a civilization without slaves, unless machines could be invented to do the work of the slaves. This is the machine age. So marvellous are some of the machines in use to-day that it can almost be said that they have brains, and can think. In this building one has only to press a button in an elevator and one goes up or down at will. We can sit at our desks and by means of wireless waves engage in conversation with people at the ends of the earth. The only thing that is quicker than a flash of electricity is thought. Our thoughts can reach the most distant star in the heavens as quickly as they can reach the North or the South’ Pole.
The following comparison of machine unci hand methods in the gathering of a crop is conclusive evidence of the vast strides which have been made within the last century : -
COMPARISON OF MACHINE AND HAND METHODS.
In the calculations below it is assumed that a man with a sickle could cut halt an acre a day and with a cradle two acres a day; that one man could rake and bind the crop from two acres a clay, and that one man could Hail out ten bushels a day. McCormick’s first reaper o£ 1831, with a 4^-foot cutter bar, and pulled by one horse, had a capacity of about ten acres a day. One man was required to rake the platform, and a boy rode the horse. These two replaced five cradlers or twenty men with sickles. The reaper required the same five men to bind the grain that were required when the crop was cut by hand. McCormick sold his first two reapers in 1840. This machine had a (i-foot cut and was drawn by two horses It was estimated that it “ will cut easily fifteen acres a day, two hands attending - one riding and driving, the other raking the grain from the machine as collected in sufficient quantities for binding “. This 6-foot machine, it was stated, “ in rank wheat will do the work of seven or eight cradles “. Another farmer, speaking of the McCormick 0-foot machine of 1844 J said, “it will do the work of not less than ten cradles “. Another statement said, “ I consider it equal to tha work of eight to tun cradles “. One farmer said, “’ in very long wheat it may be made to do the work of ten cradles, in lighter wheat five”. Assuming that the reaper with its two attendants cut fifteen acres a day, it did the work of seven cradlers. Probably the same number of men to rake and hind would be needed to follow the reaper that were required as cradlers. One man with a 10-foot tractor binder can cut 35 acres a day. With the cradle of 1831, it would require about seventeen men to cradle the crop and seventeen more to rake and bind it in a clay. If the sickle were used, still a common harvest implement of that day, it would require 70 men to cut and seventeen men to bind the same acreage in a day. Two men with a 10-foot harvesterthresher can cut, thresh, and clean about 35 acres a day. With the implements of 1831 it required 35 men to cradle and bind the same acreage in a day. With sickles it would require about 70 men to cut the crop and seventeen men to bind it. Averaging fifteen bushels to the acre, it would require 50 men with flails to thresh it out in a day. Two nien with a 12-foot harvester-thresher will cut, thresh, and clean 40 acres of grain in a day. With the implements of 1831 it would require twenty men with cradles and twenty hand binders to cover the same acreage in a day Using sickles, it would require 80 men to out the crop and twenty more to rake and bind it. Sixty hands, with flails, would be needed to thresh out the crop in a day. Two men operating the machines of 1931 do in one day what it would have taken them two or three months to do with the equipment of 1831. Two nien with a 16-foot harvester-thresher will cut, thresh, and clean 50 acres a day. With the implements of 1831 it would take 50 men to cradle and hand-bind the crop in the same length of time or 100 men with sickles to cut it and 25 more to rake and bind it. An additional 75 nien would be needed with flails to thresh it in a day.
On the East Loddon estate, Victoria, a youth and a man on the bags, harvested 800 acres of wheat in three weeks. In the days of the stripper, it would have taken five machines and fifteen men to do the same work in the same time. An improved machine does the work in even one-fourth less than this time. It is a startling fact that a loaf of bread can be produced from the tilling of the land to the wrapping of the loaf in paper for the consumer by machines and their operators. Thus agricultural workers, millers, and bakers are disemployed. In the poultry- farming industry, there is in California, a hatchery producing 8,000,000 chickens in a season. Some 80 tons of eggs are used. The whole of the incubating system is worked by electricity - touching buttons. One such hatchery in Australia would disemploy and disempay nearly every man now engaged in poultry-farming and about seven-eighths of its capacity not drawn upon.
Mr. Rhys gives another instance which he says should interest the Brisbane City Council, and, indeed, all councils. He states -
At St. Louis, where sewerage work is being carried on, 33 machine operators aided by 37 labourers, are doing the work of 7,000 pick and shovel men. An automatic mechanism producing 73,000 electric light bulbs every 24 hour?, disemploys 2,000 hand-workers for each machine installed. [Quorum formed.’]
The following letter was sent by me to the Melbourne Age, in August, 1930 : -
WORK FOR ALL - THE WAY OUT.
To the Editor of The Age.
Sir, - The slogan is sounding that all Australia must work for its redemption; the crisis has been caused by following the old financial tracks, with all their ruts and bog holes. The time has come when something new must be suggested, and if good, acted upon.
I suggest to your readers that we ought to make full use of one of Australia’s standard products - silver. The majority of the world’s population rests with more or less success on the silver currency. At the beginning of the war, when there was danger that the Broken Hill mines might close down, and so ruin the city, which, above all other cities, depends upon its mines, I suggested in The Age of 11th August, 1914, that the Commonwealth Government should purchase the whole of the minerals forming the output of these mines. Ultimately, the Broken Hill companies, to their great credit, through Mr. W. L. Baillieu, empowered me to offer the Fisher Government that, in consideration of the Fisher Government purchasing all their mineral output, the associated companies would accept very reduced prices, and, ultimately, as we were at war, they generously fixed the prices at the cost price of actual production. Had Mr. Fisher accepted this offer, many millions would have been saved for Australia, for silver, which before tlie war was 2s. an ounce, appreciated as high as 8s. Cd. ; zinc and load appreciated to two or three times the pre-war cost. Mr. Fisher, unfortunately for Australia, refused the magnificent offer of the associated mines.
I now venture to suggest that, as silver is quoted on the London market on 1st August at ls. 4d. per oz., the Commonwealth Government should mint £1,000,000 worth of Australian silver and pay for it with Australian notes. This quantity of silver would mint £4,125,000 worth of florins, shillings and sixpences, less the cost of minting.
It seems to me if the Commonwealth Government were to offer a State £1,000,000 as a loan at 6 per cent, to be spent on reproductive work for the benefit of the unemployed, the Treasurer of such State would prefer to have £4,000,000 worth of silver instead of the £1,000,000 worth of notes, and might say to the Commonwealth Treasurer, “ Give me the £4,000,000 worth of silver, charge me 2 per cent., which will give you a total of 8 per cent., instead of 6 per cent, for the million of notes, debit me with the £4,000,000, and you, in turn, will raise the credit of your Commonwealth by making £3,000,000 profit.”
I consider that, whilst silver may take approximately twenty times the space of gold, it is a much more useful currency than gold. The States would pay out the silver for wages. The silver would collect with the storekeepers, &c, and ultimately get returned to the banks or to the Commonwealth Treasury, and, as long as we are in difficulties, we should make use of silver, until the times become normal. I appeal to every Australian loving his country to use silver as much as possible, and so help Australia in the present hour of need. - Yours, &c.
Had that offer been accepted, it would have given an estimated profit of from £150,000,000 to £200,000,000 sterling, on account of the great rise in the price of lead, zinc, silver, &c.
Later, the same companies, in consequence of the war, offered to sell their minerals at cost price, which would have given even greater profits to Australia, and might have prevented the present crisis.
The opinion of the Right Honorable Andrew Fisher, who was then Prime Minister, is shown by the following letter I received from him. An estimate has since been made that, if my suggestion had been put into effect for silver, lead, zinc, &c, a saving to the British Empire would have been made, on a very conservative basis, of £150,000,000, in view of the great increase in prices that took place subsequent to the outbreak of the war. Mr. Fisher wrote -
I well remember you calling on me when 1 was Prime Minister and Treasurer of the Commonwealth with an offer from the Broken Hill Proprietary, through the Hon. W. L. Baillieu, that they would accept the English selling price before the war, less 30 per cent, for all metals purchased from their mines. Though the proposition was made to cover difficulties during a transition period, I felt two forms of specie might create unforeseen disturbance in our currency, and the circumstances were phenomenal amid huge difficulties of the early stages of the World War. I thanked Dr. Maloney and Mr. Baillieu for their forethought in a matter of high finance.
I cannot close without adding an opinion that many things were done subsequent to the proposition dealt with above that were more daring than this one. It shows clearly that government in peace times is not a guide for a world war. With all good wishes.
Silver is found in considerable quantities in Australia. With the exception of England, South Africa, Australia, and New Zealand, silver forms the basis of the currency of every country. France has its silver franc, Italy its lira; Germany, its mark; Russia, its rouble; Norway, Sweden and Denmark, the silver kroner; the United States of America and Canada, their dollars; India, its rupee; Mexico, and other countries, their silver dollar; while the great nation of China also has a silver currency. Notwithstanding these instances of the use of silver as a currency, we continue to meet our liabilities overseas with gold, and, in consequence, bring suffering and misery on our people. The power of Ivan the Terrible of Russia and of other human brutes was limited only by the boundaries of their kingdoms. Gold, however, knows no frontier or boundary. A few men in the United States of America, in company with a small number in Europe, can control the money markets of the world. Every ounce of silver mined will provide currency valued at 5s. 6d., less the cost of minting, which is estimated at 3 per cent. Assuming that the cost of an ounce of silver is ls., we find that this would give a profit of 450 per cent. - enough to make any money lender envious. Would not the people prefer a currency of that kind to that which is now in existence? I once asked the late Mr. Andrew Fisher what the Australian £1 note would be worth if Britain were conquered by Germany, and a squadron of the German fleet came to Australia and took possession. I told him that if we had a silver currency, instead of a paper currency, persons who possessed silver could plant their possessions in the ground, and that after hostilities were over these would be more valuable than paper. During the war, the Broken Hill mining companies wrote to Mr. Fisher stating that they were willing to accept, for their silver, the English prewar selling price, less 30 per cent. Had Mr. Fisher accepted that offer he would have done Australia a good turn, seeing that lead, zinc, copper, and silver increased greatly in price after the offer was made. At one time, silver sold at 7s. 6d. an ounce. The acceptance of that offer would have meant £200,000,000 to Australia. About three months ago, I asked Mr. W. H. Baillieu whether he could find anything wrong in what I had expressed in the newspapers regarding currency, and he replied in the negative. He added, “It is a good thing that Mr. Fisher did not accept the offer made. I may tell you that even after that refusal we offered to supply him with metals at the actual cost price, which was les3 than the offer I authorized you to make “. Australian notes to the value of £1,000,000 would produce £4,125,000 worth of actual silver currency with silver at ls. 4d. an ounce, less the cost of minting. I wanted the Commonwealth to lend this silver currency to the various States at 2 per cent, so that they might carry out reproductive public works. The silver currency in the treasury amounts to £312,200 ; this sum could purchase enough silver to be minted into £1,665,587 worth of currency. If that in turn were lent to the States the interest yield at 2 per cent, would be £33,311, which could be utilized to purchase more silver for minting. This silver currency would be like a snowball rolling down hill, and growing larger the further it progressed. Suggestions have been made by Mr. G. Thomas, Dr. Philpots and the Rentpayers Associations of New South Wales, that the Commonwealth Government should purchase silver at the present market value and issue 4s. notes, the Government placing in the vaults silver to cover them. These notes would be similar to the dollar bills of the United States of America and Canada. I feel certain that the various State Governments would welcome the adoption of this scheme. I have communicated my own proposal to every Premier of Australia, and the majority have thanked me heartily for having brought it to their notice. Sir James Mitchell, the Premier of Western Australia, wrote -
I have to acknowledge receipt of your letter of the 25th February, and to thank you for it.
The idea seems to be a splendid one, and I suggest that you bring it ‘under the notice of Mr. Scullin, from whom I should be delighted to borrow a substantial amount at 2 per cent, i interest
My reply to him was - 1 am grateful to you and appreciate greatly your letter of 13th March.
The resolution was passed by caucus unanimously last year. The Cabinet lias been considering it, and I wish that they would have as much energy as you have and as other Premiers have, and it would become a fact.
One premier to whom I referred the scheme, and whose name I cannot mention, for no man has ever been able to accuse me of having betrayed a confidence, said: “Dr. Maloney, if I had the power I would commence minting silver currency at once “. The greater the amount of money minted the lower would be the cost. This proposal would not only place additional money in circulation, but /)r. Maloney. would also set the silver mines at work. The population of Broken Hill at the 30th June, 1914, was 38,900, of whom 9,075 were miners. By the 31st December, 1929, the population had decreased to 23,380, and at the 2Sth February, 1931, only 2,818 miners were employed; 3,600, or 56.2 per cent, were unemployed. That is the highest percentage of unemployment in any union in any part of Australia. Of the Commonwealth’s total production of £69,000,000 worth of silver, New South Wales produced £63,000,000 worth. I, therefore, ask honorable members representing that State to lend their support to this scheme.
For 42 years I have been in political life. I never dreamed when I entered Parliament that I would live to my present age or so long enjoy the confidence of the electors. The greatest curse of humanity is the awful murder of war. Next to it is the curse of unemployment, and I hope to live to see it removed. But for the immediate future I visualize a legion of labour, enlisted like the men who so bravely offered their lives on the field of battle. The soldier received a uniform and his keep, and was paid for seven days a week. I would suggest that the legion of labour should be allowed 4s. a day for uniform and food, and should be paid 10s. a day for six days in the week. Every unemployed man would be enlisted in this legion for temporary employment, which would sustain him until private enterprise could offer a greater reward for his labour. I hate to think of unemployment being regarded as a party matter. As a medical man, I realize the truth of the statement by the health officer in Melbourne that the physical standards of men, women, and children are being lowered because they are not getting proper food. Yet God has not forgotten Australia. He has given us bountiful harvests; but I have heard no parliamentarian declare that no person in our midst shall be allowed to go hungry or cold while nature produces three times the food requirements and five times the wool requirements of our people. A pest on party differences ! Let us make a united effort to remove the infamy of unemployment from our beloved Australia.
.- The fundamental difference between the Government and the Opposition in regard to this bill, and all recent’ financial measures, is in the attitude of the respective parties towards the subject of credit. The Opposition believes that no real relief from our present deplorable circumstances can be obtained until the national credit has been restored, and that, indeed, conditions may become even worse. The Treasurer (Mr. Theodore) and his supporters on the other hand appear to be quite indifferent to the condition and level of Australia’s credit. The Government denies that the restoration of credit is an indispensable first step towards the recovery of prosperity. That is clearly shown by its stubborn resistance of economies, and its equally persistent attempts to retrieve the present unfortunate situation by a. series of proposals and measures for artificial aid in the form of inflation. First the then Minister for Health (Mr. Anstey) submitted the extraordinary proposal that the redemption of the £28,000,000 loan maturing last, year should be postponed. Then we heard of what is known as the Gibbons plan to create artificially £20,000,000 worth of credits, which meant in reality straight-out inflation. The next proposal was the Theodore plan to return by some miraculous means to the price levels of 1929, and to increase the national spending power by £100,000,000. The latest step is the proposal now before us for the issue of fiduciary notes. These plans are surely calculated further to shake and debase the national credit. As a general rule, the public is disposed to exaggerate the influence of governmental and parliamentary action both upon the nation as a whole and upon our individual lives. The present circumstances, however, are abnormal. I doubt if any government ever had power to do greater good or evil for the people than the present Government has. The importance of restoring the national credit immediately cannot bo exaggerated. I repeat what T have said on former occasions, that at least half of our troubles are due to the state of our credit. I am sure that not more than half of the existing conditions result from the slump in world price levels. That portion of our trouble which is caused by the debasement of the national credit can be remedied speedily. That would then leave us to face the balance of our difficulties, which may be said to be due to the fall in world price levels. It is true that we have no control over world price levels, but I am not affected by the gloom that so generally oppresses honorable members opposite on the subject. I do not think the present prices are in any sense fixed. I said that two or three months ago. Since then we have had a gratifying and progressive rise in wool values, due in some measure to the exchange position, but also very substantially to entirely independent causes.
Again, take wheat. Any one who turns back for half a century, and observes the fluctuations of the wheat market, is entirely mistaken in his estimate of the position if he doos not look for an improvement in the existing prices. I do not suggest that it will come this month. Possibly ii. will not come this year, but I do not for a moment believe that the present world price for wheat will continue for long. I am not depressed by Russia’s five-year plan. The world will accommodate itself to the new conditions. Had anybody been told 30 to 35 years ago that Canada would produce 700,000,000 to 800,000,000 bushels of wheat a year, he might have thought the future of wheat-growing in Australia extremely unpromising. However, the world accommodated itself to Canada’s huge wheat harvest, and history will repeat itself. There has been an improvement in the world price of base metals, and, generally, our trade outlook is substantially better than it was only a few months ago. In my opinion, those factors emphasize the supreme importance of the credit situation, and of the necessity for us to take practicable steps to bring about a restoration of our credit.
It is from that angle that I. approach the Fiduciary Notes Bill. I estimate it according to the contribution that I consider it makes or is likely to make to the restoration of Australia’s credit. Quorum formed.’] It is remarkable that this or any other Government should have decided to stake its reputation, and existence upon a bill such as this. It is equally remarkable that the measure is the Government’s SOl ( offer to the country to cure its present ills. The Government came into power definitely pledged to foster the interests of the workers and farmers. Although it has been in office for eighteen months, it has nothing but this bill on the noticepaper to offer to the unemployed, the farmers and the workers of the country. And what an offer it is. The Prime Minister (Mr. Scullin) has indicated, and it has been made clear by a number of honorable members opposite, that if the Government fails to secure the passage of the measure through both Houses, it will appeal to the country for the election of a new Parliament which will pass the bill. The Government must know quite well that the measure will not pass through this Parliament. It is, therefore, fully aware that the bill can offer no early relief either to the workers or to the farmers. That makes it all the more extraordinary that this should be its sole offer to the people.
The ordinary course that will be followed if the Government fails to secure the passage of the bill through both Houses will be an appeal to the country at the earliest possible date. Many months must inevitably elapse before the measure can again be considered, and the relief that is allegedly associated with it can be bestowed on the people of Australia. Meanwhile, what is to happen to our 300,000 to 400,000 unemployed and our distressed farmers ? The Government says, “ “We have but one offer. We offer you £18,000,000 of new paper money for what it is worth.” That is dangerous enough. The Government goes further, and says, “We cannot, under any circumstances, translate this offer of ours into anything useful to you within the next six months.”
In passing, I want to analyse the state of mind of the Government and its supporters with respect to this bill. Is the Government unanimous and wholehearted as to the presentation of this strange measure? Are the supporters of Labour in Australia in agreement with regard to it? Those are important considerations, because the bill must be prejudiced if it is condemned by a large section of parliamentary Labour members and outside supporters. And that is actually the case. The spirit and pur- pose of the bill have already had the unique distinction of splitting the Cabinet. It almost wrecked this great Federal Parliamentary Labour party. It has brought about a great schism in the ranks of Labour supporters outside Parliament. Two members of the Cabinet resigned, mainly because they considered the bill to be too extreme and dangerous. Two other Ministers objected to it on the grounds that it was not extreme enough. With the exception of four, the New South Wales Labour representatives in this House have either been expelled by the State executive, or threatened with expulsion because of their support of the bill.
Sitting suspended from 6.15 to S p.m.
– The Prime Minister, speaking in Melbourne at the week-end, complained that, although this Government was in office, it was not in power. The right honorable gentleman was obviously referring to the disposition of the non-Labour majority in another place, and was endeavouring to persuade the people that the Government’s difficulty in giving effect to its financial and industrial policy was due to the hostility of the majority in that branch of the legislature. But the plain truth is that the Ministry does not command a majority for the bill even in this chamber. It is true that when the division is taken to-night a majority may vote for it; but we have gathered from the tone of speeches delivered by a number of honorable gentlemen supporting the Government that they are strongly opposed to the bill. The Prime Minister says, in so many words, “Here is our sole legislative contribution for the salvation of Australia in her hour of trial. It is a heaven-sent specific for our ills. It is true that it is condemned, root and branch, by many of the best brains of my party. It is true also that, while some of my erstwhile followers say that it is not a cure at all, others declare that it is a rotten and dishonest proposal “. . The Prime Minister might very well add that this foremost plank in the Government’s financial policy has wrecked the great party with which he faced this Parliament a little over twelve months ago.
But the right honorable gentleman has an even more astounding confession to make in connexion with the principle of the bill. On the 5th November last, in a cablegram sent by him from London to the former Acting Treasurer (Mr. Lyons) he summed up the principle of this scheme and the purpose of this bill in these words -
To create credit for £20,000,000-
He was then referring to the so-called Gibbons plan, which is, in essence, this plan for a fiduciary issue - for loan work is unsound, and I expect the banks to refuse to do so.
The right honorable gentleman’s expectation about the attitude of the banks is interesting in the light of the recent violent and bitter attack upon the trading banks by the Treasurer and other Government supporters. Continuing, the Prime Minister stated -
Such’ a proposal (the Gibbons plan) means permanent inflation, which could not be checked, as is implied, and would demand further inflation.
The cablegram sent by the Prime. Minister to the former Acting Treasurer objecting to the Gibbons plan is our case against this bill which, as I have shown, is in reality the Gibbons plan expressed in legislative terms. We could not do better than quote the views of the Prime Minister in opposition to it. The right honorable gentleman continuing, said -
All this talk about creating credit and inflation is most damaging, and will seriously prejudice the conversion of maturing loans and treasury-bills. Since inflation was suggested efforts are being made by men here to withdraw their money from Australia, as they would lose by payment in a depreciated currency,
– What a statement from this fearless leader of the Government!
– The Prime Minister has turned more somersaults in the last six months than any other politician since we have had responsible government in this country. I also remind honorable members that, when speaking to the motion for the adjournment of the House a few days ago to discuss certain cable messages which had passed between him and his cabinet colleagues, the Prime Minister (Mr. Scullin) intimated that when he came to speak on the Fiduciary Notes Bill he would explain in further detail the sending of those messages. He had his opportunity a few days ago, but said not one word on that subject. The right honorable gentleman might also have directed our attention to the fact that even the Treasurer, who is responsible for the presentation of this bill, spoke some time ago in condemnation of any proposal to inflate the currency. To explain his change of front on this issue, the Prime Minister now pleads that circumstances have changed. Consequently, a measure which he condemned a few weeks ago, has, in some mysterious way, become an important and commendable scheme which alone can save this unfortunate country. A proposal emanating from a party so divided, and so obviously unhappy - a more woebegone and pathetic picture has never been presented in this House than that of honorable members supporting this Government - cannot be seriously regarded as the panacea for our financial and economic ills.
This is a bill to authorize the issue of paper money to the amount of £18,000,000 based on faith. This fiduciary issue will be put into circulation without any tangible security behind it.
– Who says that?
– I do. There never will be any tangible security behind these treasury notes.
– The honorable member knows that he is telling an untruth.
-The honorable member for Adelaide (Mr. Yates) has made use of an unparliamentary expression.- I ask him to withdraw it.
– I regret that it is unparliamentary, and I withdraw it.
– The bright idea behind this new credit issue is that the notes will have more or less the value of sterling, or at least have approximately the value of the present Australian notes. I submit that if there is to be no depreciation of the currency as the result of this issue, this new money must in the first place be in itself trusted; and that the Government behind it, and particularly the Treasurer, must be trusted. Another obvious, and necessary, safeguard is that it must be limited and controlled. Let us examine the situation, and see if these requirements are likely to be met. In the first place, the faith behind this nev/ issue of paper money must be strong. There is no precedent in history of the successful inflation of a currency which was already suspect and shaken. Inflation in those circumstances has always resulted in the swift depreciation of the nominal value of the paper. The Treasurer has endeavoured to persuade members that there is precedent for this proposal in the expansion of the Australian note issue during the war. Our credit was never higher than during those flaming patriotic days. The Treasurer also had the audacity to cite the fiduciary issue in Great Britain as precedent for this bill. He omitted to explain that the British fiduciary issue was guaranteed, not by a Treasurer in the present most unfortunate circumstances in which the honorable gentleman finds himself to-day, but by the Bank of England.
I repeat that, unless there is to be a swift depreciation of the nominal value of the new currency, the Government behind it must, in a financial sense, be fully trusted by the people. Oan it be sn id that this Government is trusted, in a financial sense, by anybody in the world? One has only to study the price movements of Australian securities overseas, since this Government took office, to find the answer to that question. This Ministry, which now proposes to issue £18,000^000 worth of notes for which nobody is to pay, and for which nobody has worked, could not sell a single new bond in any of the world’s markets. And this is the first Australian Government of which that could be said, with the single exception of a State government led by the present Treasurer. The cold fact is that no investor, no bank, no insurance company, no friendly society, no individual will buy at par or within a long way of par value, bonds issued by this Ministry. No merchant, no trading firm, and no contractor will accept its bonds in payment for services rendered. I doubt if it could, to-morrow, get £50 sterling for new bonds of the nominal value of £100. Despite its record and its unfitness to govern this country in n time of financial stress, this Government has the audacity to force £18,000,000 worth of fiduciary notes upon the workers and primary producers of Australia. It proposes to compel the workers to accept payment in what must prove to be more or less worthless currency. It also contemplates lending £2,500,000 of this depreciated currency to necessitous farmers, and will charge them interest upon it as though it were real money.
– They are asking for it.
– They are asking for real money, and not for the worthless paper which it is proposed to give them. This Government is not trusted. I now come to the Treasurer. Is he trusted? I suggest that the Treasurer and his colleagues in Cabinet make a complete job of these notes, and ensure that their full value is properly appreciated by printing the Treasurer’s photograph on the front of them and the findings of the Mungana royal commission on the back.
– The honorable member is certainly a dirty dog!
-I ask the PostmasterGeneral to withdraw that statement.
– I ‘withdraw, since my remark is in contravention of the Standing Orders.
– The honorable member for Henty (Mr. Gullett), and, indeed, every other honorable member, knows that throughout the whole of the debates of this session I have not permitted the subject which he has raised to be discussed, and I ask that he withdraw his reference to it.
– On a point of order, I submit that you, Mr. Speaker, have ruled that any reference to certain legal proceedings at present pending is out of order, and I do not think that any honorable member has objected to that ruling;, but there is a distinction between the legal proceedings at present pending, and on which you have ruled that matters which are sub judice should not be referred to, and the finding of a royal commission that is completed and perfected and stands without any appeal. T submit, therefore, that a general reference without any specification of the details of the finding, is not covered by the ruling that you have given.
– I do not wish to argue the merits of your ruling, Mr. Speaker; but I wish to point out that you permitted the Prime Minister (Mr. Scullin) in this House to make repeated reference to this ease, and I claim the same privilege.
– All honorable members know that I have taken exception to references in debate to certain legal proceedings. I certainly ruled the Prime Minister ‘ out of order upon each occasion that he referred to that subject, and I will not allow one honorable member more latitude than I have allowed another. I rule that the reference which the honorable member for Henty (Mr. Gullett) has made to a matter which is sub judice is certainly out of order, and r require him to withdraw it.
– With all respect to the Chair, I withdraw.
– If the honorable member’s case against this bill is as strong as he thinks it is, there should be no occasion for these personalities.
– I refer the honorable member to a vote which he gave in caucus on a certain occasion, not to mention the votes of other honorable members on that side.
This fiduciary issue is a form of inflation which can be neither limited nor controlled. If it is claimed - as it is being claimed by Government supporters - that this fiduciary issue can be both limited and controlled, I ask in what way can it, be limited and by whom can it be controlled?
M.r. Gregory. - Evidently by the Treasurer.
– If this bill were passed, and a fiduciary issue made, it would lead to many increasing instalments of similar paper money. It would not be within the power of honorable members opposite, or any public man, or of any government of Australia to control such an issue. What is the actual position ? At present in this country we have more or less in circulation some £45,000,000 worth of notes, and their present value measured by exchange is about 13s. 4d. each. In other words, our £45,000,000 worth of notes represents about £30,000,000 sterling. If Ave print on additional £18,000,000 worth of notes we shall have a total nominal issue of £63,000,000. I submit that the real value, the face purchasing value, of these notes won 1., not exceed the present sterling value of the £45,000,000 worth of notes now issued. This fiduciary issue will not increase by £1 sterling the total value of the notes in currency throughout Australia ; therefore, far from increasing the sterling value of our currency, it will relatively even diminish it. Although the Government is proposing to issue £18,000,000 worth of notes, it is at the same time making no provision at all to meet this year’s deficit, or to meet the certain deficit next year, or to provide relief next year for unemployment, which to a great measure will still be with us. It has made no provision for rural assistance next year despite the fact that, unfortunately for Australia, we shall probably be called upon again to lend aid to the farmers. This year’s deficit is estimated at £12,000,000, and I estimate that next year’s deficit, even allowing for the additional revenue which the Government has forecast, will, at the lowest, be £15,000,000. Taking the estimate for unemployment relief next year at £12,000,000, and, for farmers relief, £6,000,000, we shall require next year to obtain from somewhere an additional £45,000,000, even exclusive of this fiduciary issue which the Government proposes to make. Under those conditions the total issue of notes at. the end of the next financial year will be £10S,000,000, and I submit that by that time we shall be fortunate, indeed, if each note is actually worth 5s. sterling. The depreciation of our inflated currency will be as rapid as that of the currency of every other country which has practised inflation when its credit had already been debased. In other words, inflation, to be successful, must have -sound and trusted foundations.
This Government is attempting to do what we would do if we erected a building of the magnitude of Parliament House in some rotton, bottomless swamp. There is not the faintest hope of this fiduciary issue standing up even to the present debased value of the Australian £1 note. The proposal of the Government is repudiation thinly disguised. It is a bare-faced scheme to swindle the internal bondholder. To obtain confirmation of that we have only to examine the speeches of some honorable members on that side of the House, and the statements published by their paper, the Lalor Daily. They say straight out that this proposal is an insidious and progressive method of repudiation, and therefore it cannot be distinguished from the straight-out repudiation which the Premier of New South Wales is now practising. This progressive and sneaking repudiation at home will inevitably be followed by repudiation overseas. I do not for one moment believe that the people would stand up to paying a short rate of interest within Australia to our local bondholders and a full sterling -rate of interest to bondholders abroad. I shall not touch upon the effects of overseas repudiation, because they are too obvious, except to say that it will cost us most of our British markets, and that, in turn, will demoralize primary production in this country. It will weaken and probably wreck altogether the whole of the Empire association.
– The honorable member is far too gloomy.
– I remind the honorable member, who has a tearful concern for the workers, that this method of swindling the bondholder will put an end to the raising of loan money in this country for the next 50 years, or until such time as Australia breeds again a race of honest politicians.
Let us examine the effects of this proposal upon wages. Honorable members cannot deny that this new paper money will depreciate the true value of all our currency.
– That is the intention.
– That is the intention of the Government. In a foolish and short-sighted way, it is endeavouring, by means of this instrument, to rob the bondholder ; but apparently it does not realize that it cannot cheat the bondholder in this way without at the same time cheating all our workers. I ask honorable members to picture the plight of the Australian workers, who, in large degree, are under fixed awards, if they are paid in a drifting currency. I can imagine no worse plight ; indeed, df I, as a Nationalist Minister, were to inflict this scheme upon the workers, I should be howled out of this chamber, and quite properly, too. I can picture the extraordinary spectacle of the already congested Arbitration Court and other wage tribunals amending their awards to keep pace with the changing and cheapening currency. This measure aims at the greatest inroad into the wages of the Australian worker ever attempted in this country. It will have a similar effect upon pensioners.
The honorable member for Bendigo and many other honorable members on that side of the House have a great deal of broken-hearted concern for the pensioners, yet they stand or fall by a bill which, if given effect, will very soon reduce the £1 a week now paid to the old-age and invalid pensioners to 5s. a week at the most. It has been said that in certain circumstances inflation might be a good thing for the primary producers. That I absolutely deny. Any advantage that the primary producer might obtain on his sales would be confined only to products sold locally, but against that he would suffer in all his purchases. The price would be marked up against him on his purchases just as surely as it would be marked up in his favour on his sales. The disastrous effects that this legislation will have upon the rural credit system of this country is one of its most sinister and far-reaching aspects. Already those effects have been profound and calamitous. All this threat of inflation - because it really is a threat of a most ominous kind - has seriously curtailed rural credits. In Sydney to-day one could not buy a ton of superphosphate from the great superphosphate houses except for spot cash. Why is that? It is not due in the main to the already heavy debts incurred with these merchants. It is due to their very soundly based fear that if they deliver £1 worth of superphosphate now and give the customary year’s credit for it, they may receive only 5s. in the £1 for it at the end of the year. That is, I say, their very proper fear. But the fact remains that our rural credit and time payment systems, without which it would be impossible for this country, and particularly for our primary producers, to carry on, have been rendered almost unworkable. Already these wild schemes of inflation have had a most damaging effect. I venture to say that this scheme has already doomed tens of thousands of our workers to certain unemployment. It has also led to a great curtailment of business and industry owing to the knock it has given to credit. I invite honorable members opposite to combat my contention that whether the scheme is sound or not - and I leave that point for the moment - it has caused this inevitable fear. 1 do not propose to refer to another bill which the Treasurer introduced last evening except to say that it is evident from it that the honorable gentleman intends to go further with his inflation process. With his credit-wrecking disposition, he actually proposes, in certain contingencies, to ship away to Britain all our remaining gold - upwards of £15,000,000. He is taking this action, we have been told, because of his deep desire to uphold our honour in Great Britain. This from the Treasurer! I cannot believe that any one so ingenuously minded as the Treasurer would think of taking a step of that kind for the purpose which he has indicated, because it is not necessary in any sense or on any ground to ship our gold overseas. I can, therefore, only surmise that in his fanaticism for this paper scheme, the honorable gentleman is not only ready to depart, in a measure, from the gold standard, but is willing to abandon it altogether, and to depend entirely upon a fiduciary scheme. Either that is his purpose or he wishes, having, possibly, in view some repudiation ideas with respect to the payment of interest overseas, first to demonstrate his wholehearted desire that this country should pay British bondholders down to its very last sovereign.
I shall not say much with regard to the gold standard. The soundness of the system may have been exploded, although, personally, I do not think that it has been. It may be only a tradition; there may be nothing in it. But if it is a tradition it is a very great one. As a people, we, like the people of many other countries of the world, have grown up with the gold standard, more or less. I cannot conceive of any surer way of utterly wrecking the credit of this country, internally and externally, nor can I conceive of any proposal more calculated to bring the value of our paper money down to utter worthlessness, than to strip ourselves of every golden sovereign that we possess. I cannot imagine anything that would cause so much uneasiness to every class of business and industry and to every worker and possessor of a banknote in this country than if they were to wake up one morning to learn that there was not a single sovereign behind their paper currency.
I wish to make a few observations in criticism of the supplementary financial statement, made by the Prime Minister in his speech on this bill last Friday, and refer to the proposal of the right honorable gentleman made to reduce, at long last, the salaries of the public servants of this country by £1,000,000. I want to show what an utter sham that proposal is, and how wide of the actual facts of the position was the Prime Minister’s statement. For this purpose I propose to quote some remarks made by the right honorable gentleman in a speech at Canberra, and reported in the Melbourne Argus of the 9th March, at a time when he was resisting all proposals for the reduction of Public Service salaries. The right honorable gentleman said -
Therefore, no mutter Low prices might tend to increase after March next, a cut in next year’s salary and wages bill would become operative and that would amount to perhaps £750,000.
This means, in other words, that a reduction of Public Service wages and salaries, due to the fall in the cost of living, will be responsible for about £750,000 of this loudly-advertised reduction of £1,000,000. Therefore, this economy, like all the socalled economies of this Government, is a sham from beginning to end. The amount of reduction proposed to be made in public service salaries, apart from the cost of living reduction, is only £250,000, or about 2 per cent.
– What’ reduction would the honorable member like to see?
– I object to all sections of the community who are working under arbitration court awards, and who have had their wages and salaries reduced by 10 per cent, over and above the reduction due to the fall in the cost of living, having to pay a special tax of 4d. per lb. on their tea, and a customs surcharge on their beer, tobacco, and other commodities in order to maintain at their full prosperity level the wages and salaries of the public servants of the Commonwealth. I remind the garrulous honorable member for Bendigo (Mr. Keane) that, as president of the Victorian branch of the Australian Labour Party, he has concurred in the making of a cut, by the Victorian Labour Government, in the wages and salaries of the Victorian Public Service. Yet he comes here and pretends to be standing up for some grand principle in arguing for the maintenance of full wages and salaries to the Commonwealth Public Service.
I shall say little more about this wretched and menacing bill, but will briefly summarize the obvious alternative. As I said at the outset of my speech, what we need is a restoration of our national credit by the adoption of simple, sane, old-fashioned methods of government finance. This Government has it within its power, as any other Commonwealth Government would have it, by a series of economies which would not lead to the unemployment of, or impose hardship upon, a single individual of this country, completely to restore our national credit. If the Government would take these steps, an immediate and fruitful influence would be felt. “Within a week or two, it could have underwritten a loan to provide rural relief; and it could have underwritten another loan to provide for public works of an urgent kind to relieve unemployment. It would be able, by these means, to obtain real money of sterling value, and not the shoddy make-believe stuff that it is proposed to carry on with - notes which will not, even carry a promise to pay. In addition, it would be possible at the London end, in a matter of a few weeks, to fund, at a lower rate of interest, our great floating debt on which we are paying a high rate of interest, and this would at once release for use in Australia the credits of upwards of £20,000,000 that our friends are prattling about. This money has been borrowed in London from the Australian banks to tide us over our difficulties. Further than that, it would be possible, as a temporary measure for a few years, to fund part of our interest obligation abroad. I personally would go as far as £10,000,000 a year on that account. In these ways, we could get relief here in taxation, ensure the balancing of our budgets, and bring about a real and immediate restoration of credit. This would remove, at one sweep, half of our present depression, and half of the business and industrial dislocation which is paralysing employment. Such relief would make possible, within the matter of a few weeks, a partial return to our old-time prosperity.
– In view of the fact that a number of honorable members still desire to participate in this debate, I do not propose to cover a great deal of ground; but I feel it incumbent upon me to reply to one or two statements made to-day by speakers from the Opposition benches.
The honorable member for New England (Mr. Thompson) suggested that the Government was putting forward this proposal for a fiduciary notes issue only with the object of obtaining electioneering material.
– Is that contested ?
– The members of the Opposition may rest assured that the Government is most anxious that this bill shall be passed. If it is passed, it will falsify, as did the Commonwealth Bank Bill, which was passed to authorize the establishment of the Commonwealth Bank, “many of the prophecies made by the Opposition. If honorable members will take their minds back to the debate on the first Commonwealth Bank Bill, which was introduced by a Labour Government, they will remember that precisely the same things were said then that are being said now.
– There is no analogy whatever in the two cases.
– The Opposition of that day prophesied that the passage of the Commonwealth Bank Bill would lead to the ruin of the country. Those and all similar prophecies have been falsified as time has passed. I assure the honorable member for New England that the Government is strongly hopeful that this bill will be passed, not only by this House, but by another place. That it will pass this House we have not the faintest doubt. All that I want to say, in reply to the sneering laughter of the Leader of the Opposition (Mr. Latham)-
– It was not sneering; it was natural laughter.
– Is that the final judgment will rest with the people.
– Let it be as soon as possible.
– When the honorable member was Attorney-General in the Bruce-Page Government, lie said that the Government would boldly take its courage in its hands and go to the people, and his leader made prophecies as to the majority his Government would get. If the prophecies of the Leader of the Opposition to-night are as reliable as those of his party in 1929, very little trust can be placed in them.
The Prime Minister (Mr. Scullin) and others have pointed out that the banks mid other financial institutions of this country, including the Commonwealth Bank - I am not. impugning their honesty or sincerity - although capable of meeting the needs of this country in the greatest economic crisis that it has ever faced, have refused to do so.
– That is an absurdity.
– Does any one contend that Australia is not facing its greatest economic crisis - that the whole world is not doing so ? It has been said that the policy of inflation, even controlled inflation, will bring ruin to this country. But I ask any sane person whether the existing monetary policy is or is not bringing ruination to our people. From one end of the country to the other we find, not only workers who have been endeavouring to purchase homes for themselves, but also our primary producers, being ruined by it.
It was rather pathetic last evening to hear the honorable member for Maribyrnong (Mr. Fenton). He is sitting cheek by jowl with those whom a few weeks ago he was smiting hip and thigh.
– He made a very good speech, and believed everything he said.
-! have no desire to make any derogatory reference to what he said, but little reliance can be placed on the utterances of a man. who one day is proclaiming one thing, and a few days later something else.
– He has had the same policy all through.
– In this House some time ago he denounced deflation, and is now denouncing an attempt to overcome it.
The Deputy Leader of the Opposition (Mr. Gullett) had a great deal to say to-night about the credit of the country, and one may infer from his remarks that in his opinion that credit has been destroyed by the present Government. He said that we cannot borrow money.
– Not two bob.
– The Government of which the honorable member for Warringah (Mr. Parkhill) was a supporter placed two loans on the London market. In regard to one, 84 per cent, had to be taken over by the underwriters, and in regard to the other the underwriters had to take over 87 per cent. If the credit of this country has been destroyed, nothing has done more to destroy it than the stinking fish cries of honorable members of the Opposition. Ever since they had to vacate the treasury benches, they have been crying aloud that the credit of the country is being destroyed. Yet their own utterances are calculated to bring about that result.
– What did the Prime Minister say in his cablegram?
– The Deputy Leader of the Opposition made some reference to the somersaults of the Prime Minister. No one has made more somersaults than the honorable member himself. The only governments whose policies he has approved have been those in which he was a Cabinet Minister. When a supporter and not a member of the BrucePage Government he smote it hip and thigh. His cry now is that the country is being ruined because Labour is in power. What he really means is that it is being ruined because he is no longer a member of the Government. The honorable member has made the admission that controlled inflation might bring some good, but he has qualified that statement by saying that the present Government is not capable of controlling a fiduciary issue, which he terms inflation.
I come now to the extraordinary reasoning of the honorable member for Gippsland (Mr. Paterson). He tried to ally the fiduciary note issue of England with the gold-backed note issue of England. I do not know that the honorable member had any intention of deceiving the House, but his words certainly conveyed the impression that the British fiduciary note issue had some tangible gold backing.
– I did not suggest that.
– The honorable member said that, taking the £140,000,000 gold-backed note issue of England and the £260,000,000 fiduciary note issue of England, the gold behind them, which is really only gold behind the Bank of England note, was equivalent to 35 per cent.
– Yes, of the whole.
– Exactly; but the real position is that the gold backing is solely behind the £140,000,000 Bank of England notes. There is no gold backing to the fiduciary note issue of England.
– That is quite obvious.
– Of course it is. I do not propose to deal with assumptions - the whole n£ the speech of the Deputy Leader of the Opposition was a series of assumptions - and I have always given the honorable member for Gippsland (Mr. Paterson) credit for making his speeches in a well-reasoned manner quite devoid of the personal abuse to which we have just been subjected by the Deputy Leader of the Opposition. But his remarks might convey to those who have not given any thought to the matter the impression that the fiduciary note issue of England has behind it some goldbacking. It has not. Nor do the notes bear upon them any statement to that effect. The fiduciary note issue of England is not a gold-backed currency, and the proposed fiduciary note issue for Australia will not differ from it in that respect.
It has been said that the proposed change in the monetary system of Australia will bring ruin to the workers.
– Hear, hear !
– What a wonderful solicitude the honorable member has developed for the workers since he had such a close run at the last election. His previous political career was devoted to doing all he possibly could to defeat their interests.
It has been said that the proposed change in the monetary system will bring ruination upon Australia. Has not ruination already been brought upon it by the existing monetary system? The Deputy Leader of the Opposition (Mr. Gullett) has talked about the funding of debts in England. When the present
Government took office!, Australia’s overseas debt was of enormous proportions. Why did not the honorable member’s Government do all these things which he says confidence in the administration will bring about?
– The present Government will have to do them very soon.
– But why did not the last Government do them ? If it was such an easy matter to fund the debt in London, why was it not done ?
We are told by the Deputy Leader of the Opposition that confidence in the Government will bring about prosperity, and by that means we shall get rid of our unemployment problem. But what is the position throughout the world to-day? Is it that in the various countries there is no government in which the people have confidence? Does the Deputy Leader of the Opposition suggest that the people of the United States of America, with its 6,000,000 unemployed, and banks, certainly small ones, crashing by the hundred - 500 of them crashed in one fortnight - have no confidence in their Government ? Is there no confidence in the Government of Great Britain, with its 3,000,000 unemployed? Is there no confidence in the Government of France, or that of Italy? Is there no confidence in the Government of Austria, and those other States whose finances were adjusted by Sir Otto Niemeyer? All these countries are teeming with unemployed, irrespective of whether there is confidence in their governments or nor.
– And irrespective of the gold standard.
– The currency of the United States of America is backed dollar for dollar by a gold equivalent, yet the country finds itself in the same desperate economic position as that of Australia. Prosperity is not brought about, therefore, by adherence to a gold standard, by confidence in the administration, or by a capacity to borrow. What is wrong with Australia? Is it something for which the present Government can be held responsible? I do not think that any honorable member will suggest that control by any political party is a factor in bringing about the present position. It is a world-wide matter. Whatever government is in office,
Australia, like other countries, has a long, hard road to follow before it can get back to the prosperity we all desire. One thing is certain, and that is that neither this nor any other country can get back to prosperity while the present system of monetary control prevails throughout the world.
Speaking the other night, the honorable member for Maribyrnong (Mr. Fenton) talked about the value of the pound. Others have suggested that after the issue of fiduciary notes there will be a great depreciation in the value of the fi note - they are merely assertions, with nothing to back them up - but the honorable member for Maribyrnong went a little further. He said that a proposal put forward by the honorable member for Brisbane (Mr. D. Cameron) was sound. I have a great respect for the opinions of the honorable member for Brisbane, but I am not prepared to accept his assumptions as absolutely infallible. When the honorable member for Maribyrnong (Mr. Fenton) bases his assumptions on those of the honorable member for Brisbane (Mr. D. Cameron), and the latter relies on the ideas of somebody else, it is impossible to reach finality in dealing with their arguments.
I do not propose to take up the time of the House by following the rambling statements of the Deputy Leader of the Opposition, because very few of them were backed by sound reasoning. Honorable members opposite have spoken of the currency of France, and of the way in which the note issue of that country has been inflated. They might have cast their minds back to what France did after the Franco-Prussian war, when it issued large quantities of paper money, for a limited period, without ruining that country. As a matter of fact, France soon returned to prosperity after that war, although Germany had imposed heavy indemnities upon it. Australia has nothing to fear from a certain amount of inflation of credit. The statement that the financial interests of Australia have declined to make advances to farmers and others because of a fear of the proposals of this Government for inflation is sheer nonsense. Eighteen months ago the banks were not prepared to advance even £250 to men whose assets were worth £15,000. One man in my electorate, whose name
I am prepared to give, had assets valued at £10,000, and a fixed deposit of £550, but his bank would not lend him £50. Was that due to proposals for inflation ?
– What is the name of that man?
- Mr. Pier, an ex-bank manager, and a member of the Nationalist party. Honorable members opposite cannot honestly say that the restriction of credit, when money was needed by the primary producers and others, was due to a fear of proposals of the present Government for inflation.
What is the alternative to the Government’s proposals? Honorable members opposite talk about the need for balancing the budget; but what concrete plans have they submitted to enable that result to be obtained ? It is true that the honorable member for Balaclava (Mr. White) disclaimed a desire to reduce pensions, yet the honorable member for Gippsland (Mr. Paterson) showed twice in one speech that he considered that a reduction of the payments for social services was necessary. These services include soldiers’, invalid and other pensions. The only meaning that could be attached to the honorable member’s remark was that he favoured a reduction of pensions. Do honorable members opposite imagine that, on an appeal to the people, the Nationalist party would be returned with an absolute majority, without the support of the miscellaneous parties represented in this House that are opposed to Labour? Does the honorable member for Balaclava believe that his opinion, that there should be no reduction of pensions, coincides with that of the honorable member for Gippsland, who has made it clear that some reduction is necessary if we are to meet our obligations, or, to use his own words, “If this country is not to topple into insolvency”? Honorable members opposite would have us suppose that they have great concern for the welfare of the workers; but, if they are not inconsistent, they will put before the people the policy that brought them defeat at the last election. If they do not, all their boasted courage will vanish into thin air. Assuming that the honorable member for Gippsland (Mr. Paterson) voices the views of the Country party, it will tell the electors that there should be a reduction of the payments for social services, and if the Nationalist party is consistent, it will advocate the abolition of federal arbitration. Neither party can escape from placing those issues before the people. Members of a government that went to the country saying that all the protection that the workers had should be removed are now claiming great concern for the workers. I would not be allowed to describe that as political hypocrisy; but it is hard to believe that houorable members opposite consider themselves honest in these matters.
The party opposite has suggested that the recommendations of the committee of experts are what they favour. That committee definitely advocates a cut in pensions and other social services. This party does not stand for that. Nothing that the Government may do will bring about a return to complete prosperity; the most we can hope for is to pass measures that will tide the country over the present critical period, so that when the general economic position improves, Australia will be able to take advantage nf it.
– The country will probably get back to prosperity in spite of this Government.
– If that be so, what need is there for all the talk of honorable members opposite over this bill? I have differed with the members of my party on many matters; but I am not ashamed to say that, whatever the decision of the caucus may be, I am always prepared to abide by it.
– Of course.
– Surely the honor able member forWarringah (Mr. Park- hill) does not suggest that honorable members of the Opposition have no differences of opinion ? He cannot claim that members of the Bruce-Page Government, were absolutely united in their views. He said that the present Government’s majority had dwindled away; but let me remind him that the last Government, which he supported, and which had a big majority, lasted only ten months. Its supporters were practically annihilated when it went to the country, and even its Prime Minister himself was defeated.
I believe that this bill, and the other measures associated with it, will prove of real value in assisting to restore financial stability. I fail to see how it can be fairly claimed that bondholders, who have not been seriously affected by thu general fall in income, should not make some contribution to the heavy burden which the country has been called upon to bear. This bill will prove of real assistance to the farmers and to the unemployed, and if members of the Opposition decline to support it the responsibility for their action will rest upon their own shoulders.
.- The Minister for Defence (Mr. Chifley) claimed that the credit of Australia had been undermined before the last Government left office. He pointed to the fact that some of our loans were not fully subscribed by the public, and had to be underwritten, and he declared that the Opposition, by its statements, had decried Australia, and prevented the Government from raising the required loans. To contradict that statement, it is only necessary for me to refer to the cable sent by the Prime Minister (Mr. Scullin) on the 10th November, 1930, to the honorable member for Wilmot (Mr. Lyons) as follows : - 1 came to London with the consent of the party. Apart from the Imperial Conference my most important mission was to restore Australian credit so that we could fund the floating debt and, if possible, raise some new money to relieve our economic position. My efforts would have succeeded had the party’s support been maintained. I found in London a desire to assist, and plans were maturing to approach the loan market when budgets were balanced.
Although there was disappointment in financial circles that our budget is not quite balanced, the door was not quite closed, and I still had hopes of success until that appalling resolution was passed last Thursday : but that proposal was disastrous.
That shows conclusively that the loan market was not closed to Australia at that time. The Prime Minister had an opportunity to obtain advances in Great Britain, and he stated that the action of his own caucus had prevented him from securing that assistance.
– It is fortunate for Australia that he could not raise further loans abroad.
– Yet the honorable member for Adelaide (Mr. Yates) supports a government which is prepared to accept loan money from Great Britain or any other country.
It was claimed also by the Minister for Defence, that the fiduciary issue of Great Britain had no gold backing. It must be apparent to the honorable member that he has not clearly set out the facts. The weekly returns of the Note Issue Department of the Bank of England, dated the 11th March last, showed that the total note issue was £400,000,000, composed of a fiduciary issue of £260,000,000, and a note issue, backed pound for pound with gold, of £140,000,000.
– Is the honorable member quoting from the CanberraTimes?
– I am quoting from the returns of the Bank of England as republished in that newspaper.
– It is entirely wrong.
– If I am wrong the honorable member can correct rae later. I understand that the Treasurer has already admitted the accuracy of the figures which I have quoted, which show that the British note issue is backed pound for pound by £140,000,000 worth of gold. In respect of the total note issue, there is a gold holding of £140,000,000, or 35 per cent. Against the fiduciary issue there are assets comprising government debentures amounting to £11,015,000. government securities valued at £238,107,000, other securities valued at £6,533,000, and silver coinage valued ‘ at £4,343,000, or a total of £260,000,000. The fiduciary note issue of Britain cannot, therefore, be compared with the Commonwealth’s proposed fiduciary issue, against which no such assets are held. The Treasurer has attempted to confuse the minds of the Australian people with respect to the proposed fiduciary note issue. “ Fiduciary “ is defined in the Oxford Dictionary of Current English as currency, “ the value of which depends upon the confidence of the public or upon securities.” The British people have confidence in the issuing authority and also adequate securities for the notes in circulation. The fiduciary note issue in Great Britain is issued with the consent of the Bank of England, and not to the detriment of the banking institutions, as is proposed here. Speaking in Brisbane the Treasurer stated that -
In consequence of legislation passed by the Bruce-Page Government, the Government is dependent upon the banks. That is the charge we make against our predecessors. The Government is left helpless while the Commonwealth Bank Board, appointed by a Nationalist Government, is doing this and is defying the Government. Is it right that such enormous power should be placed in the hands of a few private bankers?
On that occasion the Treasurer criticized the action of the Bruce-Page Government, merely because it had sufficient foresight to prevent the Treasurer of the day from obtaining control of the currency, and using it to the detriment of the people. One of the first acts of the late Government was to pass an amending bill taking away the provision that the Government could at any time control the note issue. At the same time provision was made for the appointment of a Commonwealth Bank Board, consisting of five members. The Treasurer of the day is prevented from obtaining control of the note issue for political purposes, and that is why the present Treasurer now squeals and protests so strongly concerning the action of the Bruce-Page Government, whose foresight has been the means of protecting the community at the present juncture. The Bruce-Page Government also provided by legislation for the Commonwealth Bank to become a central bank and a clearing house for the private banks.When it left office the Commonwealth notes in circulation had a gold backing of 52 per cent. with the Commonwealth Bank, and private banks held nearly 50 per cent. Collectively there was held £1 worth of gold for every note in circulation. But during the eighteen months the present Government has been in office the note issue has been so inflated that at present there are three £1 notes in circulation for every £1 in gold held.
The first action which the present Treasurer (Mr. Theodore) took on assuming office was not to safeguard the note issue but to introduce an amending Commonwealth Bank act making it obligatory upon the private banking institutions to hand over their gold reserves to the Commonwealth Bank which issued notes in return. So much has since been exported that we are now holding only approximately £15,000,000 worth of gold, whereas formerly £1 in gold was held for every note in circulation. In these circumstances, is there not every justification for the protests which the private banks have made concerning the inflation of the note issue ? For the gold which the Commonwealth commandeered from the private banks they received Commonwealth notes, which under a policy of inflation will depreciate in value. An inflation of the note issue will only accentuate the present depression and lead to further unemployment and distress. The protests of the private banks are fully justified, particularly in view of the possibility of further shipments of gold being made from Australia which would result in the present reserve of £15,000,000 being further depleted. Quite recently the Treasurer who confiscated the gold held by the private banks and who has criticized their action in very strong language, was able to address a fairly large gathering at a theatre in Brisbane - a city which has no time for him politically. He delivered a speech which he would not deliver in his own electorate, and was not game to deliver in connexion with the recent by-election of East Sydney. He told the people at that meeting that the banking institutions had to be controlled because they were acting to the detriment of the people. He further said that the Government was depending upon the banks - although it ought not to be - which were using their power against the interests of the people in this country. But speaking at a royal agricultural show luncheon the Treasurer is reported in the Courier of the 19th April, 1930, as having said -
The Australian banks and the Commonwealth Government have taken certain measures, described as sensational and drastic, in order to bring a corrective to bear upon the situation, and to prevent a national default overseas. It is because the people generally have recognized that drastic action was required that they have, generally speaking, found no fault with the action taken by the banks and the Government.
At that time he was working in cooperation with the banks in the interests of the country, but after he had utilized all their credits which were thus denied to those engaged in industry, he abused them merely for electioneer ing purposes. He adopted the slogan of “ The people versus the banks.” He knew that the Fiduciary Notes Bill would not be passed by Parliament, because at the meeting in Brisbane to which I have referred, he predicted a double dissolution before many weeks had passed. Although the Treasurer endeavoured to justify the introduction of the Fiduciary Notes Bill he knew that it would not be passed by both branches of the legislature.
The right honorable the Prime Minister (Mr. Scullin) said that the Treasurer was asked to re-enter the Cabinet because of his great experience, but we know too much of his experience. He is a past master at window dressing during an election campaign. He has been most inconsistent in his statements concerning the banks. On the 13th June, 1930, vide Hansard, page 2727, he said-
At the present time Australia is suffering not from inflation, but from deflation. We are suffering acutely from the effects of deflation. It is not deflation brought about by any authority, individual or institution within Australia. It is a deflation brought about by world-wide conditions - deflation of the commodity price levels of the world - and Australia, together with other primary producing countries, is suffering to a greater degree than most other countries, because it is essentially a primary producing country.
That is quite correct. But it is not in keeping with the statements that he and other honorable members opposite make to-day. The Prime Minister (Mr. Scullin) himself stated on the 6th August last -
Under the arrangement now approved this amount will be paid to the banks in Australia for the provision of an equivalent sum by the banks in London. The Loan Council expresses its appreciation of the co-operation of the banks in assisting the Governments to meet their serious exchange difficulties overseas.
Yet the substance of the Treasurer’s remarks, both in Brisbane and in this House, consisted of an attack on the banks !
The Minister for Defence (Mr. Chifley), speaking in sarcastic vein, stated that if we are consistent we shall know what to do at the next elections. If that honorable gentleman can be judged by his past utterances, he also will know what to do. Addressing a meeting of the Australian Labour Party at Macquarie, in his electorate, he said that he was opposed to both the Theodore and Lang plans in many essentials.
– The report of that speech from which the honorable member quotes absolutely misrepresented what I said.
– The honorable gentleman admitted that the Scullin Government had not done much. Yet he will try to convince the electors at an election that that Government has done quite a lot. He claims that any person who says that the present depression can be- lifted by legislation in a month, is guilty of a confidence trick. The Treasurer, however, has practically stated that this proposed fiduciary issue will rapidly restore prosperity, and that under it trade and commerce will boom. He has announced that work will be provided for from 40,000 to 50,000 of our people. How can it be argued that that will solve the unemployed problem, when some 250,000 persons are unemployed, and, in order to afford the measure of relief contemplated, the credit resources of Australia are to be depleted ? It may be thought that £12,000,000 is a large sum to distribute among the unemployed. It must not be forgotten, however, that in New South “Wales the State makes provision for the expenditure of £3,000,000 annually towards the relief of the unemployed, and that millions of pounds are spent in that direction also in Queensland, Victoria, South Australia, “Western Australia, and Tasmania. It is probable that already this year an amount of £12,000,000 has been provided for the relief of unemployment; yet the number of unemployed persons is increasing. This proposal will not right the position. It may provide work temporarily for some individuals ; but it is to operate for only twelve months, and by the end of that period our credit will have been inflated, and our gold exported to Great Britain, and our name will stink in. the nostrils of creditor countries to the degree that it does now in the nostrils of those in Australia who have lent the Government money. How will it be possible for the present Government to finance the unemployed when this provision has been exhausted ?
I am one of those who do not believe that Australia’s position is altogether desperate. I consider that, if we had in power a government with the necessary backbone to stand up to its obligations and to carry out the people’s desires there would be a big possibility of overcoming our national difficulties. There is no section of the people that has any confidence in this Government. It is not even regarded as having been a trier. The general opinion is that this is a window-dressing scheme, propounded by the Treasurer to serve the interests of the Government in a campaign that is regarded by it as inevitable, and that the people will ultimately demand. The honorable member for “West Sydney (Mr. Beasley) and his colleagues can send the Government to the country whenever they care to do so. The Government is carrying on only by their leave. It was not game to put forward a candidate at the by-election for East Sydney, after the Parkes debacle. At the latter by-election the Treasurer propounded his new fiduciary scheme in the hope of gaining votes for the Government candidate, but the majority in favour of the present member for Parkes (Mr. Marr) was double that which was given at the general election to the gentleman who has been elevated to the High Court Bench. Honorable members may claim that a fiduciary issue is not inflation.
– What is inflation?
– Buying the honorable member at his own valuation would be inflation. It has been admitted that this is a system of inflation, and it is claimed that it cannot be avoided. Let us see what the Treasurer himself said on one occasion in regard to inflation. According to a report published in the Brisbane Courier of the 30th November, 1923, the honorable gentleman, who was then Premier of Queensland, referring to the intention of Great Britain to return to the gold standard, said -
Australia should make every effort to maintain a sound money basis. The world has had many salutary lessons in recent years of the confusion caused by unstable money. Trade is paralyzed, commodity prices soar sky high, wage standards arc lost, and national bankruptcy ensues.
On the same date he also made the following statement: -
It is a misconception to think that by adding paper to the currency any additional wealth is created. To merely pay higher wages in paper achieves only disappointment, as the purchasing power of the paper money will be less than the purchasing power of gold by an amount which corresponds to the extent of the intiation. By inflating the currency we get into a vicious circle. Once the issue of pa,per exceeds the currency requirements of the community, the value of the money is depreciated, and commodity prices commence to soar. None suffers more than the workers, because their wages are paid on tlie assumption that commodity prices are in gold, and not inflated paper prices. Wages are always less than they should be in countries that practise inflation.
Let us now hark back to his expressed opinion concerning the proposals of the honorable member for Adelaide “ (Mr. Yates). Speaking in this House on the 30th June last, the honorable gentleman said -
I had difficulty in following the reasoning of the honorable member for Adelaide (Mr. Yates), lt seems to me that what can be accomplished by the note issue is apparent, and what will happen if too much dependence is placed upon it is also apparent. By an over-issue of notes there can be caused an inflation, which is reflected by depreciated value in currency corresponding almost in exact measure to the over-issue of notes.
Yet we are told to-day that the system which is now being adopted is that which was suggested by the honorable member for Adelaide. 1 have no hesitation in asserting that there is every possibility of the recovery of this nation under a government that is prepared to face the issue, tell the people the truth, and do the right thing irrespective qf party considerations. I claim that we have an opportunity that is not possessed by other countries. We are large exporters of primary products. Our national debt is not wholly a dead-weight war-debt; our State owned railway systems, upon which we have expended over £300,000,000, extend throughout the Commonwealth. Nearly all of our lands are owned or controlled by the State, which also holds all water rights. The greater part of our debt has been expended on public utilities in the interests of the people, and they are worth much of the amount which has been sunk in them. Therefore, I say that we cannot refer to our position disparagingly. All that is needed is confidence. When that has been restored, and when our primary products secure a fair return in the world’s markets, we shall regain a true measure of prosperity. Proof of the’ fact that confidence alone is needed is afforded by the oversubscription of the £28,000,000 conversion loan, largely as a result of the efforts of the ex-Acting Treasurer (Mr. Lyons), who left the Labour caucus when it expressed its determination to withhold interest, or to refuse to convert that stock for a period of twelve months. The people of Australia responded magnificently to the appeal that he made to them, and thus Australia was saved the degradation which members of the caucus had planned to bring about.
I feel sure that the people of Australia realize that there are means other than this proposed fiduciary issue which can and must be adopted. They will follow the lead of those who have shown themselves prepared to put up with the tyranny of their organizations, and to risk their seats by joining with honorable members who sit on this side, in an endeavour to point the way that should be followed. At election time, they will be guided by their own consciences as to what is best for Australia, whereas the gentleman who is in control of the treasury will indulge in the window-dressing and other political tactics that have always characterized him.
The people will probably be told that we, on this side, are opposed to the fiduciary note issue, because we object to the farmers receiving any assistance. That is not so; we are not opposed to assistance being granted to the wheatfarmers; but we demand real assistance for them. Indeed, the Country party has submitted a proposal to the Government which, while affording well-deserved assistance to the wheat-farmers, would cost the country nothing. A sales tax of £2 or £2 10s. a ton on the flour made from the cheap wheat of to-day would produce a fund of over £7,000,000, which would be more than the amount proposed to be allotted to their relief from the fiduciary notes issue. It would give them more than the Government proposes to give them. Moreover, such a scheme would not decrease our credit.
Nor is the Country party barren of suggestions as to the means of meeting the unemployment difficulty. It has a proposal for the provision of credits by which industry could be stimulated, and unemployment decreased. I oppose a reduction of pensions to provide assistance to the unemployed. Gold is available for that purpose.
Mr.Blakeley. -Where ?
– It is available in France at 4 per cent., as the Minister knows; but the Government, of which he is a member, has rejected a proposal to obtain gold from France, because it wants to proceed with its base proposal for the creation of a fiduciary note issue. Gold amounting to £15,000,000 is available to Australia. If given the opportunity the Country party would wipe out the indebtedness that is upsetting the exchange position, and endeavour to improve the financial position on sound lines, instead of along the lines proposed by the Government.
This bill makes no provision to assist primary producers, as that term is generally understood. It purports to assist the wheat-growers - the men whom the Government has promised to assist ever since it came into office, but for whom it has so far done nothing. Means can be found for assisting the wheatgrowers of this country, but the primary producers, as a whole, are at no loss to understand the Government’s proposals for a fiduciary currency. They will not be deceived by the argument that values can be extended by inflation, for the primary producers, more than any other section in the community, are controlled by realities. If the addition of water to milk increased the value, as well as the volume, of cream, the primary producer would have adopted fiduciary cream long ago. He knows, however, that the factory return for his can of cream is based on value, not on volume. Nor will the housewives of Australia have difficulty in realizing what is meant by an unorthodox extension of values by means of inflation, be it known as extended credit, fiduciary currency, or watered milk. Governments can no more extend credits or increase money by inflating the currency than parents can increase the food value of their children’s milk ration by adding water to it. These homely illustrations should bring home to the people the real meaning of inflation, and the impossibility of anything of value being derived from it.
From the Trades and Labour Councils of Australia has emanated a demand which has been repeated in this House by government members during this debate, that Britain should treat Australia as generously as the United States of America dealt with Britain. Instead of the Unified States of America having treated Britain generously, the opposite is true. The position is set out clearly in Honour or Dollars, by FrederickW. Peabody, a member of the bar of New York, Massachusetts, California, who, in a communication to the President of the United States of America, said -
England (meaning Great Britain) loaned her allies something like ten billion dollars, hut not as a substitute for men. Upon the invasion of Belgium, she entered the war with her armies, and before the awful death list made conscription necessary, enlisted four million volunteers. England did that - loaned ten billion dollars, recruited four million volunteers.
As a substitute for mon, we advanced England something more than four billions, under the law authorizing its payment for our security and defence. While her young men were dying by the hundred thousand in the trenches, fighting our tight as much as their own for more than a year, the war was not costing us a man. We did what we could. We helped England keep her soldiers in fighting trim by furnishing money for supplies produced in America. England asks nothing for her dead. We demand repayment of our money, with interest. We are the richest nation the world has ever known. England is embarrassed as never before. With a million unemployed, she carries a huge burden of debt, and has resorted to a taxation almost confiscatory. America taxes an income of $5,000 by $37.50; England taxes it $787. She is dependent for her revenue upon her trade, and our tariff wall practically excludes her from trade with us. Nothing is undamaged but her honour; nothing unshaken but the unshakable steadiness of her soul. And yet we, the Croesus-nation, demand of struggling, staggering England, not only the four billions we let her have, hut an additional seven billions, because she must have time in which to pay. Because she is in trouble, we charge her seven billion dollars for interest. We have no moral right to a farthing from England, but she signed, and we hold her to her signature.
Mr. President, what do you, as a man, think of the way we have treated England? What I think of it is of no consequence. What is of consequence is what the world thinks of it, what America thinks of it, what posterity, what history will think of it. ft may be that, in time, language will contain words that will adequately characterize it. They are wanting in tuy vocabulary.
He added -
England proposed cancellation of all war debts at a net cost to her of six billion dollars, inasmuch as the nations owe her that amount over and above what she is said to owe us. We declined the proposal and demand the uttermost farthing; and England now agrees to forgive her debtors all they owe her in excess of the amount we require of her. A striking contrast, that!
That is how the United States of America treated Britain; that is American generosity. Yet, for political purposes, those “who would decry Britain, in the interests of the depression which they hope to bring about and the suspicion which they wish to engender, repeat statements regarding the generous treatment of Britain by the United States of America. The fact is that in the history of the world no nation has ever been treated more cruelly than Britain has been treated by the United States of America. I suggest to honorable members who speak so approvingly of the United States of America, and that country’s treatment of Britain, that they should approach the Labour Government in England, which has not demanded from the American States an amount nearly equal to the sum which we owe the British Government in respect of the war, and ask that Australia be given the right to collect the money which those States owe to Britain, but have not paid, with a view to squaring Australia’s account with the United States of America. I remind honorable members that Britain, in paying her own internal debt, is paying the greatest war debt of any country in the world, notwithstanding that she gained the least benefit from the struggle.
One would imagine from the statements of honorable members opposite, and the actions of the Prime Minister (Mr. Scullin), that the present Treasurer (Mr. Theodore) is a heaven-sent financier, whose mission in life is to protect the interests of the Commonwealth. I remind those who hold that opinion that when the Treasurer became Treasurer of Queensland in 1915, the public debt of that State was £56,869,046. By 1927 Queensland’s indebtedness had increased to £106,479,916. The Treasurer complained that in 50 years Queens- land piled up an indebtedness of over £56,000,000, yet in the ten years or so of his administration, that State’s indebtedness increased by £50,000,000. The per capita debt of Queensland, which was £3 10s. in 1915, increased to £33 lis. by 1925. Moreover, increased taxation was piled on year by year to enable the State to pay its way.
– How were those debts incurred.
– Largely in connexion with State trading operations, on which there was a loss of £2,083,110 up to 1927. In various State enterprises £6,256,167 was locked up in 1927. During the years of plenty, when the people were living in prosperous times, deficits were common, notwithstanding that fresh taxation was imposed from time to time. The railways, during ten bounteous years, showed a total loss of £12,370,000, notwithstanding that freights and fares had been increased more than in any other State. In the year prior to the Labour Government assuming office railway operations showed a credit balance of nearly £50,000. Taxation, which in 1914-15 was only £1 Ss. 2d. per head, had increased by 1926-27 to £5 2s. Id., a higher increase than in any other State. Those figures are eloquent of the extravagance of the Theodore administration during years of plenty. While the people’s money was being raked into the Treasury by means of taxation, deficits were being built up. Queensland was left by Labour in an unfortunate position, from which it hopes to be retrieved only by the policy and administration of the present Government.
Speaking in Brisbane recently, the Treasurer made the extravagant and inaccurate statement that the BrucePage Government, during its six years of office, had persisted in a policy of wasteful extravagance, and during the last three years had borrowed in New York and London £129,000,000. A reference to the figures prepared by the Commonwealth Statistician shows that the amount of the Commonwealth debt was increased by the Bruce-Page Government during those years by only £4,000,000.
– I said that the Australian Governments had borrowed £125,000,000 during that period.
– I have quoted from the report in the Brisbane Courier.
– Quote from Hansard. which contains the correct figures.
– I am not quoting from a statement made by tha honorable gentleman in this House, where honorable members could hear and contradict him, but from a statement he made at a public meeting in Brisbane, whither, he flew to escape from the observation of his fellow members.
– The report is not correct.
– Why has it not been corrected?
– It has been corrected.
– Not in the Courier nor in other Brisbane newspapers. The fact is that the national debt was increased by only £4,000,000 during the last three years of the Bruce-Page regime. That Government had reduced the net war loan indebtedness by £40,000,000, and had made provision for the total public debt of Australia, amounting to £1,100,000,000 to be wiped out in 56 years, by annual sinking fund contributions, which the people hardly notice. It also placed into the sinking fund £14,000;000 in excess of statutory obligations. That Government established also the Loan Council, which has removed the possibility of politicians like the Premier of New South Wales interfering with the national credit by floating loans at fabulous prices. Those two achievements are alone sufficient justification of the Bruce-Page regime.
The bill before the House has been introduced merely for political purposes. I hope that the Government will see fit to accept the suggestion of the Country party, that a small sales tax on flour be imposed to give immediately to the wheatgrowers the relief that is overdue. In regard to the unemployed, I trust that the Government will not wait for a general election or a double dissolution, but will, with the co-operation of all parties, establish a credit that will assure to the unemployed sustenance and work. The complete rehabilitation of industry and permanent employment, however, will not be possible until the advent of a government which the people can trust to adopt sound methods of finance and avoid the inflation expedients which have brought other countries to disaster.
– The political happenings during the last two weeks have been notable for two outstanding incidents. The first was a very definite statement by the Prime Minister that budgets cannot be balanced this year and that under no circumstances would the Government interfere with pensions, and the second, the speedy action of the Government in submitting to the House the measures of its financial policy.
– Because of the conference held on Friday.
– This haste’ can be explained by the decision of the people at a recent by-election. That decision, whether acceptable to Ministers or not, has impelled the Government to do something definite. The Prime Minister said this bill is a central proposal around which others will revolve; it is the main feature of a policy to meet the extraordinary circumstances existing to-day. I, and those associated with me, claim that these measures have been introduced because the public generally has demanded that some action be taken to cope with our present economic and industrial troubles. Whether the people will accept the Treasurer’s scheme in its entirety as a means of solving these troubles has yet to be ascertained, but those members of the House associated with me in the group to which I belong are prepared to support the bill, because whilst we believe that, it will not solve all Australia’s most pressing problems it is the beginning of an attempt to deal with them.
The Prime Minister’s definite statement that budgets cannot be balanced this year was very pleasing to me because during the last twelve months, and particularly during the last six months, many members of the Labour party have been convinced that to balance budgets by adherence to the programme which the Government was following was humanly impossible. During the State election campaign in New South Wales I declared that the Government could not hope to meet all its commitments by the policy it was pursuing, and that some other means would have to be adopted, not only to square the ledger, but particularly to meet the crying needs of the unemployed. All sides will agree that in order to balance budgets, it is necessary first to provide employment, and stimulate business activity, because by this means only can revenue be increased. The Prime Minister has at length admitted that budgets cannot be balanced this year, and it is refreshing to hear from him at last a definite confirmation of what others have been saying for some time. That they were right can be proved by reference to the Estimates for the current financial year. According to the last budget speech, a revenue of £66,000,000 would be required to meet the expenditure of the Government. At the end of the first six months only £22,000,000 had been collected, and if the decline were maintained throughout the year, a deficit of about £21,000,000 would be inevitable. It is, therefore, perfectly clear from the foregoing that the rising tide of unemployment, and business stagnation, has made it impossible for the Government to balance its budget. The Prime Minister said that although the Niemeyer agreement had not been accepted in its entirety by the various governments represented at the August conference in Melbourne, he favoured a policy of at least adhering to its principles.
– He said that it was the rigid determination of the Government to adhere to the principles of the agreement.
– In no circumstances will I support the adoption of the Niemeyer agreement. I made that statement on several occasions during the election campaign in New South Wales, and I know that the same opinion is held by prominent members of the Government. The Niemeyer policy cannot be carried out in its entirety, if the Prime Minister is loyal to his statement that in no circumstances would he interfere with old-age, invalid, and war pensions. One clause of the agreement deals with interest payments, and the amounts to be provided for that purpose each month. It means, in effect, that the interest liability must take precedence of all others; even pensions and other social services must be set aside in order that interest may be a first claim upon the revenue. If the Prime Minister accepts principles which involve that procedure, he will have difficulty in reconciling such a policy with his declaration that in no circumstances will pensions be interfered with.
– He said that he will insist on the interest being paid.
– That means that social services must be detrimentally affected in some way, and that his promise in regard to pensions will be jeopardized.
– He said a few days ago that not one pound of interest will be repudiated.
– Time will determine to what extent that course can be followed, but I and those associated with me stand unreservedly for the maintenance at all costs of pensions and those social services which have been fought for and won by Labour during the last 25 years.
Following the signing of the Niemeyer agreement a long statement was issued by Sir Otto Niemeyer himself, containing many assertions that have been made repeatedly by the opponents of Labour during the past two years. It referred at length to the cost of production in this country, and followed a line of argument that has been used extensively by our opponents, and recently by some members of the present Government. An examination of the number of instances in which the matter was dealt with reveals that, on each occasion, the costs of production were considered only from the point of view of the wages of the workers in the industry. I instance the recent pastoral award. A cut was made in the shearers’ wages but no attempt was made to lower the costs of production in any other department of the industry. That proves conclusively that the thoughts of these people centre only upon one aspect of the matter, the wages of the workers.
I feel that all those who range themselves on the side of Labour must in the strongest terms condemn the statement that was made by Sir Otto Niemeyer following the Melbourne conference. I was a member of the Government at the time, and took the opportunity to express my opinion on the subject in the right quarter. The honorable members who represented the Government declared that they did not acquiesce in Sir Otto Niemeyer’s statement. They intimated that he had made it entirely “ off his own bat,” and that it had no reference whatever to them. I contend that, even if that were so, the fact remained that that memorandum was issued immediately following the decisions of the conference, arid was, in a sense, supplementary to and in support of the conference proceedings; therefore, no public denial having been made by those who attended the conference, it has been taken that al] agreed to and supported the statement. I pointed out that, if the Government representatives did not support it, they ought to have done the right thing, from the Labour point of view, and declared themselves against the memorandum, so that the Labour movement would at least know that they did not stand for the statement made by Sir Otto Niemeyer. It is on that point that I feel much criticism must be levelled against the action of those representing the Government at the time.
A good deal has been said about the proposal of the Prime Minister to deal with the wages of public servants, and much capital has been made of it. It appears to me that when a campaign of economy is to be indulged in the first step taken by the present Opposition, and one in which the Government is, apparently, prepared to give a lead, is to attack the public servants. An investigation discloses that the great bulk of those employed in the Public Service are associated with the postal and similar departments, that their wages have been fixed by the Arbitration Court, and that they do not average more than about £5 a week. I do not subscribe to the attack on those men. There may be some public servants who draw large salaries and who occupy positions that perhaps need not have been created. The responsibility for the continuance of those appointments rests with the Government. Many of those positions were established by the party which is now in Opposition, and it must accept its share of the responsibility. I am not holding any brief for those highly paid men, but desire it to be clearly understood that I shall use every means at my disposal to defend to the last ditch the position of the wage-earners in the category that I first mentioned. Frankly, even though some members of public service unions may see fit to enter into conference with the Public Service Board or anybody else I hold the view that no section has any right to sacrifice any of the principles that have been fought for and gained by the Labour movement, and I shall oppose any move to force unionists to sacrifice any such principles. I am satisfied, from the Prime Minister’s speech and other references that have been made to the Public Service, that the Government is endeavouring in a measure to meet the demands of the Commonwealth Bank Board by making what that body deems to be adequate economies in the administration of the Public Service. The Government is apparently attempting to placate the Bank Board, at the expense of the lower paid officers in the Public Service, in order to induce it to agree to the Government’s policy, and make available the necessary credit to meet its immediate needs. I shall not be a party to any coercive methods which will sacrifice these people. I hold the view that the real struggle now going on in Australia is to decide whether Parliament or the Bank Board, backed by private institutions, is to rule. The Government should definitely declare itself against those institutions, and should desist from pandering to them. The time has long passed when governments should negotiate on such a basis, and it is as well to know where the Government and the Labour movement stand in these matters.
When the Prime Minister was asked what was the opinion of the Bank Board to the proposals submitted by it, he stated that it would accept the decisions of Parliament. The Bank Board was quite safe in taking up that attitude. Apparently, it had a very fair idea of what the decision of Parliament will finally be.
– In any event, it is bound by the legislation of this Parliament.
– Apparently, the Bank Board has taken its cue from the Leader of the Opposition. I read in a Sydney newspaper published soon after the declaration of the Treasurer (Mr.
Theodore), a statement declaring that under no circumstances would the Senate allow this measure to pass. So that in giving its undertaking the Bank Board bad some assurance that the measure would be rejected in another place. I am inclined to take the view that the proposal that has been put forward by the Government docs not very seriously affect the interest of the financial institutions. They may be putting up an opposition to the measure, per medium of their representatives in this chamber, and may take certain steps in another place, but, when followed to its logical conclusion, it will be found that the procedure is not unusual. It is proposed by the Government to raise loans, at some suitable time, to meet the fiduciary note issue proposed in this bill. That brings the whole position back to that which existed prior to the introduction of the measure. The argument of the Government is that the time is not suitable to place a loan on the market, because of circumstances that have arisen. The circumstances alleged are that a certain attitude has been adopted by the Government of New South Wales - which, in the opinion of that Government, is the only way to meet the desperate needs of the country fairly and frankly - that precludes this Government from regarding the present time as suitable for the raising of the loan. The objective of the Labour movement is certainly not advanced by the action of this Government, which is a definite step against the nationalization of banking in Australia.
The utterances of the honorable member for Wide Bay (Mr. Corser) give me an opportunity to deal with a most important matter. I hold the view that while this measure is designed to provide money for the wheat-farmers, and in a small measure to relieve unemployment in the States, it must not be accepted by honorable members that it will solve the problems now confronting us. The measure may assist to relieve the tension in certain directions, but it will not overcome our main difficulties, or relieve us of the crushing burdens under which the country is labouring. No one will deny that our greatest burden is the enormous interest payments that have to be made, not only here, but abroad. It is well to face the position, and declare frankly that action must be taken to reduce that burden immediately, to bring it more reasonably in keeping with the country’s capacity to pay. When dealing with the matter of what was asked by those who supported the Labour candidate for East Sydney (Mr. Ward), reference was made to our external debt. The supporters of the honorable member for East Sydney demanded that the treatment that was extended by the United States of America to Great Britain should be extended by the. latter country to Australia. There has been, a good deal of talk upon what might be considered actual war debts, and upon what could reasonably be brought under that category for refunding purposes. It is true that a large amount was raised in Australia to enable us to participate in the war. It is also true that a considerable amount of revenue, which would ordinarily have gone towards building up our social services, had to be used for carrying on the war. Over £370,000,000 from revenue alone was used for that purpose, while a total war expenditure of over £744,000,000 was incurred by Australia. I could not quite follow the reasoning of the honorable member for Wide Bay in this matter. The honorable member dealt extensively with an article appearing in “ Honour or Dollars “, but he did not get down to the real essence of the case, or indicate exactly what is meant by the arrangements entered into by Great Britain and the’ United States of America. I remind honorable members that towards the end of 1917, Great Britain borrowed about £900,000,000 from the United States of America at 5 per cent. The interest accruing on that loan, up to the 31st September, 1922, was £129,438,707. Of that, Great Britain paid only £20,676,535 during 1922, and a further £84S,136 in 1923, or a total of £21,524,671. The remaining £107,914,036, was not met until the funding arrangements were entered into between the two nations. If any honorable member had stated in this chamber, or on the public platform that Great Britain had defaulted in those payments, Ids utterances would have been regarded as disloyal, calculated to belittle the integrity of Great Britain. The fact remains that Great Britain was unable to meet those interest payments when they fell due. I am not complaining about that. After all, the United States of America gained many concessions out of the war, gathered to itself the major portion of the world’s gold, and created a set of circumstances that suited its purposes from a financial aspect. Had Great Britain paid nothing at all, I would not complain. I am not complaining of the arrangement made between the United States of America and Great Britain, but it is a fact, nevertheless, that prior to the completion of the negotiations to fund its war debt, the British Government was unable to meet its obligations. In that sense it, for the time being, was guilty of repudiation. It is significant that, whenever we demand, on .behalf of Australia, that Great Britain shall give to this country terms similar to those which she secured from the United States of America, we are called repudiators, not only by honorable members opposite, but also by a number of Government supporters. I make no apology for the stand which I take in this matter. I believe that the views I hold are just and equitable.
The debt contracted by Britain with the United States of America carried interest at 5 per cent., and the funding arrangement made in 1923 provided for an interest charge of 3 per cent, for the first ten years, and 3-£ per cent, for 52 years. When the negotiations were entered upon the House of Representatives of the United States appointed a committee to deal with the matter, and the Prime Minister of Great Britain, accompanied by the Governor of the Bank of England, visited the United States of America to place the position of the British Government before that body, and the agreement already referred to was adopted. Is it too much to ask that Britain shall now accord to Australia treatment as favorable as she received from the United States of America ?
Between 1914 and 1918 the people of this country raised enormous sums of money in order that Australia should play her part in the war. The strain upon our economic resources on account of this effort is now so great that we have, in every
State of the Commonwealth, the sorry spectacle of a huge army of unemployed. I make no apology for demanding that our commitments in regard to the war be reviewed along the lines indicated, because if we had not incurred that expenditure we should have been able to maintain our economic resources unimpaired, and provide adequately for our own people. I submit that we have a good case to place before the British Government for the funding of our overseas debt on terms similar to those obtained by Great Britain from the United States of America. Prance also secured most liberal terms from Great Britain with regard to her war obligations. At the close of that great struggle with the central European powers the leaders of successive French governments did not hesitate to demand the most favorable terms for the discharge of their war obligations. Acting, as they had every right to do, in the interest of their people, they insisted that the burden of the war debt be reduced. As we know, they were successful.
It is extraordinary, therefore, that whenever we demand that our interest burden be reduced, we are told that it is highly improper, and that the people of this country must continue to bear indefinitely the tremendous load that has been placed upon them. We are informed that any action in this direction will destroy the confidence of overseas investors in Australia’s securities, and that, if we are to retain this confidence, we must stand up to all obligations, whatever the cost may be in suffering to our people. I have heard a lot of talk from members of the former Government on this matter of confidence. Any representative of that Government should be the last person in the world to talk about the restoration of confidence. The record of the Bruce-Page Administration is its own condemnation. In January, 1929, it approached the money market for £8,000,000, and had the mortifying experience of seeing 84 per cent, of the loan left with the underwriters. In May of the same year it sought to raise another £12,400,000, of which amount 50 per cent, was left in the hands of the underwriters. That measured in unmistakable terms the confidence of overseas investors in the previous Administration, so the argument that any talk of a readjustment of our war obligations would mean a lack of confidence in the Commonwealth is altogether too thin to stand examination.
France, in 1917, borrowed from Great Britain £650,000,000, and paid no interest upon it until the arrangements were made to fund the debt in 1929. When the war was over, and when the various allied nations were considering what arrangements should be made for the payment of debts, the representatives of France demanded their full share of reparation payments, and, in addition, secured for France the territory of Alsace-Lorraine, which, as we know, is rich in minerals and provides enormous revenues for the republic. In the funding arrangements agreed to in 1929, France undertook to pay her debt to Great Britain over a period of 62 years at the rate of £14,000,000 a year. In that period she will pay Great Britain the sum of £868,000,000, including h per cent, for bank charges. How different will the position of Australia be at the end of 62 years. Under the existing arrangements the Commonwealth will pay, on a total debt of £550,000,000, interest amounting to £26,000,000 a. year, so that at the end of 62 years Australia will have paid in interest alone £1,612,000,000, and will still owe the principal sum. Why should not the concession, granted by the United States of America to Great Britain, be passed on by the Mother Country to the Commonwealth? To those who declare that it is not possible to do anything to alter the existing arrangements, I would say that it only requires a definite declaration by the Commonwealth and State Governments to persuade the British Government that a more satisfactory funding arrangement must be made with Australia. It is humanly impossible for the people of this country to continue very long under the existing conditions.
Italy also secured remarkably favorable terms from Great Britain. If we could obtain similar treatment for Australia, the discharge of our war obligations would be a comparatively simple matter. Italy borrowed from Great Britain £600,000,000, and, like France, made no effort to pay interest or prin- cipal until 1923, when, under the funding arrangements agreed to, Italy undertook to pay £4,000,000 annually over a period of 62 years. Capitalized at 5 per cent, Italy in 62 years will pay Great Britain £86,000,000 for a debt of £600,000,000.
It is, of course, fairly well known that, in all these funding arrangements other aspects carry a good deal of weight. Prior to the outbreak of the war we heard a good deal about the evils of secret diplomacy and bartering treaties between the various nations. It was generally believed that one result of the war would he to do away with all secret negotiations and secret treaties which, for the most part, were made at the expense of the smaller nations. But I am convinced that the evils of secret diplomacy are as rampant to-day as they were prior to the war. It is’ no secret that concessions are given by one nation in exchange for more favorable treatment by another nation. It is understood that in return for the favorable terms allowed by Great Britain for the payment of her war debt, Italy granted certain concessions to Great Britain in the Mediterranean. In this way the rights of the smaller nations so often are bartered away for advantages secured by one or other of the great powers. I believe that because Australia is not in a. position to offer worth-while concessions to Great Britain, the people of this country are to be called upon to bear this crushing interest burden for an indefinite period. Unless a tangible attempt is made to ease the strain, both in Australia and abroad, all the proposals submitted by this Government during the last fortnight will serve no useful purpose.
The Leader of the Opposition (Mr. Latham), referring to the position of the Bank Board, urged that there should not be any form of political control over the policy of the bank. The honorable gentleman and those who support him talk at large about the rights of democracy, but question its proper application when a Labour Government is in power. When any attempt is made to counteract the effect of a» financial policy which so vitally concerns the interests of the people, and stems the flow of credit which is tlie life-blood of industry, honorable members opposite urge that in no circumstances must the representatives of the people have an opportunity to deal with it. I make no apology for my views on. this subject. I unreservedly stand for the right of the people to control the credit system of this country. This Parliament should have complete control over institutions whose policy so vitally affects the lives of our people. I say frankly that I would use all the means at my disposal to have these institutions placed under the control of this Parliament. Honorable members opposite, when speaking in this House, talk a good deal about political control, but when we check up their actions when in power, we have no trouble in ascertaining where they stand in respect of political control, [t is quite easy for them, when they occupy the Opposition benches, to state hat political control is not desirable, but we cannot overlook the fact that the Bruce-Page Government established political control in most of the departments that count.
I have often expressed the opinion that although the Labour party may have a majority in the Commonwealth Parliament and in most of the State Parliaments, it is difficult for it to give effect to its policy when the administration of the financial institutions of this country is in the hands of its political enemies. I have, at all times, contended that democracy in its most advanced stage has a right to a voice on the various boards and tribunals that have been appointed so that the administration of those bodies shall, to some extent, be in step with the wishes and demands of the people according to the Government they elect. I have had the opportunity of meeting the members of the Commonwealth Bank Board in conference, and, on one occasion, one member of the board deliberately declared that he was opposed to Labour’s policy and would use every effort to prevent Labour from giving effect to its financial proposals. Yet, honorable members opposite say that there must be no political control of the Commonwealth Bank. I favour the appointment to boards and tribunals of nien whose aim is to develop Australia along lines in accordance with the wishes of the Parliament of to-day. The control of these institutions should not be in the hands of persons who are responsible to no one. The Bank Board is subject to no directions or instructions; it has full power to do anything it likes. I do not pose as a financial genius, but I know some of the members of the Bank Board, their history and their associations, and I am convinced that quite a number of members in this House will never take second place to them.
The Deputy Leader of the Opposition (Mr. Gullett), in his speech this afternoon, tried to uphold the present monetary system. He made use of many arguments in an endeavour to show that the present system was quite satisfactory and that there was no need for the introduction of this legislation. He said that the proposal cf the Government should not be seriously considered. It is interesting to know that, the honorable member, speaking at a pleasant Sunday afternoon meeting at Wesley Church, just before Christmas, expressed quite a different view. He took part in the Parkes by-election and he repeated the cry of the private banking institutions and of those associated with the Nationalist party, that under no circumstances must any reflection be made upon the monetary system. It is, therefore, just as well to quote what the honorable member said on another occasion, so that we may know of the change that took place in his views. Speaking at Wesley Church the honorable member for Henty said -
Unemployment was due not to machinery, but to the partial failure of the credit system - a system, that on its present huge scale, was a relatively new thing. It had never been completely understood, and, consequently, had got out of control. The result was a collapse in price levels.
It is evident that the honorable member changes his views to meet the particular circumstances that may happen to arise. I can only conclude that the honorable member, speaking that Sunday afternoon, expressed what was really in his mind. In a measure he conformed with the Christian atmosphere that naturally would be present at such a gathering. Apparently the political atmosphere is a different matter altogether, and in this House he sticks solidly to the directions of the banking institutions.
The Leader of the Opposition (Mr. Latham) referred to the decision of caucus that the loan of £28,000,000 which fell due last December, should stand over for another twelve months at the prevailing rate of interest, and that the Commonwealth Bank should make provision to meet the requirements of necessitous bondholders. I have no hesitation in saying that I supported that decision. After all much has been said in this House about the necessity for sacrifices to be made by all sections of the community. Attacks have been made upon wages, and one would naturally think that bondholders should at least be prepared to bear some small measure of sacrifice, by offering no opposition to the decision of caucus. That proposal was supported by Sir John Monash, who declared that the loan should be held over, not for twelve months, but for two years. He argued that in view of the depression, such an action would not be unjust; yet our political opponents and others raise the cry of repudiation throughout the country. There was no talk about repudiation of the rights and privileges of the unemployed, and the conditions under which the wages of the workers have been determined. There was no talk about repudiation on the part of the last Nationalist Government of New South “Wales which arbitrarily cut wages and destroyed pensions. But immediately any public man suggests that bondholders should make sacrifices in common with other sections of the community, the Opposition accuse him of repudiation.
The decision of caucus in respect of the £28,000,000 loan certainly provided a means for intensive advertising on the part of the press and thus profits for the press itself. Naturally, those who supported the theory that certain members of the Labour party were repudiationists, could secure plenty of space to air their views, and in leading articles they boosted the then Acting Treasurer (Mr. Lyons) to a degree to which no other public man has been boosted in this country. They realized that it was to their material advantage to follow his line of action. A complete answer to the allegations of honorable members opposite was furnished in the statement of the Treasurer that the added cost to the taxpayers because of the redemption of the loan was over £200,000. There has been no talk of the consequent increase in the interest bill, and the need to impose extra taxation to meet it. It must not be forgotten that whereas a large parcel of those bonds were originally issued at 4 per cent., bondholders were given an opportunity to convert them at 6 per cent. It is only just that those bondholders should share the sacrifices that are being made by other sections of the community.
Certain members on this side of the House have been accused by both Government and Opposition supporters of being dishonest, and dishonorable, because we advocate a re-arrangement of Australia’s financial obligations. The basis of our honesty and aspiration is not to be measured in pound notes. It is measured in flesh and blood as far as the people are concerned. “When it comes to a question of providing food, clothing, and shelter for our people, as against meeting our enormous interest obligations, I have no hesitation. in declaring that I stand for the people. There is no other stand for any genuine Labour representative to take, more particularly in this present crisis. For many years we have endeavoured to secure an opportunity to get to grips with the real forces which have been fattening on the life blood of the community. At various elections we have advocated certain reforms, with the object of solving some of the outstanding problems confronting this country. There is a lot of talk in this chamber, but actually nothing happens. That goes to show that this national parliament is impotent to deal with the great problems which confront us. The Minister for Defence (Mr. Chifley) made reference to the fact that the problems of Australia are the problems of the world to-day. This is certainly an indication that the system of society, as we know it, has failed to render to the people what is really required of it. The inventive genius of mankind was never before at the height that it has reached to-day. We have in this country food in plenty, and the means to supply the requirements of the people. Science and invention have made it possible for us to manufacture in abundance the machinery and other articles that we require, yet despite those achievements, we have in the community thousands of people who are actually on the verge of starvation. Our social system has failed miserably.
I support this measure because, if given effect, it will open the way to a general attack upon our financial institutions, which after all must bear the responsibility for much of the present financial depression throughout Australia.
.- I shall not concern myself very much with the angry outburst of the honorable member for West Sydney (Mr. Beasley). He has seen fit to denounce both the Government and the Opposition, because he stands for the Lang policy. That policy, however, has been disowned by the Prime Minister (Mr. Scullin) and the Treasurer. (Mr. Theodore). The honorable member ridiculed the suggestion that it was necessary to restore confidence in Australia before industry could be stimulated or work provided for our people ; but the Government has acknowledged that this is necessary by introducing this bill which is entitled the Fiduciary Note Issue Bill. A fiduciary note is backed, not by gold, but by confidence and faith; all other Australian notes have a gold backing. But I ask how a government, which has exhausted the patience and lost the confidence of the general community, can expect to have notes of this kind accepted with confidence and faith that they will be redeemed at their face value? The Government has shown that it is not willing to take the steps which are necessary to rehabilitate industry, and therefore the people have no confidence in it.
A comparison has been made between the notes which the Government proposes to issue and the fiduciary notes issued in Great Britain; but no proper analogy can be drawn between the two cases. The introduction of this bill has been rendered necessary, because the Commonwealth Bank has refused to provide the currency which the Government considers to be necessary at present. In England, the Bank of England can provide fiduciary notes by requisitioning the treasury for authority to issue when the need arises, and all such notes are backed by the resources of the British treasury. The reverse will be the position in Australia if this note issue is agreed to, for here the fiduciary note will be issued in spite of the bank’s opposition.
– What backing have the British fiduciary notes?
– They are backed by British Government securities - bonds and the like. The Australian fiduciary notes, if issued under this scheme, will not be worth their face value, because confidence in the Government is altogether lacking. The fact that such confidence is lacking is shown in the stock exchange quotations for Australian securities. It is very unfortunate that the value of our government stock is unstable.
It is proposed to provide fiduciary notes to the value of £6,000,000 to assist the wheat-growers, and to the value of £12,000,000 to assist in the rehabilitation of industry, and to provide work on government undertakings. It is also claimed that this issue will have the effect of stabilizing prices at the 1929 level, or at any rate that it will help in that direction. Everyone in the community except mere speculators desires that prices shall be stable. But this cannot be done by providing an unstable currency. No attempt has been made to disguise the fact that the currency will be inflated if these notes are issued ; but it has been argued that inflation to this extent is justifiable. The Treasurer favours this measure of inflation, although the Prime Minister has declared that he is opposed to inflation of any kind. To this extent, therefore, the right honorable gentleman and his colleague appear to be at variance.
I maintain that the currency of the country should be stabilized, otherwise stability in the value of commodities is impossible. Values must fluctuate unless the token representing £1 remains stable. At present, no one knows the purchasing power of £1 notes. It varies almost every day; but if we have further deliberate inflation values of commodities will rise to the extent that the currency is debased. I am not concerned at the moment about whether a gold backing for our notes is really necessary or not, but I am very seriously concerned about the fear that is abroad in Australia that our currency will lose its value. That this is a real fear is shown by the fact that people are paying at the rate of £30 per £100 to get their money out of thecountry. We are losing millions of pounds of capital per month. If this bill becomes law it will not compensate us for the loss of capital which we have already suffered. It is far more likely that the passage of the measure will drive twice £18,000,000 from Australia. Capital is leaving here mainly because people lack confidence in the ability or will of the Government to meet its liabilities. If this bill is passed, fiduciary notes will be in circulation side by side with notes with a gold basking, and this will be most undesirable. What we require at present is real money. When those who control real money in the community believe that a government is in office which is worthy of the confidence of the community they will make their real money available. We also require additional real money from overseas.
The Treasurer declared this afternoon, in introducing another bill, that it was unpatriotic for people to send their money out of Australia.
– It is treachery.
– I disagree with both the Treasurer and the honorable member for Corio. The people who have hitherto made their money available for investment in Australia have been given reason to fear that the Government, by its failure to pass legislation in keeping with the times, and by its failure to balance its budget, and live within its income, may default. These people have commitments of their own and there is nothing unpatriotic in them withdrawing such of their money as they can secure, and re-investing it where conditions are more favorable. I am not arguing at the moment whether there is or is not good ground for their fear; all that concerns me is that this fear has taken possession of the people.
We have to face the position to-day that we cannot borrow money overseas or in Australia. If this bill is passed I am afraid that the Government will find it impossible to convert the loans which will shortly be falling due in Australia, or to raise new money for public works, because the last vestige of our credit will be gone. We are faced with not only this proposal to print paper money, but with another proposal, in a complementary measure, to permit the export of the last sovereign from Australia. Cannot we imagine how our banknotes will be regarded if they have no gold backing whatever? What we require is the restoration of credit by the adoption of sound methods of finance. This would make money available for investment and industry at reasonable rates of interest. The money is here for investment immediately the conditions become favorable. However honorable members opposite may abuse those who. control capital in this country, they must admit that industry cannot be carried on without capital. What is capital? ls it not the assets which are saved out of industry? I contend that the scheme of this bill involves the taking away of the money of the thrifty and the giving of it to those who have failed to exercise care in their financial affairs. [Quorum formed.]
In my opinion, the adoption of this scheme will not assist the wheat-growers as the Government suggests. The whole basis of the proposal is the deliberate intention to re-establish wholesale prices at the 1929 level. We are dependent for our national income mainly upon primary production. If we operate a policy which will keep up the cost of production, we shall make impossible the profitable sale of our primary production on the world’s markets and this will place us at a further disadvantage with other countries. For this reason those who depend upon the export of primary production for their livelihood will be called upon to suffer instead of being helped by this measure. I do not for a moment believe that the primary producers will accept this sop which is offered to them.
I do not intend to repeat the arguments which have been already used in the debate against this bill. The honorable member for Maribyrnong (Mr. Fenton) made a most effective reply to the case submitted by the Treasurer and the Prime Minister in support of this bill. His criticism of the Government’s policy was most destructive. But I wish to deal with the statement that honorable members on this side of the chamber desire to advantage the bondholders at the expense of the workers, and the old-age, invalid and war pensioners of Australia. They know perfectly well that there is no truth in the statement, because at no time have honorable members on this side of the chamber said that they are in favour of a reduction of invalid or old-age or war pensions. But the effect of the Government’s proposal will certainly be to reduce the value of wages and pensions. The Government, although fully alive to the desperate position in which it finds Australia to-day, is so tied up to outside organizations that it is obliged to keep up the pretence of maintaining wages at the same old, high level, and by a subterfuge depreciate the value of wages and pensions. Was there ever anything more dishonorable than (his attempt to deceive the workers and the pensioners? The Prime Minister declares that, as long as he holds office, there must be no reduction in the basic wage or in the standard of living. No more foolish utterance has ever been made by a responsible public man. The Prime Minister knows perfectly well that he has not the power to-maintain wages at the high level of the past, and that he cannot maintain the high standard of living enjoyed in this country in years gone by. What use is it to talk about standards of living when hundreds of thousands of people are out of employment, and, therefore, have no standard; when the Prime Minister knows, or ought to know, that, apart from the select few whose rate of wages are still being maintained by arbitration awards, wages generally are down and the people have been obliged to accept a lower standard? Seeing that possibly every individual in the community is on a lower standard of living to-day, the Prime Minister’s declaration is a most foolish one.
– The Treasurer says that there must be sacrifices all round.
– Yes, but the scheme is to pretend to one’s political supporters that they are not to be expected to bear any of the sacrifices.
A great deal has been said in denunciation of Great Britain for expecting payment of interest and sinking fund on our war debt to that country in accordance with a funding agreement. That war debt is £82,000,000, and not £560,000,000, as asserted by the honorable member for West Sydney (Mr. Beasley). In fact, it is the only debt we owe to the British Government, and the only war debt we owe abroad. It is the only1 debt upon which Britain can, if she chooses, reduce the interest payable by Australia. All our ether overseas indebtedness is to bondholders, and who and what they are we do not know. In any event, our war debt to the British Government was funded as u result of an agreement on what we thought at the time were generous terms. Many of us were in this Parliament when the late Senator E. D. Millen went to England and made that agreement. It was applauded by the press of Australia and the Prime Minister of that time, and we all considered the terms most generous. It is now SUEgested that Australia should approach the British Government, and, because of the difficult circumstances in which we find ourselves to-day, ask it to bear the loss, and not Australia. We boast about our high standards compared with those enjoyed by people who suffered far more than Australians did during the war, and who have always existed on a much lower standard than is enjoyed in Australia, yet we are begging those people to bear some of our burden so that we may still maintain our high standard of living, which, the Prime Minister said, must not be lowered.
A comparison has been made between the treatment of Australia by Great Britain and Great Britain’s attitude towards its indebtedness to America. Great Britain had to make the best bargain it could with America. It would not repudiate its liabilities, and it could not force the European countries to pay. But because they would not meet their obligations, are we not to meet ours? In any case, why was our debt to the British Government incurred? It was incurred because during the war Great Britain provided the money for the high rates of pay we gave to the Australian soldier, higher than were paid to any other soldiers that fought alongside Australians. It has been the proud boast of Australia that it played its part during the war and made some sacrifices, and that those who fought in the Australian forces were paid at a higher rate, were better fed, and were better equipped than were the soldiers of any other country engaged in the conflict. 1 was pleased that that was so, because men who are doing the fighting should be well fed.
When they are fed well they can be called upon to undertake any task, and will carry it out cheerfully. But because the Australian soldiers were better paid, better fed, and better equipped than the soldiers of other nations, this debt was incurred to Great Britain, and now we are going to ask people who fought side by side with us at lower rates of pay and on lower rations to foot the bill for us. No more shameful suggestion has ever been made. It is a disgrace to this Parliament that any honorable member should suggest it. It is not the way to maintain our credit or to create confidence or to induce the people in the Old Country to hold out a helping hand to Australia in its time of distress. We must stand by our obligations, and by every agreement into which we have entered. I think it was Lord Morley who said that those who treat politics and morality apart will never understand the one or the other. There are men in this Parliament, even Ministers, who do not understand the one or the other.
Apart from the question of what is honorable we must, on the score of high expediency, honour our obligations. We must pay our debts or financial ruin and destitution will result.
– It is here now.
– Many hundreds of thousands of people in Australia are honestly seeking work, but the majority of our people are living in comparative comfort. Nearly all are well fed. What is this standard about which we talk? We have our motor cars to run hither and thither. We attend picture-shows, and have two holidays a week. We work 44 hours a week, and have all sorts of comforts. That is the standard we are to maintain.
The Prime Minister has told us from time to time that Australia will honour its every obligation, and that he does not stand for repudiation. A year ago no one would have thought it possible that a Prime Minister would have to stand up in this Parliament and make such a declaration. Of course, we shall not repudiate; but, seeing that it has been thought necessary to resort to a debased currency to keep up the pretence of financing the country, and that we are also being threatened with the export of the last ounce of gold, it looks as if we are getting very close to defaulting. What will be the position next year? I have already said that this fiduciary issue will drive out more capital. Bad money always does drive out good. What will be the position of the workers with capital leaving the country at the rate it is, because there .is no confidence in the Government? Industry cannot revive. There will be more unemployment. The wheat-growers, the potato-growers, and the fruit-growers will all be in the same position as now, because the Government will keep up costs. We can only maintain a high standard by working a little harder or being a little cleverer than our fellowworkers in other countries. The standard we enjoy and boast about is not Heavensent. The one thing necessary, as has been said over and over again, is restoration of confidence. We have had a great many words from the Prime Minister and members of his Government to the effect that Australia will meet every commitment, but what we want is something more than words, something tangible that will prove to the people in our own country and overseas that we are determined to pay our way. Once we do that there is not the least doubt money will be available for industry, not a debased currency, but real money. There is plenty of it in this country. It is not the function of the banks to provide capital. If those who have money have not sufficient confidence that if they invest their money they will get a reasonable return for it, the banks cannot find capital. The scheme before us to-day appears to me to be one of making the people believe that the banks are responsible for all our troubles. I hold no brief for the banks. They are established for a purpose which I think they discharge well. The reason that the banks cannot make credit available to private individuals is that they have to finance governments to so great an extent. Nor do I hold a brief for the bondholders - I know no individual who has bonds - but I repeat that the agreement entered into with the bondholders must be kept.
When we raised the last conversion loan of £28,000,000, we told the public by news- paper advertisements and placards that it was a fine investment. The slogan chosen by the Acting Treasurer was “ Commonwealth bonds are as good as gold.” Now the Government proposes that, before one penny of interest is paid, it should be taxed to the extent of 3s. 6d. in the £1. That would reduce the return to less than 5 per cent ! Will anybody now believe in the promise to pay the face value of the notes to he issued under this bill? When the Government of the day, after telling the public that interest at the rate of 6 per cent., free of State taxation, will be paid, proposes to tax that interest to the extent of 3s. 6d. in the £1, it is sheer repudiation. Apart from what is honorable and moral, we cannot afford to do that. How are we to meet the liabilities falling due this year and next year? My opinion is that the deliberate policy of this Government is to default abroad, and to meet its internal commitments with a debased currency. It must default unless confidence is restored within the next few months; but owing to its actions the last vestige of confidence has gone, because the Government proposes to ship away the last of our gold in order to pay a small part of its debts.
I take this opportunity of entering my protest against the bill. I am convinced that a new government is needed if we are to save this country from financial ruin. I have lost all confidence in the Government, and I regret to say that I have lost every vestige of faith in the Prime Minister, because he has said so many things, and taken them back the next day or the next week. We do not know what he stands for. He still insists that we will not default; but he knows perfectly well that the policy that he has pursued in the last twelve months must inevitably bring about that result. If there were any evidence that the Government was prepared to let every individual in Australia make sacrifices rather than that we should default, there would be a revival of confidence immediately, and Australia would he able to obtain all the money it needed - real money and not a debased currency.
– Will the honorable member go on the basic wage?
– Yes, I have been on it. The honorable member for Corio does not know, because he is not well informed, nor do the Prime Minister aud the Treasurer know, that the men who have done the hard work of this country have never enjoyed the basic wage. The Prime Minister has told us that the old pioneering spirit has not departed. What does he care about the men working in the Mallee, in the forests of Gippsland, or in practically every electorate in Tasmania ? Those men do not work merely eight hours a day; they have never had the basic wage. When they cleared the bush and brought it into productiveness, they never earned more than 10s. a day. They are now receiving 9s. a day, and are being taxed at the rate of 3d. in the £1 to provide work for the unemployed.
– That tax has not been used for the unemployed in Tasmania.
– The Minister knows that what t am saying is true. If those men had not worked hard for 9s. a day, the basic wage, and the higher rates paid to city dwellers under arbitration awards could never have been received. Those employed in the mines in Tasmania and elsewhere are willing to accept a reduction of their wages, and they have done so rather than receive a dole. It is useless for the Government to declare that the basic wage must be preserved; it is impossible to enforce it. The men who carry their food into the bush, and gather up a few pounds of tin to enable them to buy more food, are not in receipt of the basic wage. The declaration that there shall be no lowering of the basic wage shows that the present Government misunderstands the position of country workers. It is merely interested in the city-bred individuals; but I claim that the city dwellers are not entitled to a high standard of living at the expense of the workers who are producing the real wealth of Australia, which alone can maintain our solvency.
I suppose that there is no doubt as to the result of the vote on this measure; hut if the Government is sincere in its protestations, before it repudiates our debts or meets them with a debased currency, which amounts to repudiation, let the people decide the issue. The Government knows perfectly well that it dare not do that. Without action by members in. another place, it could go to the country in a month if it wished to do so; but Ministers are holding on to office. Though they declare that they do not stand for repudiation, by the measures they are bringing forward they are making default inevitable. The Leader of the Lang party in this House has said, “You can call me a repudiationist if you like. We are not ashamed “. Yet this Government is kept in office solely by the votes of those who support the Lang policy which is repudiation at home and abroad.
Motion (by Mr.Scullin) agreed to -
That the question be now put.
Question - That the bill be now read a second time - put. The House divided. (Mr. Speaker - How.Norman Makin.)
Majority . . 5
Question so resolved in the affirmative.
Bill read a second time and committed pro forma.
House adjourned at 11.47 p.m.
Cite as: Australia, House of Representatives, Debates, 25 March 1931, viewed 22 October 2017, <http://historichansard.net/hofreps/1931/19310325_reps_12_128/>.