17th Parliament · 3rd Session
Mr. Speaker (Hon. J. S. Rosevear), took the chair at 10.30 a.m., and read prayers.
Motion (by Mr. Chifley) agreed to-
That the House, at its rising, adjourn t» to-morrow, at 10.30 a.m.
– Is the Minister for Munitions aware that Western Australia Wire Netting; Limited, a Perth firm, has a galvanizing plant lying idle because of lack of coal and man-power? In view of the urgent necessity to have galvanized wire and wire netting for Australia’s food production programme, will the Minister consult the Minister for Supply and Shipping (Mr. Ashley) and the Minister for Labour and National Service (Mr. Holloway), with a view to action being taken to break these bottlenecks?
– I know that there is an industry for the manufacture of wire netting in Western Australia. I should be very glad to have it utilized to its fullest capacity if supplies of wire, which is essential to the manufacture of wire netting, were available, but adequate supplies of man-power and coal are needed to produce the wire.
– There are supplies of wire.
– Then, coal and manpower are needed to enable the wire netting to be galvanized. I. shall consult the Minister for Supply and Shipping, and the Minister for Post-war Reconstruction, with a view to determining what assistance may be given.
– Three weeks ago, I asked the Minister repre- senting the Acting Minister for the Army a question based on the fact that civilians in the Katherine district of the Northern Territory were compelled to purchase margarine with their purchases of butter, and was promised that a reply would be obtained. I have received a further letter stating that Army officers have declared that they had acted on the advice, and with the consent, of the Administrator of the Northern Territory. Cannot this unsatisfactory state of affairs be brought to a head during the present visit of the Administrator to the Australian Capital Territory?
– I recollect that the honorable gentleman raised this matter and that I promised to obtain a reply as soon as possible from the Acting Minister for the Army. I regret that I have not yet received that reply. I shall take the matter up again with the Acting Minister for the Army, as well as with the Minister for the Interior - to whom the Administrator of the Northern Territory is responsible - with a view to its being resolved quickly.
– I ask the Minister for Transport whether the plans for the standardization of railway gauges provide for the construction of a line to connect Canberra with the New South Wales system at Yass? If not, will he undertake to have this proposal included in the general scheme?
– The report submitted by Sir Harold Clapp does not provide for the rail connexion mentioned. The honorable member’s request will be considered.
– Will the Acting Prime Minister make an unqualified statement regarding the release of members of the Australian Imperial Force, the Royal Australian Air Force and the Royal Australian Navy who have given five years service overseas? It was stated in the press yesterday that the right honorable gentleman proposes to make a statement shortly, and that he will be guided by the need for pharmacists in connexion with the Commonwealth free medicine scheme. Will he make a statement free from any qualification, and allow all of the men with five years overseas service to be released, as members of the Opposition have received letters with regard to deserving cases, such as men in advanced years who should be released? Will the Acting Prime Minister take steps to ensure that the necessary reorganization shall be made at once, so that the places of the men released may be filled?
– In the statement that I have already made on the matter I pointed out that the releases would have to be made on a graduated scale. In reply to a question asked by the honorable member for New England yesterday, I indicated that I hoped not later than Friday to amplify the statement which I made last week. In making the releases regard must be had to operational requirements.
– Will the statement be qualified by the need for certain professional men, or any consideration of that kind?
– I mentioned yesterday that on certain aspects of the matter the Government desired to confer with the Advisory War Council. As a meeting of the Council will be held to-morrow, I hope that I shall be in a position to make a further statement on the matter on Friday.
Queensland Supplies - Reduction in State Output.
– I direct the attention of the Minister for Munitions to the following telegram which I have received from Mackay: -
Joinery timber suppliesurgently required important priority works Mackay. Timber control Cairns refuses release supplies to J. Zemek, joinery works, Mackay, despite repeated application. Supplies of joinery for war housing and other priority works being held up due to short supply suitable timber. Local timbers unprocurable. Request immediate approach to Minister with view of having release of orders granted to mcn requirement. Treat urgent.- Graham, M.L.A
Will the Minister have inquiries made, with a view to easing the position?
– Timber has been in short supply since the beginning of the wilt. Recently, this country has had to import up to 4,000,000 superficial feet of timber a month to meet urgent war needs alone. The honorable member will understand that a shortage of essential timber in different parts of Australia is due to the heavy demand for all kinds of works for the fighting services.
– That is what this is for.
– I have no doubt that wo have been just unable to supply the timber required for the works mentioned by the honorable member. However, I shall have a thorough examination made in order to ascertain how soon timber can be made available for them.
– As I have been informed that State forestry officers have instructed saw-mill proprietors to reduce their output of timber, despite the fact that ample supplies are available in the forests, will the Minister for Munitions make immediate representations to the State authorities to ensure that the maximum supply of timber shall be cut and milled to meet the present heavy demands?
– I should be very surprised to know that any such order has been given by the State authorities. If it has been given, I suggest that the only reason would be transport difficulties.
– One saw-miller claims that his mills have been reduced from three to one because of this order.
– There is an urgent need for all classes of timber, and I certainly will take the matter up immediately with the State authorities to ensure that production at full capacity shall be maintained as far as possible.
Technical Training - Direction of Labour
– I ask the Minister for Labour and National Service whether the Government has had any discussions with the trade unions likely to be affected as the result of the technical training programme, on which the Government, has announced it will spend £.1,300,000 per annum. Does the Minister anticipate any difficulty in having persons trained under that programme admitted to the unions covering the trades in which they will have been trained? Has the Government had any discussion with the unions regarding admittance to membership of discharged members of the forces generally?
– There have been no discussions between the unions and the Government, but Mr. Eltham, th( Director of Technical Training, who works in conjunction with the State technical training authorities has an advisory committee on which trade union representatives sit. The joining of the trade unions by vocational trainees is discussed with those representatives as progress is made.
– The Minister does not anticipate any difficulty?
– The Minister for Post-war Reconstruction is reported in the press as having told a deputation that after the war there would be full employment for all, but that every man might not get the job that he would like. Does that mean that if a man does not like the job to which he will be allocated, he will have to take it, whatever and wherever it may be, or will he be free to refuse the job offered to him? Should he refuse it, will he then have to accept the “ dole “, or whatever form unemployed relief will take, or will his refusal debar him from whatever payments and benefits are to be made available to the unemployed?
– Last week the honorable member for Wide Bay (Mr. Corser) asked a similar question, and I gave what I considered to be a comprehensive reply. The position is that the Government is determined that in the post-war period there shall be full employment but no direction of labour. I pointed out to the honorable member for Wide Bay that the number of people who can be employed in particular occupations is governed by natural limitations. For example, more than a certain percentage of the population cannot be employed in the legal profession, because there is a limit to the number of persons that the profession can support.
– That position obtained before the war, and there was no need to regulate it then.
– I do not want to repeat what I said in my reply to the honorable member for Wide Bay. Apart from the natural limitations, artificial limitations also control the number of people who may be employed in particular occupations. The Government proposes to sweep aside, so far as it is constitutionally able, any artificial limitations preventing persons from entering certain occupations, but beyond that, it will not be able to go. The Government will insist on full employment, and on no direction of labour. In the ordinary course of events, that policy will solve most of our problems.
– The following article appeared in the Adelaide Advertiser of the 26th June: -
” Australia Behind Other Countries.”
Australia is lagging behind other British and Allied countries in relaxing restrictions on petrol rationing, according to the Federal Chamber of Automotive Industries now meeting in Melbourne.
Gas producers in Australia, the chamber claims, have saved at least 100 million gallons of petrol during the war. Canada and South Africa did not use gas producers, yet Canada has increased its basic ration since V-EDay.
The chamber says that Australia has been badly treated compared with Canada and South Africa, and is now receiving a lower ration than the United Kingdom or the United States. Other Governments evidently have been more active in obtaining supplies and tankers than the Australian Government.
Will the Minister representing the Minister for Supply and Shipping comment on that statement?
– I not that reference is made to the difference between Australia, on the one hand, and Canada and South Africa on the other. The differences between the countries is well known. Neither Canada nor South Africa was threatened with invasion. Consequently, the criticism is in bad taste. In some instances, the pressure exerted by Australia on the Petroleum Board in Washington, which consists of representatives of the allied countries and has the final determination of allocations, was so insistent that it could perhaps be described as discourteous. Had our pressure not been constant this country might have fared much worse during the war; but, considering all the factors, the people of Australia have fared well in transport matters. We have maintained our transport system, with some inconvenience, it is true, and I am confident that the time is not far distant when the position will be improved. In this connexion, however, I point out that whatever may be done to increase the petrol ration, the rubber problem is still serious: until it is less acute, the general transport situation cannot be greatly improved.
– Will the Acting Prime Minister, at the next Premiers’ Conference, obtain the opinion of the State governments and, if necessary, their consent to the establishment of national chest hospitals - one in each capital city - as a preliminary step towards, and a stimulus to, an Australia-wide campaign to control, and ultimately to abolish, tuberculosis and other chest diseases in Australia?
– The subject of tuberculosis and its diagnostic treatment was discussed nine or ten months ago by Commonwealth and State Ministers for Health. The representatives of the Commonwealth Government, of whom I was one, intimated that the Commonwealth Government was prepared to make available £50,000 a year for diagnostic treatment, and later to join with the States inproviding the capital necessary to establish hospitals for the treatment of this disease. The grant of £50,000, which was to be subsidized by the States on a £1 for £1 basis, was based on information that the Commonwealth Government had . received that a sum of £100,000 would be sufficient to cover all expenditure that was likely to be incurred in the treatment of tuberculosis during the war. The Commonwealth Government made it clear that it was sympathetic to the inauguration of a campaign against this disease. At the moment a sum of £50,000 is available from the Commonwealth for this purpose, and the Commonwealth Government is prepared to discuss with the State governments problems associated with the capital expenditure which will be involved in combating this disease.
War Risk Bonus
– Did the Minister repre senting the Minister for Supply and Shipping read in to-day’s issue of the Canberra Times a report that seamen in Brisbane had held a stop-work meeting to discuss the proposal of the Maritime Industry Commission to cancel the war risk bonus as from the 1st July next? As this bonus was granted for the duration of the war, and the war in the Pacific is still raging, does not the Minister consider that the proposal of the Maritime Industry Commission is illegal, and will lead to a general strike in Australian ports?
– The war risk bonus has not been cancelled, but has been varied in connexion with ships operating along certain parts of the Australian coast where danger from enemy action no longer exists.For example, I believe that it is not necessary to pay a war risk bonus of 331/3 per cent. to merchant seamen serving on ships in Spencer’s Gulf, St, Vincent Gulf, Bass Strait or other waters south of Sydney. But the payment of the war risk bonus to merchant seamen on ships which operate in northern waters will be continued. In some instances, the rate has been maintained, and in others, it has been reduced. This matter was considered six or seven months ago by Mr. Justice De Baun, who was then chairman of the Maritime Industry Commission, and he suggested that Order No. 46, which varied the rate, should be introduced.. However, the Government believed that any alteration at that stage would not be wise, because it desired to be satisfied that the southern waters were safer than they were believed to be at that time. Honorable members will recall that German submarines were then operating in the vicinity of the Australian coast. That menace has been removed. I should add that in all these matters discussions have taken place with representatives of the maritime unions. We wanted to be just and equitable. We believe that the seamen have given good service to this country during the Avar, and we want to give them full reward for their service. I believe that the decision of the Maritime Industry Commission was equitable, and that the Government has acted justly towards the seamen in this matter as a whole.
– I ask the Minister for Munitions whether pencil sharpeners are still being made at the Small Arms Factory at Lithgow? If so, how are the boys up there progressing? Would not some of them go to the progressive town of Newcastle to make wire and wire netting?
Mr.MAKIN.- Just after the last depression the Lyons Government appointed a committee to investigate whether the Small Arms Factory at Lithgow could be used for the manufacture of civilian goods. As the result of that investigation, it was found desirable to maintain key personnel and a nucleus of skilled operatives at the factory to engage in certain forms of manufacture, including sheep-shearing machines, forgings for motor cars and other articles, for the manufacture of which the machinery in the factory was suitable. At present, the normal programme at the factory has dropped to a point where it becomes necessary to maintain a nucleus of key personnel. We are still in war, and, therefore, we must maintain !-o important an establishment in a position to undertake the manufacture of essential equipment which may be required at the shortest possible notice. However, it is not desirable that such personnel should become an undue charge upon the taxpayers. Therefore, the factory has been engaged in the manufacture of articles required by the civil community, thus obviating the cost of keeping that key personnel in idleness. Those men are being employed to the best advantage. They are of a class not required at Newcastle. They are highly trained technicians, who specialize in high precision work. In order to show the wisdom of our action in maintaining that nucleus of technicians at Lithgow, I mention that an urgent order has just come to hand for work which can now be undertaken immediately at that factory. ifr. White. - An order for pencil sharpeners?
– The honorable member should show a little of the intelligence which one is entitled to expect from members of the Opposition. Because we have retained key personnel at Lithgow we are now able to set to work immediately on an urgent order from the fighting services. So long as the war continues I shall apply the policy which I have just outlined with respect to the retention, of key personnel in munitions factories at Lithgow and elsewhere.
– I have had many requests from poultry-farmers in the Boothby electorate asking whether anything can be done to improve supplies of poultry feed. They have pointed out that meat meal is almost unprocurable, and that they are forced to u.=e unsatisfactory substitutes. Can the Minister for Commerce and Agriculture make any statement as to the possibility of the early release of poultry feed stocks?
– I am not in a position to give any indication of an easing of the position. Owing to acute drought conditions, especially in South Australia, the supply of meat meal will con tinue to be most difficult, and it will be a considerable time before any relief can be given. However, I shall investigate the situation generally, with particular attention to the district mentioned by the honorable member, and I shall ensure that everything possible is done to afford relief. At present, I cannot hold out any hope for an immediate improvement of the overall supply position in South Australia.
– I ask the Treasurer whether the Commonwealth Treasury proposed to the Commonwealth Grants Commission a fundamental change of the technique of assessing special grants to the States for the year 1944-45. Did the Treasury claim that the adoption of its ulan would enable the assessment of special grants under section 96 of the Constitution and the determination of additional financial assistance under the States Grants (Income Tax Reimbursement) Act 1942 to be dealt with concurrently and as one problem? What was the result of the submission, and what is the present view of the Treasury with regard to the matter?
– There has been no suggestion of any fundamental change of the method of assessing grants to States. The submission made by the Treasury in regard to the applicant States was along the same lines as the submissions which it has made over at least the last two years. There have been some slight variations, of course, due to the fact that some States have established very large surpluses, whilst others have not fared so well and, in fact, have deficits. Discussions have taken place between Treasury officials, myself, and members of a committee which was appointed by the Ministerial party to examine suggestions that have been made. I have asked certain officers of the Commonwealth Grants Commission, in an unofficial capacity, to inform the minds of members of the committee of the principles under which grants are made to the States. Representations have been made, particularly on behalf of Tasmania, about what is regarded as the inequitable method by which the amounts of grants are determined. I repeat that, although there has been a great deal of discussion about the matter, the principle under which State grants will be determined for the year 1944-45 has not been fundamentally changed.
– Some time ago, the Prime Minister announced that the Government proposed to retain complete control of Government-owned factories which were basic to an adequate defence policy and that it might also be necessary to include some other factories, such as those concerned with aircraft construction and shipbuilding. The remainder of the government-owned factories and annexes would be made available for operation by private industry, or for joint operation by the Government and private industry. In view of this statement, will the Minister for Post-war Reconstruction make an early announcement, for the information of both the public and interested parties, specifying which factories come within the respective categories mentioned? “Will he ensure that surplus factories shall be disposed of at the highest prices and under the best conditions obtainable?
– It is not an easy task to ensure that factories which are surplus to the Government’s requirements shall be disposed of in such a way as to return to the Commonwealth the greatest amount of money that can be obtained. Private enterprise likes to work in the dark, to some degree; a firm does not like its competitors to know that it is negotiating to buy a particular government factory. The matter involves considerable difficulty, but I shall have it examined to see whether a further statement can be made.
– In view of “the fact that lives have been lost in three civil air-line’ crashes recently, and that in each instance the aircraft concerned was of an outmoded type, will the Minister for Air undertake a review of the issue of certificates of airworthiness in cases where structural weaknesses through fatigue may be present though not detected by routine examination; anc survey of all types of aircraft in use foi passenger transport with a view to tb, retirement of obsolete machines?
– As the honorable member’s question covers a number of phases of civil air-line operation, 3 ask him to place it upon the noticepaper. However, I say to the honorable member, and to the public generally, thai certificates of airworthiness are granted to civil aircraft only after a thorough examination. There is no need for anxiety in that respect. So far as I have been able to ascertain, the record of civil air-line operators in this country is as good as that of similar organizations in any part of the world.
– I wish to ask th.Acting Prime Minister (Mr. Chifley) a question regarding the recent floods on the northern rivers of New South Wales. Many house-holders at Lismore and Murwillumbah have lost practically all their furniture and other possessions, and I raise this matter in the hope thai something will be done for flood victims, particularly pensioners, who have nol the means to replace these possessions. I understand from officials who ‘are working in the affected areas, that the State and Commonwealth authorities intend to provide financial assistance only by way of loans, which, obviously, could not be repaid by the unfortunate individuals to whom I have referred. Will the Acting Prime Minister consult with the Acting Premier of New South Wales, Mr. Baddeley, to see if it is not possible to make advances to local authorities in affected areas, such as the Lismore and Murwillumbah municipal councils, so that they may be able to alleviate acute distress promptly?
– In the course of a telephone conversation with me, the Premier of New South Wales intimated that he would keep me apprised of the results of investigations being made in the flooded areas by Inspector Elford, assisted by Mr. Bellemore, UnderSecretary for Labour in New South Wales. Since that conversation I have received a letter from Mr. Dickson, a member of the New South Wales Government, on behalf of Mr. Baddeley, setting out particulars of the flooding, anddetails of a telephone conversation which took place between Mr. Weir, of the New South Wales Treasury Department, and myself on the subject. The points raised by the honorable member have not been the subject of discussion, but I propose to have a full statement on the matter prepared, which I will submit to Cabinet for consideration early next week.
– In relation to the delivery of bread, milk, ice and vege- tables, can the Minister for Post-war Reconstruction state whether it is the intention of the department to relax zoning restrictions so that discharged servicemen might have an opportunity to engage in such occupations?
– The Department of Post-war Reconstruction was responsible for introducing the zoning system in relation to deliveries of bread and ice and other commodities, but not for the zoning of milk deliveries, as in Sydney and Melbourne. That is controlled by the State governments concerned. The purpose of the zoning system is to conserve man-power and materials, and the Government is of the opinion that the time has not yet arrived when this form of control should be relaxed. I assure the honorable member, however, that the matter is kept constantly in mind and when the time is opportune to do so the Government will relax the regulation to some extent. The system operates only under a national security regulation, and when the war is finished that regulation will lapse.
Operation of Income Tax (War-time Arrangements) Act.
– In view of complaints that the Income Tax (War-time Arrangements) Act is operating unfairly in certain States, will the Acting Prime Minister arrange for the Commonwealth Grants Commission to investigate the way in which the legislation has operated, so that, if inequities are occurring. Parliament may be advised and take such remedial measures as are considered necessary.
– As the honorable member knows, the uniform taxation legislation provides that any State may make application to the Commonwealth Grants Commission for a review of the compensation paid by the Commonwealth. That has been done by the Tasmanian Government. I do not feel disposed at the moment to suggest any amendment to the uniform tax law or the various acts associated with it - particularly that relating to the payment of compensation to the States; it is for the States themselves to submit a case to the authority which this Parliament has constituted the adjudicator in regard to the amount of compensation to be paid. The Commonwealth Government cannot ask for a reduction unless certain social services or activities of that nature are taken over by the Commonwealth Government, thereby reducing the expenditure of the States. Therefore, the States are in the privileged position of being able to apply for an increase of compensation, but the Commonwealth Government cannot take any action to secure a reduction.
– Has the Acting Minister for External Affairs read in to-day’s Canberra Times the article headed “ Anti-Soviet Agitators Assailed “, which reads -
A denunciation of American influences, bent on stirring up hatred against Russia, was made by the Secretary of the Interior (Mr. Ickes) when making a speech in honour of the 70th birthday of the German novelist, Thomas Mann, who was driven from Germany by the Nazis.
Mr. Ickes described them as “ pretended patriots “ who, with loyalty on their lips and matricide in their hearts, are trying to edge us into war with Russia. “ Sometimes I wonder whether Goebbels is really dead, as he deserved to be, or whether he only emigrated to the United States. So many things now said about Russia in this country are’ Goebbelese ‘ - the songster may be dead but the melody - or cacophony - lingers on “, added Mr. Ickes.
Will the Minister direct the attention of the editors of the Sydney Bulletin and the Century to this article?
– I have not read the article, but I shall do so. In view of certain other press statements during the last week, I intend to make a statement to the House either to-morrow or on Friday.
– In view of the shortage of supplies of superphosphate, and the possibility that adequate supplies will not be obtained from Nauru Island for some years, will the Minister for Commerce and Agriculture consider having a consignment of the rock from Transjordania, that was placed on the pier at Haifa, brought to Australia and tested, with a view to obtaining future supplies from that area?
– Under an international agreement, the whole of the world supplies of superphosphate are allocated by the Combined Food Board in Washington, and the Commonwealth Government cannot in any circumstances ask for supplies to be provided to it from an independent source. The supplies from Transjordania have been brought to the notice of that board, but so far we have not received any satisfaction. According to information which the Director-General of Agriculture has received, there is a doubt as to the quality and quantity of the supplies that are available in Transjordania. There is a world shortage of superphosphate. If the honorable member has stated the facts correctly, it would be onlyreasonable to suppose that the International Phosphates Commission would avail itself of the opportunity to obtain supplies from this source. Investigations will be continued by the Government.
– Could not a consignment be sent out and tested?
– I shall consider the matter.
Clifton Hill Seat
– Has the attention of the Acting Prime Minister been directed to the failure of the Liberal party, before the close of nominations yesterday, to nominate a candidate for election to the Clifton Hill seat in the Legislative Assembly of Victoria? May this refusal by the Liberal party to test public opinion on the Commonwealth Government’s banking legislation, be taken to mean that there will be no further waste of man-power and newsprint by banking and other interests on propaganda against this important and necessary legislation?
– I was not aware of the fact mentioned by the honorable member, and thank him for the information, which is very much appreciated. I am afraid that I cannot assign reasons which the Libera] party would regard as satisfactory, for its failure to nominate a candidate.
Motion (by Mr. Lazzarini) agreed to-
That leave be given to bring in a bill for a n act to authorize the acquisition by the Commonwealth, for certain purposes, of land in the Northern Territory of Australia comprised in the Town of Darwin and its environs, and for other purposes.
Bill presented, and read a first time.
In committee: Consideration resumed from the 26th June(vide page 3614).
Clause 7 agreed to.
Clause8- (1.) A body corporate which desires authority under this Part to carry on banking business in Australia may apply in writing to the Treasurer for authority accordingly.
– The clause does not contain any power to terminate a licence that has been granted unconditionally, or to impose any conditions which subsequently may be found necessary. Subclauses 3, 4 and 5 read - (3.) An authority under this section granted to a body corporate specified in the
First, Schedule which was not carrying on banking business in Australia on the twentysixth day of November, One thousand nine hundred and forty-one, or to a body corporate not so specified, may be granted unconditionally or subject to such conditions as aru specified in the authority. (4.) Where an authority under this section is granted subject to conditions, the Governorgeneral may, from time to time, vary or revoke any of those conditions or impose additional conditions. (5.) Where an authority under this section is subject to conditions, the body corporate to which the authority is granted shall comply with those conditions.
If a. licence is granted subject to conditions, under sub-clauses 4 and 5 those conditions may be varied or the licence may be terminated. I should like the Treasurer to make a statement on the matter.
– Certainly, it was not intended that a licence should be continued unconditionally if the body holding it did not comply with what the Commonwealth Bank regarded as the general conditions. I shall a?k the Commonwealth law officers to examine the matter.
– There is provision for the imposition of specified penalties in the event of contravention of the conditions. If a licence has been granted unconditionally, it stands to reason that there cannot be a contravention of conditions. It seems rather peculiar that the bill should fail to provide that licences granted unconditionally may be revoked.
.- I move-
That the following new sub-clause be added: - “(10.) Where an authority under this section is refused, an appeal against such refusal may be made to a full court of the
High Court constituted by not less than three Justices.”
The clause provides that the Treasurer may impose whatever conditions he may choose, or issue an authority unconditionally. There should be the right of appeal against any such arbitrary decision.
– The problem mentioned by the Leader of the Australian Country party (Mr. Fadden) is largely an administrative one, and relates to a matter which should not be open to an appeal to such a body as the High Court.
– Why is provision, made in clause 53 for an application to the High Court for a direction to a bank which has been convicted of an offence under the act or the regulations?
– There are special reasons for that. The reasons why the banking control regulations were first given effect make another story. In this matter 1 am guided a great deal by experience of the operation of the present regulations, which, generally speaking, do not seem to have provoked any incidents which would warrant other than a general administrative direction. ‘Certain provisions with regard to interest rates and the policy with regard to advances, I think it will be generally agreed, ought to be dealt with after consideration by the Commonwealth Bank, but I do not think that the right of appeal would help in any way in connexion with what seems to me to be wholly an administrative problem. If the people concerned chose to lie quarrelsome, they could hold up the administrative work, with the result that arguments which have not arisen during the operation of the present regulations might occur.
– -The right honorable gentleman is now referring to war-time conditions.
– That may be so, but ‘ there may be less need in future for exercising administrative control in respect of the bodies to which the right honorable gentleman has referred, except with regard to interest rates, than there has been in war-time.
– Does not the right honorable gentleman think that the associated banks have some rights, and should be satisfied that those rights will be preserved ?
– The right honorable member for Darling Downs was referring, not to the trading banks, but to pastoral companies and, perhaps, building societies. The granting of the right of appeal would merely cumber administration.
As Treasurer I have had very few discussions about matters of this kind.
. -The attitude adopted by_the Treasurer (Mr. Chifley) is extraordinary. He says that the clause deals with a matter of administration. I suppose that he means that somebody in the Commonwealth Bank, probably the Governor, would tell a clerk that the first schedule to the bill was to be amended by eliminating the name of one of the trading banks, as a result of which its authority to operate would be revoked. That might be an administrative matter from the point of view of the Commonwealth Bank, but to the trading bank it would mean annihilation, and there would be no appeal against the decision. The Governor of the bank might have received directions from the Treasurer of the day. There is a difference of opinion as to the source from which the Treasurer’s instructions come. Some say they come from the Australasian Council of Trade Unions, and others declare that they are issued by the Communist party. Others, again, state that the instructions come solely from the Labour caucus. None of those bodies is responsible to this Parliament. [ cannot understand the attitude of the Treasurer at all. I hope that the Minister who assists him (Mr. Lazzarini) will tell the committee how the Government justifies its proposal. Even in such a small matter as the relations between the Civil Constructional Corps and the municipal and shire councils of Australia
– What has that to do with the bill?
– It shows the attitude of the Government in a much smaller matter such as where a horse-drawn grader is taken for the work of the Civil Constructional Corps, because if, on its return to the owner, the sum paid by way of compensation is not satisfactory, provision has been made by the Government for an appeal. Yet no such provision is made in the case of institutions which are responsible for the savings of many thousands’ of people. Despite what has been said, by supporters of the Government, the trading banks have rendered a great service to this country. There should be a right of appeal against a decision which might have the effect of destroying a private bank because of political bias against it.
.- The attitude of the Treasurer (Mr. Chifley) to this clause seems rather narrow, insofar as he bases his refusal to provide for an appeal on the fact that up to the present no such necessity has arisen during the operation’ of the National Security Regulations. On his own admission, however, such undertakings as pastoral companies and building societies have not come under the regulations at all. Clause 7 states that a body corporate shall not after a certain time “carry on any banking business”, unless in possession of an authority to carry on banking ‘business, but clause 8 is not quite similarly worded, although I cannot interpret it as having a different meaning from clause 7. Clause 8 refers to a body corporate which desires authority “ to .carry on banking business “. It seems to me that any of the companies referred to will automatically be covered by the bill and will be required to obtain a permit to carry on banking business. Clause 8 also provides that where an authority is granted subject to conditions, the GovernorGeneral may from time to time, vary or revoke any of those conditions or impose additional conditions. It seems that the Treasurer, or the officer in charge of the Treasury for the time being, could submit a report which would deprive the companies of their right to carry on their banking business. They have no right of appeal, if a report on wrong premises is submitted and their business is taken away entirely. The Treasurer should accept the amendment submitted by the Leader of the Australian Country party (Mr. Fadden) as a fair and just method by which those companies may have protection. I cannot see that that would in any way weaken the authority of the Treasurer or the department; certainly it would improve the bill.
.- I add my plea to that of other Opposition members that the Government reconsider its attitude, which reminds me of its stubborness on a previous occasion in this- House when we spent an afternoon appealing for the setting up of a tribunal to which owners of machinery acquired’ by the Allied Works Council could appeal. The Government’s answer was a relentless “ No “ until it suddenly discovered that it had already set up such a board. I am astounded, in view of the ramifications of the companies referred to in clause 8, that the Minister assisting the Treasurer (Mr. Lazzarini) does not accept, the amendment to ensure that they shall receive justice. The revolutionary banking proposals strike at the economic roots of the Commonwealth, and no one knows what, will happen as the result of their application by this Government which takes its orders from an outside authority. It went to the people in 1943-
The CHAIRMAN (Mr. Riordan).Order! I ask the honorable gentleman to deal with the clause.
– I am dealing with it. 1 am pointing out its weaknesses. The clause is of vital consequence to the pastoral companies that opened up the country that you, Mr. Chairman, assist to represent in this Parliament. Their splendid service entitles them to all the protection with which this Parliament can provide them against extreme proposals which may emanate frsm the Government at the behest of those behind the scenes. I want to protect them in the interests of the people they have served, the great, primary producers of this country, who would be in difficulties but for their activities. They have been referred to with hatred by soap-box orators as “ beef barons “. I fear that that hatred may be so stirred that the forces to which the Government looks for its orders will be able to wipe them out overnight through executive action unless we provide the safeguard contained in the amendment moved by the Leader of the Australian Country party (Mr. Fadden). I hope my appeal will not fall on deaf ears. Thu Minister assisting the Treasurer (Mr. Lazzarini), as a Minister for the Crown in a democracy should at least ensure fair play.
– The need for this amendment is related to clause 9 of the Commonwealth Bank Bill, in which th,Treasurer is given power to control the policy of the Commonwealth Bank, which means that its policy may be changed periodically according to what political party is in power. It isessential, therefore, that nothing should be done to enable the policy of the trading banks* to be continually interfered with. In these circumstances, this amendment is a good one in that it not only protects the banks and other companies that make advances from unnecessary interference, but also will make for continuity of policy. If the Treasurer, through the Commonwealth Bank, knows that before any alteration can be final there is the possibility of an appeal to the High Court before which the whole matter will be discussed on its merits, he will hesitate before making grave changes. What is asked for is reasonable. It will tend to improve the relationship between the Commonwealth Bank and the trading banks and will undoubtedly ensure continuity of financial policy.
– Honorable gentlemen opposite talk about private banks as if there were some threat of revoking their licences under this clause, which provides that the trading banks must be licensed. There is no provision for revoking their licences except when they go out of business. Subject bo that condition, their licences will remain in force indefinitely. The Treasurer (Mr. Chifley) dealt with pastoral companies. The amendment seeks to transfer a decision as to whether they shall be licensed from the Government to the High Court.
– The Minister does not understand the amendment.
– I do. The right honorable gentleman wants to allow those companies the right of appeal to the High Court if the Treasurer refuses to license them. That means that, in the final analysis, the High Court and not the Treasurer will say whether they shall be licensed. This bill provides that the Government, through the Treasurer, shall exercise that authority. It is futile for honorable gentlemen opposite to seek more explanations. All the talk in the world will not change our mind.
– I cannot understand why the Government will not accept the amendment. The right of appeal has been inherent in British justice ever since Magna Charta. This clause provides that the Governor-General - that means the Government - may, not shall, grant licences. In sub-clause 3, it is provided that licences may be granted unconditionally or subject to such conditions as are specified in the authority. It is not hard to understand the concern existing throughout the community to-day for the trading banks and pastoral companies, because, in the report of the Royal Commission on Monetary and Banking Systems, we read the following words of the Treasurer: -
As I have already stated, I think that banking should be conducted without profitmaking considerations.
In paragraph 10, he said -
I am of the opinion that the trading bank section of the Commonwealth Bank should be extended, with the ultimate aim of providing the whole of the services now rendered hy private trading banks.
That statement was not made in the heat of the moment but I should say, after mature consideration. The aim of the right honorable gentleman is clear. He is out to put the trading banks out of action. What he has in mind in connexion with pastoral finance companies I do not know, but clearly he wishes the trading section of the Commonwealth Bank to be the only trading bank in the Commonwealth. Clauses 7 and 8 give to the Treasurer the right to say whether or not an authority shall be given. In paragraph b of sub-clause 2 of clause 8 the Governor-General may grant to a body corporate an authority to carry on banking business in Australia. Honorable members will notice that the word is “ may “ not “ shall “. I am not satisfied with the Minister’s explanation, and I trust that the intention will be made clear.
– There is not much difference between registering a bank and registering a union. If a trade union desires to be registered, it makes application to a nonpolitical authority for registration. Should that authority refuse the application, the union has the right of appeal. The same thing ought to apply to otherorganizations, such as banks and pastoral finance companies, representing various sections of the community. Clause 8 also provides that an authority may be revoked, or, in other words, an organization deregistered. The conditions of an authority may be altered by the Treasurer under sub-clause 4. If we apply to one section of the community a certain formula in regard to registration and de-registration there can be no good reason for not applying the same formula to other organizations which serve the interests of other sections of the community; they, too, should be treated judicially rather than politically. That is the purport of the amendment. The well-being of any large section of the community should not be the plaything of any political party. Supporters of the amendment do not question the integrity of the Treasurer, or his desire to act fairly; but as every Treasurer is subject to some bias as the result of the views which he has held for many years, the occasion may arise when a company, or a corporate body, or a bank will be subjected to a grave injustice. One of the safeguards against such an injustice is the right of appeal to an. authority which is believed to be free from political influences. Our judicial system in Australia is held in high esteem because those who have been appointed to administer justice have discharged their duty free from political bias. The Minister for Home Security (Mr. Lazzarini) represents a large body of unionists who have had experience in the courts, and have availed themselves of their rights of appeal. Indeed, some unionists have gone further-
– I ask the honorable member to confine his remarks to the amendment before the Chair.
– I was merely drawing an analogy, and was about to say that, when not satisfied with the result of their appeal, some sections of the community have, at times, resorted to direct action. There can be no direct action by banks and their depositors, or by pastoral finance companies and their clients. In order to avert a situation which may cause an injustice to be done to any section of the community, I ask the Minister to give further consideration to the amendment.
.- The reply given by the Minister for Home Security (Mr. Lazzarini) strengthens the case for the inclusion of safeguards in this clause. The Minister said that the amendment aimed at taking power from the Treasurer and giving it to the court. It would be well to include in this legislation provisions that certain matters shall be entrusted to a court which would act judicially, rather than that they should be left to the caprice of any Minister or departmental officer. It is important that in legislation which comes before us, the meaning of its provisions should be as clear as possible, and that the rights of individuals or of corporate bodies should be stated clearly. The wording of this clause, particularly paragraph b of sub-clause 2, is far from definite. That paragraph provides that if the applicant is a body corporate, other than one specified in the first schedule, the Governor-General may grant to it an authority to carry on banking business in Australia. If the clause contained a provision for an appeal to another body it would be competent to interpret the word “may” as “shall’’ on the grounds of precedent. If several companies be granted permits under certain conditions, and other corporate bodies are refused permits, an appeal could be made to the court which would be competent to decide that a precedent had been established, and to overrule the decision of the Treasurer not to grant a permit. I appeal to the Minister to consider this clause from that point of view, namely, that a decision by a Minister or a departmental officer may be made capriciously. That would be possible under this clause. There should be a method whereby a just and regular interpretation could be given to members of the public who desire to operate or benefit under the clause. I am not satisfied with the reply of the Minister for Home Security. All that we desire is that the court shall be able to interpret the law intelligently and justly.
Clause agreed to.
Clauses 9 and 10 agreed to.
Clause 11 -
It shall be the duty of the Commonwealth Bank to exercise its powers and functions under this Division for the protection of the depositors of the severalbanks.
– I move -
That the words “ for the protection of the depositors of the several banks “ be left out with a view to insert in lieu thereof the following words : - “ to ensure that each of the several banks shall meet its liabilities to its depositors, and safeguard the interests of its borrowers “.
The clause, as drafted, provides that the Commonwealth Bank shall exercise its powers and functions for the protection of the depositors of the several private trading banks. There is a difference between the meaning of the phrase “ protection of the depositors of the several banks “ and the words “ ensure that each of the several banks shall meet its liabilities to its depositors”. This bill creates a new situation in the banking system of Australia by controlling the ability of the private banks to manage and direct their own business, as they did formerly. In many respects they will be completely under the control of the Commonwealth Bank, and will have to obey its directions regarding the type of lending in which they may engage, the amount of advances that they may make, and. the amount of interest that they may charge. Formerly, the trading banks managed their affairs, as prudently as they were able, in the interests of their depositors and shareholders, and of the community in general. Therefore, a greatly increased responsibility devolves upon the Commonwealth Bank, which will be the directing authority.
A trading bank, having complied with a direction of the Commonwealth Bank, may be unable to meet its liabilities. Some honorable members may contend that such a position might arise because of the manner in which the bank conducted its business,but I propose to disregard that aspect, because the record of the private trading banks in Australia since the economic depression of 1893 has been extremely good in regard to protecting the interests of their depositors and shareholders. Since 1S93, only three private banks have failed, and they were only small institutions. Two of them were the Primary Producers Bank of Australia, which had deposits amounting r,o £1,213,000, and the Federal Deposit Bank Limited, which had deposits amounting l.o £690,000. The inability of those two institutions to meet their obligations were not “ failures “ in the true meaning of the word, because the Primary Producers Bank of Australia ultimately paid its creditors 19s. 9d. in the El, and the Federal Deposit Bank Limited a somewhat smaller amount.
Hence, the private trading banks have an excellent business record, and if conditions arc created in future which endanger their financial stability, the risk should be borne by the directing authority, namely, the Commonwealth Bank. The amendment will remove any possible misunderstanding that may arise us the result of the present phraseology of the clause. The purpose of the clause, as drafted, is that the Commonwealth Bank shall protect the interests of the depositors of the several banks. The adoption of the amendment will ensure that people who lodge money with private trading banks will not become the victims of a policy carried out at the direction of the Government and the Commonwealth Bank.
– As the honorable member for Richmond (Mr. Anthony) stated, this legislation has been drafted to protect all persons who have any monetary interest in the private trading banks. The legal advisers of the Government have assured me, and the Government is satisfied, that the clause in its present form provides complete protection. For that reason, I cannot accept the amendment.
– I support the amendment. The clause, as drafted, is too vague to be of any value, but the amendment will clarify the position. Since 1S93, the record of the private trading banks is a monument to their competency and integrity. This legislation will not safeguard depositors and borrowers. The whole of the banking system depends upon financial stability of the banks, and the competency of their management, and the general integrity of their policy. This clause implies that the necessity has arisen to protect the depositors of the several trading banks, whereas the banking history of Australia since 1.893 demonstrates that, the depositors have had nothing to fear. The Australian banking system compares more than favorably with that of any other country. Only three private trading banks have failed since 1893, and of those institutions, the Primary Producers’ Bank of Australia held a total deposit liability of only £1,213,000. The obligations of the other, two institutions were even smaller. But the total deposit liability of the whole banking system, wa? £258,000,000. In addition, the Primary Producers’ Bank of Australia ultimately paid 19s. 9d. in the £1, and the Royal Commission on Monetary and Banking Systems expressed the view that if the assets had been realized in an orderly manner the ultimate proceeds would have been far more favorable than that. The management of Australian banking institutions is something of which we should be proud, and expressions of concern for the safety of depositors’ moneys are unnecessary. But what the position will he under a. politically controlled Commonwealth Bank time alone will show. Personally, I hope that the integrity and general good standing of the Australian banking system will be maintained.
.- The Treasurer (Mr. Chifley) pointed out that the clause, in conjunction with other provisions in the measure, will afford ample protection for borrowers and others having dealings with a private bank. At the same time, however, I should like to have seen specific reference to protection of borrowers. The right honorable member for Darling Downs (Mr. Fadden) cited the case of the Primary Producers’ Bank of Australia, and the honorable member for Richmond (Mr. Anthony) pointed . out that that bank ultimately paid 19s. 9d. in the £1 to depositors, but many borrowers from that institution suffered considerable loss as the result of the closing down of the bank. I understand that accounts were Bold to a private concern, in which a leading light was Mr. Woolcott Forbes, about whom all of us have heard. Although depositors with thai bank may have received their money ultimately, many primary producers who were borrowers from that institution suffered considerable loss. Had a provision of this kind been in operation even the three failures of private hanks since the ‘nineties would have been prevented, because they would have been able to fall back upon the Commonwealth Bank in order to protect their depositors and borrowers. The right honorable member for Darling Downs has really shown the great weakness in the private hanking system in the absence of some protection such as will be afforded under this legislation. He stated earlier in the debate that, in the period from 1930 to 1933, 5,099 private banks in the United States of America collapsed, only 730 of which subsequently re-opened for business. We do not want to see that state of affairs in this country.
– But the banking system in the United States of America differs entirely from the banking system in Australia.
– Yes, because we have the Commonwealth Bank to stand by it. But even the three banks which have failed in Australia would not have done so had a provision of this kind been in operation. Let us take the Government Savings Bank ‘of New South Wales, for instance. Although that bank subsequently re-opened, and its accounts were taken over by the Commonwealth Bank, many depositors sold their deposit books for only 12s. in the £1.
– They did not have to sell; they foolishly sold their deposit books.
– Many of those depositors needed money urgently and were thus forced into the hands of moneylenders. They sold their deposit books at a considerable discount. Had a provision of this kind been in operation, the Commonwealth Bank would have : beer obliged immediately to take steps in order to protect depositors and customers of that bank without waiting for legis lative action by the Federal and State Governments. Whilst the right honorable member for Darling Downs gives much credit to the private banks for having survived periods of stress, he does not seem to realize at what price they saved themselves. In many cases it was at the price of the degradation of borrowers and of the whole industry. That aspect must be taken into consideration as well as the interests of people who have invested in the private banks. As the Minister (Mr. Lazzarini) has pointed out, ample protection will be afforded under the clause in conjunction with other clauses to borrowers and customers of private banks.
– I support the amendment moved by the honorable member for Richmond (Mr. Anthony) particularly that portion of it. which proposes to safeguard the interests of borrowers. Replying to the secondreading debate last night, the Treasurer (Mr. Chifley) realized that the interests of borrowers should be protected as well as the interests of depositors. In reply to an interjection by me he said that the Commonwealth Bank ought not to be a party to a deflationary process which forces people whose assets are good to reduce their overdrafts in times of stress. He realized that borrowers are deeply concerned should a bank fail at any time. The depositors may get some, or all, of their money back. As the right honorable member for Darling Downs (Mr. Fadden) pointed out, the depositors in the Primary Producers Bank of Australia received practically the whole of their deposits back. I believe that the Commonwealth Bank itself requires this instruction that it must look. after the interests of borrowers in private banks. The idea that the primary duty of a bank is to look after the interests of depositors, very often forgetting the interests of borrowers, seems to saturate every banking system. The history of the financial crash in the early nineties shows that borrowers suffered very substantial losses. I draw the attention of the committee to what the Royal Commission on Monetary and Banking Systems reported with respect of the failure of the Primary Producers Bank of Australia Limited and the Federal Deposit Bank
Limited of Brisbane. Dealing with the former, the commission in paragraph 360 of its report, stated -
The immediate cause of the failure was the loss of nearly 40’ per cent, of its deposits in eighteen months, and the inability of the bank to obtain repayment of its advances. A very large proportion of the borrowers were primary producers, who suffered severely from the fall in the value of their products, and were unable to discharge their obligations to the bank. For the same reason, primary producers, who had money on deposit, were compelled to withdraw it. Others did so because they had lost confidence in the bank. It appears also that insufficient provision had been made for doubtful debts.
In paragraph 361 of its report, the commission stated -
The balance-sheet prepared immediately after suspension showed that the bank was not in a hopeless position. Its capital was still intact, and some reserves remained. The first report of the liquidators showed an estimated surplus of assets over liabilities of about £379,000 after providing for anticipated losses. Vo doubt many of the advances were “ frozen “, hut had these been nursed, it is probable that a substantial proportion would have bean recovered. . . .
Not only could those advances have been recovered, but also the persons to whom the advances were made would not have been ruined. An appeal was made to the Commonwealth Bank at the time to come to that bank’s assistance, but the Commonwealth Bank was unwilling to nurse it through its difficult period. Therefore, it is necessary to provide a direct instruction, as proposed in the amendment, to the central bank that it is its duty to look after the interests not only of depositors but also of borrowers.
– How is that to he done ?
– In the case of the Primary Producers Bank of Australia it could have been done had the central bank acted as any central bank in the world should, and is empowered to do, that is, to make direct loans to the trading bank concerned. In any banking system the central hank is virtually the father who should look after his children, the trading banks, and advise them as to the policy they should carry out, and generally with regard to the trend of events throughout the world. It is the duty of the central bank, provided the trading banks do not trade unwisely and are willing to take the advice of the central bank, to nurse the trading banks through periods of difficulty, and thu* protect the interests of depositors and borrowers. Should, at any time, a trading bank ask its borrowers to reduce their overdrafts, undoubtedly, when a number of borrowers are concerned, they would make their views and opinions known to the central bank ; and under tinclause the central bank would have the right to investigate the affairs of the private bank and nurse it through its period of difficulty. Paragraph 365 of the report, relating to the Federal Deposit Bank Limited, is as follows: -
A few weeks before the suspension the Directors of the Bank sought assistance from one of the large trading banks, which released the amounts which it held on fixed deposit, and advanced up to 80 per cent, of the value of Commonwealth Government securities held by the Federal Deposit Bank. This proved to be inadequate, and an application for assistance was made to the Commonwealth Bank, which came to the conclusion that the circumstances were not such as justified Commonwealth Bank action.
In the light of the statement of the Treasurer last night and examples I have cited from the royal commission’s report, it is most essential to instruct the Commonwealth Bank that not only should the interests of the depositors be safeguarded but also those of the borrowers. I am sure the Minister assisting the Treasurer will be only too glad to accept the amend-‘ ment.
.- I do not share the confidence of honorable members opposite that this provision will result in the protection of the rights of depositors or the safeguarding of their interests. I see nothing upon which to base that confidence, either in the history of Australia’s politically controlled banking institutions or that of other countries whose banking policy has been subject to government control. Turning to Australia’s record, I refer, first, to the Agricultural Bank of Western Australia, which has been mentioned earlier in the debate, the affairs of which have been the subject of inquiry by two royal commissions. The latter revealed that the estimated losses on that hank’s operations amounted to more than £12,000,000. Secondly, the recent experience of the Government Savings Bank of New South Wales provided an example of the disastrous consequences which can flow from government interference with the banking system. The Government states that it proposes to protect the depositors, but experience has proved that government interference with certain banking institutions has resulted in a general weakening of confidence in the banking system and actual losses to the depositors. A sound banking system has been operating in Australia. If a weakness developed in one trading bank it was offset by the strength of others. Our eggs have not all been in the one basket. It is now proposed to effect a change, but the banking structure will be so constituted that weaknesses at the top will be spread throughout the whole system. Will that ensure a greater protection to the depositors than that afforded under the present system? The history of other countries where such a scheme has been tried illustrates the disaster which followed in the wake of centralized control. It is possible to have spectacular success under centralized control only if perfection is attained in administration. Unfortunately, however, neither human beings nor i he instruments created by human hands ere capable of perfection, and it is also possible to have a spectacular disaster from centralized banking administration -in fact the danger of failure offsets any advantages which might flow from such a system.
A curious illustration of the Government’s diffidence concerning the stability of government finance has been given when certain authorities have refused to accept government ‘bonds at their face value as payment of probate duties and income tax. The Government has not been prepared to accept its own bonds taken out in government loans. If the Government so doubts its capability to maintain economic stability in respect of moneys lent to it by way of war bonds, then I do not expect -lability to he established under a governmentcontrolled banking system. Therefore, I fail to see that the depositors in trading banks will have any greater security under centralized control than they would have if the present system were maintained - that is having a strong antral bank operating in friendly cooperation with private hanks.
Mr. BERNARD CORSER (Wide Bay; [12.22].- Division 2 of Part II. of the bill deals with the protection of depositors and illustrates the Government’s idea. It is clear that in the opinion of the Government in that respect there is a strong possibility of the private banking - system crashing - not because of the position of private banks over the years, but because of the banking legislation now before the House and the Commonwealth Bank Bill which it has recently passed. In that bill an attempt was made to slay the private banks, and it does not appear that the interests of depositors, borrowers, or shareholders will be protected. If, as is proposed, a great proportion of the capital of the private banks is taken from them and placed in the hands of their competitors, nothing but destruction will result. In the light of that possibility the Government has provided in clause 11 -
It shall be the duty of the Commonwealth Bank to exercise its powers and functions under this Division for the protection of the depositors of the several banks.
The mere fact of saying that the depositors will be protected does not provide machinery for private banks to continue their operations on the solid basis on which they were built up, or in the interests of depositors. The honorable member for Richmond (Mr. Anthony) has moved an amendment to ensure that each of the banks shall meet its liabilities to its depositors, so that if the structure is preserved and the Commonwealth Bank exercises an interest over these banks, the depositors, borrowers, and shareholders in them will be protected. The honorable member also suggests that the Commonwealth should recognize its obligation to those depositors and borrowers. If the banks crash as the result of the position occupied by the Commonwealth Bank - and some honorable members hope the Commonwealth Bank will get the trading banks into a position where they will crash - the interests of the borrowers will be affected. The capacity of the private banks to lend money has already been affected by the war-time controls which have frozen a substantial percentage of their deposits.
I see no reason why provision should not be made in this clause for the protection of depositors. It is inevitable that after this legislation has been in operation for a few years the deposits of the private banks will have been drained. Already, deposits totalling £230,000,000 are held by the Commonwealth Bank. The interests of depositors and borrowers can be safeguarded only by permitting the private banks the use of sufficient of their funds to enable them to operate at a profit, and they can do so only if they are able to lend money in competition with the Commonwealth Bank. It will be agreed that if for a substantial proportion of the money which the private banks derive from depositors, they can receive a maximum of 17s.6d. per cent. interest, they will not be able to lend money at a low rate of interest. These bills will hamstring the private banks. The degree to which the Commonwealth Bank “ raids” the funds of the private banks will determine the degree to which the capacity of those banks to lend money to the people of this country will be restricted. Already, by commandeering private bank funds amounting to £230,000,000, the Commonwealth Bank has restricted the activities of the private banks as lending institutions. A continuance of theserestrictions will not only prejudice the interests of the depositors, but also will handicap greatly the development of this country, because owing to the unprofitable rate of interest fixed, it will be impossible for the private banks to compete with the Commonwealth Bank in the open market. To protect the interests of borrowers, we must safeguard the interests of the banks. Any action which undermines the foundations of the private banking institutions of this country will injure both the depositors and borrowers. The restrictions placed on the private banks by this legislation, sooner or later, will necessitate the calling in of loans which, of course, will mean that the borrowers will suffer. They will suffer also because they will not be able to obtain money at the lower rate of interest which would be possible if the private banks had the additional £230,000,000 at their disposal and were able to disburse it in the form of loans.
Not only is that sum withheld from the private banks under war-time controls, but also it is available to their competitor, the Commonwealth Bank. Over the years, people have deposited money with the private banks and purchased shares in them, so enabling those institutions, with the protection of governments, to develop considerably. Why, in this period of our history, should we pass legislation which will prejudice the interests of these institutions by restricting their activities and permitting the Commonwealth Bank to engage in unfair competition with them ? Apparently, no consideration is to be given to widows and others who, with their meagre savings, have bought shares in the private banks. This legislation also shows a lack of consideration for industry because the interests of borrowers are the interests of industry generally. I support the amendment and hope that it will be accepted.
– I support the amendment which will protect both depositors and borrowers. The value of this legislation which has been brought down to integrate the central bank and trading bank systems of this country, is virtually destroyed by the political control over the Commonwealth Bank given to the Treasurer. However, that is something which a subsequent Parliament, in which we on this side of the chamber will have a majority, will alter. In the meantime, however, it is necessary to make this legislation as perfect as possible, so that the number of amendments which will have to be made when the Opposition occupies the treasury bench, will be as few as possible. Consideration of this measure shows that the Commonwealth Bank has a moral obligation to ensure that both depositors with and borrowers from, trading banks shall be protected adequately Clause 15 states - (1.) Except with the authority of the Commonwealth Bank, a bank shall hold tangible assets in Australia of a value not less than the total amount of its deposit liabilities in Australia.
That is to say, the Commonwealth Bank shall determine whether the tangible assets in Australia of a private bank are equivalent to the deposits in thatbank. Therefore if a bank is not able to meet fully its commitments to its depositors, it is obvious that the central banking authority will have fallen down on its job. There is no reason why the Commonwealth Bank should not protect both borrowers and depositors, and in fact the whole business of the trading banks. Cinder this bill provision is made for the central banking authority to hold, in “ cold storage “, approximately £230,000,000 of the deposits of the private banks, and if any trouble occurs, the degree to which the Commonwealth Bank will release those frozen deposits, will determine whether there will be a loss to depositors, and whether there will be a sudden call-up of borrowings, by the hank. Both of these may cause tremendous loss. But there is a second reason: For central banking purposes, the Commonwealth Bank controls millions of pounds which really belong to the trading banks, and therefore it has a responsibility in that regard. Thirdly, the Commonwealth Bank will have power, under this legislation, to maintain rigid control of the operations of the private banks. It will bc able to prevent them from increasing the total amount of their advances and deposits, and it will be able to determine the class of advances and the purposes for which they shall be made. In these circumstances, the Commonwealth Bank should ensure that depositors shall suffer no loss. Also, it should protect borrowers, because we must remember that, although a minor crisis may not cause the insolvency of the banks, it may place borrowers in an invidious position. When the first Balkan war broke out early in this century, a sudden demand for exchange occurred and, as the result, there was a big call up of advances that had been made in respect of one class of business in order to secure exchange for trading in wool and so on. Under such conditions, the difficulties of borrowers are greatly increased. Conaider the position of depositors with private banks and government institutions, such as a government savings bank. [ recall the bank smash of 1893, when depositors were selling fixed deposit slips for a fraction of their real value - 10s., 12s., 13s., or 14s. in the £1 - and the crash of the Government Savings Bank of New South Wales in 1930, when people were trying to sell their deposit books for lis. or 12s. in the £1 because they were dubious of their chances of securing their deposits from the bank. We must provide some definite guarantee against a repetition of such occurrences. We must try to establish public confidence in this new financial organization in which the central bank and the trading banks will work together. In view of the extra powers of control over almost all of the business of the trading banks, which this bill will give to the Commonwealth Bank, the amendment submitted by the honorable member for Richmond (Mr. Anthony) for the protection of small depositors and borrowers is reasonable and proper. If agreed to, it will establish a measure of confidence in the new banking system which otherwise will not exist.
.- The Opposition is dying very hard in this debate.
– The borrowers will die very hard under this bill.
– The borrowers have not died in this war. They have been very well catered for and their interests have been very well protected through the exercise of the powers which the Commonwealth now has. In the postwar years, borrowers and depositors will suffer no disadvantages under the provisions of this clause. The right honorable member for Cowper (Sir Earle Page) has raised the same old “ scare bogy “ about depositors selling their deposit receipts and bank books at a reduced rate. This is all part of the scare-mongering policy that, has been pursued by honorable members opposite for many years.. The clause is designed to retain a measure of Commonwealth control over banking in the interests of the private banks. We have had experience, both during the financial depression and during this war, of what can be done by vested interests when they have control of the financial system. The method of controlling banking in peace-time is of great importance to the people. All of the talk from honorable members opposite about political control of banking under this clause is mere “ hooey “. We know what can be done in the interests of the nation by means of controlled finance, because we have seen what this Government has done during the war. I have no desire to frustrate the efforts of private enterprise, but, in the final analysis, the Government, subject to the approval of Parliament, must control the operations of our banking system. That is the purpose of this clause, and therefore I support it. The right honorable member forCowper spoke of depositors selling their bank books at reduced rates and earlier in the debate drew a harrowing picture of their sufferings. That is the sort of spectre that has been raised by the honorable members opposite for many years in an effort to prejudice the public against any reform of the financial system. These intimidatory tactics are intended to make the people fearful that the Government will take their savings from them by some subtle financial process. Nothing of the kind is intended, and nothing of the kind will happen.
– It seems that the Government, in this bill, wants to play with a double-headed penny.
– This is not a “ twoup “ school.
– It might as well be one for all the effect produced by the well-considered suggestions of honorable members on this side of the chamber.
Sitting suspended from 12.45 to 2.15 p.m.
– When amendments are proposed which seek to transfer responsibility from the Treasurer to the High Court, the Treasurer and the Minister assisting him repudiate with a good deal of scorn the implication that any authority should usurp their powers. Yet, now, when an amendment seeks to place on the Commonwealth Bank and, incidentally, the Treasurer the responsibility for ensuring that the interests of depositors and borrowers shall be protected, as they are ostensibly but not actually by the clause, the aim is completely to evade that responsibility which ought to be theirs by virtue of the fact that the functions of trading and other banks are tobe so interfered with by this legislation that no longer will they be in control of their own managements. In particular, as other speakers have pointed out, there is the grave risk of borrowers as well as depositors having their interests very seriously prejudiced by the Commonwealth Bank, because of the possibility that it will be politically controlled. The provision in the clause that it shall be the duty of the Commonwealth Bank to exercise its powers and functions under this division for the protection of the depositors does not give an adequate assurance to borrowers and depositors, but is simply an expression of a pious hope that the Commonwealth Bank will do its best. If its best is not sufficient to save a borrower from having his advance called up by a bank which gets into difficulty, or to recoup deposits, the Government can merely say, “ We did our best “. and the depositor or borrower will be left completely at the mercy of financial wolves. The man in whom I am most interested is the borrower. The honorable member for Reid (Mr. Morgan) has stated substantial facts, which show that when the Primary Producers Bank went into liquidation the person who secured its assets, including the moneys owing to it - the mortgages of the borrowers - was John Woolcott Forbes. He sold many of those assets. Many persons who had borrowed money had to sacrifice their assets in order to repay their advances. All that we ask is that, if the Government interferes it ought to guarantee protection that will be definite and not merely a pious expression. The Minister assisting the Treasurer was a member of the famous Lang group in this Parliament when the Government of New South Wales was responsible for the failure of the Government Savings Bank of that State.
– That is a complete untruth. The Royal Commission on Monetary and Banking Systems contra dicts the honorable gentleman flatly. The interests which he supports were responsible for the closing of that bank.
– I shall quote from the report of that commission, to show that the infamous Lang Government which the Minister supported, destroyed the Government Savings Bank of New South Wales.
The CHAIRMAN (Mr.Riordan).That has nothing to do with the bill.
– It has everything to do with the bill. I am showing how borrowers and depositors were affected by the closure of the Government Savings Bank of New SouthWales. That is what I am trying to remedy by my amendment. I quote from the report of the royal commission -
The position is aptly summarized in the evidence of the President of the Government Savings Bank of New South Wales in the following words: - “ Lookingback, with a calm review, I consider that the tragedy of the closing of the Government Savings Bank can be attributed to a conjunction of forces, some of which were economic and unavoidable, and others which could have been avoided had political and party considerations been less short-sighted, and had the Government against which suggestions of a political interference with the Bank were made, not justified those forecasts by acts or proposals which weakened the Bank’s resources and financial stability, and thereby precipitated unnecessary withdrawals by the depositors on the principle of safety first.”
I am particularly anxious that the interests of depositors in, and borrowers from, the banks shall be safeguarded far more than they would be under the pious terms of the clause. In spite of the protests of the Minister assisting the Treasurer, we know that depositors in the Government Savings Bank of New South Wales sold their passbooks for 1 2s. in the £1. He claims that they were not compelled to do so, and that there was no lawto prevent their being paid in full.
– They were paid in full.
– Those who were able to wait were eventually paid in full. But at the time the depositors did not know how long they would have to wait, or whether they would ever be paid in full. The matter was in abeyance for quitea long time. Those who were desperate for money, and saw a chance of realizing on their pass-books, sold them for 12s. in the £1.
– Wealthy vested interests traded on their fear.
– I welcome that interjection, because I am sure that, holding such a view, the honorable member will support my amendment, the object of which if to prevent wealthy vested interests or anybody else from having a prior advantage which will enable them to secure the assets of depositors or borrowers. If the amendment is carried, the depositor or the borrower will know that, in the event of the failure of a trading bank or a government savings bank, the Commonwealth Bank will guarantee to him the full value of his equity, and that he will not have to wait in suspense for months, not knowing whether finally he will get his money in full or in part. Therefore, I invite the support of honorable members who have shown by their interjections a very proper concern for the interests of the borrower and the depositor. I realize, of course, that we are up against a brick wall. Nevertheless, our duty as an Opposition is to state the facts. I hope that the Government will consider the amendment further before the bill goes to the Senate.
Clause agreed to.
Clause 12 agreed to.
Clause 13- (5.) Where the Commonwealth Bank has. in pursuance of sub-section (2.) of this section, assumed control of the business of a bank, the Commonwealth Bank shall remain in control of, and shall continue to carry on the business of that bank until such time as -
Bank, it is no longer necessary for the Commonwealth Bank to remain in control of the business of the bank.
– I move -
That the following proviso be added to sub-clause (5.): - “Provided that where a bank is of the opinion that it can carry on and control its own business it may apply to a Full Court of the High Court constituted by not less than three Justices, to be released from the control of the Commonwealth Bank.”
The power taken under this clause is very necessary, and was recommended by the royal commission. Nevertheless, it is claimed to be too far reaching. It is also claimed that the terms under which a bank shall be controlled and managed by the Commonwealth Bank are too indefinite; in fact, there is no limit as to time, nor does the clause state any circumstances under which control shall revert from the Commonwealth Bank to the original management. It is obvious that the Commonwealth Bank should be empowered to intervene in the event of the indications pointing definitely to a bank having reached such a condition that it cannot meet its liabilities, particularly to its depositors, and, consequently, cannot provide an essential safeguard for borrowers. The royal commission pointed out that, on the failure of the Primary Producers Bank, had there been an orderly realization of assets under the direction of the Commonwealth Bank, the situation might have been saved, and certainly would have been improved. The recommendation of the commission is in paragraph 614 of its report, and reads -
We propose now to consider the action to he adopted in the case of a bank which is unable to meet its immediate obligations. This may be due to the refusal of that bank to accept the advice of the Commonwealth Bank, or it may be due to circumstances beyond its control. In such a case, we are of opinion that the Commonwealth Bank should take prompt action im order to prevent serious consequences to the whole system. Its first duty would be to make a complete investigation of the affairs of the bank in question, and as soon as possible to announce the result of its investigation. If the investigation shows that the bank is in a sound position, though temporarily embarrassed by insufficiency of liquid assets, a reassurance by the Commonwealth Bank to that effect would probably be sufficient to allay public alarm and prevent the development of a panic. In such a case, the Commonwealth Bank might go even further and undertake to guarantee the deposits, provided that it were given adequate security and some control over the bank, pending extrication from its difficulties.
That furnishes the necessity for the clause, and I am in wholehearted accord with it. But there are no conditions whereby a bank, having been assisted to escape from its difficulties, may regain control from the Commonwealth Bank. There should be a proviso limiting the time for which control may be exercised by the Commonwealth Bank. This would provide machinery by which it could have its affairs competently investigated. No doubt the decision of the High Court would be based on the facts and circumstances placed before it.
In other words, the merit of -the claim of the bank to carry on would be assessed by the High Court. I simply desire to provide machinery by which a bank could have its affairs thoroughly investigated after it had been taken over, in its temporary embarrassment, by the Commonwealth Bank.
– I move -
That the following new sub-clause be added : - (7.) In exercising any of its powers under this section the Commonwealth Bank shall not be subject to direction by the GovernorGeneral or by the Treasurer.”.
Like the Leader of the Australian Country party (Mr. Fadden), I have no quarrel with the general principle of the clause, but the powers which are taken in it are very far reaching. A bank may be taken over, not only when it informs the Commonwealth Bank that it cannot carry on, and not only when it becomes unable in fact to meet its obligations, but also when, in the opinion of the Commonwealth Bank, it is likely to be unable to meet its obligations. If the powers provided in this clause were to be exercised by the Commonwealth Bank independently of political direction, I should have no quarrel with them at all. The object of the amendment is to prevent section 9 of the Commonwealth Bank Act from enabling these powers to be in truth exercised by the Treasurer of the day. Unless some words are put in which exclude the operation of that provision of the Commonwealth Bank Act, I see nothing to prevent the Treasurer of the day from giving a direction which would have the effect of binding the Commonwealth Bank to take some action under this clause.
– The amendment is obviously necessary, having regard to the general set-up of this bill and of the Commonwealth Bank Bill which preceded it. The monetary and banking policy that the bank is to pursue is set out in no uncertain manner in clause 9 of the Commonwealth Bank Bill. As the Treasurer is virtually the financial dictator of the whole financial structure, the decision with regard to taking over a bank under the clause now under consideration should not be placed entirely in his hands. The decision to take over a banking institution in the manner set out in the bill should not rest exclusively and finally with the political head of the Commonwealth Bank. The amendment therefore is very desirable, because the decision should not be subject to political direction, either through the GovernorGeneral or through the Treasurer.
– The amendment is not acceptable to the Government. As the Treasurer (Mr. Chifley) said in his second-reading speech on the bill, he has no intention to interfere with the management of the Commonwealth Bank.
– He will not always be Treasurer. The Minister himself may occupy that position next month.
– Nor would I interfere with the management of the Commonwealth Bank. The Government considers that the position is completely safeguarded. This is purely a matter for administration by the Commonwealth Bank itself, in regard to which no government would interfere.
Clause agreed to.
Clause 14 -
The Commonwealth Bank, the Governor and Deputy Governor of the Commonwealth Bank, and any officer of the Commonwealth Bank, shall not be subject to any action, claim, or demand by, or any liability to, any person in respect of anything done or omitted to be done in good faith in the exercise, or in connexion with the exercise, of the powers conferred on the Commonwealth Bank under this Division.
– I move -
That, after the word “ faith the following words be inserted: - “and without negligence “.
This would require that the Commonwealth Bank, in order to enjoy the protection of the clause, must act not only bona fide, but also without negligence. I have some reason to believe that the Minister at the table (Mr. Lazzarini) may accept the amendment,
– The Government accepts it.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 15 - (1.) Except with the authority of the Com mon wealth Bank, a bank shall hold tangible assets in Australia of a value not less than the total amount of its deposit liabilities in Australia.
– I had occasion to point out earlier in the course of the discussion that the expression “ tangible assets “ is a curious one. It is a term of accountancy, but I have grave doubt whether it can be described as a term of art for the purposes of a statute.It ought to be made the subject of some definition. It has now been indicated to me that the Minister will be agreeable to an alteration to produce that result, and accordingly I move -
That the words “ tangible assets “ be left out, with a view to insert in lieu thereof the following words : - “ assets other than goodwill “.
– The Government will accept that amendment.
Amendment agreed to.
Clause, as amended, agreed to.
Clause 16 -
This Division shall commence on a dateto be specified by the Treasurer by notice in the Gazette.
– I move -
That the following words be added - “ and thereafter it shall be the duty of the Commonwealth Bank to exercise its powers under this Division solely for the purpose of regulating the volume of credit and currency in Australia in terms of the general objectives set out in section eight of the Commonwealth Bank Act 1945”.
Clause8 of the Commonwealth Bank Bill provides -
It shall be the duty of the Commonwealth Bank, within the limits of its powers, to pur sue a monetary and banking policy directed to the greatest advantage of the people of Australia, and to exercise its powers under this Act and the Banking Act 1945 in such a manner as, in the opinion of the Bank, will best contribute to -
the stability of the currency of Aus tralia;
the maintenance of full employment in Australia; and
the economic prosperity and welfare of the people of Australia.
Under the provisions in this division with regard to special accounts, a tremendous latent power is placed in the hands of the Commonwealth Bank to vary the amount of the deposits provided for under sections 18, 19, 20 and 21, and that power can >be very harmful to the financial structure of the trading banks. Under this division it would be possible to freeze the whole of the new cash in the trading banks’ hands since August, 1939, and up to 100 per cent, of any additional deposits from now on. This clause could cripple any appreciable increase of the trading banks’ loans. It could not only prevent one trading bank from increasing its own business at the expense of another bank, but it could reduce the whole of those banks to the position that they occupied in August, 1939, or to whatever position in the future the Governor of the Commonwealth Bank, acting under instructions of the Treasurer, might desire. Thus business could be forced away from the trading banks to the Commonwealth Bank, if the power were used except for the purposes laid down in clause 8 of the Commonwealth Bank Bill. Clause 20 of this bill states, inter alia -
Each bank shall . . . lodge in the special account established by it under this Division such amount (if any) as the Commonwealth Bank, by notice in writing, directs.
This bill goes far beyond the proposals of the Royal Commission on Monetary and Banking Systems, which, in paragraph 589, made the following recommendations : -
The Commonwealth Parliament should legislate to provide that the Commonwealth Bank Board, with the consent of the Treasurer, may require every trading bank to keep with the Commonwealth Bank a deposit of an amount not less than a percentage, specified in the requisition, of the liability of that bank to its depositors in Australia.
Each trading bank should be required to keep on deposit the same percentage. The board should have power at its discretion to vary the percentage from time to time within the limit fixed by the consent of the Treasurer.
The authority to requisition should not remain in force for more than six months after the consent of the Treasurer has been given, but the Treasurer should have power to consent to its extension for a further period not exceeding twelve months. In any period of two years, the power should not lie exercised for a longer period or periods than eighteen mouths.
The idea of the commission was that a large increase of the surplus funds of the banking system temporarily placed in the central bank should not be allowed to stay there without being dealt with in. some way other than a temporary provision for special deposits. If the public demands its money from the banks and is dissatisfied with the present banking system as it operates under the two banking measures, and is determined to have bank notes in exchange for its deposits, I venture to say that no government would be prepared to refuse the depositors their right to take out notes and hold them. When a run on deposits of the Savings Bank took place a decade ago, Sir Robert Gibson, then chairman of the Commonwealth Bank Board, told the depositor; that the bank would be prepared to pay notes to every depositor who asked for them. No bank would dare to refuse, because refusal would be regarded as default by the Commonwealth itself. If the depositors did demand payment of cash and the notes were being hoarded in private homes, it would be most embarrassing to the currency system of Australia. If the people had fear as to the stability of the currency - clause 8 of the Commonwealth Bank Bill specifically states that the purpose is to maintain such stability - there would be great danger in allowing the notes to be left in the hands of the people. If the people became afraid that the notes would lose their purchasing power, they would immediately try to convert them into real assets, and price levels might get completely out of control. That is what happened in Germany. Those notes and deposits are what may be called “ hot money “, money which if suddenly thrust into the open and used by the people to purchase goods would raise price levels and depreciate the currency. The Royal Commission on Monetary and Banking Systems say the danger in requiring the trading banks to make permanent deposits with the central bank and recommended that in any period of two years the power should not be exercised for longer than eighteen months because it considered that to allow the Commonwealth Bank to hold those fund9 permanently would tend to encourage the central bank to procrastinate in releasing them. If the recommendation of the royal commission were adopted the Commonwealth Bank would realize that it could not requisition deposits from the trading banks for more than eighteen months in a two-year period, and the Government would know that it was necessary to undertake funding operations in order to remove surplus cash for the time being from the economic system. That would be the normal course. The Government would float loans and withdraw the surplus cash. If it were found that the economic system required more cash, the Commonwealth Bank would then purchase the bonds, pay the cash back into the banking system, and thereby make it more liquid. This clause possesses great danger because it leaves the whole system open to a vicious political attack upon the banks. It is an unstable way in which to try to immobilize surplus cash, and therefore endangers the credit of Australia. It is with pleasure that I move my amendment providing that the central bank shall carry out the principles laid down in clause8 of the Commonwealth Bank Bill.
– The Government is satisfied that the amendment is unnecessary, because it is completely covered in clause 8 of the Commonwealth Bank Bill to which the honorable member for New England (Mr. Abbott) referred. That clause reads -
It shall be the duty of the Commonwealth Bank, within the limits of its powers, to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia and to exercise its powers under this Act and the Banking Act 1945 in such a manner as, in the opinion of the Bank, will best contribute to -
the stability of the currency of Australia ;
the maintenance of full employment in Australia; and
the economic prosperity and welfare of the people of Australia.
The Government is convinced that the matters mentioned by the honorable gentleman are thoroughly covered and that full protection is given by that clause.
Mr. FADDEN (Darling Downs- Leader - The whole of this division is most objectionable; it is one of the most dangerous features of the bill. It should be deleted, but I realize that that is impossible. I therefore support the amendment moved by the honorable member for New England. He said that the function of the central bank should be to look after the credit basis and, to a certain degree, the distribution of credit, but that the general distribution of credit should be in the hands of the trading banks. That was made plain in the report of the Royal Commission on Monetary and Banking Systems. It is obvious that the Government has adopted this rigid method in Division 3, in regard to special accounts in order to strangle and embarrass, as far as possible, the activities of the trading banks; which means the activities of private enterprise generally. No one has ever suggested that there should be indiscriminate release of the special accounts set up in war-time in order to prevent inflation. No one would ever dream of advocating that, because it would be totally unwise. But the method of release is entirely in the hands of the Commonwealth Bank and the Commonwealth Government. That the £240,000,000, constituting the special accounts, known as war-time deposits, has been invested, either in treasury-bills or in war loans, by the Commonwealth Bank is shown clearly in the balancesheet of the Commonwealth Bank. If the deposits were required in an expanding economy after the war, the distribution could be easily regulated by the Commonwealth Bank’s disposing of its securities on the open market. The money would go back into the banking system, but its career would end at the Commonwealth Bank. By taking the £240,000,000, the minimum sum of the surplus deposits, the Commonwealth Government will minimize the resources of the trading banks and inevitably divert that money into the general banking department of the Commonwealth Bank. Let us analyse the position in order to see the extent to which the general banking system will be affected by the rigidity of this measure. The £240,000,000 is composed of cash surplus which was wholeheartedly deposited by the private banks with the Commonwealth Bank during the war to prevent inflation, but that amount has been provided on the 1939 level. The surplus deposits over the deposits of 1939 were brought into the central bank by way of special deposits. But there has been a fall of the value of money since 1939; so the amount taken as a basis in 1939 has been reduced to a large degree. But apart from that argument, what is likely to be the position? The banks are pegged as to activity because they are pegged as to the volume of deposits. If the special deposits are not frozen in the central bank, they will be invested by it. If they are frozen it will be a very costly and unwise procedure, the details of which need not be discussed now. With the transfer from war to peace, which we hope will not be long in coming, there will be general expansion of the economic life of the nation, but, under the scheme for requiring special deposits, the banks are precluded from taking any part in that expanded business. ‘Consequently, machinery is to be set up to freeze the deposits and curb the activities of the trading banks m order to divert the control of the monetary system as far as possible into the hands of the Government bank. The trading banks will not have the wherewithal to pick up the expanded business which assuredly must come. This provision can best be described as a straitjacket on private enterprise.
Clause agreed to.
Clauses 17 to 19 agreed to.
Clause 20 (Lodgments in special accounts).
– I did not get any information last night from the Treasurer (Mr. Chifley) or his chief assistant (Mr. Lazzarini) in regard to certain remarks that I made. I asked whether the Commonwealth Government had the right to force a bank to lend money to it on any terms whatever. I pointed out that the Commonwealth Government had the power to acquire property on just terms. I asked whether property in the form of money could bo acquired on just terms seeing that money would have to he paid for that money. I did not get any answer. Perhaps it is asking a little too much of the Minister assisting the Treasurer.
– It is a constitutional question.
– I do not know of any power in the Constitution enabling the Commonwealth Government to compel people to lend things to it on any terms, just or otherwise. It has complete power to acquire, which means purchase. The Government will take full power under this legislation to compel banks to pay into a special fund at the Commonwealth Bank all excess funds acquired by them in their business. That is not laid down as a term of the granting of a licence, but it is something to occur if a bank has successfully carried on under a licence. I do not know where the Government has that authority. - The taking of that money from the banks prevents them from carrying on the vocation that they are licensed to carry on by the Commonwealth Government. Further the funds in the hands of the banks are. the funds of private people. They are people who do not desire to enter trade. Fearing the risks of investment in the open money market, they are content to take a lower return of hank interest, leaving the principal in the hands of people they trust to make good use of it. This provision will impose upon the private banks the obligation to lodge all accrued profits in special accounts. This restrains the banks from carrying on their lawful vocation. The Constitution gives the Commonwealth Parliament power to legislate on banking, but in this legislation the Commonwealth Government will be giving licences without conditions. There is no question that, the banks mentioned in the first schedule have the rights to carry on business. Having given them that right, the Commonwealth Government has no right to do anything which prevents them from carrying on business. The whole clause shows that the attitude of the Government is to secure by fair or foul means the utter destruction of the ‘banking system. It is prepared to violate the Constitution or anything else to do so. I hope that the time will come when it will be called to account. I hope that a decision will ‘be given that will tell the Government that the Australian Constitution cannot be trifled with.
– The honorable member for Barker (Mr. Archie Cameron) may have his opinion argued before the High Court, if this matter is ever challenged. My answer to him now is that under the Constitution, the Parliament of the Commonwealth has complete power to make laws relating to banking. ‘Under that power, the Government is enacting this legislation. The honorable gentleman and 1 hold different views on this matter, and I am not prepared to express an opinion regarding the constitutionality of this division. If the honorable member requires legal advice on the subject, [ refer him to the Leader of the Opposition (Mr. Menzies).
Clause agreed to.
Clause 21 - (1.) Except with the consent of the Common wealth Bank, a bank shall not be entitled to withdraw any sum from the Special Account established by it under this Division.
.- The effect of clause 21 is that the consent of the Commonwealth Bank will be required before a private trading bank may withdraw any sum from the special account established by it under this division of the bill. Some provision should be made to protect the legitimate demands of the customers of the bank. After all,, the money which is paid into these special accounts belongs to the depositors with the trading banks. I did not intervene in the discussion of the very interesting point raised by the honorable member for Barker (Mr. Archie Cameron) regarding the constitutionality of these special accounts, not because I have not views on the matter, but because at this stage L do not feel like making a long speech on a complex subject. Nevertheless, the point raised by the honorable member is a very real one, having regard to the terms of the Constitution. But putting that matter aside at this stage, I point out that this money belongs to the depositors with the trading banks, and they are entitled from time to time to call on the trading banks for their money. These moneys are not the assets, but the liabilities, of the trading ‘banks.
– The trading banks are only the trustees.
– Yes, and they are due to perform their obligations in relation to those liabilities whenever they are called upon to do so. To test the feeling of the committee on this matter, I move -
That, in sub-clause (1.) after the words ‘ Commonwealth Bank “ the following words be inserted: - “which shall not be unreasonably withheld in any case where the proposed withdrawal is for the purpose of meeting commitments to depositors “.
The effect of the amendment would be that the Commonwealth Bank would be precluded from a merely arbitrary refusal of consent in a case where commitments to depositors by the trading banks were involved, and they desired te get their money for the purpose of honoring those commitments. The proposal is not very complex. It seems to me to be not only the essence of good banking practice, but also simple honesty as between banks and) their customers, and as between both those parties and the Commonwealth Bank.
– The amendment which the Leader of the Opposition (Mr. Menzies) submitted might with advantage have been taken in conjunction with an amendment that I intend to move, because one states the principle and the other the method for implementing it. I move -
That the following words be added to subclause (1.): - “other than in the case of a decrease in the amount of the average of that bank’s total assets in Australia for any month below the amount of the average of its total assets for the preceding month or to enable that bank to follow the advance policy determined in accordance with section twentyseven of this Act”.
Unless the Government proposes to pursue the path of inflation to an unlimited extent, the deposits of the trading banks must at times fall. With the institution of the special accounts, any increase of the deposits of the trading banks will be automatically taken by the Commonwealth Bank. If deposits fall, the banks should have the right to withdraw an equivalent proportion from the special accounts. If they do not possess that right, they must decease their advances to customers, or sell other assets. That is how economic depressions begin.
Clause 21 is inconsistent with clause 27, which provides that the Commonwealth Bank shall have power to determine the lending policy that the private trading banks shall pursue. If the policy so determined by the Commonwealth Bank happens to be one of expansion, the trading banks should be placed in a position to use such portion of the moneys frozen in the special accounts as is required to enable them to conform to the policy prescribed in clause 27. No reasonable objection can be raised to this suggestion, as otherwise the Commonwealth Bank would be using two controls for an identical purpose, and that might cause all kinds of difficulties.
– The sole effect of clause 21 is to prevent the private trading banks from carrying out the functions that, under clause 8, they are licensed to perform. The purpose of abank in accepting deposits is to carry out the functions of banking. In other words, it will lend money on overdraft or mortgage, discount bills, and handle foreign exchange and securities. By compelling the private trading banks to place their surplus funds into special accounts and providing under clause 21 that the trading banks shall not be permitted to withdraw all or any of those surplus funds without the consent of the Commonwealth Bank, the bill is contradictory. As I stated, clause 8 confers on every trading bank named in the first schedule an unconditional licence to carry on business. That provision is in conflict with clause 21. However, it appears to be useless to protest to the Minister (Mr. Lazzarini), who is as reticent as the Tower of Silence that stood in Asia Minor in classical times. It was noted only for skeletons and vultures. When the account is rendered for this legislation, the taxpayers, not the Government or the misguided mortals who are supporting this foolishbill, will have to meet it.
Clause agreed to.
Clause 22 -
The Commonwealth Bank shall pay interest, at half-yearly intervals, to eachbank on the daily balance of that bank’s special account at a rate, not exceeding Seventeen shillings and sixpence per centum per annum, determined from time to time by the Commonwealth Bank with the approval of the Treasurer.
.- I move-
That all the words after “ rate” be left out with a view to insert in lieu thereof the following words : - “ determined from time to time by negotiation between the Commonwealth Bank and the trading banks, regard being had to the then general level of interest rates and the level ofcosts of conducting banking business “.
This clause deals with the rate of interest to be paid by the Commonwealth Bank to a private trading bank for the use of the money that it will be compelled to leave in a special account established under the National Security Regulations. The private trading banks generously agreed that, in the national interest in war-time, a percentage of their accumulated deposits should be placed in special accounts with the Commonwealth Bank. At the referendum last year, the Government endeavoured to obtain authority to continue its wartime banking powers in the post-war period, but its proposals were rejected by the people. Now the Government is attempting, in this legislation, to make its policy a permanent feature of the Australian banking system, to the detriment of the private trading banks. At present, the amount in the special account totals £240,000,000, and the rate of interest payable in respect of the money is 15s. per cent. The bill provides that the rate shall not exceed 17s. 6d. per cent. It does not guarantee that the private banks will be paid even 10s. per cent. The amendment is an endeavour to save the trading banks from destruction, and to avert the socialistic control of finance that must follow their collapse. Normally, interest rates in Great Britain are lower than they are in Australia,but the special war-time accounts in Great Britain bear interest at the rate of £1 2s. 6d. per cent. compared with 15s. per cent. in Australia. Therefore, strong exception must be taken to the incorporation, in permanent legislation of this nature, of an arbitrary maximum rate, because interest rates vary substantially from time to time. No figures are available to show the actual costs of those deposits, apart from the interest rates which the banks might pay. An investigation conducted in 1933 revealed that wages costs alone represented a charge of 13s. per cent, on the total deposits of the Bank of New South Wales. That indicates that the probable cost of handling this business, for which the Government provides a maximum rate of 17s. 6d. per cent., will be well above that level. Wages, general costs, and income tax charges have increased considerably since that investigation was made, and they may continue to rise, because there is no statutory limit on them. Therefore, the maximum rate fixed by the Government is unfair. The Minister assisting the Treasurer has said that the Government has power to legislate in relation to banking, but it is not correct for him to assume that it has power to steal the people’s money, which has been entrusted to the banks, or that any constitutional authority would interpret the Constitution as giving to a government which believes in nationalizing everything the power to nationalize banking. Safeguards have been provided for the people who deposit their money with the trading banks and who invest their savings in shares. Yet the Minister has the audacity to imagine that the Government can ignore those safeguards and steal the depositors’ money in order to crush the banks. The Dominion of Canada, which has a constitution similar to our own, and whose people hold the same beliefs as Australians, has enacted amending banking legislation recently. In the House of Commons, the Minister for Finance said that the bill represented the result of a thorough study of the existing banking law and of the’ changes which should- be made to enable the chartered banks to meet present-day needs. He continued - . . It would not satisfy those whose doctrines led them to advocate the nationalization of the banks as a step towards the overthrow of private enterprise, nor those who could not withstand the temptation of making free credit available in a way which would result in the debasement of their monetary system. . . .
Yet this Government is trying to destroy the private banks hy depriving them of their freedom to trade. They must inevitably sustain losses as the result of such action. The clause represents an endeavour to break public confidence in the private banks. I have no particular brief for those institutions, but since this country was first colonized they have operated, according to the fair British system of banking and have developed Australian credit to a degree of which we ought to be proud. They have made possible the construction of great trunk railway systems throughout the country, the establishment of profitable trade and commerce, and the development of our primary and secondary industries. They have also been able to provide sufficient money from the people’s savings for the Commonwealth to borrow £200,000,000 annually for the purposes of the war. My amendment is a means of preventing the Government from destroying these institutions. According to the Journal of the Parliaments of the Empire, the Minister for Finance in Canada also stated -
Dealing with the four arguments used by its advocates to support the case for bank nationalization, Mr. Ilsley said that they already had control in the hands of the Government through the Bank of Canada. The need for public direction of monetary policy did not necessitate the socialization of all their banks. It required only socialization of central ba’nking, which they had already achieved.
Our central banking system is already socialized, and that is all .that is necessary to cover the needs of the country. This clause provides for the elimination of private banks by destruction instead of by purchase. No doubt the Minister for Information will deny that statement, but he is an advocate of the destruction of the trading banks. This is the Government’s method of introducing nationalization of banking. My amendment is designed to prevent unfair treatment of the trading banks which have the right to operate under the Constitution, and in which the people have confidence. If the Government wants to fight them, it should do so fairly instead of attempting to strangle them out of existence. They should be permitted to remain in the field of commerce under reasonable competitive conditions. The Government seeks to bleed them white by taking away from them their opportunities to secure reasonable profits in the course of fair business. Nobody can say that my amendment is not just.
– I have much pleasure in supporting the amendment. Clause 22 is another example of the Government’s complete departure from the spirit and recommendations of the Royal Commission on Monetary and Banking Systems. During his second-reading speech the Treasurer (Mr. Chifley) emphasized frequently that this legislation was in conformity with the recommendations of the royal commission. I have not the slightest doubt that he did so in order to make the people believe that it proposed to implement the recommendations’ of the royal commission, of which he was a member, and which investigated for two years before announcing its’ decisions. However, nothing could be further from the truth. Everywhere in this banking legislation are specious misrepresentations of the commission’s recommendations. Clause 22 provides that the Commonwealth shall pay interest at a rate not exceeding 17s. 6d. per annum on the balances in the special accounts. That establishes a permanent ceiling on the price of money in these special accounts. Had the Government imposed an inflexible maximum on wages there would have been an angry outcry from the people. They would not submit to having their wages fixed for all time irrespective of increases of living costs and of wage increases in other countries. The same is true of prices of commodities. We could not limit prices to a never-changing level. However, that is what is proposed: in this clause in relation to the price of money. The amendmentproposes to liberalize the clause by providing that the interest rate shall be - “determined from time to time by negotiation between the Commonwealth Bank and the trading banks, regard being had to the then general level of interest rates and the level of costs of conducting banking business”.
The rigidity of the ‘bill as it stands is likely to cause the central bank and embarrassed governments to be very loth to release deposits into the economic system of the country, with the consequence that interest rates outside will be driven up in a black market. The Government is creating an outside black market which will tend to force up rates of interest against the community. In fixing a maximum rate of 17s. 6d. per cent., the Government thinks that it is providing cheap money for ever, whereas outside rates of interest will probably rise higher than the market rates would be if the surplus deposits of the banks were allowed to flow back into the community, keeping the banks’ assets in a. liquid state. All of this magnificent planning by bureaucrats who have no experience of life’s battles has only caused rigidity, instead of the flexibility recommended by the royal commission as being necessary to the swiftly changing economy of Australia which, affected as it is by drought, flood and fire, changes probably more quickly than that of any other country. The Government in Canberra is detached from the affairs of the nation, and leads a life almost like that of Phillip II. in the Escurial in Spain, where he was completely detached from the interests of his people.
– Order! The honorable member must direct his remarks to the amendment.
– The amendment shows that the Government is completely detached from a sense of reality and has no knowledge of what is happening outside the capital. .Segregated in Canberra, it leads an almost monastic existence, and knows little about the economy of Australia and the needs of the people.
.- As this clause is an important part of division 3 which relates to “ special accounts “, the committee is under an obligation to ascertain precisely what it means. One of the consequences that must inevitably result from the enactment of the clause is that the right of borrowers to a competitive service will disappear. It has been argued with force that the effect of the Government’s policy will be to restrict the capacity of the trading banks to the level of their operations as at
August, 1939. Obviously, if this be true, the trading banks will not be able to give their clients the service they formerly received. It will be unfortunate, also, that as .the result of this restrictive policy, the younger generation of Australians, including servicemen who will be returning to civil life, will be deprived of an advantage enjoyed by earlier generations of Australian. If the trading banks are to be restricted to operations at the level of August, 1939, they will have no opportunity to seek new accounts, except to the degree that their clientele shrinks through death or the cessation of business activity. Even that degree of flexibility will not be available to the banks for the attraction of new clients for, undoubtedly, many of their existing clients will desire to expand their operations and will take up the whole of the slack that will be created by death or the cessation of business operations. Consequently all new customers will be forced to trade with the Commonwealth Bank. Thus the Australian economy will lose from its banking system the competitive element which hitherto has been a feature of it. Quite clearly the operations of the private banks will be curtailed because of these considerations. Another disadvantage will be that clients who, for any reason, may be dissatisfied with the treatment they are receiving from their bankers, will be deprived of the opportunity to transfer their business to another bank. This freedom to transfer from one bank to another has been a safeguard, in the past, to small_ business men, primary producers and others. In the future, however, clients of banks will be deprived of this means of counteracting what they may regard as unjust or conservative treatment. So there will be introduced into the Australian banking system the rigidity which the honorable member for Now England (Mr. Abbott) has so properly condemned. I regard the amendment of the honorable member for Wide Bay (Mr. Corser) as a move in the right direction, because it focuses attention on one of the weaknesses of the Government’s legislation in regard to special accounts.
.- The reasoning of honorable members opposite on this clause is remarkable. As I understand the amendment, its purpose is to provide that ordinary rates of interest shall be paid on money deposited in special accounts under the provisions of this clause.
– No one has suggested that.
– Then what rate of interest is suggested?
– The market rate.
– In accordance with the recommendation of the Royal Commission on Monetary and Banking Systems.
– Well, is not the market rate the current rate? Of what advantage can these provisions be to the country if interest at the market rate is to be paid on depositors’ money placed in- the care of the Commonwealth Bank? The honorable member for Fawkner desires the Government to become a kind of fairy godmother to the private banks.
– That would probably be in accord with the honorable gentleman’s desires to establish a department of motherhood.
– The Leader of the Australian Country party need not be facetious. I would not be permitted, under the Standing Orders, to discuss the matter that he has mentioned; but I shall do so on a subsequent occasion. I have no quarrel with the proposition that the private banks should be permitted to pursue their normal activities within the framework of this legislation, but I am strongly of the opinion that the Commonwealth Bank also should be permitted, to develop its operations without the restrictions that have been imposed upon it in recent years. I do not regard this clause as unreasonable. The private banks will be paid interest at a certain rate on any of their depositors’ money which they place in these special accounts.
– It is their own money.
– I could say a lot about this being “ their own money “. It is, of course, the depositors’ money, acquired because of the progressive policy which has been applied by this Government in the last few years. If the money is left in the care of the private banks without any supervisory control, the private banks will proceed to expand credit to their own advantage, and, without doubt, they would exploit the community.
– The Government is seeking to exploit the depositors.
– The honorable member for Wilmot (Mr. Guy) was a supporter of the financial policy of the Labour party in days gone by, but now he is running away from it. If he continues to do so, we shall have something to say about it one of these days.
– I invite the honorable member to do so.
The TEMPORARY CHAIRMAN Order! The honorable member for Bass must confine his remarks to the clause and the amendment.
– The right honorable member for Cowper (Sir Earle Page) has said that this is the depositors’ money. I reply to him that honorable members on this side of the committee are as anxious as are honorable members opposite to protect the depositors’ money.
– “Hands off tie people’s savings.”
– That interjection cuts no ice. The Labour party is seeking to protect the people’s savings. I am sure that after this legislation has been in operation for a reasonable period it will be so popular that no government will dare to repeal it.
was Treasurer, the private banks made a voluntary and spontaneous agreement with the Commonwealth Bank whereby large sums held by the private banks were deposited with the Commonwealth Bank. Subsequently, the Curtin Govern ment promulgated certain national security regulations which converted a voluntary agreement into a compulsory arrangement. The Government is now seeking to freeze these assets or, as it puts it, to prevent the use of them for inflationary purposes by a sudden financial thaw. I have carefully examined both the Commonwealth Bank Bill and this bill to find any plan whatever for the thawing of these frozen funds, but J have not found one. The Government is now . seeking to use, illegitimately, money which waa placed in the care of the Commonwealth Bank, for that would be the result of the making of these funds available for the Industrial Finance Department and the general trading business of the Commonwealth Bank. This money was placed in the custody of the trading banks because the depositors had confidence in them, and the trading banks placed it in the custody of the central bank for the express purpose of assisting it to perform its central banking functions. Originally, the understanding was that the deposits would be so fluid that the trading banks would be able to utilize them to relieve any financial strain they might experience. The deposits were lodged at a nominal rate of interest, a rate very much lower than that which the banks have to pay to their depositors. It is extraordinary that, in such circumstances, there has been no plan to thaw them, or to make certain that they will not be responsible for a terrific wave of inflation, by being used as the central bank has used them during the war, with the concurrence of the trading banks. The trading banks are now told that these deposits are to be frozen, and that the interest rate on them is to be only 17s. 6d. per cent., no matter to what degree interest, rates may rise or fall. This rigid limitation of the interest rate is entirely wrong. If the Government were to introduce elasticity, such as was suggested by the royal commission, and was proposed by Mr. Theodore in the Central Reserve Bank Bill that he introduced in 1930, there might be some justification for the interest rate of 17s. 6d. per cent., and the matter could be discussed on its merits. But when the ostensible object of the whole of this division is to ensure that the trading hanks shall not make advances or have deposits exceeding those made or held in 1939, it is absolutely without merit. Therefore, I urge the acceptance of the amendment. Money for investment, particularly from abroad, can be best attracted by offering a reasonable rate of interest. Without such assistance, we shall have difficulty in providing the monetary resources that will be necessary for great future developments in this country, and shall bc obliged to “ pull ourselves up by our shoestrings”. Therefore, the Government should bring down a plan for the liquidation of these deposits, or make the interest rate elastic.
– The Government cannot accept the amendment. All that has been said by the right honorable member for Cowper (Sir Earle Page) has been repeated over and over again. The Government is determined that there shall be no interference with this division of the bill. The right honorable member said that these funds would be used b.y the Industrial Finance Department and the General Banking Division of the Commonwealth Bank. He knows that that is quite wrong, because ‘the Commonwealth Bank Bill specifically provides that they shall be kept in the central bank. One honorable member opposite has said that the money of the trading banks is being stolen, and amy her has referred to it as money belonging to depositors in those’ banks. I agree that it belongs to the depositors; and they will agree with me that it is much safer in the Commonwealth Bank than it would be in the trading banks. Deposits in the Commonwealth Bank would he insecure only if the country as a whole should fail to meet its obligations. It is not necessary for me to repeat what was said at the secondreading stage on this proposal. The clause is to remain as it now stands.
– I should be the last to ask the Minister to engage in vain repetition. I do not want him to do so; in fact, I wish that he would desist. But I should like to have from him, for the first time, answers to two questions. The first question is a very simple one: Why is it considered necessary to fix the upper limit of the rate of interest in this clause, although no such fixation occurs in any other clause of this bill or in any clause of the Commonwealth Bank Bill? I. shall welcome an answer to that question, and perhaps the Minister will give one. I have my own ideas as to why the maximum amount of interest has been stated here. It is true that there are references to interest elsewhere in this bill. Also, very wide powers are being given to the central bank to control the rates of interest that may be paid to or by a trading bank. But nowhere except in this clause is the rate stated. Having heard the humorous contribution to the debate by the honorable member for Bass (Mr. Barnard), one can have very little doubt as to why the amount was inserted in this clause. It was to satisfy a very vocal anti-trading bank section on the Government side. If only we can tell the people that these great, bloated, moneylending institutions will not get more than 17s. 6d. per cent, on their money, everybody will realize that we are really giving the banks a good, sound, democratic wallop. That is the real reason why, for the only time in any of this legislation, the interest rate has been stated ; although, as honorable members realize, the provision that is being made in this clause is designed to last in perpetuity. This is not a temporary war-time regulation. Oddly enough, the interest rate was not stipulated in the temporary wartime regulation dealing with this very important matter. It is only when the temporary and emergency provision is being converted into a permanency that an upper limit, is stated on the amount of interest that is to be paid. My second question is this: Why is it that in this clause, for the only time in both of these bills, distrust of the Treasurer (Mr. Chifley) is expressed by the Government? In the Commonwealth Bank Bill, the Treasurer was so much to be trusted that he was given power to overrule the Governor on any matter of financial or banking policy. Elsewhere in this bill, the Treasurer is so much to be trusted that he has a great mass of powers. The bank, too, has a great mass of powers. Clause 22, if amended in the way foreshadowed by the honorable member for Deakin (Mr. Hutchinson), by the omission of the reference to 17s. 6d., would read -
The Commonwealth Bank shall pay interest, at half-yearly intervals, to each bank on the daily balance of that bank’s Special Account at a rate determined from time to time - not by the trading bank, but - by the Commonwealth Bank, with the approval of the Treasurer.
On every other problem dealt with in the Commonwealth Bank Bill and this bill, the Government’s consistent view has been, “ You can trust the Treasurer ; you can trust the Commonwealth Bank “. Here, the two of them must act in concert; yet, when they act in concert, the Government says for the first time, “We cannot trust them ; therefore, we must insert a specific rate of interest “.
I repeat my questions. First, why should this be the one place in which an interest rate is named; and, secondly, why should this be the one provision in both bills in which the Treasurer is not to be trusted by the Government?
– I support the amendment. The clause, as drafted, can be best described as “ price fixation with a vengeance “. The Treasurer (Mr. Chifley) has sought to fix in perpetuity the compensation that shall be paid for the funds that have been lodged as special war-time deposits. There are two reasons for the fixing of a ceiling rate. The Leader of the Opposition (Mr. Menzies) has mentioned one of them, namely, that this ridiculous, arbitrary rate was fixed with a view to appeasing those who want full-blooded socialization of the banking system. The second reason is a very good one from the Government’s point of view, having regard to its policy, namely, that this is the cheapest and easiest money which any government has ever enjoyed ; it can be described as “ money from home “. During the war, and as a wartime measure, £240,000,000 was deposited on the lowest economic basis of 15s. per cent. That money has been utilized to assist the Commonwealth Government either with its war loans, for which an interest rate of 3i per cent, is paid, or with the issue of treasury-bills at the rate of 25s. per cent. - cheap money for governmental activities. Is there any wonder that the Government, consistently with its policy of nationalization on the cheap, wants to hold at the ridiculously uneconomic rate of 17s. 6d. per cent, “the £240,000,000 of trading bank funds that has made one of the greatest contributions to Australia’s war effort? The Commonwealth Bank has made a profit of £2 10s. per cent, by having obtained this money at 15s. per cent, and by having utilized an unstated portion of it - an unascertainable portion, so far as I am concerned - in the taking up of government securities at an interest rate of £3 5s. per cent. The Government has used the maximum possible amount of that £240,000,000 to finance the war, paying 25s. per cent, for it to the Commonwealth Bank, which pays 15s. per cent, to the trading banks. Is it any wonder that it wants to continue as long as possible that method even if it means the strangulation of the private banking system and private enterprise? It is nationalization on the cheap. The most emphatic exception must be taken to this provision. As the Leader of the Opposition has said, in no other part of this legislation has the rate of interest been prescribed. When we were discussing the Mortgage Bank Department we were told that the rate of interest could not be prescribed because such a flexible thing as interest rates could not be permanently prescribed. We were told the same story about advances to exservicemen, advances by the Rural Credits Department, the Industrial Finance Department, and every other activity of the Commonwealth Bank. We were told that it was dangerous to prescribe an arbitrary rate of interest permanently, having regard to the ever-changing conditions that control interest. Interest is governed by all sorts of economic factors. Price levels, economic expansion, inflation and deflation, and so on, all play their part in combination in governing interest rates. Yet, on an important matter like this, the Government, in order to be consistent with its policy of nationalization or socialization on the cheap, intends to continue at a prescribed parsimonious rate of interest the seizure of the surplus funds of the private banks. Nothing more inequitable has ever been presented to Parliament. The injustice should be avoided by the carrying of the amendment moved by the honorable member for Wide Bay (Mr. Corser).
.- Some of the statements made by honorable gentlemen opposite have been so exaggerated that I cannot forbear to take a little time to answer them. They centre mainly on the maximum rate of interest to be paid by the central bank on deposits made by the trading banks. As I pointed out in my second-reading speech, and as must be well known to all who have made a study of the subject, it is a cardinal principle that no interest is paid on the funds of member banks lodged with a central bank. So the statements made by the honorable member for Barker (Mr. Archie Cameron) and the honorable member for Wide Bay (Mr. Corser) about the stealing of the private banks’ funds are quite incorrect.
– I did not mention the word “ stealing “.
– But I did, and I adhere to it.
– I was not referring particularly to the statements made by the honorable member for Barker, but they were equally bad.
– They may have been worse, but that is not what f said.
– They carried the same implication. The statements made by honorable members opposite give an exaggerated picture of the position. The Bank of England, which honorable gentlemen opposite cite as the ideal central bank, pays no interest on the deposits of member banks.
– lt pays £1 Ss. per cent.
– I am not speaking of war-time deposits, but it pays no interest on the ordinary member deposits, the reason being that those deposits are used by the central bank not to weaken the ordinary banks but in order to safeguard them.
– But these special funds are in addition to the funds that would normally be deposited by the trading banks with the central bank.
– There has been no statutory provision as to what amounts of money they shall deposit with the central bank in order that it may ensure their solvency as member banks. The honorable member for New England (Mr. Abbott) was a member of the Royal Commission on Monetary and Banking Systems which recommended that the central bank should have the power to require the member banks to deposit with it a proportion of their funds. It did not specify the percentage. As one member of tie commission pointed out, the central bank, under that power, could call up 100 per cent, of the member banks’ deposits. Of course that would never be contemplated. The same remark applies to this provision, that the deposits called up in war-time as an anti-inflationary measure shall be held by the central hank, the Commonwealth Bank. That is for two purposes. The first is to ensure against inflation by the sudden release of deposits in the immediate post-war period. The second is to ensure the solvency of the Australian banking system.
– And the third is to ensure that those deposits shall never be released.
– Those deposits may be released as the circumstances require. This provision will strengthen the position of the private banks. It will be no hardship to them. The assets that they carry, not in cash, but in a readily realizable form and not required by them, will be deposited with the central bank. I repeat that it is unusual for central banks to pay interest on deposits of member hanks, because if they did they themselves would have to make profits, and it is a fundamental principle that profits shall not be a necessary part of central banks’ operations. It is understood of course that they do make profits, but it is provided in their constitution that they shall not be required to pay interest on deposits lodged with them, because that would require them to make profits. The Bank of Canada has been instanced. It requires the lodgment with the central bank of 5 per cent, of member banks’ time and call deposits. No means are provided by which that 5 per cent, can be recovered. The act contains no provision whereby the deposit can ever be got back from the central bank. The honorable member for Wide Bay (Mr. Bernard Corser) referred to the Canadian system as the ideal system. The fact is that Canada is learning from Australia. It had no central bank until 1938 when the Canadian Central Bank was established with slightly more than half of the capital held by the Canadian Government, and slightly less than half by the ordinary public, presumably banks and other financial institutions, but only three years later the Government of ‘Canada bought out the ordinary shareholders. That indicates that the Canadian Government realized that it must have more influence, not less, over the bank. In Commercial Banking Legislation and Control, by A. M. Allen and three others, the Canadian banking system is analysed. Under that system, inspectors are required every year to inspect every member bank and report to the Minister for Finance, whose responsibility it, is to take whatever action he thinks fit. About, that, this book says -
Government inspection was not introduced without great opposition on the part of the hanks, but clearly a detailed banking code presupposes some system of inspection.
The opposition to the Canadian banking legislation very much resembled the opposition to various clauses of this bill. Fears as to the influence that the Treasurer will exert over the Governor of the Commonwealth Bank have been expressed.
– Not influence, direct power.
– Yes. The Canadian system has been cited as more or less perfect, but, as far as political control is concerned, it is more advanced than the Australian system, as is shown by the following extract from the same authority -
The control of commercial banking in Canada is vested primarily in the Minister of Finance, not, as might have ‘been expected, in an independent, non-political inspectorate. This, however, has never been made a ground for complaint, as far as can be ascertained. iSo both points of the Opposition’s arguments are effectively answered. The only exception that can be taken to the specification of a maximum rate of 17s. 6d. pei- cent, as the interest to be paid on the deposits of member banks with the central bank is that generally central banks pay no interest at all on such deposits. As regards political control, a greater measure of political control is exerted in Canada than is proposed in this legislation.
The Macmillan report recommended that the private banks should be required to have on deposit with the central, bank 10 per cent, of their deposits, the reason being to strengthen the banking system, and the member banks. No one has ever denied, not even members of the Opposition, that the central bank should hold deposits of the private banks. The suggestion is usually made that a fixed percentage of deposits should be lodged. 1 consider that the method proposed in the bill is wiser. ‘ If a fixed percentage were imposed it . could happen that the banks would have a -large amount with the central bank, and yet be unable to meet depositors’ demands. By the provisions of this bill, they will be assured of being able to meet a sudden call. It is essential in any banking system wherein a central bank operates that deposits be made by the member banks. The deposits of the member banks with the Commonwealth Bank have been accumulated as the result of the peculiar system of financing by means of treasury-bills, as against the acquisition of notes against the transfer of securities. Should an emergency arise and the banks require to meet deposits atcall, there is not a shadow of doubt that, notwithstanding the refusal of the Government to accept a certain amendment, the Commonwealth Bank will go to their assistance in pursuance of its role as the protector of their solvency. As the centra] bank will have more than would be needed to meet that sudden demand, it would not be necessary to suspend the act in order to protect them as would be necessary if a fixed percentage were provided by law. It is, of course, possible for not only the war-time deposits but also all increased assets that the banks obtain in the post-war years to be called up by the Common wealth Bank. I dealt with that aspect in my second-reading speech, tt is true that the Commonwealth Bank could do that, but it is far more likely that that would be a reserve power which would enable the central bank to enforce its will if necessary on the member banks Even honorable members opposite admit that the central bank must have power to enforce its will on the member banks. The ordinary methods of open-market operations, or variation of discount or interest rates do not provide the perfect power. I believe that, under this clause the central bank will have very great power to force its will upon the member institutions so that it shall achieve its real purpose as a central bank. The clause is wise; and the rate of interest prescribed is not out of keeping with what should be expected from a central bank, except, that, it is greater than is customary. Generally the clause will not impose upon the private banks the hardships suggested by the honorable member for Wide Bay, whose statements were a gross exaggeration of the position.
Mr. hutchinson (Deakin) [4.15].- The honorable member for Perth (Mr. Burke) stated that a central bank should not seek to make profit*. With that opinion, I agree. The function of a true central bank is to maintain financial stability, and always to have liquid funds at its disposal. A trading bank, because of its profit-making motive Seeks business. But the particular institution to which the honorable member referred is rather a peculiar type of central bank, because it is presided over by a Governor, who has a dual role to fulfil. Despite their conflicting functions, he must conduct not only a central bank but also a trading bank. In one capacity, he is not to seek profits; in the other, he must endeavour to make profits. The Treasurer (Mr. Chifley), who was a member of the Royal Commission on Monetary and Banking Systems, admitted that his object was to “get” the private trading banks. Therefore, in our discussions of this subject, we must realize that the central bank proposed by this Government will not be a normal central bank, and that the Treasurer will control the various activities of the Commonwealth Bank.
Clause 22 deals with the rate of interest to be paid on the special accountsestablished by the private trading banks. The money in those special accounts wasaccumulated by the trading banks as the result of the normal flow of war-time finance. All political parties agreed that the war should be financed by three methods, first, taxation, secondly, loans-, and thirdly, central bank credit. Under war-time conditions, the deposits of the private trading banks expanded, and in order to avoid secondary inflation, the Commonwealth Bani, “froze” some of their funds for the duration of the war. That action had the approval of the trading banks. The Government was not obliged to promulgate a national security regulation for the purpose of compelling them to establish special accounts. They agreed also that the rate of interest payable on the money in the special accounts should cover only the cost of collecting it. An interesting situation will arise in the post-war period, and no Minister has yet referred definitely to it. The people will require money for many purposes, such as the erection of homes, purchase of furniture, repairing of ships, and installation of new machinery for farms and factories. If the funds in the special accounts are to be frozen, the trading banks will not be able to provide their clients with the necessary financial accommodation, and’ people must have recourse to the General Banking Division of the Commonwealth Bank. That will give rise to many difficulties. For instance, the Commonwealth Bank does not have branches in every part of the country and, therefore, must make the existing trading banks its agent, although they are its competitors. Otherwise, primary producers will be forced to come to the cities for the purpose of interviewing the managers of branches of the. Commonwealth Bank. In respect of the development of our rural areas, that will be a retrograde step. The managers of branches of the Commonwealth Bank in the cities will not have an intimate knowledge of the problems of primary producers.
The CHAIRMAN” (Mr. Riordan).Order! I ask the honorable member to relate his remarks to the clause. “Mr. HUTCHINSON. - I mentioned that matter because it will be most important in the post-war period. Regarding variable deposits, I am not sure that the ordinary open market dealings of the Commonwealth Bank after the war will be sufficient to enable it to control the entire credit structure of the country. Therefore, some recourse will have to be made to deposits. In the past, the Commonwealth Bank and the trading banks have been able to agree upon the most advantageous procedure to adopt, and I see no reason why similar co-operation should not exist in future. The wealth of experience accumulated by the trading banks over many years would then be available to the Governor of the Commonwealth Bank. The Government should have approached the problem in that manner, because banking can succeed only on the basis of cooperation and goodwill. When the amendment now under consideration has been disposed of I propose to move that in clause 22 the words “ not exceeding seventeen shillings and six pence per centum per annum “ be left out. The Government should accept that amendment, because it is in conformity with its policy. If the Minister rejects it, I can only conclude that the Government will not accept any amendment submitted by an honorable member on this side of the chamber. Any proposal to fix an arbitrary rate of interest that may remain for five or ten years, cannot be defended. Administrative costs might rise and the interest payable on deposits in the special accounts, which belong to the clients of the banks, would be less than the cost of collecting the money. Therefore, the trading banks would be paying to have their funds “ frozen “ by the Commonwealth Bank, although some of the money may be used in competition with them for business. All honorable members hope that the standard of living will be raised after the war. When that occurs, the administrative costs of the trading banks must increase; but the clause provides that a rate of interest not exceeding 17s. 6d. per cent, per annum shall be paid on the deposits. No valid reason can be adduced for rejecting my amendment, and I ask the Minister (Mr. Lazzarini) to discuss it with the Treasurer and the Government’s advisers.
.- In the absence of any substantial reply from a Minister to the arguments adduced by honorable members on this side of the chamber, I am compelled to analyse the reply given by the industrious young member for Perth (Mr. Burke). In his comparative adherence to orthodox banking principles, as he believes, he considered, that the virtual confiscation of the surplus funds of the private trading banks constitutes the reserve for the central bank. He then proceeded to endeavour to justify the use of such funds for the purposes of a central bank. If one could believe that that was the purpose in fixing interest at a rate not exceeding 17s. 6d. per cent, per annum for the moneys in the special accounts, I might agree with the honorable gentleman. However, I propose to review briefly how those funds came into the possession of the Commonwealth Bank.
Unless some control had been exercised over surplus funds which flowed into the trading banks as the result of inflationary finance methods, during the war, a serious degree of secondary inflation would have occurred in Australia. For that reason, during the .regime of the previous Government, the funds of the trading banks, for the purposes of borrowing and lending, were “ pegged “ at the levels of August, 1939. In the interim, the excess funds paid into the special accounts by the trading banks amount to more than £240,000,000. Now, honorable members on this side of the chamber desire an explanation of the treatment that the Government proposes to accord to those funds after the war. Honorable members recognize that in war-time, those moneys must remain frozen, because the materials and labour required to expand the consumption of goods for the purpose of absorbing the funds, are not available. This amendment deals not with war-time conditions, but with the post-war period. By fixing the rate of interest payable on the funds in the special accounts at 17s. 6d. per cent, per annum, the Government has acted arbitrarily, and has thereby indicated the shape of things to come for the trading banks. The honorable member for Perth appeared to believe that the accumulated funds, exceeding £240,000,000, would be used as the reserve fund of the central bank, for the stabilization of the activities of the private trading banks and the protection of borrowers and lenders. But that is not so. The so-called central bank is to be used as a competitor of the trading banks, and will, therefore, serve the dual purpose of a reserve bank and a trading bank. For a central bank to undertake such a function is like a marine insurance company accepting insurance premiums from ship-owners against the risk of shipping losses, and investing those premiums in ships on its own account. It would not be a satisfactory kind of insurance company for a ship-owner. Similarly, this will not be a satisfactory kind of reserve bank for the trading banks, because it will use their funds in the ordinary process of trade, subject to all the economic risks to which the banks themselves are subject. It will offer no security as a reserve bank. The fallacy of the argument of the honorable member for Perth that these funds are to be used as funds for the reserve bank is easily exposed. An examination of the bill shows that the trading banks are to be restricted to the financial position which they occupied at the 3rd September, 1939. It is a truism that a bank never stands still. It must grow or shrink; it cannot have a static existence. Consequently, the banks which supply the funds to which this discussion relates must either progress or lose ground. Under this bill, they will have no chance to progress, and therefore, the notion of the Government supporters that the funds are really held for reserve bank purposes is mere fiction.
– Of course the word “ fiction “ strikes harshly on the ears of honorable gentlemen supporting the Government, who do not realize the purport of the clause. They are helping to throw a spanner into the financial system without realizing what will happen when the wheels begin to turn. I support the amendment moved by the honorable member for Wide Bay (Mr. Corser). Any Government which desired to be fair would accept it. I shall repeat the proposed amendment in case some honorable members opposite might be disposed to support it.
– This is sheer stonewalling. The honorable gentleman will not be allowed to do too much of it.
– At any rate, the Minister has not stone-walled. He has not given an intelligent reply to any proposal made from this side of the committee. Therefore, the only course open to members of the Opposition is to examine the bill, form their own conclusions, and pray to God that some private member will give a satisfactory explanation of the clauses. It is positively disgraceful that honorable members should be treated in this manner by a Minister who remains dumb, making no attempt to reply to constructive suggestions by members of the Opposition.
– The honorable member is not present in the chamber very often. He disfranchises his electors two weeks out of three.
– If the Minister disfranchised his electors twelve months out of twelve they would not notice any difference. I respectfully ask the Minister on this occasion to answer the Opposition’s questions. The Leader of the Opposition has courteously asked him why an interest rate has been fixed in this clause, when no interest rates have been fixed in any other clauses of this bill or of the Commonwealth .Bank Bill. Why has the authority for the fixation of interest rates been taken out of the hands of the Treasurer in this clause, when, in every other clause, the authority of the Treasurer is supreme? If the Minister will give a fair reply there will be no stone-walling on this side of the committee.
– It is not my intention to delay the passage of the bill. The only desire of honorable members on this side is to make the Government play the game fairly. The honorable member for Perth (Mr. Burke) took exception to my remark that, under this clause, the Government would virtually steal the special deposits. That is true. It will be equivalent to stealing, because the private banks will have to pay more for the money than will be returned by the Government in the form of interest. In other words, the Government will obtain the money at less than cost. The honorable member for Perth also claimed that the national banking system of Canada was based on Australian legislation. The Canadian Minister for Finance made that clear on the 2nd May, when the new banking legislation was before the Canadian Parliament. According to the Journal of the Parliaments of the Empire, the Minister said -
Business nien accustomed to dealing with banks would bear witness to competition that took place between the banks in attracting accounts. The charge of monopolistic combination conspiring to. restrict credit was a figment of the imagination. The fourth point was the argument that nationalization of the banks was the first step necessary in the liquidation of private enterprise and the ushering in of the Socialist State. There they had the crux of the whole case. To those who were convinced Socialists it must seem obvious that control of the banks and other financial institutions was an indispensable instrument for the liquidation of free enterprise and for ushering in the new dispensation. But the relation between banker and borrower was a private, confidential relationship. A large proportion of their citizens would not want any government to intervene. A far more important point was the undesirability of having the credit of each of them and of every business assessed by civil servants working under political control for a government banking monopoly.
This Government is doing the exact opposite of what has been done .by the Parliament of Canada. Far from following in thi3 Government’s footsteps, the Canadian Government stands exactly where this Opposition stands, in the the interests of our banking institutions. I hope that the Minister will accept my amendment. By so doing he will show that the Government is willing to give the private banking institutions an opportunity to compete in the open market. Fair competition i3 in the interests of the people. If the banks be allowed to operate properly, the people, if they are not treated generously by the Commonwealth Bank or any other bank, will be able to take their business elsewhere. The Government apparently wants to kill all freedom of enterprise and institute a socialistic state. This clause is designed to close down the free banking institutions of the nation.
Mr. HUTCHINSON (Deakin) [4.42 J. - I move -
That the words “ not exceeding Seventeen shillings and sixpence per centum per annum “ be left out.
I shall not repeat what I have previously said. If this amendment be accepted by the Government, it will remove the provision for a limit on the interest rate, thus allowing for any increased administrative costs in the future. The rate of interest will be determined by the Commonwealth Bank, with the approval of the Treasurer (Mr. Chifley), which will be in line with what the Government has provided in other clauses of the bill and also in the Commonwealth Bank Bill.
– This clause is in keeping with the rest of the division to which it belongs. It will take from the trading banks certain moneys, which represent liabilities of those banks to their customers, and will place them compulsorily in the custody of the Commonwealth Bank. This will be done without any question of consent by the trading banks . and without any regard to whether it is in accordance with the terms of the banks’ 1 licences. A certain rate of interest will be fixed for the use of the money. The Commonwealth Government has no power to impose such a condition as this. If it compels the trading banks or any other institution to deposit money with it, then it must pay a fair and reasonable rate of interest. Otherwise the banks will be in the same position as the Europeans in the Balkans during the Turkish invasion, when the janissaries were composed of Christian boys who had been brought up as Moslems to fight on behalf of the people who were destroying their own nations. I recall the fall of Acre, when Nur-ed-Din the Mamaluke told his opponents that he had bought his daughters for five dinars apiece and had paid for them with his own gold ! That will be the position of the trading banks under this clause. They will be compelled to deliver their assets to the Commonwealth Bank, but they will not be fairly remunerated for the use of those assets, even assuming that there is constitutional power to compel them to deliver the fluids. I am not aware of the existence of any such power, and I hope that its non-existence will be proved in the proper way in due course. This clause and the other clauses of the division which have been agreed to are absolutely indefensible. It is utterly immoral that the Commonwealth Government should compel a private individual or corporation to deliver property to the Commonwealth, the transaction being thinly disguised by the delightful term “lodgment”, and that the remuneration for the delivery of that property should be only a fraction of the rate of interest which would be payable on the open market. The private banking institutions have done a great deal for the development of this country, but it now appears that their own funds are to be used for their destruction.
– They have made the ammunition wilh which they will be shot.
– That is so. The whole thing savours of the revolting incidents in some countries overseas lately when people were obliged to dig their own graves.
– It reminds me of sending scrap iron to Japan.
– If the honorable member desires an argument on scrap iron I am quite willing to accommodate him.
– The honorable member for Barker would “ scrap “ on anything.
– I have been awaiting an opportunity to discuss scrap iron. When an appropriate occasion arises to do so I shall take advantage of it. The action of the Government in relation to these special accounts is quite indefensible. I hope, therefore, that the amendment will be accepted, but I suspect that it will not be;
– I cannot allow this clause to pass without voicing the strongest protest against it. In effect, the Government is imposing a capital levy upon the private banks, as it will do on private citizens, when it deems the time opportune to do so. The Government action in regard to these special funds amounts, practically, to confiscation. No indication has been given that these funds will be returned to the private banks. Only a trifling rate of interest is being .paid for the use of the money. In the days to come, these funds will be used by the Commonwealth Bank in competition against the trading banks. In other words, the private banks will find that their own funds are being used in competition against them with crippling results. In a very real sense, the private banks are digging their own graves, or, as the Leader of the Australian Country party (Mr. Fadden) put it, they are making ammunition with which they will be shot. The purpose of these twin banking bills is to give effect to the weird financial ideas of some honorable gentlemen opposite who think that, by this means, prosperity and happiness will be achieved, whereas, of course, the reverse will be the case. The people will be disillusioned very quickly, for the Government has available to it very few persons with adequate administrative experience and commercial training to engage in the banking operations on which it is proposed that the nation shall be launched. We know very well that under other clauses of the bill certain action is to be taken with regard to overseas exchanges. Public money, as a matter of fact, is to be used in a multitude of new ways to the disadvantage of the people. The Commonwealth Bank Board is to be disbanded and, in short, caucus will be in a position to control the currency. Inevitably, this must result in the discouragement of private enterprise. Development will be hindered in every way at a time when the United Kingdom Government is endeavouring to revive trade with Australia. The savings of the people will be in jeopardy as soon as this legislation becomes operative. I make the strongest protest against the Government’s plan to cripple the private hanks. Certain members of the Government are infatuated with their strange financial dogmas. They believe in complete socialism, whereas people of common sense realize that socialistic enterprise is never so efficient as private enterprise.
– The honorable member for Balaclava must confine his remarks to the clause which deals with interest rates.
– The Scriptures tell us that the labourer is worthy of his hire. [ am submitting to the committee that money is also worthy of its hire. The Government is proposing to take large sums of money from the private banks, nit it is not willing to pay them the current interest rates for the use of the money. The banking institutions may be strong enough to survive this most unfair treatment, but I offer my strong protest against the application of such a policy.
.- I support the amendment and protest strongly against the confiscation in which the Government is proposing to indulge. The tactics of the Ministry savour strongly of those of the buccaneers of days gone by and are repugnant to every right-thinking person in the community. An aggregate sum of about £240,000,000 has been taken from the Associated Banks. If the Government had the slightest desire to act fairly it would agree to pay a reasonable rate of interest on this money. No one can deny that the operations of the private banks have been most beneficial to the rural areas of Australia, which could not have been developed as they have been but for that assistance. The private hanks have won a reputation for fair dealing. The people of our country districts acknowledge that a great deal of the expansion and development that has occurred has been due to the wise financial policy of the private banks. In these circumstances it is only fair that a reasonable rate of interest should be paid on the special deposits which the trading banks have lodged with the Commonwealth Bank: It is most unjust that this money should he held without proper compensation. The policy of the Government in this connexion savours of buccaneering, and bears all the marks of the confiscatory procedure that may easily be read into the statement made by Lenin in April, 1917-
We are all agreed that the first step in this direction (i.e. towards communism) must be such measures as the nationalization of the banks. Let us put into practice these andi similar measures and we shall see. We cannot at once nationalize the small consumers’ concerns - i.e. one or two wage workers, or place’ them under a real workers’ control. Through, the nationalization of banks they may be tied hand and foot.
– I ask the honorable member to confine his remarks tothe clause and the amendment.
– The clause deals with interest rates, and I am contendingthat fair interest should be paid on the special accounts held by the Commonwealth Bank for the trading banks. There can. be no doubt that the policy of the Government is the ultimate socialization of banking. It regards this as the “ open sesame “ to complete socialization. In. my opinion the taking of this money without the payment of proper interest is tantamount to confiscation.
.- The use of the words “ confiscation “ and “ buccaneering “ by honorable members opposite is entirely unjustified. The Commonwealth Bank has dealt generously with the trading banks in relation to these special deposits. We all know that the money which the Commonwealth Bank is holding in these special accounts has accumulated as the result of war activities. It may be assumed that the private banks do not desire to make huge fortunes for their shareholders out of war conditions, yet they were holding huge sums on behalf of the shareholders which they could not possibly reinvest or use in a normal way. In my opinion the Commonwealth Bank acted generously in paying 15s. per cent, on the money so held for the private banks.
– Dick Turpin did that sort of thing many years ago.
– Honorable gentlemen opposite must have obtained advice on these matters from modern Dick Turpins. The Government is not proposing to confiscate this money. When the private banks hold excess funds in current accounts for their customers they make a charge for keeping, the accounts, but the Commonwealth Bank is actually paying the private banks 15s. per cent. for keeping their accounts. The Commonwealth Bank has also acted generously to the private banks in that it has discounted treasury-bills to them amounting to more than £70,000,000, and allowed them 30s. per cent. on the transaction as compensation for the fall in their other investments due to war restrictions on building mortgages, &c.
– Since when?
– During the war period.
– The honorable member should study economic history.
– In my opinion an explanation is needed as to why the Commonwealth Bank compensated the private banks in this manner. The private banks could not have reinvested the money. Yet, in spite of the two generous gestures to which I have referred, honorable gentlemen opposite persist in saying that the Commonwealth Bank is confiscating the funds of the private hanks. Let me ask them what would happen if this huge amount of £240,000,000 did not remain under the control of the Commonwealth Bank. Apart from this legislation, the money could not remain with the Commonwealth Bank after the conclusion of the war and the expiration of the term during which the National Security Regulations will remain in force thereafter. If this vast amount of money ceased to be controlled if might be released almost in a lump sum, with a resultant wholesale inflation.
– It is ridiculous to suggest such a thing.
– I take it that even the Leader of the Australian Country party considers that some measure of control should be continued. In the course of time, undoubtedly, this money will gradually flow back to its owners who are the customers of the private banking institutions, but unless that process is gradual, inflation will undoubtedly occur. The purpose of the Government in enacting this part of the legislation now before us is to ensure that inflation shall not occur. I consider that the Government is acting fairly in providing the rate of interest set down in the bill. If these accumulated special funds should become available immediately after the war for investment in speculative activities there would undoubtedly be a period of boom and burst, with a consequent depression such as followed the last war. We do not want another such depression with its wholesale poverty and unemployment. Therefore, this is a very reasonable proposition. The method chosen is the only logical one by which the matter could be handled. A fair rate of interest is allowed.
.- Government supporters profess to believe that the rate of interest specified is fair, even though it is solely a token rate on a large block of capital which is intended to be seized. To those of them who regard as valuable the report of the Royal Commission on Monetary and Banking Systems, and contend that the recommendations of the commission are being implemented in this legislation, J refer paragraph 594, in which reference is made to London funds. The commission pointed out -
The central bank might from time to time he faced with the embarrassing possibility of its London funds being exhausted whilst some of the Australian trading banks were still more than adequately supplied with funds in London.
That position could arise in Australia; therefore, it has a bearing on the rate of interest. Discussing various proposals under which money could be acquired by the Commonwealth Bank from the trading banks, the commission pointed out that there could be a compulsory loan to the central bank. That is what the Government here proposes. In that respect, the commission made this observation -
It is difficult to specify any definite figure for the latter purpose … In the cast of the additional amounts required for building up its reserves, the Commonwealth Bank should be prepared to pay the trading banks the rates at which they are willing to sell to their most favoured customers.
– That relates to foreign exchange.
– Whether it be called exchange, funds or capital, the principle is the same. In the one case it is capital in England, and in the other case it is capital in Australia. The honorable member will not gain by attempting to sidetrack. The point is, does the Government wish to pay a fair rate of interest or a rate which more or less will amount to robbery of private institutions? If it intends to take capital from the banks, it should be prepared to pay to them the interest that they would receive from their customers in the ordinary way of business.
Clause agreed to.
Clause 23 - (1.) The Commonwealth Bank may, from time to time, by notice in writing, require each bank to transfer to the Commonwealth Bank an amount of sterling equivalent to such proportion as is specified in the notice of that bank’s excess receipts of foreign currency as at the close of business on a date specified in the notice, not being more than twenty-one days before the date on which the notice is given. (3.)Each bank shall comply with the requirements of any notice under sub-section (1.) of this section within seven days after the receipt of the notice by the bank.
– This clause contains a provision which deals with the transfer to the Commonwealth Bank of foreign currency held by a trading bank. On the face of the clause, a possibility exists to which I want to direct the attentionof the Minister. I am perfectly certain that it has not been contemplated by him or by the Parliamentary draftsman. The clause reads -
The Commonwealth Bank may, from time to time, by notice in writing, require each bank to transfer to the Commonwealth Bank an amount of sterling equivalent to such proportion as is specified in the notice of that bank’s excess receipts of foreign currency as at the close of business on a date specified in the notice, not being more than twenty-one days before the date on which the notice is given.
If we want to see what the expression “ excess receipts of foreign currency “ means, we turn to clause 26, in which it is defined in these terms -
The possibility that exists is this: The Commonwealth Bank might give notice to a trading bank that it was to transfer to the Commonwealth Bank the whole of its excess of foreign currency as at a certain date . Subsequently, it might give an exactly similar notice in respect of a period two or three days later. There is nothing in the clause to prevent it from doing that. If it should give a notice which related to a date separated from the first date by only a few days, the net result would be that the trading bank would be under the obligation to pay twice approximately the same sum-. Take a concrete case: Let us suppose that the amount of the excess receipts of foreign currency as defined, held by a certain bank, is £1,000,000 on the 1st June and is still £1,000,000 on the 8th June. Let us suppose, then, that the Commonwealth Bank gives notice that the excess receipts as at the 1st June are to be transferred to the Commonwealth Bank. There is nothing in this clause to prevent its giving notice that the excess receipts as at the8th June shall be transferred to the Commonwealth Bank.
– It would then be less than £1,000,000, surely !
– No. So long as there is no restriction on the period of time which can be covered by these notices, there is nothing to prevent the Commonwealth Bank from giving a notice while another notice is still current, relating to a date only two or three days from thedate originally selected, and relating also to exactly the same sum of money. The effect would be that the £1,000,000 would become payable twice.
– If the excess receipts amounted to only £1,000,000, they could not be payable twice.
– Unless the bank chose to break the statute, it would be under the obligation to pay £1,000,000 twice. I have circulated an amendment to insert after the expression “ from time to time “ in the first line of the clause, the words “ but not more frequently than once in any period of 28 days “. As the Minister will see, that amendment would obviate this danger. The date specified is to be not more than 21 days before’ the date of the notice, and it has to be complied with within seven days of the giving of the notice. Therefore, a total period of 28 days is involved in the transaction. If we were to provide that the Commonwealth Bank was not to give a notice more than once in any period of 28 days, it could never give a notice twice in respect of substantially the same sum of money. ‘ I have raised the matter, not because I imagine for one moment that this is contemplated by the Government or the Commonwealth Bank, hut because I consider it to be proper that attention should be drawn to the fact that, without some safeguard, this provision could be used in order to give a direction for the payment twice of one sum of money, and that, in such circumstances, a hank whose obligation might otherwise be £1,000,000 would encounter an obligation of £2,000,000. I suggest that the Minister have the matter examined by the Parliamentary Draftsman. I am certain that, if he agrees with me that :that is a possibility on the present wording, the clause ought to be altered.
– I consider that the possibility mentioned by the Leader of the Opposition is not likely to occur in practice. Nevertheless, I promise to have the matter examined carefully by the Parliamentary Draftsman, and to draw the Treasurer’s attention to it before the bill goes to the Senate.-
– In regard, to the point raised by the Leader of the Opposition (Mr. Menzies), let us suppose that a bank, at the commencement of the division, has London funds amounting to £12,000,000 sterling. On two consecutive Mondays subsequently, its London funds amount to £13,000,000 sterling. Excess receipts of foreign currency on each of those days would amount to £1,000,000 sterling. The Commonwealth Bank, comfortably within its time limit of 21 days, could requisition twice the excess of £1,000,000, thus reducing the bank’s London funds to £11,000,000 sterling. The weakness is in the wording of the clause, as it relates to the time factor. Acceptance of the amendment suggested by the Leader of the Opposition would overcome an obvious oversight in drafting.
– T move -
That, in sub-clause (3.), after the word? “ the bank “, the following words be inserted: - “or within such other period as is specified hy the Commonwealth Bank “.
The Treasurer (Mr. Chifley) has stated in his explanatory notes that this division of the bill follows the recommendation of the Royal Commission on Monetary and Banking .Systems and, in addition, is designed to continue the power temporarily possessed by the Commonwealth Bank under the National Security (Exchange Control) Regulations to requisition the overseas funds of the trading banks. The commission recommended, not legislation on the subject but an extended exchange mobilization agreement which would not embody the principle of requisition that is here incorporated. From this recommendation, Professor Mills and Mr. Abbott dissented, considering it unnecessary. The ostensible purpose of the division is to enable the Commonwealth Bank to requisition from trading banks any London funds exceeding the amount held by them when the division comes into force. The London funds of the trading banks have reached low levels during the war, mainly due to the Commonwealth Bank’s handling of export transactions, the wartime requisitioning arrangements, and the voluntary surrender of £12,500,000 Australian to the Commonwealth Bank just before the outbreak of the war. Prior to the war, the Commonwealth Bank was assured of adequate London currency through the exchange mobilization agreement entered into between it and the trading banks in August, 1930. By means of this agreement, the trading banks have co-operated in providing whatever funds have been found necessary for the service of the overseas debt. It is perfectly obvious that the Commonwealth Government and the Commonwealth Bank are attempting to establish an economic dictatorship. They hope to control all credits and exchange, as well as all exports from this country. If they are placed in a position to keep down the prices of primary products under this provision, the people concerned will be very seriously affected. The Government has two objectives in view, one, the nationalization of every industry of which it can get control, and, two, the keeping down of food prices on behalf of the members of the industrial unions that support it. Professor Gustav Cassel, the noted Swedish economist, said -
Economic dictatorship is much more dangerous than people believe. If we allow economic freedom and self-reliance to be destroyed, the powers standing for liberty will have lost so much in strength that they will not be able to offer any effective resistance against a progressive extension of such destruction to constitutional and public life generally.
And if this resistance is gradually given up - perhaps without people ever realising what is actually going on - such fundamental values as personal liberty, freedom of thought and speech, and independence of science, are exposed to imminent danger.
What stands to be lost is nothing less than the whole of that civilisation that we have inherited from generations which once fought hard to lay its foundations, and even gaw. their life for it.
The whole division should be deleted in favour of an exchange mobilization agreement as recommended by the Royal Commission on Monetary and Banking Systems. The period of 21 days within which the Commonwealth Bank can requisition funds is too long. It would introduce a large element of uncertainty into the trading banks’ management of their oversea transactions. The period in which requisition can be made should ‘be shortened. The statutory time limit of seven days, imposed by sub-clause 3, is too severe, as a hank may be unable to complete its internal arrangements in time, and would thereby incur the heavy penalty of £1,000 for each day by which it exceeded the limit. The amendment is proposed to give the Commonwealth Bank some discretion in the handling of foreign funds, exchange, and credits needed to finance our imports and: exports, and I hope that it will be accepted.
– There must bo some time limit. Officers of the Commonwealth Bank assure me that seven days is enough for the transactions to be completed. Therefore, there is no need for the time to be extended.
– I am disappointed at the Minister’s reply because the amendment is surely, on the face of it, very reasonable. The whole matter simply comes down to this: an order isgiven to the trading bank to transfer thosemoneys. No doubt it is quite true that: in most cases the transfer can be effected, within seven days, but, every now and then, there will be the uncommon case in. which seven days will be- too short. All. the amendment does is say to the Commonwealth Bank, not to the trading: bank, “ If you feel, in special circumstances, that seven days will be too short,, we authorize you to extend that period “. I can hardly imagine anything morereasonable than that. The Commonwealth. Bank makes the requisition. If it thinks that the time should be extended to ninedays, why should it not be able toextend it?
.- The Government will’ accept the amendment. The draftsman tells me that “ within such other period could mean within a lesser period, and. I suggest that the word “ further “ be substituted for “ other “.
– I direct the Minister’sattention to the fact that I used “further “ in the amendment that I circulated.
Amendment amended accordingly, and as amended, agreed to.
.- I move -
That, at the end of the clause, the following proviso be added :- “ Provided that no requisition of foreign currency in terms of this section shall be such as to reduce the excess balance of foreign currency held by any bank below the amount of surplus foreign currency held at the date of the commencement of this Division.”.
The argument advanced by the Leader of the Opposition (Mr. Menzies) on. the amendment which the Minister (Mr. Lazzarini) promised to have examined applies equally to this amendment. My proposal is substantially the same as that suggested by the right honorable gentleman, but I believe that mine would clarify the position better and make quite certain the amount of London funds that the trading banks would be entitled to regard as their particular reserve. The clause must be read in conjunction with clause 26, which defines “ excess receipts of foreign currency “. In general, it means the funds in excess of those in the hands of the banks in London at the date of the passage of this bill. The London funds at present are at a low ebb. The receipts from the wool clip will not be in until August.
– They will not begin to come in until then.
– That is so. They will then flow in for some time. At present the London funds are at their very lowest. Therefore, from the point of view of the Commonwealth Bank, it would be an advantageous time at which to fix the maximum London funds that can be held by the trading banks. If the amendment were adopted the necessity for various other parts of this clause would be avoided. It is stated in very definite terms that the amount of London funds at the date of the passing of this legislation shall be the normal, and that anything beyond that amount shall become liable for transfer at the command of the Commonwealth Bank. I hope that the Government will accept either this amendment or that of the Leader of the Opposition; both have substantially the same purpose, which is that the London funds of the trading banks shall not be reduced to the point at which it will be impossible for the banks to carry on commercial operations on behalf of the people for whom they use those funds.
– I support the amendment moved by the honorable member for Richmond (Mr. Anthony). I agree that this clause must be considered in conjunction with clause 26, which gives the Commonwealth Bank the power to requisition foreign currency to a degree far greater than is intended. It seems to pay no regard whatever to the need for any limit. Unless a limiting proviso be added to clause 23, as the honorable member for Richmond has suggested, serious injustice may be done to the trading banks. “ Surplus foreign currency” means surplus London funds.
Clause 26 states -
In this Division - “ excess receipts of foreign currency “, in relation to any bank as at any date, means the amount by which the amount of that bank’s surplus foreign currency as at that date exceeds the amount of its surplus foreign currency as at the date of commencement of this Division;
In respect of any date on which such an excess exists the Commonwealth Bank can requisition up to 100 per cent, of that excess. I do not think that was really intended. The Leader of the Opposition (Mr. Menzies) drew attention to the anomaly and to the fact that, under the wording of the previous clause, the Commonwealth Bank could actually requisition twice the excess. I also gave a hypothetical case to show how that could be brought about. The Government ought to accept the limit proposed by the amendment, because, when this division is implemented, which will be immediately the bill is passed, the foreign funds or London funds, which are the same thing, will be at their lowest possible point, because the proceeds of the Australian wool clip will, as the honorable member for Richmond (Mr. Anthony) said, only commence to go into the London funds early in August, and the funds will not reach their peak until some time in November. Therefore, by the provision suggested, the Government surely will be at an advantage in having the basis fixed at the lowest possible level.
– The amendment moved by the honorable member for Richmond (Mr. Anthony) is quite unnecessary. It would achieve nothing more than is already provided for. The bill does not take away from the banks anything in the way of London funds which they possess at the commencement of this proposed act - only the excess thereafter.
– But money will be going into the London funds all the time. It is only the excess about which we are complaining.
– It is the excess beyond the amounts at the commencement of the act.
– But the London funds are at their lowest at present.
– They are at zero and will be so until later in the year. The Minister says “ only the excess “. Of course it is. It is the excess above an abnormally low datum.
– That is because of the definition in clause 26.
– Then it seems that clause 26 is the clause on which to deal with this.
– Then it will be too late.
– Order !
– That is the explanation, and the amendment cannot be accepted.
Clause agreed to.
Clause 24 agreed to.
Clause 25 -
The Commonwealth Bank may sell foreign currency to a bank -
where the Commonwealth Bank is satisfied that that bank has complied with the provisions of this Division and is likely to suffer a shortage of foreign currency; or
if the Commonwealth Bank considers that, for any other reason, it is desirable to do so.
. -I move -
That all the words after “ Commonwealth Bank “, first occurring, be left out with a view to insert in lieu thereof the following words: - “ (d) shall sell foreign currency to a bank where that bank has complied with the provisions of this Division and is in the opinion of the Commonwealth Bank likely to suffer a shortage of foreign currency to meet legitimate commitments; “ (b) may sell foreign currency to a bank if the Commonwealth Bank considers that for any reason it is desirable to do so.”.
The main difference between the amendment and the clause as it stands is that the word “ may “ is altered to “ shall “. The principle involved, as far as itseffect upon the Commonwealth Bank is concerned, is retained, because the clause says “ where the Commonwealth Bank is satisfied “. The amendment uses the words “ is in the opinion of the Commonwealth Bank likely”. Therefore, it comes once more down to the judgment of the Commonwealth Bank. Nothing is taken away from the Commonwealth Bank, but the amendment does make it mandatory that if in the opinion of the Commonwealth Bank the trading banks need money for legitimate requirements that money shall be made available. Clause 23 imposes an obligation on the trading banks to comply with a request of the Commonwealth Bank that they shall hand to it certain excess London funds, but there is no obligation on the Commonwealth Bank in clause 25 that it shall make funds available to the trading banks for legitimate trading purposes. In the main, the great bulk of the overseas funds comes into the possession of the trading banks, because they conduct most of the trading activities of the Commonwealth. It is vitally important that the trading banks should not be uncertain at any time regarding their ability to carry out the necessary trading functions of the nation, and meet the requirements of particular customers. I hope that on this occasion the Minister will give a thoroughly considered reply to my representations, because the Opposition has been treated most discourteously during the consideration of thisbanking legislation. Repeatedly, the Minister has failed to give any explanation for rejecting amendments which we have submitted. Although our numbers may be small, we represent more than 40 per cent, of the total electors of Australia, and our submissions should be treated with greater courtesy than they have received. I urge the Minister to accept the amendment.
.- The Government will not accept the amendment. The purpose of this clause is to place the control of foreign currency in the hands of the central bank, and the effect of the amendment will be to remove that control.
– That is not correct.
– Under the clause as drafted, the Commonwealth Bank will be able to do everything that the honorable member seeks to achieve in his amendment. The substitution of “ shall “ for “ may “ would limit the powers that the central bank may exercise.
– The Minister (Mr. Lazzarini) is displaying great consistency by rejecting the amendment submitted by the honorable member for Deakin (Mr. Hutchinson). Members of the Opposition are becoming weary of moving amendments designed to improve this bill, but the Minister’s stubborn attitude will not discourage them from performing their function as a virile Opposition. We have spent many hours examining the bill because we recognize our responsibility to make the best possible out of the worst and most dangerous measure that has ever been introduced in this Parliament. Time will prove the wisdom of my words.
Under this clause, the Commonwealth Bank is under no obligation to sell foreign exchange to the trading banks in return for the Commonwealth Bank’s right to acquire foreign exchange from them’ When honorable members refer to the Commonwealth Bank, they should not believe that they are discussing a proper central .bank, because this institu1 1011 will be a most vigorous competitor with the trading banks, and will use their money for that purpose. If this clause bc not amended, dealings in foreign exchange in Australia will be destroyed. A monopoly will be held by the Government by virtue of the politically controlled banking machine. The Government could use the clause for the purpose of rationing imports. Has the Government considered the effect that this provision will have on the primary industries which must sell their surplus produce abroad? This clause is another instrument to drive private enterprise out of competition with the Government. If only to keep our primary industries on a sound basis, we must maintain a free exchange market. No country can expect to have one-way traffic, and that statement will apply with greater force after the war, when we shall be obliged to find markets under different conditions from those which assisted us, as members of the British Empire, before the war. The British market was our best outlet, but it has been affected by war-time conditions. In future, we shall have to compete in the open markets of the world. In order to ensure any degree of success, we must have a stable economic plan, and the first requirement for that is a free market in foreign exchange. The implementation of this measure can be far more destructive to Australia than an unwise customs tariff policy. For those reasons the amendment must, be supported.
Evidently, the Government ha3 no regard for the repercussions from its policy. The Minister merely replies, “ The Government has made up its mind. You can talk until you are black in the face, but we shall not accept any amendments”. It does not matter how disastrous the results of rejecting the amendments may be, so long as the Government can implement its policy of socialization by driving private enterprise out of competition with politically controlled activities.
– I strongly support the amendment. This clause should be wholly complementary to clause 23. The Commonwealth Bank should be prepared to sell freely to the trading banks foreign exchange at the rates which it quotes. If the Commonwealth Bank does not recognize its obligation, the rate of exchange will be pegged at a false rate, and the whole community will thereby encounter difficulties. This clause is grossly unfair to the trading banks, because their receipts not only from wool but also from other primary produce exported, are derived mainly in the period, the 1st July to the 31st December. The value of the Australian wool clip at present is about £70,000,000 per annum. Australian iamb exports occur between the 1st September and the 31st December, and the bulk of the beef exports between the 1st July and the 31st December. At the time when the London funds of the trading banks are at their lowest ebb, the Government is seeking to provide that any excess of funds in future shall be made available to the Commonwealth Bank, although that institution will not sell London funds freely to the trading banks in order to finance necessary imports. The reason is sinister. The whole of the economic structure of Australia is related to a factor to which Mr. Melville referred in his evidence before the Royal Commission on Monetary and Banking Systems, namely, the fixed exchange rate. He said -
To make the problem simple enough for practical purposes we must select one factor in the economy and attempt to fix it, at the same time endeavouring, ils far as possible, to make every other factor in the economy adapt itself to the fixed’ factor.
Having regard to the necessity for Australia to trade on friendly terms with other countries, her need for overseas capital, and the convenience of traders and financiers, it seems best in her case to fix the exchange rate and adapt the economy to that fixed rate. In order that the exchange rate may remain fixed, however, it is necessary, first to accumulate a substantial balance of funds in London, and then to expand credit in Australia when that balance increases, and to contract it when the balance falls.
In this instance, the central bank will not be obliged to make available to the trading banks funds which were taken from them in the past. Because, for better or for worse, Australia must preserve a fixed exchange rate, as this policy is too rigid. Australia will become a Fascist state, in which importers will not be permitted to enter in advance into commitments for imports, because at any time the Commonwealth Bank may refuse to make London funds available to the trading banks for the purpose of financing such purchases. When other countries, including Germany, refused to sell overseas funds to people who legitimately required them, black markets flourished. The result of the policy was to wreck the whole national economy. This danger cannot be overcome by creating central bank credit. Referring to this subject in his evidence, Mr. Melville said -
Apart from this, the policy gives us no means of testing how much central bank credit should bc made available or how long we should wait for a dose of inflation to be effective. If in the face of intractable unemployment we impatiently turn the handle of the printing press and spend undefined sums on public works, an unhappy outcome is only too probable.
Ee realized that economic problems cannot be settled by purely monetary means. The human element must enter into consideration. But this clause is most inhumane and detrimental to Australian trade. It is opposed to the principle of the Atlantic Charter, and the Mutual Aid Agreement. It will prevent the free conversion of. Australian currency into overseas currency, and will he grossly unfair to Australian traders.
– I support the amendment moved by tile honorable member for Deakin (Mr. Hutchinson). I am glad to see at the table the Minister for Repatriation (Mr. Frost), whose State of Tasmania will be affected by the manipulation of London funds at the present time and in the immediate postwar period, perhaps more than any other State. The Minister is one of many Tasmanians who, unfortunately, were engaged in the apple and pear industry, the market for which in the’ United Kingdom was completely destroyed as the result of the war. That market will have to be revived in some way, but from inquiries that I have made I fear that very little has been done so far to reestablish the growers’ connexions in the United Kingdom. The British markets for dried fruits and other primary products also have disappeared. It will be necessary for private enterprise to take up this matter in the most energetic way and explore every avenue with a view, not only to securing the United Kingdom market again, but also to entering the markets of other countries. Unless the amendment be accepted, this clause will place one more obstruction in the way of those who already have enormous difficulties confronting them in the restoration of the 1939 overseas trading position.
– The honorable member need not worry. The matter has been investigated.
– The Minister’s assurance is not very comforting. There is not a sign of action anywhere. If the war ends this year, the apple-growers of Tasmania, and other Australians who normally depend upon United Kingdom markets for the disposal of most of their products will find that those market? have been lost to other countries. They will have a very sad awakening, if they depend upon the assurances of the Minister. The position requires more than investigation; it demands action. The people who will provide that action aw private business men, not government administrators. It is most important to open the gates as widely as possible to overseas trade in the interests of our post-war development.
– I ask the honorable gentleman to address himself to the clause. It deals with the sale of foreign currency by the Commonwealth Bank.
– Exactly ! Foreign currency is of value only insofar as i1 pays for goods. That is all that foreign currency is intended to do; it is tied up with our export trade, and, therefore, when thinking of foreign currency, we must think in terms of butter, apples, meat and other goods.
– And every item of imports.
– Yes. It involves the whole of our export and import trade. I was interviewed yesterday by a man who wanted to establish a market for canned fruits in the Middle East. He was an Air Force officer who had been a business man in civil life. He had been through the Middle East and had seen wonderful opportunities for the sale of Australian canned fruits, provided that the markets were seized immediately.
– Is he the first one to go through the Middle East looking for markets?
– He is a man of active mind and keen foresight. He said that, prior to the war, Australian canned fruits were practically unknown in that area, but, as the result of shipments being sent to our armed forces, they had become favorably known in the last three or four years. Wo should exploit that market now, before the United States of America, Canada, South Africa and other countries establish their connexions and their goodwill. Nothing has been done about it. Private enterprise will do the job, but it will need foreign currency for the purpose. Governments cannot do it. If the Government will not accept the amendment, it will show that it is developing a totalitarian outlook, in. that it wants to do everything through its own agencies and deprive private enterprise of every opportunity to assist in post-war reconstruction. If the Government believes that it will promote prosperity by preventing private organizations from doing jobs that they want to do, we shall achieve very unsatisfactory results in the post-war era.
– I should not have spoken again but for the explanation given by the Minister assisting the Treasurer (Mr. Lazzarini), who made the mistake that I warned him not to make again. His interpretation of my amendment was completely wrong.
Perhaps I did not explain it clearly enough to him. At any rate, he tried to make it appear that I was attempting to make it mandatory on theCommonwealth Bank to sell foreign exchange in any circumstances whatever, thus detracting from the power of the Commonwealth Bank. I ask the Treasurer (Mr. Chifley) to examine the amendment, and clause 25 as it stands. I am urging that the word “may” be altered to “shall”. This would give more point to the clause and impose an obligation on the Commonwealth Bank. If the amendment wore agreed to, the amended clause would read as follows: -
The Commonwealth Bank shall sell foreign currency to abank -
This would not take away the basic power of the Commonwealth Bank in regard to exchange because of the later words “ in the opinion of the Commonwealth Bank”. The amendment would improve the clause, and would reassure the trading community - an important consideration which we should always keep in mind. I ask the Minister assisting the Treasurer whether, after this explanation and, I hope, after having read the amendment again, he will announce the result of his further consideration.
– “ May “ must remain.
.- -On behalf of the honorable member for New England (Mr. Abbott), I move -
That paragraph (a) be left out.
Paragraph a is as follows : -
The paragraph is linked with clause 23. It imposes no obligation on the Commonwealth Bank to sell foreign currency, although the bank will be able to acquire such currency from the other banks. The honorable member for Deakin (Mr. Hutchinson) has dealt fully with this aspect of the matter, except that the honorable member for New England (Mr. Abbott) proposes to move for the insertion of a new sub-clause in the following terms: - (2.) The Commonwealth B’ank shall sell foreign currency to a bank where that bank has complied with the provisions of this division and is likely to suffer a shortage of foreign currency to meet legitimate commitments.
The same arguments apply to this amendment as applied to the amendment submitted by the honorable member for Deakin. A trading bank may be placed in a most invidious position. Its customers may have entered into commitments overseas, but in the meantime, owing to the requisitioning of foreign currency by the Commonwealth Bank, the private bank may be left without overseas funds to finance the’ transaction. In other words; its funds for overseas trading may have been seized by the Commonwealth Bank.
– Particularly having regard to the point which, the right honorable member made earlier, that the requisitioning authority is itself a trading bank in competition with the other banks.
– That is so. The country should be reminded continually that the Commonwealth Bank is not merely a central bank. Its activities will be extended so vigorously, and with such encouragement from this Government, that it will become the most active trading bank in the Commonwealth. Whatever the safeguards that may apply to the generally accepted practice of central banking they must be divorced from any consideration of this politically established and controlled form of hanking. The Government should consider the disadvantages that may apply to the trading community by virtue of these foreign exchange provisions. The Commonwealth Bank will be able to acquire the surplus foreign exchange of the trading banks, but there will be no obligation on it to sell foreign exchange. Foreign exchange might be withheld from private banks in such circumstances as to cause temporary dislocation of their business. Apparently, the Government has paid no regard to - seasonal and other factors, which also must be taken into consideration. That is the reason for the proposals of the honorable member for New England. The amendment has all the force of the amendment which was proposed by the honorable member for Deakin, and the same arguments apply to it.
– And the same answer.
– But the Minister has not replied. That is the trouble. We have to use every means at our disposal to force some .sort of reply from the honorable gentleman, even if it is only a repetition of his negative to every amendment submitted by the Opposition. I hope that the honorable member will think the matter over during the dinner hour, and I am sure that, if he does so, he will recognize the dangerous form of the clause as it stands and accept the safeguards that will be provided by the proposed amendment. Such an alteration would be in the interests of the future economy of Australia, with particular reference to our great exporting industries.
Sitting suspended from 5.59 to 8 p.m.
.- I support the amendment of the Leader of the Australian Country party. I consider that it should be accepted in order to make the intention of the clause quite clear. The Government has stated that it desires, in this matter, to give effect to the recommendation of the royal commission. We consider that the clause as drafted does not do so. The memorandum circulated by the Treasurer (Mr. Chifley) states, in this connexion -
The Banking Commission recognized that the central bank, being required to make pro vision for the national commitments abroad including overseas debt service, should not be embarrassed by a shortage of London, funds while such funds are available to the banking system as a whole. It also recognized that the central bank should hold reserves of London funds to assist it in the performance of iicentral banking functions.
The Banking Commission therefore recom mended that a new exchange mobilization agreement, binding for a period of years-, should be entered into between the Common wealth Bank and the trading banks to replace the then existing voluntary exchange mobilize lion agreement under which the banks mad.available to the Commonwealth Bank a pro-portion of their receipts of London funds t” assist in meeting the overseas debt service. (Para. 597.)
The National Security (Exchange Control) Regulations have operated during the war to mobilize Australia’s overseas resources by requiring the banks to make available to the Commonwealth Bank their excess receipts of London funds after effecting payments in respect of imports and services. The provisions of Part III. of this bill which cover the control of foreign exchange would enable similar arrangements to operate after the war but as explained in the notes on Clause 29 ex change control will be necessary only in emergency conditions. Consequently the Commonwealth Bank will require to have power In mobilize London funds accruing to the Australian banking system after the withdrawal nf exchange control.
The price at which transactions in sterling are effected between the Commonwealth Bank and the trading banks has always been a in niter of agreement.
This clause provides for sales of foreign currency to banks to meet their normal business requirements.
It is only reasonable that the Commonwealth Bank should make sales to the trading banks in the circumstances set out- If it is to be allowed to draw upon the resources of the trading banks in London, provision should be made for any of the trading banks to make calls upon the Commonwealth Bank to meet any emergency in which they may find themselves. I consider that a moral obligation rests on the Commonwealth Bank to assist any one of the trading banks to meet a difficulty of this kind that might arise in London. In this way the Commonwealth Bank will be, in fact, a central bank. Every one of us will agree, I am sure, with the statements in the Atlantic Charter and in certain other international . declarations that the only way to ensure permanent peace in the world is to permit international trade to operate freely. We desire to do all that we can do to achieve that end. I hope that if the Minister (Mr. Lazzarini) is. not able, at the moment, to accept the amendment, he will give us an assurance that he will have the points that have been raised examined, and, if necessary, take action to amend the clause when the bill is before the Senate. The memorandum which the Treasurer has circulated clearly indicates that the Government desires the Commonwealth Bank to do what we think it ought to do in these
circumstances, but in our view the clause, as drafted, does not give expression to that intention.
– The committee, before the suspension of the- sitting, rejected an amendment designed to achieve the same end as the amendment now under consideration. Honorable gentlemen opposite declared then that the central bank provided for in this bill would be only a political bank. That may be their opinion; the Government has a different opinion. The Government is also of the opinion that the clause as drafted gives effect to the recommendation of the banking commission. I cannot accept the amendment, and I do not think there is any need to have the wording of the clause examined.
.- That is one of the most foolish remarks I have ever heard in this chamber. The Minister must be well aware that in the past many clauses that have been drafted with care to give expression to certain intentions have subsequently been held by the judicial authorities to express something quite different and the Parliament, has had to amend its legislation accordingly. All I am asking is that the Government shall consider the points that have been raised in order to satisfy itself that the clause as drafted clearly expresses the intention to which the Treasurer (Mr. Chifley) has committed himself in the memorandum that has been circulated. I remember clearly a certain provision in a land tax bill which was supposed to express a certain intention but was afterwards construed by the High Court in quite a different way. I desire to guard against a repetition of that experience in this legislation. I urge the Government to consider the points that I have raised. We hope that after the passage of these measures our banking machinery will be oiled by goodwill and complete understanding between the Commonwealth Bank as the central bank and the trading banks. We should endeavour to create an atmosphere that will assist in the smooth working of our financial machinery.
Mr. LAZZARINI (Werriwa- Minister for Home Security and Minister for
Works) [8.10]. - The legal advisers to the Government have expressed the opinion that the clause as drafted gives effect to the recommendation of the banking commission, but I am quite willing to ask them to examine the provisions again in order to reassure themselves that this is so.
.- I am not satisfied that the clause provides for the reciprocity which the right honorable member for Cowper (Sir Earle Page) has indicated to be necessary between the Commonwealth Bank and the trading banks in regard to foreign exchange. In my opinion it is only right that if the Commonwealth Bank is to have the right to call upon the foreign exchange resources of the trading banks, a particular trading bank should be entitled in an emergency to seek similar help from the Commonwealth Bank. This should be elementary in the relations between the central bank and the trading banks. Unless such reciprocity exists, Australia’s trade and commerce overseas maybe seriously prejudiced. I ask the Minister assisting the Treasurer (Mr. Lazzarini) to give a definite assurance that reciprocity is really provided for. Unless he does so, I cannot help feeling that something sinister lies behind this provision and that it is another device which will be used to cause the trading banks to tighten the noose around their own necks.
Clause agreed to.
Clause 26 (Interpretation).
– The expression “excess receipts of foreign currency “ is used in this clause. I consider that the words should be “ excess balances of foreign currency “.
– I am assured by the Government’s legal advisers that it isimmaterial whether the word “ receipts “ “ or balances “ is used. What is meant is the excess of one amount over another, and that is what is provided for.
Clause agreed to.
Clause 27- (l.) Where the Commonwealth Bank is satisfied that it is necessary or expedient to do so in the public interest, the Commonwealth Bank may determine the policy in relation to advances to be followed by banks and each bank shall follow the policy so determined.
Penalty: One thousand pounds. (2.) Without limiting the generality of the last preceding sub-section, the Commonwealth Bank may give directions us to the classes of purposes for which advances may or may not be made by banks and each bank shall comply with any directions so given.
Penalty: One thousand pounds. (3.) Nothing in this section shall -
.- This is one of the most significant clauses in the bill. I hope that it will be debated fully, so that all honorable members will be completely aware of its implications. It proposes to give to the Commonwealth Bank the power to direct the trading banks as to the classes of purposes for which bank advances may be made. I direct attention to the important difference between giving to the central bank power over the volume of credit in the community at any given time, and giving to it the power to direct the classes of purposes in respect of which that credit may be used. The clause is superficially attractive. It conjures up visions of orderly planning and wisely directed national development. Yet it is as full of menace as a V bomb, and if projected against Australian industry could be no less destructive. The explanatory memorandum states that it gives effect to a recommendation of the royal commission. I invite honorable members to examine very carefully both the memorandum and the wording of the clause. The royal commission, in its recommendation, said that the Commonwealth Bank should obtain as much information as it could about industrial development in Australia, and then advise the trading banks as to the directions in which it was desirable in the national interests that advances should be made. Its recommendation in paragraph 621 reads -
In order to promote a wise distribution of credit, the Commonwealth Bank should equip itself with all possible facilities for ascertaining economic trends in Australia and abroad, so that it can advise trading banks as to the directions in which it is desirable in the national interests that advances should be made.
The explanatory memorandum on the bill makes this statement -
This clause will give statutory effect to the suggestion of the Banking Commission (paragraph 621 ) that the Commonwealth Bank should advise the trading banks as to the general direction of advances without interfering with the granting of particular advances.
Honorable members will note that the clause proposes not that the Commonwealth Bank shall advise but that virtually it shall instruct trading banks as to the classes of purposes for which advances shall be made. The trading banks will be involved in very heavy penalties if they fail to observe those instructions. Clearly, the intention is that this provision shall be the spearhead of the attack by the Government and the Commonwealth Bank against the private industries of the Commonwealth. Here we have, not what Mr. Lang once aptly described as the professors’ picnic, when he was discussing the shape of things to come as propounded by the Government’s planners at the Summer School of Political Science, but the professor’s playground, on which Australian industries will be kicked round by those gentlemen like so many footballs. I challenge the Government to name one democratic country, not under a socialist dictatorship, in which power is given to the central bank to direct industry as to the classes of purposes for which advances shall be made. The Minister assisting the Treasurer (Mr. Lazzarini) sniggers. Apparently, that is the most intelligent contribution that he can make. If he cannot produce the information personally, will he obtain it from those who are advising and instructing him? Of course, this is to be the bureaucrats’ harvest. Power is to be entrusted, not to the men who have to risk hard cash, not to the men who, by bitter experience and painful effort for years, have gained some knowledge of the fields in which invest ment may best be made, but to the bureaucrats, who will be able to give to Australian industry directions as to where investment shall take place.
One of the great factors making for progress in the economic life of this and all other democratic countries has been that men with capital to invest have been free to seek fields for their investment. If they found they were not doing well in the field chosen, they had to increase their efficiency, or make innovations which would enable them to compete more effectively. One of the most potent forces in Australia, America and Great Britain, has been the need for investors to make their money earn a profit; otherwise, they would decline into bankruptcy. As the result of their efforts, the community has been able to advance steadily. Progress has been made in technique, invention and other forms of development. Apparently, all .that is to go, and the dead hand of bureaucratic control is to guide the future development of Australian industries. I direct the attention of honorable members opposite to one of the most unhappy consequences of this thoroughly undesirable policy. The result will be to strengthen so-called vested interests in this country, and to make it more difficult, virtually impracticable, for the servicemen or other young Australians to seek for themselves the avenues in which they will attempt to make industrial or commercial development; because it is quite clear that they are to be told that the Government believes that there are certain avenues in which development has been carried as far as it ought to go, and should be closed. Those men will not be permitted to compete with others already established, and will have to direct their energies into other channels. The Minister for Post-war Reconstruction (Mr. Dedman), at question-time today, significantly enunciated a somewhat similar policy, when he said: “You might find that the legal profession, for example, is overcrowded “. I have never known the legal profession to complain of competition by men qualified and prepared to tackle others already established. In fact, a steady influx of new talent and competition promote vitality and progress in any profession or industry. So the committee must examine the clause carefully. In fact, it should reject the clause, which is full of menace and is a threat to the proper development of Australian industry. That will be the result if honorable members still regard this Parliament as a democratic institution. I foreshadow an amendment which proposes to adopt the language of the recommendation of the royal commission. That will test the bona fides of the Government, and enable its supporters to decide whether they are being misled as to the significance of the clause, or whether the- Government has correctly stated that it gives statutory effect to the recommendation of the royal commission.
.- Like the honorable member for Fawkner (Mr. Holt), I consider that this is the most dangerous clause in the bill. It strikes at the very root of private enterprise, and the ability of individuals in all classes of the community to determine the kind of life that they will live. The Minister for Post-war Reconstruction (Mr. Dedman) foreshadowed future Government policy in respect of such matters, when he said to-day that if certain occupations were considered to have been filled they would be regarded as not suitable for entry by other persons. He instanced the legal profession, thus implying that if the Government considered there was a sufficiency of lawyers, other individuals would not be permitted to become lawyers. That intention, which is implemented by the clause, will lead to the Government deciding when there are sufficient solicitors, doctors, electricians, . bricklayers, bakers and butchers in our supposedly free democracy. Under such a totalitarian regime, an individual may be reduced to the occupation of an unskilled labourer. The clause goes a little further than that, because it provides -
Where the Commonwealth Bank is satisfied that it is necessary or expedient to do so in the public interest, the Commonwealth Rank may determine the policy in relation to advances to he followed by banks and each hank shall follow the policy so determined.
We must not forget that in saying the Commonwealth Bank we mean the Commonwealth Government, because the Treasurer will direct the policy to be followed by the trading banks under instructions from the Commonwealth Bank. Therefore, if the Commonwealth Bank determines that trading banks shall not make advances to agricultural industry, beyond a certain point, that will be the end of expansion in that industry. If the Commonwealth Bank instructs the trading banks that no more advances shall be made to the electrical industry, or that all forms of electrical development are to be reduced, every individual dependent for his livelihood on that industry will be under the complete ban of the Commonwealth Bank.
– This clause has the most serious implications, and I am not discussing it flippantly. If the Minister will give to this provision a meaning different from that put forward by the honorable member for Fawkner (Mr. Holt) and myself, we shall be delighted to hear it. But the Minister will not be able to do so. The explanatory memorandum makes clear what is intended. That these controls were necessary in war-time is admitted by all honorable members, but now we visualize a return to normal conditions, when individuals will yearn for comparative freedom from restrictions. Referring to the success of these powers in war-time, the explanatory memorandum stated -
This power, has proved helpful under wartime conditions, and will be useful as a continuing power to ensure that at all times, the credit resources of the nation are put to the best use.
Who will determine what is the “best use”? Will the individuals who have made a success of their particular industries, who risked their capital in them, and who are responsible for the employment of tuns of thousands of persons, he the judges? Or will the woolly haired economists, theorists and bureaucrats make the decision? These bureaucratic theorists, who know everything except how to make a normal living, who have never been a business success themselves, and who have been sad “flops” under competitive conditions, are surprisingly able executives when they can make the rules to suit themselves. This is the “ New Order “, and these theorists will determine the industry in which each citizen shall work. The hanks will be permitted to assist some industries, but will not be allowed to help others. These restrictions strike at the root of our economic system. If industry cannot be conducted remuneratively, the workers will ultimately suffer. The Government’s proposals regarding full employment mean that persons formerly employed by private enterprise will be given temporary government work in distant parts of the country, far removed from their homes and their families.
– The honorable member is painting a wonderful picture.
– It is a very real picture. Honorable members opposite have been very silent during this discussion and I invite them to expose any possible flaw in my argument. I move -
That all the words after “ so “ in sub-clause (I.) to the end of the clause be left out with a view ito insert in lieu thereof the following words: - “in pursuance of its duties set out in section eight of the Commonwealth Bank Act 1945, the Commonwealth Bank may determine broadly the policy in relation to advances to be followed by banks by giving directions as to the classes of purposes for which the advances may or may not be made by banks and each bank shall comply with any broad directions so given, but nothing in this section shall be construed as empowering the Commonwealth Bank to determine policy with respect to the amount or nature of securities taken by a bank against any advance made by it”.
Whilst I hope that the Minister will accept the amendment, I am not optimistic, because the nationalization of banking, and the continuance of bureaucracy long after the National Security Act has ceased to operate are the Government’s deliberate policy. However, in submitting the amendment, I am expressing the view of a large section of the community which believes that individualism and freedom of enterprise are still worth striving for.
– The honorable member for Richmond (Mr. Anthony) stated the position correctly when he said that this clause represented the deliberate policy of the Government. Consequently, the amendment is not acceptable. The honorable member for Fawkner (Mr. Holt) complained that the Government is doing things that no other country has done.
I inform him that this Government does not look for precedents, or follow slavishly the examples of other countries. We do what we believe to be right, and othoi countries follow our example. One honorable member complained that the Government desires to “ push industry around “, and the Leader of the Opposition (Mr. Menzies), on a previous occasion, referred to my views on the banking system as “ clotted nonsense “, although he had not read a word of what I had written. In reply to those criticisms, I quote the words of Sir Herbert Holden, a director of one of the largest financial institutions in England, and formerly a member of the board of the Bank of England. Addressing students of the Oxford University, he asked, “ What caused the depression ? “ He answered this question by saying that the bankers caused the depression by following their agesold custom of refusing advances and calling up overdrafts. This clause is inserted in the bill because the Government desires to ensure that bankers shall not cause another economic depression in Australia. The honorable member for Richmond claims that he represents primary producers. But the private trading banks, which he defends so stoutly, increased their profits and accumulated reserves by exploiting primary producers. The hanks refused to grant financial accommodation to primary producers for the purpose of enabling them to extend their production, and called up their overdrafts. This clause will prevent banks from directing credits and advances into non-reproductive channels. I have often referred to the experience of a cotton manufacturer who had a standing overdraft of £750,000 with the associated banks. He desired to purchase 1,000 bales of Australian cotton for his spinning mills in Melbourne and Sydney. Although he had doubled his assets from the time when that overdraft was first granted to him, the banks would not provide him with further accommodation and even asked him to reduce his overdraft by £250,000.
– He must have been a big capitalist.
– He was; and honorable members opposite shed crocodile tears for such men. While the private trading banks refused to make advances to primary producers and to secondary industries, which would have increased the wealth of the nation, they poured out hundreds of thousands of pounds for the erection of palatial picture theatres in the cities. Because of that experience of the misdirection of money, the Government is empowering the Commonwealth Bank to instruct the private trading banks that if primary and secondary industries require financial accommodation, they must receive it in preference to luxury industries. That is all that is involved in this clause, which provides, in subclause 2 - (2.) Without limiting the generality of the last preceding sub-section, the Commonwealth Bank may give directions as to the classes of purposes for which advances may or may not be made by banks and each bank shall comply with any directions so given.
The purpose may be primary or secondary production or any of a large variety of things. Honorable gentlemen opposite say that the depression came from somewhere else and had to come to Australia. In my second-reading speech, I said that you do not justify murder in Australia because some one is murdered in London. An economic wrong in London is an economic wrong in Australia. Australia can do an economic right .before Great Britain or any other country does.
– Now answer the arguments.
– What argument does the honorable member want me to answer ?
– Our argument on subclause 2.
– -What I have said plainly and tersely is what this clause means. There is nothing in the explanatory note in the memorandum in conflict with the royal commission’s recommendation.
– Has the Minister read it?
– The royal commission recommended advice, but the clause provides for a direction.
– The clause is very plain and equally definite. The Government is also definite in its intention to keep it. I have stated the salient reasons why; there are others. The principal reason for the clause is our intention that the misdirection of the national income by the banks that preceded the depression in this and other countries shall not recur. The Commonwealth Government, through the Commonwealth Bank, by means of this clause, will keep a watchful eye on the direction in which the associated banks use their funds. If it thinks that advances are being made too much one way, thereby creating a lop-sided economy, the banks will be brought up with a round turn and ordered to direct their funds in the way in which the Commonwealth Bank, in its wisdom, determines they shall be more useful in the national economy. That will create a balanced economy and make for the general welfare of the people through national development. That is what the clause means, and that is why the Government intends to retain it.
– The Minister (Mr. Lazzarini) is the joy of my life. He was audibly moved and he moved many of us by the sad story of the gentleman who could not get another quarter of a million from the bank. Having described to us how some cotton-spinner was deprived of the necessary accommodation by his bank and, having thrown in for good measure a few cases of farmers whose overdrafts had been called up, he then said, optimistically, that that was what this clause was to deal with. As very often happens, that is exactly what it does not provide for, because, if he had cared to read the whole of the clause - a practice that I commend to him on most of these bills - he would have known that, under sub-clause 2, the Commonwealth Bank may give directions as to the classes of purposes for which advances may or may not be made. In sub-clause 3, he would have found this, which I can describe only as the death-knell of his friend, the cotton-spinner -
Nothing in this section shall -
authorize the Commonwealth Bani to make any determination or give any direction with respect to an advance made, or proposed to be made, to any particular person-
– The right honorable gentleman is not in a court of law now.
That is the worst legal quibble that I have ever heard.
– I am afraid that 1 must, in spite of that crushing rejoinder, go on for a time demonstrating that the Minister is either neglectful of his duty in not reading the bill or incompetent in not reading it accurately. He disposes of it as a legal quibble-
– The right honorable gentleman knows that he is falsifying everything I said.
– For the information of the Minister I shall read the rest - or (b) affect the validity of any transaction entered into in relation to an advance or affect the right of a bank to recover any advance-
If that does not mean, “call up over drafts “, I shall be glad to be informed by some Labour member of the committee if what it does mean - or enforce any security given in respect of in advance.
So the effective thing that this clause does is to protect the right of any bank to call up any overdraft or to refuse to give an overdraft. Yet the Minister, safe in the knowledge that he is not in a court of law, has the effrontery to tell the committee that what the bill expressly does not do is what the bill is really being passed to perform. So I leave it to the committee and turn back to what the clause actually does. I turn back because this clause deserves serious analytical consideration by both sides. The questions raised by the honorable member for Fawkner (Mr. Holt), in the first instance, are of very great importance. An amendment has been moved by the honorable member for Richmond (Mr. Anthony). I do not know that I am in favour of it. I think it goes farther than I should be disposed to go in giving compulsory authority to the Commonwealth Bank, but that perhaps is a minor consideration. What is the essence of this matter? I invite the Minister and his colleagues to pay attention and to consider it. In the first place, this proposed law is to be a postwar law. This is not something designed to deal with emergency conditions of war. National Security Regulations cover them and will continue to cover them. This proposed statutory provision will not come into operation until the war is over.
– The power may never be used.
– But it is a power. I am not concerned to speculate how some Minister will or will not use that power or how some bank will or will not use it. I am only concerned - and my honorable friend, the honorable member for Robertson (Mr. Williams) must also be concerned - as a legislator with the power that is being conferred. The power is being conferred for after the war; that is the first thing I emphasize. The second thing I emphasize is that the statement in the explanatory memorandum is, as the honorable member for Fawkner pointed out, entirely disingenuous. It says in quite plain terms that the clause will give statutory effect to the suggestion of the banking commission that the Commonwealth Bank should advise the trading banks as to the general direction of advances. That is an utterly untrue statement. The clause does not give statutory effect to the recommendation at all. It drastically alters that recommendation and then converts an altered recommendation into law. The Minister cannot tell me or any other member of this committee that power to advise Jones is translated into statutory terms by saying that there is power to give orders to Jones. They are two entirely different matters. So the explanatory memorandum in that respect is false. The next thing I ask, having put those two matters aside, is: What is aimed at in the earlier portions of this clause? There are two ways in which a central bank may deal with credit and issue credit. It may deal with it in terms of quantity, which, after all, is the true and established function of a central bank. It may regulate the volume of central bank credit or the size of the credit base. That is all quantitative. But the moment it regulates the purposes for which credit may be used it is purporting to control the quality of the use of credit. If a central bank or any other bank is to control the quality of the use of credit, every one will realize that the central authority must be in a position either to create or to know all the plans of the planning authority, because it is idle for the central bank to say, “You shall not use money for a butcher shop, or for a picture theatre, or for a grocery establishment “, unless there is a mass plan of social and industrial development into which that fits. In other words, you just cannot have qualitative control of credit by a central bank except under a completely planned economy. Now, where is this completely planned economy? We do not possess it. If the people of Australia have their way we shall never possess it. I know that a great deal has been said by honorable gentlemen opposite about planning for the post-war period. I know that there is a Department of Post-war Reconstruction and that it has in it many planners, but no honorable gentleman opposite can tell me that he anticipates a totally planned economy in Australia when this war is over. First, we have not got it, and, secondly, we cannot have it, because the result of the recent referendum made it, for the time being at any rate, legally impossible. The point is that it is of no use trying to superimpose central bank control of the quality of, the use of credit on a partially planned economy. That will not do because, if you are going to say to the trading banks, “Look, for the next six months, you are not to advance money for constructionof this or that type or for business of this or that type “ then your directions will be gratuitous and damaging, unless you are working to an absolute schedule in the organization of the country. The honorable member for Fawkner is obviously right when he said that this is the kind of thing that fits quite neatly into totalitarian forms of government. You could do this in Nazi Germany and Fascist Italy without difficulty, because all the activity of individuals was under command, but if you are going to bring into the middle of what is and will be broadly a free economy, an instrument which belongs entirely to a controlled economy, the only result will be a complete “ botch “. So, in my view, the only thing to do is to go back to the recommendation of the royal commission by adopting the amendment of the honorable member for Fawkner.
has deliberately distorted the observations of the Minister assisting the Treasurer (Mr. Lazzarini). The Minister cited a general case of cotton spinning.
– He did not. He cited a particular cotton spinner.
– He cited a general case of cotton spinning as one of the classes of purposes for which advances may or may not be made in accordance with sub-clause 2 of clause 27, and no amount of denial by honorable gentlemen opposite, who have a very weak case and are trying to bolster it with all sorts of weak arguments, can contradict what the Minister said. In order to support his general contention, he then cited the case of a certain cotton-spinner who was refused reasonable accommodation by a certain bank. I charge the Leader of the Opposition with deliberately distorting the remarks of the Minister in charge of the bill.
– The Minister is always charging somebody with something.
– And very successfully, too.
– It will be interesting to see how successful the Minister is.
– I have also donned the mantle of the prophet once or twice, and I say now that, while the right honorable gentleman leads the Liberal party, we shall never leave the Government benches.
– The Minister is a great optimist.
– I am a realist too.
– The honorable gentleman will be back in his place very soon.
– My place will be on this side of the chamber for many years to come. Let us examine the clause, and all of the propaganda with which honorable members opposite have attacked it. What will be the result of the implementation of this clause, in conjunction with other clauses of the Commonwealth Bank Bill, which has already passed this chamber ? The private banks of Australia will stillbe able to issue credit, subject to three conditions. The first condition is that the Commonwealth Bank shall be empowered to govern the volume of credit issued by the private banks. The second is that the Commonwealth Bank shall be able to direct the use of the credit issued by the private banks. The third is that the Commonwealth Bank shall be empowered to fix the rate at which the private banks shall be allowed to issue their credit. Honorable members opposite wish to perpetuate the present situation, whereby each individual bank can issue or restrict credit at will. That is the theoretical position. In actual practice, the associated banks meet and lay down a general policy, which they almost invariably follow. There is a monopoly control of private banking in this country,, and this Government contends that it is against the public interest that private banks, either individually or collectively, should ““be, allowed to issue and contract credit. They should not be allowed to lay down a policy of inflation or deflation. The authority to lay down credit policy should rest with the Commonwealth Parliament. We are not abolishing the private banking institutions. We are not nationalizing them. They will continue to function under this legislation, but they will not be allowed to exercise the powers that were given to them under charter by the colonial governments of the last century or by acts of the British Parliament, under which some of them operate in this country.
The issue is fairly plain. Honorable members opposite stand for a continuance of the unrestricted right of banks to issue and contract credit. The Government says that the lessons of depressions, and the sum total of human misery that was experienced in depression years, must be learned, and that the powers of a few people, who are responsible only to their shareholders, shall be taken from them and reposed in the National Parliament. The Labour party- has been charged with doing something that has not been done elsewhere. The Labour party does not exist to follow precedent slavishly. It exists to create precedents, and it has created a number of excellent precedents for the world during the 45 years of the life of this Parliament. We are not traditionalists. I am proud that, in many respects, I am an iconoclast. It is easy to follow policies laid down by somebody else and say that what is, is right. But, if we have a bad situation, we ought to be courageous enough to alter it. Therefore, the Labour party proposes to make sure that everybody in this country shall have full employment in future. We cannot have full employment while we leave power iD the hands of private bankers to put people into work or take them out of work just as they decide to issue or contract credit. It was the banks’ policy of deflation which caused so much undeserved destitution and misery during the depression years, from 1930 to 1939. The Royal Commission on Monetary and Banking Systems, about which we have heard so much was appointed by an anti-Labour government. It made its report about 1937, but not one anti-Labour government - and there was a succession of them from 1935, when tha royal commission was appointed, until 1941, when they happily disappeared from the political scene - ever attempted to give effect to any of that commission’s recommendations. Ons would imagine, after listening to honorable members opposite, that the royal commission was a rather radical body. Actually its members had very few progressive ideas. Of the six members, only one represented the Labour party. That is the measure of its radicalism. The chairman was Mr. Justice Napier, of the Supreme Court of South Australia. If this Government were appointing a royal commission on banking, I am certain that it would not appoint Mr. Justice Napier as chairman. Next on the list was Mr. E. V. Nixon, a leading accountant, and adviser of big business in Melbourne - one of the Collins House group. Next was Professor Richard Charles Mills, one of the woolly headed economists about whom the honorable member for Richmond (Mr. Anthony) talks. TEe only real democrat on the commission was the Right Honorable Joseph Benedict Chifley, the present Acting Prime Minister. Then we had Mr. Henry Arthur Pitt, who was the Director of Finance of the Victorian State Treasury, and who has been actively engaged in campaigning against this very bill. Last on the li.=t was Mr. Joseph Palmer Abbott. Nobody would mistake the honorable member for New England for a democrat.
The CHAIRMAN (Mr. Riordan).I ask the Minister to deal with the clause before the committee.
– I was drawing attention to the constitution of the commission, a recommendation of which is in part the basis of this clause. I started from the chairman and went right through to the last member, the honorable member for New England. In other words, I descended from the sublime to the ridiculous. I now quote from the recommendation of the commission in paragraph 621 of its report -
In order to promote a wise distribution of credit, the Commonwealth Bank should equip itself with all possible facilities for ascertaining economic trends in Australia and abroad, so that it can advise trading banks as to the directions in which it is desirable in the national interest that advances should be made.
What is the use of advising the banks? If a thing ought to be done, then let us establish the machinery to do it. Why set np a costly body to give advice to the banks if it is not intended that they shall accept and act on that advice. That is only fooling with words.
– The Minister will be attacking the Advisory War Council next.
– I was never in favour of it, as the right honorable member is aware.
– That shocks me. I shall need to reconsider my position.
– The fact that the Leader of the Opposition found reasons for leaving it, now makes me doubt whether I was right in the first place. The basis of this clause is a recommendation by a body of men which included only one representative of the Labour party. We also had for our guidance the Reserve Bank of New Zealand Amendment Act 1936, which justifies the action we are taking and about which honorable members opposite seem to know nothing. Clause 10 of the New Zealand act states -
It shall be the general function of the Reserve Bank, within the limits of its powers, to give effect as far as may be to the monetary policy of the Government, as communicated to fit from time to time by the Minister of Finance.
We have copied that provision in the Commonwealth Bank Bill. The section continues -
For this purpose, and to the end that the economic and social welfare of New Zealand may be promoted and maintained, the Bani shall regulate and control credit and currency in New Zealand.
The fact that the government bank in New Zealand is given the power to control credit and currency means that it has power to control advances as well. If it controls currency, it must control everything affecting currency.
– Honorable members opposite are trying to argue that the general does not include the specific, whereas it does. That power is a general power, and under it the New Zealand Government regulated investments in New Zealand from 1936 onwards. It hae used considerably more than £25,000,000 of national credit, at 1:) per cent, interest, in the building of houses. Honorable members opposite do not like these facts. By the issue of national credit, and by the powers given to it to direct the employment of credit by the banks, the New Zealand Government has ensured that the credit of the nation baf been profitably employed for the building of houses, instead of picture theatre? and expensive blocks of flats.
– New Zealand could not have had a Directorate of War Organization of Industry.
– This may interest the honorable member for Bendigo, who has turned about ten political somersaults on this issue since 1934, when he was very much in favour of monetary reform-
– I ask the Minuter to deal with the clause.
– I am doing 30 by advising the honorable member that, in 1941, the Government of New Zealand used national credit to the amount of £7,000,000 to guarantee to the farmers a price for their meat, when the lack of refrigerated shipping space precluded export. The honorable member for Richmond went to New Zealand, at that time, and told the people there that, Australia did not intend to use national credit as it had been used in New Zealand to help the farming community.
– That is an absolute lie.
– It is true and the honorable member knows it to ‘be true.
– The Minister’s time has expired.
– lt is a lie.
– The honorable mem-, ber is known as “Larry the Liar”.
– I ask the honor.a t)10 member for Richmond to withdraw bis remark.
– I withdraw the unparliamentary expression as you request, Mr. Chairman, but I ask that the Minister be requested to withdraw his statement, which was completely incorrect. I have never made the statement which he mentioned, and the accusation is offensive to me.
– To what remark does the honorable member refer?
– The Minister said that when I was in New Zealand I made a statement that national credit would not be used in Australia as it had been used in New Zealand to assist the farmers, or words to that effect. The statement was absolutely untrue and I ask that it be withdrawn.
– There was nothing personally offensive in that statement. The honorable member may combat it later in debate if he so desires.
.- The Minister for Information (Mr. Calwell) has tried to prove that what has happened in New Zealand will happen in Australia under this clause. The fact is that this system has not been applied in New Zealand. Although the banking system of New Zealand is not above criticism, no attempt has been made in that dominion to limit the functions of the private banks in their trade. That is what is clearly proposed in this clause. The conditions in New Zealand cannot be compared with those in Australia. In New Zealand, for example, many thousands of homes were built in 1938. I wish that this Government had put in hand a comprehensive housing scheme instead of wasting public money as it has done in so many ways. There can be no doubt that under the provisions of this clause the Government will be able to control industry. Notwithstanding the rebuff that the Government received from the people in connexion with its Constitution alteration proposals, it is going ahead with its plans and: iB seeking to circumvent the declared will of the people. The purpose of this clause is to permit instructions to be given to the private banks as to how much money they shall lend, and to whom it shall be lent. The Government, under the provisions of this measure, will take control of development in this country and that, in my opinion, will be very dangerous. As the honorable member for Fawkner (Mr. Holt) has said, that procedure is comparable with what was done in totalitarian countries. I have said more than once that in Germany the government put into operation all kinds of controls. It limited investments, it supervised imports and exports, it controlled banking. In short, it did the very things which this Government will be able to do when this measure becomes law. Honorable gentlemen opposite inveigh against monopolies, but they are assisting to establish in this country the worst kind of monopoly - a government monopoly. They desire to place all our private banking and financial institutions under government control. The particular purpose of this clause is to give to the Executive power to say who may obtain advances from the banks and for what purpose they may be obtained. Under these provisions it would be possible for the Government to prevent a potential Nuffield from developing hie ideas. We all know that Lord Nuffield began life in humble circumstances. His first business- enterprise was made possible by a bank overdraft. He has now become one of the greatest of British industrialists and a noted philanthropist. It is deplorable that the Government should seek to apply a policy which would prevent the exercise of such enterprise. Under this clause the Government could decline to allow the Bank of New South Wales, the Commercial Bank of Australia, or the English, Scottish and Australian Bank, for example, to make an advance to any manufacturer for any purpose. If this clause becomes law it will have the result of hindering instead of promoting development. It will be remembered that some months ago, the representatives of the Chambers of Manufactures of Australia waited on the Prime Minister (Mr. Curtin) for the purpose of discovering, if possible, the post-war policy of the Government in regard to the development of trade. The Prime Minister made the following remarks to the deputation : -
The Government looks to private industry to make a major contribution to production and development, and thereby to employment in the post-war years. There will be an important task for the Government in this period, hut the main responsibility Vies with manufacturers themselves.
The policy outlined by the Prime Minister is not likely to be implemented by the passage of legislation of this description. A feature of the development of British communities has always been the encouragement of the private enterprise of individuals, but this Government is endeavouring to apply socialistic doctrines by covert means. The Minister for Information (Mr. Calwell) said in the course of his speech that the Commonwealth Bank would do three things under the legislation now before the Parliament. First, it would control volume, which I would regard as an obvious central bank authority. Secondly, it would direct the flow of credit. I understood the Minister to say that, in this regard, it would have approved the increase of the overdraft of £750,000 by a further mere £250,000. That, in my opinion, would be a very serious thing. Such a large overdraft should only rarely be granted to one organization. “What is needed is that the bank should make credit available to the small trading organizations which have always been the backbone of British commercial communities. In the economic structure of British communities, the personal associations between the managers of banks in provincial centres and the customers of the banks have been of the utmost importance. I consider that the Government’s policy will have the effect of stifling enterprise. It will remove that important personal touch between the managers of private banks and their customers which has always been important to our commercial and industrial well-being. Honorable gentlemen oppo site seem to have developed into calamity howlers.
Mr.Fuller. - The honorable member for Balaclava is a scaremonger.
– The members of the Labour party have had a good deal to say about what happened during the depression and the following years. 1 was Minister for Trade and Customs in the Lyons Government in 1933, and it was my duty to study the statistics in relation to unemployment and get people into work. At that time there was between 27 per cent, and 30 per cent, of unemployment in the community. When the Lyons Government went out of office unemployment had been reduced to 10 per cent. During the regime of that Government more than 3,000 new factories were opened, and 250,000 additional persons found employment in our factories. The new factories were opened by private enterprise, yet honorable gentlemen opposite seem to be unable to refrain from villifying the business system that made possible that great development. They seem to be intent upon applying the repudiated economic system of alien countries. It will be extremely unfortunate for Australia if the Commonwealth Bank is authorized to limit advances and to direct development into particular channels.
– That will not be the effect of the enactment of this clause.
– I disagree with the honorable member for Dalley (Mr. Rosevear).
– Will the honorable member read sub-clause 3?
– The clause provides that the Commonwealth Bank “ may determine the policy in relation to advances to be followed by banks and each bank shall follow the policy so determined “. It also provides that without limiting the generality of that provision the bank “may give directions as to the classes of purposes for which advances may or may not be made by banks and each bank shall comply with any direction so given “. Sub-clause 3 reads - (3.) Nothing in this Recti on shall -
authorize the Commonwealth Bank to make any determination or give any direction with respect to an advance made, or proposed to be made, to any particular person ; or
There can be no doubt whatever that the clause, as a whole, authorizes the Commonwealth Bank to determine policy in relation to advances and to give directions as to the manner in which advances may be used. Ultimately then, the individual business is concerned.
The third of the three statements of the Minister for Information to which I shall refer was that the Commonwealth Bank will divert the use of credit. Unfortunately, the private banks will be under the domination of the Commonwealth Bank and the Commonwealth Bank will be under the domination of caucus. Honorable gentlemen opposite are still seeking to adhere to the policy of regimentation. Prices are to be controlled; the Directorate of War Organization of Industry is to carry on its work, though, perhaps, under another name; taxation is to be maintained at a high level; and man-power is to be regimented.
– Order! The honorable member must confine his remarks to the clause.
– I am of the opinion that regimentation will continue to be a feature of Australian life if this Government is permitted to remain in control of the country. Furthermore, the personal relations between businessmen and their bankers, which are inherent in most British communities, may disappear from Australian commercial life; unemployment may be accelerated, and personal initiative may be discouraged. This would undoubtedly lead to depressed conditions. There will be, in a sense, a black market in money and all kinds of endeavours are likely to be made to avoid the restrictions that the Government is obviously seeking to retain. We are well aware that even under existing conditions, proved tax evasions have totalled about £30,000,000. If the Government is allowed to pursue its present policy that situation will not be remedied. People will not be able to obtain advances to embark upon new enterprises, and in dustrial development will languish. The Government is acting unwisely in seeking approval of these drastic clauses. Too much power is being placed in the hands of politicians. We shall have not a peoples’ bank, but a politician’s bank, for the Treasurer will be able to dominate the bank, but he, as I have said, will be dominated by caucus. The priceless advantages of democracy are likely to be lost to us by the regimentation which the Government is seeking to enforce. Democracy will be definitely on the defensive, and the scope for autocratic control will be enlarged. The arguments advanced by the Opposition against the clause are well founded.
The CHAIRMAN (Mr. Riordan).The honorable member’s time has expired.
.- The overriding consideration in this division is the welfare of the people as a whole. That is made clear by sub-clause 1, which reads -
Where the Commonwealth Bank is satisfied that it is necessary or expedient to do so in the public interest, the Commonwealth Bank may determine the policy in relation to advances to be followed by banks and each bank shall follow the policy so determined.
That should be read in conjunction with clause8 of the Commonwealth Bank Bill. The policy of the private banks must conform to the policy to be carried out by the Commonwealth Bank under that legislation. Clause 8 of the Commonwealth Bank Bill reads -
It shall be the duty of the Commonwealth Bank, within the limits of its powers, to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia, and to exercise its powers under this Act and the Banking Act 1945 in such a manner as, in the opinion of the Bank, would best contribute to -
the stability of the currency of Australia :
themaintenance of full employment in Australia: and
the economic prosperity and welfare of the people of Australia.
The Minister assisting the Treasurer (Mr. Lazzarini) has pointed out that, under the provisions of clause 27, the Commonwealth Bank will be able to prevent the wholesale calling up of overdrafts - the sort of thing that brought about the last depression. The Leader of the Opposition (Mr. Menzies) has claimed that, by reason of sub-clause 3, the Commonwealth Bank will not be able to interfere with the right of a private bank to recover any advance or to enforce any security given in respect of an advance. That, doubtless, relates to the individual rights of the bank and its customer. Nevertheless, the Commonwealth Bank will be able to give directions along the lines mentioned by the Minister, and if a private bank does not carry out that ‘general policy it will commit a breach of this legislation. Subclause 2 contains the wise provision that the Commonwealth Bank may give directions as to the classes of purposes for which advances may or may not be made by banks and each bank shall comply with any directions so given.
The experience after the last war proved the vital necessity for having such a power in the Commonwealth Bank, in order to prevent alternations of booms and depressions. For a while after the last war, ex-servicemen were looking for avenues for the investment of the gratuities that had generously been given to them by the Government. Many unsophisticated men succumbed to the blandishments of “ go-getters “, such as land salesmen, extremely speculative builders, and the like, -who had no regard for sound business methods. A gentleman named Mr. Henry O’Halloran purchased large tracts of land on the outskirts of Canberra. He even established a head office in Australia House, London, and gave to his operations an official appearance. He employed many “ sharpers “, and others who had served terms of imprisonment, to go from door to door among primary producers and workers. I recollect two simple-minded dairy-farmers being induced to buy blocks by one of these gentlemen. They were shown decorative plans nf the projected capital city, embodying railways, town halls, a university, schools, parks and gardens, which existed only in the promoter’s imagination. Unfortunately, these men were so busy on their dairy-farm that they had not the time to inspect the blocks before purchase. When they had paid practically all the purchase money, they visited the site of the capital city, only to find that they had to employ a guide to locate their holdings. They were bitterly disillusioned when they discovered what they had been induced to buy. The legal advice that they sought convinced them that they were not entitled to the return of the purchase money; consequently, they lost their hard-earned savings. Many others were in a similar plight. The same firm prepared bright plans of the Jervis Bay area, and the land that it sold is covered with bush to this day. Those who purchased it have had to carry the load of rates and taxes ever since. This firm also prepared plans of the Port Stephens area. That is the class of investment which this clause is designed to prevent. Men of the type of O’Halloran are a good business “mark” for a bank, because they have the right security for an overdraft, but the unfortunate person who if deluded into dealing with them has no protection. A worker was induced to buy at Port Stephens what appeared to be a block with a nice water-frontage. Having been handed his deeds, he decided to devote one of his holiday periods to an inspection of his purchase. He met the local agent and arranged to be taken to the block. At the foreshore, a boat was hired. After rowing for a couple of miles, the purchaser said to the agent, “ Surely we ought to be coming to it now “. The agent replied, “ I think that we are just about passing over it”. It was a water frontage all right. That is the kind of enterprise that was financed after the last war. The promoters of many “wild cat”, no-liability mining companies and the like, prevailed on persons to invest their hard-earned savings. That class of investment is not good business for a bank’s depositors or shareholders, because the shareholders of no-liability companies are not bound to pay calls. The investment is very risky. An eldorado is alleged to exist, but actually is never found. The proposition may appear sound on the surface, but in the event of failure an overdraft cannot be recovered as there are no assets*. The Government may desire funds to be diverted, to constructive enterprises. It probably will be charged with home-building in the post-war period, when 250,000 homes will have to be constructed. It desires to have every facility, so that it may come to the aid of the people. It is vital to the welfare of the nation that the lag in housing should be overtaken. The Government will look to private banking institutions to play a part in that connexion. At present, they are not working quite in harmony with the Government. A housing scheme was launched by the Government of New South Wales. Many private financial institutions intimated at one stage their willingness to support it, but they have now changed their minds and claim that the fixed rate of interest - 3$ per cent. - is not attractive enough to warrant their making advances. The Commonwealth Bank, under other powers, may agree to certain funds which it controls flowing back to private financial institutions, hut may desire to impose certain conditions. For example, it may wish to insist that the money shall be devoted to home-building. If it had not the power to control the class of investment, the private banks would be able to lend the money for less constructive purposes. Uniformity of policy as between private financial institutions and the Commonwealth Bank in the opening up and development of this country in the post-war period will be absolutely essential.
– The two Ministers who have spoken have adopted the usual method of Government members of not replying to arguments of the Opposition, but emitting a spate of abuse about what the private banks did and refrained from doing during the depression. ‘ The Minister assisting the Treasurer (M!r. Lazzarini) made the extraordinary statement that the private bankers were the cause of the depression, and asked us to accept as gospel everything that was said by an old gentleman named Sir Henry Holden. He also claimed that the private banks had exploited the primary producers by refusing to make advances to them, and that the present proposal is to prevent them from continuing that practice. We discussed this afternoon a private bank that was rather over generous in some of its advances, with the result that it. “ ran on the rocks “. The Commonwealth Bank did not go to its assistance. I do not know whether the Minister proposes thai every other private bank shall be driven on to the financial rocks by being compelled to give to borrowers who are not credit-worthy all that they ask. The Minister went on to say thai while the private banks were squeezing primary producers they were making advances for the erection of picture theatres. I do not know where he obtained his evidence, or what sort of man he is to make such statement* in this chamber when he had the opportunity to submit evidence to the royal commission which travelled throughout Australia for two years collecting evidence. That body was set up by the Lyons Government, and on it was a representative of the Labour party who to-day holds the distinguished position of Acting Prime Minister. If the Minister knew that such terriblethings were occurring, why had he noi the decency to place the matter before the commission and enable it to recommend to the Government action which would prevent a repetition of them? The Minister did not come forward: but here, under the protection of Parliament, ho made statements which hiknew were untrue and which he had noi the courage to make to the banking commission.
– The honorable member is only a humbug!
– I tell the honorable member that no evidence was given to the commission to substantiate the statements he made to-night. The Minister for Information (Mr. Calwell) has a reputation throughout Australia for making some of the most extraordinary and irresponsible statements uttered by any person in public life. He is continually doing that sort of thing. He said some remarkable things tonight; among them was the allegation that the associated banks meet and lay down a credit policy. Like the Minister at the table (Mr. Lazzarini) and other Cabinet Ministers who have a monomania with regard to bankers, he seems to think that private bankers are the worst riff-raff in the world and do all sorts of things, quite regardless of Australia’s interests. According to the Minister, the members of the associated banks meet, presumably in Melbourne - 7hicb is the associations’ head-quarters - to lay down the credit policy of this country. It might interest this gentleman who poses as such an authority on every subject - God forbid that his statements should be taken as Gospel! - as well as his colleague at the table to know that the associated banks do not include two of the largest and wealthiest banks in Australia. I refer to the Bank nf New South Wales and the Commercial Hanking Company of Sydney. Those two banks wield a most powerful influence in the structure of Australian Hiding banks, but they are not members i.f the trading banks association. So much for the truth of the Minister’s statement. The honorable gentleman quoted the report of the royal commission, and said that the commission itself was in no way a radical body and included only one “true blue” Labour man. In his usual maimer the Minister discussed the personnel of that body. He referred to Mr. E. V. Nixon, as the accountant for certain large monopolistic companies in Australia - which are now the political bedfellows of the Government - such as the Broken Hill Proprietary Company Limited and other concerns represented by Mr. W. S- Robinson. The Labour party severely criticized these companies while it was in Opposition, but since it came into office it has cuddled them and nestled to them as though they were its sweethearts. Mr. Nixon is au outstanding accountant in Australia and his ability and great record of service have been recognized by the Government which has appointed him to some of the most responsible positions in the Commonwealth. During the war, Mr. Nixon imperilled his health because of the work be did, and he has suffered several periods of illness. Some remarks were made about Professor Mills by tin? Minister for Information, some sneering, dirty remarks which were like the mouth and tongue that produced them. But what has the Government done with Professor Mills? It has appointed him head of the University Commission and head of the Commonwealth Grants Commission - two of the most important bodies operating in Australia. One shapes the future of young Australians being educated in the university, and the other the economic welfare of the States. Then the honorable gentleman referred to Mr. H. A. Pitt, Director of Finance in Victoria for many years.
– On a point of order, Mr. Acting Chairman, I draw attention to the fact that the matter with which the honorable member is dealing appears to have no connexion with the clause under consideration.
– The Chair is allowing a certain amount of latitude in discussing this clause because a similar privilege was given by the Chairman of Committees. For that reason the discussion has covered a wide range of matters, but 3 ask the honorable member to confine his remarks within reasonable limits.
– They want to hear one -isle only !
– I do not propose to discuss the abilities or services rendered by other members of the commission. Mr. Justice Napier, who was maligned by the Minister, is one of the most distinguished jurists in Australia, and since the work of the commission ended he has been elevated to the high and honorable position of Chief Justice of South Australia. Mr. Chifley was a gentleman who rendered great service to the commission. He worked very hard indeed, and his record should be known to the Minister, even if the records of other members of the commission are not. Modesty prevents me from drawing attention to myself
– I think the honorable member might return to the clause now.
– I shall return to the clause, as though it were a bucking bronco from which I could not be unseated. The criticism of the banks by the Minister was, in effect, not a criticism of the trading banks of Australia for reducing credits to their borrowers during the depression, but of the central bank. I wish to quote what the Right Honorable J. B. Chifley, Acting Prime Minister of the Commonwealth, had ‘o sAy with regard to these matters. Tn the majority report of the Royal Commission on Monetary and Rankin? Systems, which he signed) and from which he has made no dissent, the right honorable gentleman was a party to the opinion contained in paragraph 500 -
The limit to the process of expanding advances and deposits is set by the necessity tor keeping what, in the opinion of the banks, are adequate cash reserves. The amount of cash reserves which any bank will hold in proportion to its liabilities, is a matter decided in practice from its own experience as to the kind of demands made upon it in the past and from its expectation as to the future. . . .
Paragraph 501 states -
The cash reserves of the trading banks include cash, and assets which can readily be turned into cash. They consist of -
) Coin and notes.
Deposits with the Commonwealth Bank.
Coin and notes, which are cash in the strict sense of the word, are the only legal tender money. Deposits with the Commonwealth Bank can be drawn at once in legal tender money. Treasury-bills are three months’ promissory notes issued by the Government to the Commonwealth Bank. Some of the bills are sold to the trading banks, which can at any time obtain legal tender money for them by discounting them with the Commonwealth Bank. London funds are English money held in London by the trading banks for which they can obtain Australian legal tender money by sale to the Commonwealth Bank at the current rate of exchange.
That is the crux of the whole position concerning the basis upon which credit was contracted by the banks during the depression. They were prevented by their cash position from making further advances to their clients who wished to borrow. In paragraph 502, Mr. Chifley agreed that -
If honorable members cast their minds back to the depression period, they will recollect that in 1929 the first break in the monetary systems of the world began when the Credit Anschultz Bank inVienna failed. Gradually that failure spread through the world, and in addition there was a tremendous fall in the prices paid for primary products on the world’s markets. At that time seasons throughout the world were very good, and production was at a high level. I think it was Jevons, a famous economist of the eighties, who said, “ If you want to find the cause of your depression, look to the heavens “. In the years immediately preceding the depression, the heavens were sending copious showers upon the earth and primary products were being harvested in tremendous quantities. As a consequence of the oncoming depression, Australian primary products were realizing much lower prices overseas than they had realized from 1915 to 1924 and later. There was a contraction of the cash being brought into the financial system of the Commonwealth, owing to the failure of the London funds to produce the normal return from the sale of Australian primary products overseas. Consequently, the cash resources of the banks decreased. The banks had to retract their advances and were unable to do other than follow the measures they adopted. There was one bank, however, that could have come to the assistance of the trading banks and the people to a much greater extent than it did - that was the central bank; the present Commonwealth Bank of Australia. It sat back, however, and did little. So the contraction of credit continued until it sucked the life-blood out of industry, and made it anaemic. The man on the land responsible for primary production got no relief until the private trading banks smashed the fixed rate of exchange in Australia and forced it up to 130. Yet the Minister who sits at the table and the Minister for Information and his colleagues in the Government party condemn day and night the trading banks as the institutions that ruined Australia. It was the Government’s own institution which failed to advance cash to the trading banks so that credit could have been more liquid. This lack of liquidity was responsible for the economic failure of the country.
The TEMPORARY CHAIRMAN.The time allowed, the honorable member has expired.
.- I have listened with considerable interest to the remarks of the honorable member for New England (Mr. Abbott) on this clause. I have heard the honorable member speak on the subject of banking on a number of occasions, and I remember that he was a member of the Royal Commission on Monetary and Banking Systems. In all his tirades his principal grievance against the Government has been that it has not slavishly followed the recommendations of that body. If the honorable member could be regarded as typical of the personnel of the commission, then I commend the Government for not slavishly following its recommendations. The clause now before the committee is perhaps the most vital in the bill. Advances and investments by banks are the alpha and omega of the banking system. Parliament has to determine in broad terms whether the policy to be followed in connexion with advances and investments shall be directed to a given plan, or whether we shall witness a renewal of the financial anarchy of the past when every bank went its own way and used the people’s deposits as it liked. Whether we speak of the Commonwealth Bank or the private trading banks, all the advances and investments they make are based on the deposits of the people in one form or another. In making those advances and investments the banks use little or none of their own capital. In deciding how they shall dispense advances and investments, therefore, Parliament must decide how they shall expend, the deposits of the people. So it is important to examine the first part of the clause, which says -
VVhere the Commonwealth Bank is satisfied
Chat it is necessary or expedient to do so in the public interest - [ do not know whether honorable gentlemen opposite are opposed to the banking system being used in the public interest, but that, is the qualification. It ‘is not what the Commonwealth Bank as a bank decides to do, but what it decides to do when it is satisfied that it is necessary or expedient in the public interest. I again remind the committee that whatever action is taken by the Commonwealth Bank or any other bank will be taken because of the backing that it has from the deposits of the people - and the people are the public. So, after all, we have to determine whether general public funds shall be used for the purpose of advancing the public interest. Doe,anybody object to that? Who toda;determines the policy of the private banks? They’ decide policy for themselves. They decide what advances and investments are to be made. I remind the committee that the advances and investments that they make are made noi with their own money, but with the public’s money held in different forms of cash and securities.
– Their customers’ money.
– Their customer? are the public. How the devil does tb, honorable member define the difference between the two?
– The customers are noi the whole public : that is the difference.
– It is the difference between the customers and the total population of Australia.
– We are getting ~ somewhere. The honorable member if splitting the public into two parts, one being the customers of the bank and the other, those who have no bank account? at all; but he can split the public into half a dozen parts and it will make no difference to my argument that the money used by the banks belongs, not to the hanks, but to the public. So this clause proceeds to say that when the Commonwealth Bank decides that ii is necessary or expedient to do something not in the interests of the Commonwealth Bank, but in the public interest, it ma? then determine the policy in relation teadvances to be followed by the bank* and that the banks shall follow thai policy. Do honorable gentlemen opposite object to the fact that the Governmentowned and Government-controlled bank shall direct policy in the public interest? They have no objection to the private banks, whose business it ifto make profits for their shareholders, collectively or individually, deciding what policy of advances shall be pursued. That, is precisely what is happening today. It is out of that class of financial anarchy, without any organized financial policy directed from a central source, that we have waves of depressions and inflation, because there has not in the past been any other motive behind the policy of the hanks regarding advances and investments than the dividends of the shareholders of those banks. The public interest came a very bad second. Let us look a little farther. This clause also provides in sub-clause 2 that-
Without limiting the generality of the last preceding sub-section, the Common wealth Bank may give directions as to the classes of purposes for which advances may or may not be mode by banks and each bank shall comply with any directions so given.
I!n discussing that, the Minister assisting the Treasurer (Mr. Lazzarini) pointed out that it provided the means of determining a fixed policy for the whole banking system as to the nature of advances and investments and as to what path they should follow in the general public interest. He made one unfortunate mistake. It was not a mistake to those who wanted to understand. He contrasted the treatment of a person who wanted to set up an industry which would provide employment and create wealth in the community with the treatment of another person who wanted to build a picture show, and paid out in Australia nothing more than the expenses incurred in running the show; most of the money was expended on films in a foreign country.
– It was simply an illustration.
– Exactly. The Minister mentioned two kinds of cases in order to show where past uncontrolled issuance of credit could lead the community. That formed the basis of the criticism of the Leader of the Opposition (Mr. Menzies). He swooped on it very much like a hawk swooping on a sparrow, but his very swoop utterly discredited a previous speech by the honorable member for Warringah (Mr. Spender) and the argument of the honorable member for Hew England (Mr. Abbott), who, only a few minutes ago, said that this clause would force the banks to make advances to all kinds of borrowers who waste their money on race-horses and in other foolish ways.
– Oh, no, I did not!
– Of course he did. The honorable member completely repudiated the argument of the Leader of the Opposition, who rightly pointed out that this clause did not compel any bank to make an advance to any particular person who might be a doubtful debtor. The honorable member for New England, however, in his usual extravagant way, in order to pour ridicule on the bill, said that this clause would cause the banks to make advances to all kinds of reckless borrowers who wast their money on race-horses and otherwise.
– I was not talking about the clause.
– It is too late for the honorable gentleman to try to withdraw. His arguments are refuted by those of the Leader of the Opposition. So I say there is no real connexion between what the Minister assisting the Treasurer said and the purpose of the bill itself. He did particularize two cases in order to illustrate two industries, one of which was fattened by bank credit and the other, a more eligible industry, was denied it. The Leader of the Opposition said that we could not have complete control of credit except in a completely planned economy. Well, we have just passed through one of the worst droughts in Australian history. We have had the ravages of bushfires and floods and every other unpredictable element. Anybody who thinks that we can have a completely planned, economy in this country without reference to what are known as the acts of God is a plain fool. It cannot be done. I do suggest, though, that a planned economy of any description, whether complete or incomplete, is infinitely better than the anarchy of the past, which has led to cycles of depression, boom, and burst. That is what the bill aims at avoiding. The right honorable gentleman said, not only that we must have a completely planned economy if we are to have complete control of credit, but alao that we must have a complete schedule. I should be very interested if the right honorable gentleman would tell us exactly how, in all the circumstances - seasonal conditions, international conditions and the collapse of the prices of our primary products overseas - we are to get a complete schedule on the matter of a complete economy.
– So should I, oddly enough.
– Of course the right honorable gentleman would. The point is this: he claims that the Government has not, and the inference from his interjection was that it cannot have a planned economy. So we get back to the anarchy of the past.
– This is an elementary form of logic.
– I think I am debating the matter fairly. The honorable member for Richmond (Mr. Anthony) has moved an amendment. The clause says that the Commonwealth Bank, in the public interest, may determine the policy to bc followed hy the banks. In his amendment, the honorable member says that the Commonwealth Bank may determine broadly the policy in relation to advances to be followed by the banks. Just what does he mean by “ broadly “ if all he says after “ broadly determine the policy in relation to advances to he followed by the banks” is that, the banks shall comply with that decision? After giving a very indefinite mandate to the bank to determine broadly the policy to be followed by the other banks, he says that they shall comply. I am pleased to have the assurance of the Leader of the Opposition that that goes too far altogether.
The TEMPORARY CHAIRMAN.Order! The honorable gentleman’s time has expired.
– We are indebted to the honorable member for Dalley (Mr. Rosevear) for another illuminating exposition of what clause 27 means. We are also indebted to the Minister for Information (Mr. Calwell), but each honorable gentleman has excelled himself in showing that this clause means exactly what the Opposition fears that it means. It fears that if this clause becomes the law of the land there can be only one banking policy in Australia, so far as advances are concerned.
– I have the assent of the honorable member for Dallev for that. It stands to reason, in the normal course of affairs, that sooner or later some mistake will be made by those who determine and enforce that policy. Under the present system the banks are under no obligation to conform to the whim or order of the Commonwealth Bank or, through the Commonwealth Bank, the Commonwealth Government. The different bank boards, which consist of men who have some knowledge of the industries of Australia, some stake in those industries, and some responsibility to the depositors in. the banks, formulate the policy that they consider in their wisdom will in the long run be best for the advancement of the primary and secondary industries. But, if this bill becomes law, we shall get right away from that policy and arrive at a state of affairs in which the only policy for advances will be that laid down by the Commonwealth Bank on behalf of the Commonwealth Government. It stands to reason that any mistake made by the Government or the Bank Board will be more farreaching and deep-seated than anything that could happen under the present banking system.
– But all the mistakes in the past that have led .to bank crashes have been made by private banks.
– That is not how I read banking history. Honorable members on the Government side of the chamber have one or two ideas about banking fixed firmly in their minds. As, in our youth, we always looked forward to the celebration of the 5th November, so to-day, when honorable members opposite have anything to say about finance, we always look forward to them mentioning, first, the depression, and, secondly, the bank crash of 1893. If the Commonwealth Bank is to be empowered to say what class of industry is to be assisted, what form of credit is to be granted, and what volume of credit is to be employed, the converse must also apply, and the Commonwealth Bank will be able to determine what stoppages and what call-up of credit already advanced shall be made. Honor.ab’ e members on the Government side of the chamber have by no means argued that advances made by the Commonwealth Bank will never be called up. That is not their intention.
– Sub-clause 3 of this clause provides for that to be done.
– That is <o, and that, is what I want to impress upon t.ho committee. If this universal power is granted to the Commonwealth Bank, it will be in much the same position, as the Australian posts and telegraphs service, in which everything is done by regulation. The Commonwealth Bank may decide to make advances to the wheat industry, or it may take a fancy to the dairying industry, the eucalyptus industry, the snapper shark industry, or the crayfish industry. People having obtained advances from the Bank for whatever industry is in favour, and having undertaken certain obligations, may find that the Labour party caucus has suddenly decided that the money shall flow in a different direction. Credit may be taken away from the snapper shark industry, for instance, and transferred to the oyster industry, which I commend to a number of supporters of the Government - although they are not likely to be interested - because, in the realm of silence, they might find a few pearls. Advances may be diverted to the buffalo industry, or perhaps to some infant industry in New Guinea, such as tea, spice, or rubber, which, I submit, with great respect to the honorable member for “Dalley (Mr. Rosevear), is a suitable substitute for leather. These matters must be considered seriously. To pass clause 27 in its present form will bc dangerous. It will deliberately provide that there shall be only one policy in regard to advances, and therefore,
That there shall be only one policy in regard to the calling up of advances when the powers that be decide that the credit is not being properly used. It will mean that every one must be in step, whether we are going in the right direction or not. I have never seen in any piece of legislation a better example of the old adage about putting all our eggs in one basket. If the basket should be dropped by the weary or languid arm of somebody in authority, all of the eggs will be lost. Referring to the years of the depression, the honorable member for New England (Mr. Abbott) spoke of the accumulation of primary products. It is a pity that honorable members on the Government side of the chamber do not. go into the history of the depression more deeply. I was a member of Parliament at the time of the depression, and T know what vast accumulations of wheat there were in the world. In North America alone, sufficient stocks were piled up for export purposes to supply the markets of the world for five years. In Brazil, the surplus of coffee was so great that it was used for fuel. Overproduction also occurred in the sugar industry, and the world price consequently fell to the equivalent of 1-Jd. per lb., Australian currency. The Java sugar industry perished then, not because Java could not grow sugar, but because it could not sell sugar. Much the same thing happened in respect of metals. Under the international silver agreement, stocks of silver were piled up in the smelters of the world, and the price of copper fell disastrously because of the discovery of huge quantities of copper ore in the Belgian Congo as well as in the United States of America and Mexico. These are only a few instances of the way in which, at a time of great production throughout the world, piles of important primary products were stored up because they could not be sold.
– There were many hungry people who could have used the surplus foodstuffs.
– Members of the Labour party talked at that time about disposing of surplus wheat stocks to some of the hungry people-
The CHAIRMAN (Mr. Riordan).I ask the honorable member to connect his remarks with the clause.
– The clause relates to advances to industries, and every industry in Australia is involved. If the policy of the Commonwealth Bank is to be directed to the production of huge surpluses of certain commodities, I am entitled to refer to the events of a few years ago. The honorable member for “Wannon (Mr. McLeod) spoke about supplying surplus primary products to overseas countries during the depression. At the only time when we could sell our primary products overseas, prices were so low that producers would have “gone broke”. I have said that frequently about the last depression, and I shall have occasion to say it again if certain policies are pursued. Honorable gentlemen opposite talk a great deal about the depression, but, at that time, the Australian Labour party held the reins of government in practically every State of Australia as well as in the Commonwealth. That was a period of government of which the Labour party should not he very proud. L hoped that its members would learn a few lessons from the depression, but, judging by the bill, I would say, as was said of the Bourbons, that they have learned nothing and have certainly forgotten nothing. No honorable member on this side of the chamber desires to see a repetition of the conditions of the depression, as government supporters have alleged. No greater slander than that has ever been uttered. If the conditions which caused the last depression occur again, this legislation will not eliminate them. Honorable members opposite have for years tried to persuade the people that every economic ill can be cured by some ringing of the financial changes. That is not true.
– The honorable member’s time ha3 expired.
.-Some extraordinary statements have been made by honorable members opposite in connexion with this clause. The most remarkable were those made by the honorable member for Barker (Mr. Archie Cameron). His attitude is one of despair. He says that nobody in opposition wants to see a repetition of the events of the depression years. But what would he do to prevent a recurrence of the depression? He wants to continue with the same old monetary policy, with the same people in charge of the expansion and contraction of credit, subject to no direction of any kind, and controlling it in the interests of a few at the expense of the many. Whatever may be said about this- legislation, at least it is evidence of the Government’s sincere desire to lay the foundation for a more secure existence than the people of Australia have ever experienced. The honorable member for Fawkner (Mr. Holt) used some extravagant language when forecasting his amendment to this clause. He said, loosely, that professors play around with economics in this country as men play with a football. The honorable member implied that the drafting of the measure and this vital clause was not done with honesty of purpose. However, honorable members opposite and supporters of the Government will inevitably approach these problems by different routes. There cannot be reconciliation between the views of the Opposition and supporters of the Government on such matters. Nevertheless, the Opposition should, at least give to the Government and its advisers credit for honesty of purpose in the drafting of the measure. The honorable member for Fawkner (Mr. Holt) spoke about bitter experience under bureaucrats and professors playing football with economic problems. He also spoke about the small men. Presumably, he referred to men not small in stature but small in mind, and implied that the Government desired to introduce something which was not in the interests of the community.
– That is rot.
– That is the only term which I am able to apply to the remarks of the honorable member. The honorable member for Barker (Mr. Archie Cameron) spoke of the over-production of goods. The problem is not so much the overproduction but the under-consumption of goods, due to lack of proper distribution. The objective of the clause is the proper direction of monetary policy. It gives to the Commonwealth Bank power to direct, in certain circumstances, the policy of the trading banks. Much has been said about the depression and its effect upon the community. No one can deny that the depression was aggravated by the action of the private banks in contracting credit, because we recall that it was for that reason the State Governments were obliged to provide moratoriums in order to protect borrowers. All this, however, is history. Dealing with the explanatory notes circulated by the Treasurer, the Leader of the Opposition (Mr. Menzies) contended that the clause did not, as the Treasurer claimed, express the relevant recommendation of the Royal Commission on Monetary and Banking Systems. That is a matter for argument. Whilst the right honorable gentleman declares his view, I am of the opinion that the clause faithfully translates the views expressed in paragraph 621 of the commission’s report, which reads -
We recommend -
In order to promote wise distribution of credit, the Commonwealth Bank should equip itself with all possible facilities for ascertaining economic trends in Australia and abroad, so that it can advise trading banks as to the directions in which it is desirable in the national interest that advances should be made.
The Government has faithfully interpreted that recommendation in the clause now before the committee. The objective of the clause is to enable an authority whose basic motive is not the making of profits, or the protection of the interests of the few against those of the community as a whole, to plan monetary policy. The same fundamental difference which existed in “1911 between the views of the Opposition and those of supporters of the Government when the Commonwealth Bank was established exists to-day. In 1911 the Opposition condemned the proposals of the government of the day in terms similar to the condemnations uttered by the Opposition in this chamber to-day. However, the contentions advanced by the Opposition against the establishment of the bank in 1911 have since been proved to bo wrong, and I have no doubt that the contentions of the present Opposition will likewise be confounded.
– The clause is very dangerous, but it is natural to expect the Government to introduce it and to implement it wholeheartedly, as the honorable member for Dalley (Mr. Rosevear) said that the Government intended to do, because it is an indispensable part of the financial and monetary set-up envisaged under the Government’s hanking legislation. I remind the Parliament and the country that this legislation is virtually post-war legislation. The conditions that prevail to-day during war should not be perpetuated in the post-war era. However, having regard to the financial regimentation envisaged in the clause, it is obvious that the Government has no intention of relaxing present war-time regulations, controls and restrictions after the war. These regulations, controls and restrictions were brought into existence noi only as a safeguard against inflation, and in order to control the volume of purchasing power, hut also to divert material resources from civilian to war-time needs. When the war is over, that process should be reversed. The Government claims thai the effect of the clause is to give effect te the recommendation of the Royal Com mission- on Monetary and Banking Systems. The honorable member foi Dalley declared that if all of the member of the commission were of the calibre oi the honorable member for New England (Mr. Abbott), the Government would noi be wise to accept any recommendation oi the commission. But the explanatory notes circulated by the Treasurer (Mr Chifley) state that the clause gives effect to paragraph 621 of the commission^ report. The commission, in paragraph 620 of its report, said -
We have indicated in chapter VI., thai the Commonwealth Bank “ should pay some regard to the distribution by the banks oi the volume of credit amongst different indue tries “. We consider that as the Common wealth Bank develops its intelligence service, and has at its disposal a body of useful in formation, it should bc in a position to advise the trading banks as to the directions in which it is desirable, in the national interest, thai advances should be made. For example, when it has regularly before it the analysis ot trading bank advances according to industries together with information as to economic trends at home and abroad, it should be in a position to indicate industries which should be encouraged to expand others which should not. We do not suggest that the Common wealth Bank should interfere in any way with the granting of particular advances by trad ing banks, but rather that it should advise as to the general direction of advances.
He would be a very simple-minded person who would say that the clause implements that recommendation of the commission. The commission simply recommended that the Commonwealth Bank should give advice with respect to monetary policy. The very basis of the commission’s recommendations as a whole is the necessity to continue cooperation between the central bank and the trading banks. For that reason, it states in no uncertain words that the centra] bank should limit its activities so far as distribution of credit is concerned. Obviously, it should undertake a certain volume of distribution, but should not do so in a vigorous way. It should control the credit base, and leave the distribution in the main to the trading banks. The commission in paragraph 669 of its report said -
The most desirable banking system in the present circumstances of Australia is one which includes privately-owned trading banks. The system which we contemplate is one in which a strong centralbank regulates the volume of credit, and pays some attention to its distribution. We are of opinion that the adoption of our recommendations will place the Commonwealth Bank in that position. We are satisfied to leave the distribution of credit to privately-owned trading banks, working for profit, but regulated in the manner indicated in our recommendations.
It is apparent from the clause that the Commonwealth Government has no other objective than to use the Commonwealth Bank to regiment the financial resources of the country, as a part of its general socialistic set-up. There can be no doubt about the Government’s intention in that respect, because whilst the regulations, controls and restrictions to which I have referred are essential and tolerable during war, they should not and will not be tolerated in peace. The Treasurer in his explanatory note states -
Regulation 7 of the National Security (Wartime Banking Control) Regulations provides that ‘‘in making advances a trading bank shall comply with the policy laid down by the the Commonwealth Bank from time to time”. This power has proved helpful under war time conditions . . .
Of course it has. It has been necessary for the reasons I have mentioned to control purchasing power in order to put some break upon inflation, and to divert resources from civilian requirements to war-time needs - . . and will be useful as a continuing power to ensure that at all times the credit resources of the nation are put to the best use, and that the making of advances by banks does not lead to an unbalanced expansion of credit in any particular field. This clause will enable the Commonwealth Bank to determine the policy in relation to advances which is to be followed by all banks, without giving it control over individual advances. It is specifically provided that the Commonwealth Bank will not have the power to direct that a bank shall or shall not make an advance to any particular person.
I repeat that this is an integral part of the programme which the Government visualizes in its future organization for the control of the monetary system. The honorable member for Dalley has advanced the very reasons why the clause cannot be accepted, and why we should not run the risk of implementing it; because the Royal Commission on Monetary and Banking Systems, dealing with Australia’s general economy, insisted that in the interests of the development of the country our economy should be maintained in as flexible a state as possible. Paragraph 515 states -
In Chapter 1 we have called attention to the characteristics of the Australian economy, and the ideal system as we see it is one that takes those characteristics into account. Since Australian conditions differ from those of many other countries, the structure and functions of other monetary and banking systems cannot safely be accepted as models, although they may offer useful points of comparison or contrast. As we see it, the Australian economy is subject to external influences, such as movements in world prices for foodstuffs and raw materials, which form our chief exports, and to internal influences in the form of seasonal fluctuations, which affect the volume of primary production. It is therefore essential that the monetary and banking system which has to serve an economy of this kind should be kept as flexible as possible to allow the necessary response to changes in these conditions.
There we have the indisputable evidence that there cannot be rigidity in the general economy of a country such as this which, to a large degree, depends for its prosperity upon seasonal conditions. As no doubt the Government has in mind control of the flow of available financial resources, with a view to creating full employment, it is interesting to note the remarks of Professor Melville who gave evidence in regard to this matter before the royal commission. He said -
It is sometimes suggested that the objective of monetary policy should be full employment of men and resources. This seems to me tobe, not only the monetary problem, but also the whole economic problem. Full employment is theobjective of all economic activity, but the economical use of resources requires a delicate adjustment of means to ends. Unfortunately, neither full employment nor the economical use of resources can be secured by monetary means alone. I have already indicated certain circumstances in which the attempt would lead to a spiral of inflation from which the nation could extricate itself only at the cost of great dislocation and heavy unemployment. Apart from this, the bank credit should be made available or how long we should wait for a dose of inflation to be effective. If in the face of intractable unemployment we impatiently turn the handle of the printing press and spend undefined sums on public works, an unhappy outcome is only too probable. These criticisms indicate only the most superficial objections to the policy, The more important objects are more fundamental, but I think it is unnecessary for me to discuss them here.
He went on to say that, owing to the conditions which I have mentioned, there cannot he rigidity in the class of economy which we have in Australia. I thought that I saw a glimmer of hope in the remarks of the Minister assisting the Treasurer, who said that the passing of this clause would wipe out depressions. The Minister said that the Government was determined that there would not be another depression, and blamed the trading banks and the then government for the last one. I shall quote now no less an authority than Professor Copland, who in An Essay on Banking Policy says -
The causes of the depression in Australia are now well known - an acute fall in export prices in overseas markets, and a sudden stoppage of overseas loans. The income of primary producers was cut in half by the fall in prices and their spending power correspondingly reduced. Loan expenditure on public works was even more seriously affected. From both causes unemployment rapidly increased, the profits of all enterprises were reduced - in many casescompletely annihilated - and government budgets were utterly disorganized.
Finally, I quote the following extract from the concluding paragraph of Professor Copland’s “ essay “ : -
We can therefore only reap the benefits of a liberal banking policy if the control of the currency be free from political interference.
– Order ! The right honorable member’s time has expired.
.- I have listened to a very interesting discussion, in the course of which the honorable member for New England (Mr. Abbott) and the Leader of the Australian Country party (Mr. Fadden) have quoted lengthily from the remarks of “ long-haired “ professors. Earlier in the debate upon this legislation, we were given to understand by honorable members opposite that these “long-haired” professors were a menace to the public interest, but apparently there is some great virtue in them if their views are opposed to the principles of this measure.
The Leader of the Australian Country party and his supporters cannot have it both ways. They cannot in one breath condemn professors as being a menace to the community, and in the next breath quote them in support of their opposition to this bill.
Clearly the Leader of the Opposition (Mr. Menzies) pointed out to the Assistant Treasurer (Mr. Lazzarini) that this clause does not interfere with individual advances by banks. On the other hand, the honorable member for New England opposes the clause on the ground that it will force the banks to give credit to all kinds of reckless people who will spend their money in all sorts of wasteful ways, including betting on race-horses. In my previous remarks I dealt with the claim by the Leader of the Opposition that the credit policy could not be completely controlled except in a completely planned economy. The right honorable gentleman castigated the Government, which he said had set up a Department of Post-war Reconstruction, but had no completely planned economy. I raised the question of whether any government in a country such as this which depends so much upon primary production, could setup a planned economy. The Government having been castigated for not having a completely planned economy for the future, I was pleased to hear the admission of the Leader of the Opposition that he had no plan for the future..
– Is the honorable member merely deceiving himself?
– I am not.
– It sounds singularly like it.
– I am placing the real construction on the words which the right honorable gentleman used.
– “ The Government was castigated for not having a completely planned economy “. Does the honorable member consider that to be a fair account of the argument adduced from this side of the committee?
– It is. The right honorable gentleman went to great pains to prove it. When I pointed out that no government in this country could have a- completely planned economy - or, in the words of the right honorable gentleman, an absolute schedule - he admitted nhat he had no cure for the situation.
– I have always said so. l t is a pity the honorable gentleman does not take a real interest in the debates.
– We have had two admissions. The first is that the views of the Leader of the Opposition and the honorable member for New England in relation to this clause differ, and the second is that the Leader of the Opposition has no plans for the future.
– That is untrue; I suspect, deliberately so. If I were quoting what an honorable member said the other night, I would say that the honorable member for Dalley is lowering the debate to the lowest level of putridity.
– Like the Leader of the Australian Country party and the honorable member for New England, the Leader of the Opposition quotes longhaired professors when it suits him. Even the devil can quote the Scriptures. The point that I want to make is that, whatever other construction may be placed on the contributions which the honorable member for Richmond has made to the discussions in committee, it at least can be said that they constitute a castigation of the Minister and of Government members generally, for not having explained the provisions of the different clauses of the bill. I draw attention to the statement in the bill that the Commonwealth Bank, in the public interest, may determine the policy in relation to advances to be followed by hanks. Let us view the fine line of distinction that is drawn by the amendment of the honorable member for Richmond. He proposes that the Commonwealth Bank may determine broadly the policy in relation to advances to be followed by banks. What exactly does he mean by that? Is that an official amendment of the Australian Country party? If so, can any member of that party explain to me what is meant by the expression, “ The Commonwealth Bank may determine broadly the policy in relation to advances to be followed by banks”? Every one will admit that it is most indefinite. Nobody can define “broad policy”.
– Nobody can define- “ policy “.
– Least of all can. the right honorable gentleman define hit policy. I have asked whether this is an official amendment of the Australian Country party. I want to know whether,, in the absence of the honorable member for Richmond, any other honorable member opposite can state what is meant by a broad policy in relation to advance* to be followed by the banks.
– The words mew what they say.
– They mean exactly nothing. Here is the point of theamendment : Although nobody can define “ broad policy “, it proceeds to providethat each bank shall comply with any broad directions that may be given. W<* know that, under the bill, the Commonwealth Bank will decide in thepublic interest what the policy shall bc, and that other banks shall follow the direction given to them. I put it to honorable members that, to provide for the determination of a broad policy - which cannot be defined - and then to provide that a bank which cannot follow the broad policy which cannot be defined shall be penalized, is to descend from the sublime to the ridiculous.
– The honorable member has not completed the reading of theamendment
– It proceeds to provide that nothing in this clause shall beconstrued as empowering the Commonwealth Bank to determine policy. There it ends. What does it mean? An indeterminate thing called a broad policy must be observed by the private banks Then, the Commonwealth Bank is to b<empowered to enforce that which cannot be defined even by the mover of th»amendment.
I move on to the prospective amendment of the honorable member for Fawkner (Mr. Holt), which proposes te delete all the words after the word “ may “, and to insert the words “ the Commonwealth Bank may advise the banks as to the direction in which it is desired, in the national interest, thai advances should be made “.
– Those are the terms of the explanatory memorandum.
Mr.ROSEVEAR. - The committee has three choices.
– We have only “Buckley’s “.
Mr.ROSEVEAR.- One choice is the bill as it stands, which provides that the Commonwealth Bank, in the public interest, may determine a policy in relation to advances to be followed by the banks. The second choice is the indeterminate and completely nonunderstandable amendment of the honorable member for Richmond, and the third choice is the amendment of the honorable member for Fawkner, which completely neutralizes the whole thing and reverts to the old position.
– I am glad to have the admission that it would have a neutralizing effect. That is entirely accurate.
Mr.ROSEVEAR.- The intention of the honorable member is to revert to the old position.
– No. I intend to revert to the royal commission’s recommendation.
Mr.ROSEVEAR.- That is true. The amendment provides that the Commonwealth Bank may make recommendations, but does not provide that penalties shall be imposed if those recommendations are not accepted. Consequently, it is not worth the paper on which it is written. The honorable member for Richmond cannot explain his amendment, nor can any member of his party. The honorable member for Fawkner admits that his amendment has the effect of restoring the old position.
– I do not admit that.
– It does not impose any penalty if its conditions are not carried out, and, therefore, its effect is neutralized. Parliament therefore has to make a broad choice between allowing the Commonwealth Bank - a government instrumentality - to determine, in the public interest, the policy of advances and investments, or the system which has brought ruin to every country in the world - that of private banks with their right to use public funds to make investments in the interests of themselves and their shareholders instead of on behalf of the people whose money they are using to make advances.
Corporalo. G. O’Connor.
Motion (by Mr. Chifley) proposed -
That the House do now adjourn.
.- For some time I have been endeavouring to obtain the release from the armed services, on compassionate grounds, of Lance-Corporal Owen George O’Connor, of Ian-parade, Concord. In the Sydney Sun of the 26th June the following account of his bravery appears: -
For the standard of bravery in south Bougainville to-day, they cite the deeds of twenty year old Lance-Corporal Owen George O’Connor, of Ian-parade, Concord.
O’Connor stood guard over a wounded man when three Japanese attacked with fixed bayonets. He killed them all. He carried the wounded man to safety while bullets zipped through his clothing. Then he returned to save another wounded man, gave covering fire so that a third wounded man could escape, and finally rescued a signaller pinned down by enemy fire.
O’Connor was second in command of a nineman patrol, whose task was to locate a sus- pected Japanese head-quarters. When 1,000 yards from the Hongorai River, the patrol sighted Japanese on its rear leftflank. The commander crept back to contact another patrol, and arrange an outflanking movement Japanese now were sighted in front, and as the commander returned, 50 Japanese attacked with rifles, light machine,guns and mortars The signaller was pinned down, and could not get to his wireless to summon help.
O’Connor tried to crawl forward, but bullets cut through his clothing and drove him back. He detailed Private Roy Miller, of Tasmania to crawl hack for help, but he, too, was pinned down.
Several times O’Connor tried to reacha wounded man, but each time bullets cascading into the leaf-strewn ground kept him back He made a wide detour and readied the man. took off his equipment and dressed his wounds. A Japanese mortar bomb landed beside him, but failed to explode. Three Japanese rose from their jungle cover and charged with fixed bayonets. O’Connor killed them one by one with his Owen gun.
A forward scout cried that he had been hit. O’Connor covered him, later dressed his wound, and directed him to crawl to safety.
Meanwhile, the Bren gunner, Private Dun Barnes, of Footscray (Melbourne), who had been covering the platoon, called out that he had only one magazine of ammunition left. O’Connor ordered him to retire, and sent Owen gun fire over the head of Private Stan Harling. of East Malvern, Melbourne, who was pinned down, enabling him to crawl back. O’Connor was last to come out. Several times he risked betraying his position by calling to a wounded man that he would not leave him. He dragged this man to safety. O’Connor, who has an extremely youthful appearance, was a butcher before the war.
Mrs. O’Connor wept when told of his action. Poor kid. He’s not 21 until November.
I wish he was back home,” she said.
I knew he had done something wonderful. He’s very modest. His last letter, written on the 17th June, had a postscript, saying he had been interviewed ‘ over that day when my cobber, John, was killed ‘. “ He said, ‘ They said it would be in the papers and over the air, but please don’t worry, Mum. It’s O.K. and a thing of the past ‘. “ He had written a month ago to say that John had been killed and he dragged in his body. He said he couldn’t stand to see it lying out there.”
Mrs. O’Connor added that Owen first worked at the abattoirs with his father, a wholesale carcase butcher. His father died two years ago. “ I wanted Owen to carry on his father’s business, but the Army authorities refused to let him. I had to let the business go.” said Mrs. O’Connor.
I have read that report to the House so that honorable members might gain an indication of the outstanding courage of this young soldier, only 20 years of age. I congratulate him on his splendid achievements, and his mother on having a son of that calibre. His action should entitle him to a Victoria Cross or some fitting award. Since the Acting Prime Minister (Mr. Chifley) is in the House, I appeal to him to make representations to the Cabinet to have the release of this soldier brought about in the near future. His family has had a succession of misfortunes. His father, who was a butcher, died two years ago, and recently the business has failed. His mother is also in a bad state of health. In view of the hardship being suffered and the desire pf the soldier to return home to assist his family in their hour of need, I earnestly hope that my representations will be given favorable consideration.
.- Mr. Speaker-
– I call attention to the state of the House.
The bells having been rung and a
Mr. Speaker adjourned the House at 11.16 p.m.
The following answers to questions were circulated: -
r asked the Minis ter for Commerce and Agriculture, upon notice -
– The answers to the honorable member’s questions are as follows : -
Australian Army: Absence without Leave - Private Neilson.
y. - On the 24th May the honorable member for Griffith (Mr. Conelan) asked the following question: -
I direct the attention of the Acting Minister for Defence to the case of a young Australian, QX49114, Private Alex. Neilson, who has been court-martialled in Brisbane, because, in his anxiety to see active service, he was absent without leave and was later found serving with American troops in the Philippines. His service there was marked by brave deeds, and he was recommended for a decoration. Will the Minister give sympathetic consideration to this case, and see that Private Neilson is allowed to satisfy his desire to rejoin his unit, which is now in action?
The Acting Minister for the Army has now supplied the following answer : -
This soldier was tried by District CourtMartial on the 22nd May and found guilty oi absenting himself without leave from the 6th February to the 22nd April, but he was sentenced to undergo no punishment. Neilson was to be returned to his unit but was sent to hospital on the 4th June suffering from indians.
Cite as: Australia, House of Representatives, Debates, 27 June 1945, viewed 22 October 2017, <http://historichansard.net/hofreps/1945/19450627_reps_17_183/>.