4th Parliament · 1st Session
The President took the chair at ,3 p.m.; . and read prayers.
– Is the Minister representing the Postmaster-General now in a position to answer the following question which I asked on Friday last: -
Is it the case that some contract and semiofficial post and telegraph offices in Queensland are in charge of persons who cannot read their call, and that one of those officers recently took two and a half hours to dispose of on eighteenword message?
-The Deputy Postmaster-General, Brisbane, reports as follows : -
No; no case of the kind has come under notice.
– I wish to ask the Minister of Defence whether it is correct that there has been prepared a map showing the areas in which it is proposed to divide the States for the purposes of the new Defence Act, and, if so, whether he has any objection to make the map available for the information of honorable senators ?
– A map is in course of preparation, and when it has been finally approved it will be made available to the public.
asked the Minister representing the Minister of Home Affairs, upon notice -
Whether it is the intention of the Government, during this session, to introduce a Bill dealing with the Capital Site question, and whether on such Bill an opportunity will be afforded the Senate of considering the advisableness of selecting a more suitable site than the one already tentatively chosen?
– The answer to the question is -
The Minister of Home Affairs states that he has already intimated, in reply to questions, that the Government’s intention is to go straight on with the location, designing, &c., of the Federal City within the territory mentioned in the Seat of Government Acceptance Act 1909.
– That does not tell us whether we shall get an opportunity of revising the decision.
MINISTERS laid upon the table the following papers: -
Quarantine Act 1908. - New Regulation60a (Provisional). - Statutory Rules 1910, No. 78.
Lands Acquisition Act 1906. - Woodstock, New South Wales : Post Office. - Notification of the Acquisition of Land for Site.
Public Service Act 1902-1909 -
Repeal of Regulation 172, and substitution of new Regulation in lieu thereof. -Statutory Rules 1910, No. 81.
Repeal of Regulation 202 and substitution of new Regulation (Provisional) in lieu thereof. - Statutory Rules1910, No. 82.
Motion (by Senator McGregor) agreed to -
That leave be given to introduce a Bill for an Act to provide for the acceptance of the Northern Territory as a Territory under the authority of the Commonwealth and for the carrying out of the. agreement for the surrender and acceptance.
Bill presented and read a first time.
Debate resumed from and September (vide page 2497), on motion by Senator McGregor -
That this Bill be now read a second time.
– The observations I have to offer will be few and brief. I recognise that this measure represents a step forward in the gradual exercise of our legislative powers.Under the Constitution we possess the power to control the paper currency as well as the metallic currency. I do not think that any previous measure has been received with such hostile criticism as has this one. The bulk of the criticism has come from our Conservative friends who sit on the opposite side of the chamber, and some of whom have said that as the result of its operation disaster will overtake this young country. I recognise that the forward movement of advanced Democracy demands legislation of this description. If our opponents, both in Parliament and out of it, recognise the fact that the people of Australia, when they agreed to the Constitution Bill, invested this Parliament with power to control the paper currency, they might have saved themselves much worry and the country a lot of time so far as their criticism wasconcerned. It has been argued during the debate that the existing financial institutions are being assailed. In framing and launching this measure there is no intention on the part of the Government to attack any financial institution in existence. I am glad to say that whilst a few of the bankers of Australia have uttered anathema, a great many believe that this will be a useful measure. There is one section which, I dare say, will experience some anxiety by reason of the presentation of this Bill to Parliament - I refer to those persons to whom in the past Australia has gone for money in order to develop its resources. I freely admit that the Bill contemplates the raising of a certain sum of money without interest. Under this Bill, the persons in the Old Country to whom we have hitherto gone for the purpose of raising money with which to develop our resources will find themselves deprived of a certain amount of profit, and their agents also may. have cause for annoyance. But these individuals constitute the only section which is likely to experience any loss from the operation of the measure. I would remind my honorable friends who have criticised the Bill that a few years ago the bankers of Australia were quite willing to support a measure of a somewhat similar character. The only difference between the recommendations which were then made by the bankers who gave evidence before the Royal Commission which investigated this question, and the proposals of the Bill, is that they recommended that private institutions should share a certain amount of the profits. Now, if any profits are derived from a note issue when this Bill has become law, those profits will belong to the people of Australia, and not to a privileged few.
– The difference between the present note issue and the notes which it is proposed to issue under this Bill is that the Government intend to make Commonwealth notes compulsory legal tender, and therefore they will become a forced loan.
– I have already said I freely admit that the Bill embodies a method of raising money without the payment of interest. We need not discuss that question further.
– It contemplates raising a forced loan.
– I do not see any force about the matter. 1 need not use a Commonwealth note if I do not choose to do so.
– The honorable senator would be bound to accept it if I tendered it.
– I need not. Under the Bill the interest upon our loans which has hitherto been sent abroad will remain in Australia to assist us in developing our national resources. One would think, judging by the howl which has emanated from certain quarters, that the Government are launching upon an entirely new scheme. As a matter of fact, there is nothing new about it. It is as old as is the sun itself. Later on I shall quote a few illustrations of the success which ‘has attended the issue of a paper currency. So far as our banks are concerned, I do not intend to attack them in any way. I have every respect for the banking institutions of Australia, and I recognise the good work which they have done upon many occasions. But to sum up the objection of many bankers to this Bill, I would say that it will not permit our banking corporations to enjoy the profits which they have hitherto enjoyed.
– The facilities which they hitherto enjoyed.
– I need not point to Queensland as a proof of the success of a State note issue. Every honorable senator knows how successful that note issue has been. Since the introduction of this measure we have heard a good deal of talk in reference to the American greenbacks. Now, American history proves that, despite the fact that that country was torn asunder by internal strife as well as by attack from without, every one of its notes was eventually honoured.
– The Government repudiated their own paper.
-Colonel Sir Albert Gould. - The greenbacks depreciated to 35 cents.
– I was waiting to hear my honorable friend, or some other honorable senator opposite, make that interjection. What was the cause of the reduction in value of the American greenback ? It was not the fault of the Government of the day, but was entirely due to the determined and successful opposition of representatives of banking institutions and private corporations in the United States Senate.
-Colonel Sir Albert Gould. - Nonsense !
– A leading banker in the United States Senate was _ instrumental in leading the opposition in that Chamber to the American greenback, which was the real cause of its reduction in value. As a result of that opposition, the greenback was not receivable at the Customs House. I clare say that if my honorable friends who represent the banking institutions and private corporations of Australia had their way they would endeavour to reduce the value of the note which the Government propose to issue.
– There is only one way in which its value can be reduced, and that is by the action of the Government themselves.
– There are many ways in which its value may be reduced. I have already quoted one way. Fortunately for us, no concerted effort in that direction is being made in this Chamber as is was made in the United States Senate. What is the position of the American greenback to-day? After the war it became as valuable as gold.
– Because it rested upon a gold basis.
– To-day there are ^77,000,000 worth of American greenbacks issued at par. Why ? Because they are receivable at the Customs House.
– And because there is something in the vaults of the Treasury.
– That is my answer to those who have referred to the conditions which operated in respect of the American greenback.
– The Government of the United States over-issued greenbacks to such an extent that the war cost them about $600,000,000 more than it need have done.
– The over-issue was due to the private banking corporations, and not to the Government. Wherever an honest Government are in existence, who will resist any attempt at over inflation, the note issue is perfectly safe. Reference has also been made to the American crisis of 1907. Do we not all know that that crisis was the result of a conspiracy amongst the gold magnates? If the then Government of the United States had not turned a blind eye to their actions, I dare say that some of those multi-millionaires would now have been languishing within the four walls of a prison cell. They were asked to pay in gold, and refused to do so. The Government winked at the position ; the crisis was the result. I wish to quote the experience of two or three countries in relation to paper currency. It is a matter of history that France, after, the Revolution, recovered by means of a paper currency, backed by the nation. Will any of the opponents of this measure deny this sterling fact - that at a further period in the history of France that nation received a new lease of life through the medium of a paper currency? After her devastating war with Germany, when France was defeated at Sedan, and had bitten the dust, her soldiers were returning to their own districts to find themselves homeless and workless. They found their native fields lying waste, and there was no employment for them in field, factory, or workshop. France had two issues of paper currency, each consisting of over ^60,000,000 in English money. That saved the situation. It gave work to the workless, and homes to the homeless. It set the wheels of industry revolving once more. Moreover, by means of those two issues, France was able to bring all her industries into play, and, by exporting her goods to Germany, was able to compel the Germans to buy her goods, and thus enable her to pay her indemnity in German gold. We may contrast that situation with what occurred in England at another period. During the Napoleonic wars, paper money was plenti ful in England, and there was any amount of prosperity.
– Prosperity? The country was miserable !
– After the battle of Waterloo, a return was made to a gold basis, with the result that the currency of Great Britain was contracted. If we com-; pare the situation in England after the Napoleonic wars with the situation in France after her war with Germany, we shall find that France effected the more rapid return to prosperity because of her issue of paper currency. I consider also that notes are very much handier than gold. Nobody would carry fifty or a hundred sovereigns in his pocket, but no one objects to carrying such an amount in notes. In regard to the question of safety, I understand that the Government intend to maintain a gold reserve of 25 per cent.
– “ Not less than.”
– I consider that 25 per cent, is ample under ordinary circumstances; but where the credit of a nation is behind the issue, there need be no uneasiness even if the gold reserve were less. The security which we give to these notes is the same which we should give to a foreign bondholder. The States can give to their bondholders as security for their debts no better security than we as a Commonwealth are able to offer the users of our notes. If the security offered to the bondholder be good enough, it is surely good enough for the private user of Commonwealth notes.
– The States have vast assets. Their railways alone are valuable enough to cover their debts.
– The Commonwealth also has large assets that no attempt has yet been made to touch.
– It has Customs duties.
– I am not referring to Customs duties. My honorable friend knows perfectly well that the Com- ‘ mon wealth has great assets.
– What assets has it?
– The Commonwealth has the credit of the young Australian nation behind these notes. What better security can there be? Suppose that the Naval Loan Act, of which honorable senators opposite were the authors, had been put into operation? Could they have offered better security for the .£3,500.000 which was to be raised in London than we are offering to the private users of the notes about to be issued? What was the security to be offered for the loan? Nothing but the credit of the Australian Commonwealth. We are offering the credit, of the same Australian Commonwealth as security for our notes. I have said that the Commonwealth issue will save trouble and cost by abolishing exchange on notes passing between States.
– That exchange has been abolished for some years.
– Not entirely. No later than yesterday I had to pay ex= change on an Australian note.
– A note issued by an Australian bank?
– I paid exchange on a bank note issued in Western Australia. This Commonwealth issue will remove the cost and worry attached to exchange. With reference to credit, I desire to quote from MacLeod’s Theory of Credit. At page 737, dealing with the effective force of money as compared to the effective force .of credit, he uses these words -
The preceding figures show that the absolute quantity of credit as compared to money is about 99 to r. That is, that in all prices 99 parts consist of credit, and only 1 part of money ; so that if it were possible to imagine that the whole mass of credit were annihilated, gold would rise to about 100 times its present value.
– Why is that?
– In a very able article in the Melbourne Age that paragraph, and preceding paragraphs, of MacLeod’s work, are summed up in these words -
Macleod, in his Theory of Credit, dealing with this well known fact, points out that within a given year the London Clearing House transacted ^7,000,000,000 worth of business without the use of a single coin. At the time he wrote the bills discounted in England amounted in value to ,£1,000,000,000 per annum, as against a total gold value held in England of /.I20,000,000. In the thirty years prior to that period gold used in international commerce fell from 12 to 8 per cent. In fact, says the author, banking and mercantile credits of England as compared to gold are 99 to r.
Conservatism has libelled many measures of an advanced nature that have emanated from the vanguard of Democracy. But no measure emanating from that source has, 1 think, received more libellous treatment than has this proposal for a- paper currency. We have entered upon the coinage of silver, and expect to derive a profit from it. There is no question as to our right to control silver coinage, and I do not think that any one has objected to our receiving the profits which may be derivable from it. That being so, we surely have the right* to exercise the constitutional powers conferred upon us to give to the people of the Commonwealth whatever profits may be derivable from a note issue. I have heard something about an overissue. I say that whilst the Government of the day provide for an issue of from £5,000,000 to £7,000,000 worth of notes there cannot be an over-issue, so long as they are honest in their intention. There is one canon of finance that cannot be disregarded, and that is that no more notes should be issued than the necessities of trade and commerce demand. I say that no more notes will be issued.
– That is something the honorable senator cannot guarantee.
– I will guarantee that so far as the present Government is concerned they will issue no more notes than the necessities of trade and commerce demand. Let me quote’ briefly the experience of Canada. In 1880, the Canadian Dominion issued ,£2,500,000 worth of notes. Six years later Canada increased her note issue to £4,000,000.
– Does Canada impose a 10 per cent, tax on bank notes?
– Never mind the tax ; I am giving facts and figures, which I invite the honorable senator to controvert when he speaks on the second reading nf this Bill. In 1893 the Canadian note issue was increased to £8,000,000. So that in thirteen years there was an increase in the note issue of .Canada from £2,500,000 to £8,000,000; and why? It was because the necessities of the expansion of trade and’ commerce compelled the increase.
– The honorable senator forgets that there are more bank notes than Canadian Government notes circulating in Canada.
– I have nothing te do with the bank notes issued in Canada. I am speaking of the national note issue of the Dominion. I say that it has increased from £2,500,000, in 1880, to £8,000,000 in 1893, because the expansion of trade and commerce demanded the increase. So I contend that in Australia, with a Labour Government at the head of affairs, we shall have a similar experience, and it will be found that there will be no over-issue of Australian notes. In conclusion, all I have to say is that I would very much have preferred to have seen this Bill prefaced by a measure to provide for the establishment of a Commonwealth National Bank. I believe that the day is not far distant when such a bank will be established. In the meantime I am prepared to accept this Bill. I recognise that in voting for the second reading I shall simply be carrying out the behest of the electors who gave us the majority we have on the 13th April last.
– I find some difficulty in considering this Bill because some of its objects are admitted, and other scarcely denied. While criticism must in consequence be somewhat widespread, its effectiveness may be missed because concentration is impossible. I shall presently point out what I think are the admitted objects of the measure, and those which, as I have said, are scarcely concealed. Before I do so I may say that there is one other difficulty which confronts every honorable senator on this side in offering a criticism upon the Bill, and that is that it has been pronounced by its authors to be perfect. While we may offer comments, it is impossible, in the circumstances, that anything we may say can lead to any alteration of the measure. I remember, and .if I did not I should be forced by the interjections so current in the Senate during this session to recognise it, that the majority on the other side is not less remarkable for its numbers than for its cohesion. We, on this side, are fighting a perfectly hopeless battle so far as any amendment of proposed legislation is concerned. To come back to the objects of this Bill, which interest me in many ways, I think the admitted object is a forced loan, or if the expression seems harsh, a loan without interest.
– A loan without interest might be a voluntary loan.
– It might, and I shall therefore couple the two things together, and say that one of the admitted objects of this measure is a forced loan on which there is to be no interest paid. The Vice-President of the Executive Council said that one of the objects of the Bill was to give the Commonwealth control of the currency. It is perfectly certain that the Commonwealth cannot control the currency. The Vice-President of the Executive Council probably overlooked the fact that in Australia, as in every other civilized country, the currency is not merely the note issue or the coin - whether you have a gold, silver, or other standard in metal - but is largely made up of cheques.
– Cheques are not currency.
– They form about 90 per cent, of it.
– Not of the currency, but of the medium of exchange.
– If the Minister thinks that he is a more pedantic authority on these terms than I am, he is welcome to the difference in terms.
– A cheque is not money.
– I am not anxious to instruct the Minister on a question, of currency, and, if I may, reluctantly, and with a certain amount of modesty, say so, I do not wish for his instruction. But what I have said is correct, whether in terminology or otherwise. In every civilized country, most of the currency transactions are carried on by means of cheques. That leads me incidentally to wonder whether the banks which are attacked - and that is admitted to be one of the objects of the Bill - will or will not make use of an obvious means of supplanting their notes by issuing marked cheques. I am rather interested to see whether the banks will adopt that method. There is nothing to-day to prevent a bank from issuing 10,000 cheques and sending them out instead of notes ; but, probably, if the banks took that step, they would be confronted with fresh legislation. Probably they will not adopt the method, because, as we have been told, they have agreed, with a certain amount of cordiality, to co-operate with the Commonwealth in regard to its note issue. I suspect that a little pressure has been brought to bear in order to bring about that cordial .cooperation. I do not think that it has been entirely voluntary, nor do I consider that the banks have cheerfully acquiesced in the proposals of the Government.
– The honorable senator thinks that the banks are making the best of a bad job.
– For some reason which I have not been able “to divine, the proceedings of the conference between the Ministry and the bankers have been kept entirely secret.
– At their request.
– I was on the point of asking the Minister at whose request that was done; and I am glad to have, from Senator Needham, information which, no doubt, can be regarded as per- fectly satisfactory. At any rate, I am glad to know that it was at the request of the banks that the proceedings have been kept private.
– That is a fact.
– I have no reason to object to this Bill ; but if I were a member of the Labour party, I could find no particular reason to be enthusiastic about it. In my opinion, they have more reason to criticise the Bill than have we on this side. In other words, we have less cause for concern than they have for enthusiasm. We know that a forced loan is going to be obtained by the Commonwealth without making much profit by it. The Government have not said that they intend, or hope, to make much profit. Yet there was a very simple way in which they could have made a much greater profit, while the banks would have suffered less. The Commonwealth could have said to the banks, “ We find that you have in circulation about £4,000,000 worth of notes. We control banking legislation and we think it is eminently desirable that the note issue of every bank should be fully guaranteed, that there should not be the slightest doubt that the banks can meet their note liability.” The Government could have gone on to say to the banks, “ Having that object iri view, we propose to issue an equivalent amount of notes,- which are backed up by the resources of the Commonwealth, say, £4,400,000. We ask you to take them and not to put them into circulation, but to hold them earmarked against your own issue and in return you will please hand over to us £4,000,000 in gold.” That would have been an extremely simple operation which would have resulted in much more profit to the Commonwealth, and which, I believe, would have been much more acceptable to the banks than the present arrangement. But instead of taking that course, the Government have introduced this Bill, and if I were asked why, I should say, “ The reason probably is that it is merely preliminary to something which is to come later.” That is what I meant when I referred just now to objects of the Bill which are openly admitted and objects which are scarcely concealed. I can come to no other conclusion from the internal evidence which the Bill supplies than that the Government intend later to establish a National Bank.
– Is not that part of our platform?
– I have always understood that it was, but the platform has so many planks, some being occasionally described as fighting, and others being apparently peaceful, that I did not know whether the idea of a National Bank was merely in the air. I did not know whether it was a matter for consideration during the next three or four years.
– The honorable senator will possibly have a chance to consider it next session. I hope so, anyhow.
– One might fairly ask, What is the advantage of the Bill ? I do not suppose that the Government have introduced it without some idea of an advantage. I set aside for the present the fact that it is the preliminary to a Banking Bill, and ask : What is to be gained by this legislation ? I have already said that the gain by the loan will be very little, and I think that that is practically admitted by the Government. We have heard a great deal about stability, security, elasticity, and other terms as applied to a note issue. And, incidentally, we have been told - and many of these narratives have immensely amused me - of the great dangers and occasional individual hardships which have accrued here in past years because of the fact that the banks issued notes and that at times those notes were at a discount. My answer to that is, first, that the note Issues of the banks had nothing whatever to do with the crisis. No crisis has ever arisen in Australia, and I cannot conceive that a crisis ever would arise, because the banks which were allowed under legislation to carry on buiness had got an inflated note issue. As a matter of fact, we know that the note issue in the Commonwealth has been exactly the opposite of inflated ; it has been limited to the barest necessities of the case. It has been limited, of course, because it has been taxed by the States; but even if it had not been taxed it would have been extremely limited, and no bank crisis has ever arisen here because of a note issue. Therefore, the talk about occasional hardships is to my mind utterly beside the question. But we are told that it is so necessary to give stability to Australian notes that you must offer some security which the people can regard as unimpeachable. In connexion with such talk, perhaps in the Senate, but certainly elsewhere, I heard an argument of this sort, “ What member of the public can have the slightest doubt about the value of a Commonwealth note ?” This is one remark which’ attracted my attention. “ The Commonwealth to-day owes ,£250,000,000. It is perfectly good security for twice that amount. Who, then, will doubt the value of an Australian note?” That is excellent talk, and it amused me very much. Compared with that, what would happen under this Bill ? We are told that so magnificent is the security to be offered by the Commonwealth that £250,000,000 would be a detail. But when we come to look at the Bill we find that, up to £7,000,000, we must deposit at the Treasury 25 per cent, in gold, and that when we get above that £7,000,000 - that is the figure, not ^£2 50, 000,000 - we must pay down a sovereign for every pound note. The Government have thrown a certain amount of discredit on the magnificent resources of the Commonwealth and the invulnerability of their proposed note by saying, “ Although the Commonwealth is so tremendously strong, the moment the figure £7,000,000 is reached a sovereign must be put down for every note that we issue.” There is one proper method of giving security to a note issue. That is, not by depositing gold to meet the notes, but by creating confidence in the popular mind. If the Government wish to give the people greater confidence in the proposed note issue, they can best do that, not by increasing the gold reserve, but by making arrangements for the redemption of the notes in every capital in the Commonwealth. I have very little objection to the Bill. I am sorry to say that I cannot denounce it, and that I cannot agree with many honorable senators on my own side who think it will do Australia harm. I do not believe that it contains any element of danger worthy of the name; but from the point of view of honorable senators opposite, it is a very weak and poor thing, and might have been very much better than it is. If I had been gifted with that sort of political insight which would have put me in the ranks of the Labour party, I should have found considerable fault with the Bill from their point of view. I should have said that they were not making nearly enough of their opportunity.
– How does the honorable senator know that fault has not been found elsewhere, not here?
– Of that I am no judge. Mine is not so much a criticism which denounces the Bill, as a criticism which implies that it is faulty; having, perhaps, a certain amount of sympathy with the inherent idea of it. In its construction, it is very bad, and much more ought to have been made of it. If the Government want to give the people perfect confidence in the note issue, they surely can do it by providing conveniences. What the public want, in order to feel quite certain about the value of their notes, is not the assurance which we can all give them, on whichever side we sit here, that Australia is quite equal to redeeming a note issue of ,£7,000,000 at any time, for they all know that, but the assurance that if they wish to convert the notes into gold at any time they can do so. It is convenience which is wanted. From their own point of view, the Government would make the notes much more highly appreciated, and much more entirely remove the faintest suspicion of that sort, if they would give an assurance of that kind. I do not anticipate that there will be much conversion of notes into gold. I think it will be generally agreed in regard to the conversion of paper currency into gold that the knowledge that a man can do a certain thing is all that he wants. He does not want to do the thing, so long as he knows that it can be done. I have not the slightest doubt that if the Government had made it clear that provision would be made for the conversion of these notes into gold, not only at the Seat of Government, but at other convenient centres, this Bill would have been much more acceptable. I cannot see why they should not have given that intimation. It would be perfectly easy to arrange with a bank in every capital that it should change the notes for gold on demand by any member of the community. That can be done now, and I see no reason why’ it should not be done under the Bill. The Government might well have taken into their serious consideration the possibility of co-operation for the benefit of the Commonwealth itself with the banks. Diverting from that for a moment, we have heard during the debate many minor accusations against the method in which the banks in the Commonwealth have conducted their business. One of these amused me very much. We have been told that the banks will not give gold for notes without charging exchange upon them, if such notes are issued in one State and tendered in another. We have also been told that some pressure was put upon the banks by means of a speech which was delivered at Gympie, and that, as a result pf that pressure, they have been induced to adopt a different attitude. Per- sonally, I regret that our banks have not always cashed their own notes free of exchange, irrespective of the State in which those notes have been presented. For instance, the Bank of Australasia might very properly have cashed in Queensland, free of exchange, a £5-note of the same bank issued in Melbourne. Had that course been adopted, these institutions might easily have agreed amongst themselves to make their notes convertible throughout Australia free of exchange. Such criticism, I think, is fair. At the same time, it occurs to me that it is equally fair criticism to say that the Government have no title to suggest that the banks do not offer that freedom of exchange which they should offer. If I visit any post-office in Australia to-day and tender it good gold, I am told that gold is at a discount, and that Commonwealth paper is at a premium. If I wish, as a member of the public, to obtain through the Post Office, the convenience offered by the semi-banking methods which the Commonwealth has adopted, I am charged exchange at the rate of threepence upon every sovereign which I tender. In other words, if I desire to purchase a postal-note, in order to enable somebody else to get value for that note, I am told when I put down my sovereign that I must pay threepence upon it, to complete the exchange. That is a higher rate of exchange than the banks have ever charged.
– They always charge sixpence in the pound.
– At no time have banks charged sixpence in the pound by way of exchange.
– I have had to pay it.
– Some of the banks have charged a shilling exchange upon a pound-note.
– They have charged one shilling to simpletons, and threepence to men of sense.
– They have not charged a shilling only to simpletons. They have charged it because it was the usual charge.
– As a matter of fact, the bank rate of exchange between any two States is seldom more than five shillings per cent. I can assure Senator Henderson that I can exchange his cheque on Melbourne in Launceston.
SenatorHenderson. - I am speaking of notes - not of cheques.
– Does the honorable senator wish me to believe that the banks charge a higher rate of exchange upon notes than upon cheques ? I can assure him that the rate of exchange which the Commonwealth charges upon postal notes is much higher than is the bank rate of exchange. It is not competent for us to criticise banking methods in respect to the exchange of notes, seeing that in the matter of its postal notes, the Commonwealth charges a premium for paper, and puts a discount upon gold. To my mind, this Bill will have two results. In the first place, it will deprive the States of a certain amount of revenue - about £100,000 annually - which they are at present receiving from the note tax. It will also deprive the banks of a certain amount of profit. To-day these institutions have about £4,000,000 worth of notes in circulation, upon which they pay a tax of 2 per cent. I dare say that they manage to make a profit upon that £4,000,000 worth of notes of 3 per cent. in excess of the 2 per cent.
– The honorable senator must remember the cost of printing. They pay 2 per cent. as a note tax.
– I venture to hazard the guess that, after paying that 2 per cent., they make, by virtue of their note issue, a profit of about 3 per cent. on the total amount. In other words, they make a profit of about £120,000 annually.
– That result could only be obtained if every note issued were immediately invested at 6 per cent.
– I adhere to my figures, although I cannot vouch for their complete accuracy. It is admitted that, under this Bill, the States will lose a revenue of about £100,000 annually, and I prefer to think that the banks will lose temporarily about £120,000 annually. But I have not the slightest doubt that before long the banks will find more than one method of recovering that loss. They will apply gentle and persuasive pressure to the public, and the latter will pay it. In other words, the proposed note issue will cause the banks to extract from the public about £120,000 annually. It will also impose upon those institutions a certain amount of inconvenience, because it will compel them either to keep a larger amount of till money than they at present require, or to diminish the existing circulation of notes throughout the Commonwealth. It is in regard to the circulation of Commonwealth notes that I feel a particular interest. I have not been able to gather from a perusal of the Bill, or from any statement by the Government, the precise way in which it is proposed to put these notes into circulation. 1 know that, so far as the banks want them, those institutions offer a ready way of putting a certain number into circulation. But I would like to ask the Government how they propose to get these notes into circulation to the extent that the banks do not require them? Of course, the Ministry may be prepared to issue them themselves. But, for the present, it seems to me that the proposition is that the issue shall be practically dependent upon the amounts which the banks are prepared to take. I venture to say that it is not at all likely that these institutions will take £4,000,000 worth of notes. Consequently, I think that one of the effects of the Bill will be to seriously limit the circulation of Commonwealth notes throughout Australia, and to supplant them with gold. To the extent that that is done, the Government will suffer, in so far as they hope to make a profit out of the issue. In other words, precisely to the extent that the banks use gold in preference to notes, the scheme will fail to return a profit to the Commonwealth.
– The banks must issue either gold or Government notes.
– The banks retain to themselves the right to meet every demand made upon them in gold. They are under no obligation to pay in Commonwealth notes. Originally, the Bill contained a provision which would have imposed that obligation upon them; but, as a result of more mature consideration, it has now disappeared, so that to-day there is no compulsion on anybody either to use or issue these notes.
– Gold is a legal tender under our Constitution.
– Of course it is. Again, I would remind honorable senators that the scheme which I outlined at the beginning of my remarks would, if adopted, have been more profitable to the Government and less objectionable to the banks, on account of the question of till money. In Committee, I may endeavour to ascertain whether the hearts of the Government are still hardened in this connexion; but I fear that I shall not succeed in effecting the slightest alteration in a Bill which they themselves have already pronounced perfect. -I say, frankly, that I see very little harm in’ the measure. Indeed, I think that much more might have been made of it from a Commonwealth stand-point. I see no reason for assuming that any evils are likely to result to Australia consequent upon the adoption of a Commonwealth note issue. Therefore, I approach the measure in a somewhat friendly way, and I extremely regret that the Government have not seen fit to give to persons who support it that confidence which would be such a big factor in its success. Are they so absolutely wedded to every line of it that they cannot adopt an alteration, even though they recognise that it would effect an improvement in the measure? Cannot they - even at this late hour - seriously consider the convenience of the Commonwealth ? If we make some provision whereby persons may exchange Commonwealth notes for gold in the various States, is there any member of the Labour party who will say that the Bill will suffer? I cannot see that the Ministry would incur one iota of risk by agreeing to some such provision. But, by refusing to do so, they will deliberately provoke hostility to the Bill. I can point out how easy it is for them to make their own work the object of suspicion. To-day, it would be perfectly simple for the banks of Australia, acting in concert, to collect £1,250,000 worth of notes, and to present them at the Treasury, when there was only 1,000,000 sovereigns there to meet that demand.
– They would not be game to do that.
– If they did something would happen.
– Is that a proper attitude to adopt? The interjections merely imply that there is some power which is quite prepared to act despotically for the purpose of overawing the banks, and the, are very illustrative of what is in the minds of honorable senators opposite. Why do they say, in effect, “ We have provided a 25 per cent, gold reserve to meet all demands upon Commonwealth notes, and if any man dares to say that that is an insufficient reserve, we will punish him.”
– It is a larger reserve than that which is held by the private banks.
– It is not. It is absurd to say that the private banks have not a reserve which is infinitely greater than is their note issue.
– Their note issue is not their sole liability.
– I have not said that it is, nor ought it to be necessary for me to remind the honorable senator that, in most of the States, legislation has been enacted in regardto the banks meeting their note issue. In nearly every State ample provision has been made by law for the banks meeting with a sovereign every note which they may have issued. But surely it is not worthy of Parliament to hold out a threat ; to say openly, as is being said by honorable senators opposite, that it has provided for a gold reserve of 25 per cent., and that if anybody dares to say that that reserve is inadequate, it will deal with him by drastic means. It is unworthy, and I cannot see the slightest justification for it. I cannot understand what sort of attitude it is which prefers hostility to friendly co-operation.
– It can only be done with a purpose.
– The banks might easily say that there is a considerable purpose in this legislation. They might say that its obvious purpose is to curtail their profits and to interfere seriously with them in their operations. Banks, as well as Governments, can entertain something like a desire for retaliation. Again, I say that if the Government ostensibly profess that 25 per cent. of gold is sufficient to redeem one hundred pounds’ worth of notes, I see no reason why they should not be prepared to have that question definitely tested. Otherwise, I presume that they have adopted an arbitrary standard. Personally, I say unhesitatingly that you can have with safety a much lower gold reserve to meet the notes of a country like this Commonwealth, if only you make the people believe that there is ample freedom for them everywhere within the Commonwealth whenever they desire to change their notes into gold. I am not quarrelling about the 25 per cent. I shall not side with any one who says that we ought to make the amount 30 per cent. The amount is immaterial. But what is most material and vital is that the Government should give the people some confidence ; and I cannot understand why they do not do it, except on this thesis - that, as I said before, they are following the line of hostility instead of the line of friendly co-operation. Does any one for a moment believe that if the Government liked they could not easily make an arrangement with banks whose solvency cannot be doubted for a moment to facilitate the exchange of the Federal notes for gold? The thing is easy enough, but I suppose that it will not be done, either because it is assumed by the Government that their Bill is perfect, or because the suggestion comes from elsewhere. I do not like to say that, but I am afraid that I see a trace of it in the attitude of the Government. But I am perfectly certainof this - that we shall not hear from the Government, or from the Labour party, any sufficient reason why what I have suggested should not be done.
– The honorable senator is assuming that the banks will not change Federal notes for gold.
– That is not the point at all. What the public want is an absolutely certain method by which they will be able to get gold for their notes when wanted. I, for one, for example, do not wish to go into a bank and say, “ Will you oblige me by giving me a sovereign for this note ? “ if it is only a question of being obliged, and there is no obligation on them to comply, nor any arrangement made by which they shall do so. That is a state of things which neither I nor any member of the public wants.
– And compliance may vary with the requirements of any particular branch of a bank.
– The readiness to comply may vary with the personal disposition of the bank officials, or with a hundred other things. That, I say, would be a very weak way of doing what we require. But I gather from some interjections that this attitude represents another form of the pressure that has been used. The interjections that came from Senator Blakey and Senator Lynch seemed to indicate the spirit that lies behind the attitude of the Government.
– The honorable senator is assuming a state of hostility between the Government and the banks. There is no hostility.
– I am not inclined to assume anything of the kind.
– The honorable senator seems to assume that the hostility would come first from the banks.
– All that I know is that I was told, by way of interjection, that if the banks presented £1,000,000 worth of notes at the Treasury, and asked for gold for them, something appalling would happen to them as a consequence.
– I was simply replying to the position set up by the honorable senator.
– My answer is that if we are going to back up these notes by 25 per cent, of gold, we ought to be prepared to meet them to that extent. If we do not do that, why provide for this backing at all ? What is the use of saying that 25 per cent, of gold is enough?
– We might have to keep ,£1,000,000 in gold in every capital of the Commonwealth if the honorable senator’s argument were sound.
– It would be perfectly easy for the Federal Government to arrange with the leading banks in each capital of the Commonwealth to redeem these Federal notes in gold. I entirely differ from those who think that there is danger in connexion with the reserve. I do not say what might happen in the future, but within the limits of this Bill,. I have no doubt that the notes to be issued will be accepted as common currency, just as the notes now issued by the banks are accepted. I do not belong to the alarmist section at all. But my point is that the Government could do much more - and do it with profit to the Commonwealth and with consideration to the convenience of the public - by making some arrangement with the banks. That is the only thing about this Bill that puzzles me at all. I am not bothering about the ,£4,000,000, or about the proposal that the Government are to keep one sovereign for every note issued over ,£7,000,000. I presume that that provision has been borrowed from some other legislation. I simply say, with regard to the Bill before us, that if this were the only harm that the Labour party were going to do to Australia, we should, in my opinion, get off uncommonly cheap.
– I have to congratulate the Government upon their effort to redeem a promise of very long standing. In listening to the last speaker, one might infer that something dark and mysterious lurk’s in the minds of the Labour party as to what will be proposed in future. If the honorable senator will read the programme which our party has kept before the country for a considerable time, he would have no reason to conclude that anything is likely to be proposed that has not been thoroughly well considered. Our policy is open and honest. This measure is a step towards the establishment “of a Commonwealth bank of issue; a proposition to that effect has been before the public for a long time. We appealed to the electors of the Commonwealth, and especially was this reform placed before them. So that, whatever may be done, this session or next, it cannot be said that we are endeavouring to do anything which we have not placed before the country in the plainest fashion. That being so, there is no necessity to apologize for the instalment of reforms which we are now about to give, nor for the very much more necessary instalment which will come later. Our object in taking this step is to secure, as far as lies within our power, a sound currency throughout all parts of Australia - a currency that can be relied upon to be a faithful representative of either metal or commodities. We have had unfortunate evidence in the past that there can be a currency which does not possess those qualifications. Endless suffering and misery have been caused by reason of that fact. We are proposing to establish a currency which will have the credit of the Australian people behind it, so that in future there will not be that doubt, or that degree of discount, which has previousy obtained. This, of course, is no new policy. It is as old as the hills. It is true that the question of currency is generally regarded as a pretty knotty one. There were times in history when knowledge on the subject was rather imperfect, and complexity was so rife that a British statesman in the early part of the last century could say that currency had driven more men mad than any other subject he knew of, except love. ‘I feel convinced that a vast amount of hardship and misery might easily have been avoided if some step of the nature ‘as that now proposed had been taken long ago. The object of the Government is simply to provide an improved quality of currency, and to utilize, as far as possible, the public credit for the benefit of the people. In the past, the public credit has been used by a bare section - for what end ? It has been used for the purpose of increasing the dividends and profits of the members of banking companies. This instalment of reform has the object of utilizing the public credit for the public good.
– In other words, the honorable senator means that the intention is to abolish all banking institutions. -
– It is a movement in the direction of utilizing, so to speak, that vast public credit which is really equal to so much coin. Because, after all, credit is coin in the banking world. Indeed, public credit is better than coin in some aspects, as those who have had banking ex- perience must know. The bare promise of this Commonwealth laid on the counters of the counting-houses of Europe would command, not only an equivalent in gold for the amount for which the promise was made, but actually a premium. Such a thing cannot be said in relation to the credit of any private institution. I should like to know what, after all, is the real objection to this proposal. Our proposal is to utilize the present system of credit, not as in the past for the benefit of the few, but for the benefit of the many composing the population of the Commonwealth. The Opposition have -acquired an incurable habit of opposing every measure introduced by the present Government. I am prepared to admit that when honorable senators on this side occupied the opposite benches they indulged to some extent in the same conduct. We have had an uncompromising opposition to everything’ that has emanated from this side in the way of legislative proposals. Honorable senators opposite appear to be of the opinion that nothing good can come out of this political Nazareth. What is the position at the present time? It is that the Government are engaged in an effort to enact a proposal similar to proposals adopted very many years ago by other Governments in other countries. There is nothing new or sensational in this scheme. ‘ In point of fact, the principle underlying it is so old and hoary that I am disposed to think the present Government and this party risk their reputation and prestige for advanced legislation by being associated with it at all. But the benefits we hope will follow in the improvement of the currency will, I trust, be a sufficient compensation. Senator Clemons blew hot and cold in dealing with this Bill. In one part of his speech he said it was unfortunate that the Government proposed to provide a sovereign for every £i note issued beyond £[7,000,000. Senators Walker and St. Ledger, on the other hand, expressed the opinion that the Government are not providing sufficient security for the note issue. I hope that honorable senators opposite will be able to compose their differences.
– We have not that ready method of composing differences which is adopted by honorable senators opposite, and which amounts to annihilating differences. We retain our differences, we do not annihilate them.
– The fact remains that some honorable senators opposite consider the security proposed insufficient, while
Senator Clemons has found fault with the Government on the ground of overprovision.
– I did not find fault with them on that account. It is but a detail.
– That may be so, but the honorable senator thought it well to refer to the matter in his second-reading speech, and I direct attention to the contradictions of critics of this proposal on the other side. Senator Gould favoured us with some remarkable opinions. He said that the holder of Australian notes might suffer through their depreciation. But the honorable senator’s assertion is not sufficient. He should support it with solid arguments and facts if he expects his remarks to have any weight in the Senate. I am anxious to hear from the honorable senator or from some of his colleagues, the time, the place, and the country when such a depreciation as he suggests occurred through the adoption of a paper currency.
– The honorable senator might with his eyes shut put his finger anywhere on the map of the world and touch a country that would furnish an answer to his question.
– I have never given Senator Gould credit for the ingenuity possessed by- the Leader of the Opposition in getting out of a difficult corner, but before the discussion of the second reading of the Bill is concluded I should like some clear exposition of the views of honorable senators opposite in regard to the depreciation of currency following on the adoption of a principle of this kind. Senator Gould also said that tradespeople might differentiate between payments tendered in the proposed Australian notes and payments tendered in gold. All I need say in answer to that is that that kind of thing was tried on one historical occasion, and the person concerned was laughed at from one end of the Empire to the other. In the early part of last century, when the Bank of England was issuing certain paper money under the Restriction Act, a certain Lord King, desiring to. bring his opposition to the practice prominently before the people, adopted the method of refusing to receive his rents in anything but gold. Although he held steadfastly to the currency opinion of the time, he found himself laughed at, and there is no doubt that the fanciful creation of Senator Gould, the grocer, or .trader, who. will imitate the example of Lord King, will probably be declared, as he was, to be illogical, unpatriotic, and disloyal for refusing to accept notes declared by the law of the time to be of their face value. Senator Gould also told us that the position of depositors in the banks would not be improved by this Bill. If that be so, I am supporting it under a misapprehension. As 1 understand it, the object is to prevent financial panics, so far as that can be accomplished by any exercise of legislative ingenuity. I appeal to honorable senators to recall events, not only of recent years, but also of past history. One of the objects of this measure is to enable us to avoid such extraordinary financial upheavals as occurred in these States in 1893.
– They had nothing to do with the note issues.
– They had this much to do with them, that the notes of many banks, with a good reputation for solvency, were found, for a time, to be absolutely valueless, and later, to be at a serious discount. When Senator Clemons says that the note issues had no bearing on the financial crisis of 1893, I say that they had a very important bearing upon it. The notes of many banks with a good reputation were for a time as valueless as the pieces of paper in the waste-paper basket in front of me. These notes were brought into circulation in Western Australia by spielers who went there from the eastern States, and passed valueless £10,£5, and £1 notes on the unthinking public in the gambling rooms.
– That would apply to counterfeit sovereigns also.
– While the forger and the counterfeiter may he the only men who benefit by this kind of thing, there is a great difference between a counterfeit sovereign and a bank note that has lost its value. It may be a man’s misfortune, if he does not notice that a piece of metal handed to him is a counterfeit coin, but a person accepts a bank note in good faith as of its face value. The notes circulated in future, under this Bill, will not be valueless as some of the notes of private banking institutions have been in the past. That is my answer to Senator Gould’s suggestion that the interests of depositors will not be safeguarded by this measure.
-Colonel Sir Albert Gould. - Other reasons than the depreciation in the value of bank notes brought about the panic in 1893.
– I am striving to. make it clear to honorable senators opposite that, as a result of this proposal, the notes issued by the banks in the future will be negotiable at their face value, and that in that way the interests of depositors will be safeguarded. They will know that the notes circulated by the banks will have their values certified and guaranteed by the Commonwealth Government. The interests of depositors in New South Wales suffered, in 1893, by reason of the fact that the bank notes were depreciated in value until the Government came to the rescue of the banks, and said that, from henceforth, their notes were to be of their full face value and legal tender. That is how the interests of depositors at the time were safeguarded.
– The interests of the depositors were not helped by the action of the Government of New South Wales. Some of them are without their money yet.
– Miracles will never end when we hear the Leader of the Opposition saying that the action of the Government in 1893 was responsible for injury to the depositors.
– I did not say that. I said that the interests of the depositors were not affected by the action of the Government of New South Wales.
– I take the honorable senator’s correction, and I refer him to the action of the New South Wales Legislature in passing the Bill introduced by Premier Dibbs which safeguarded the depositors’ interests.
– I can quote chapter and verse for everything I am saying.
– The honorable senator is confusing the notes with the deposits.
– When Sir George Dibbs was introducing the measure, he said that there was a sum of £3,800,000 on current deposit and at call, and that its object was to relieve the misery of those whose money was locked up in the banks. In combating the erroneous proposition of Senator Gould, let me direct attention to what has happened in other lands, because, happily, although we are a young community, we have the experience of other countries to guide us if we choose to brush aside our prejudices and inquire into the result of similar legislation elsewhere. In Great Britain, in 1793, we had the spectacle of the Bank of England refusing to assist to maintain the credit of the country. The people were on the verge of a panic, the country was at war with -France, and it was a matter of supreme importance to relieve the tension existing and improve the public credit. What was done ? The British Government came to the rescue of the bank, as Governments always have had to do when banks could not cope with their difficulties. When the Bank of England was unable to supply the legitimate trading necessities of the time, the Government had to come to -its rescue in the same way as the Dibbs Government had to come to the rescue of the banks in New South Wales in 1893. What did the British Government do ? According to Mr. Macleod, the well-known economist and writer of standing -
In 1793 great alarm was produced by the progress of the French Revolution, and money became very scarce. Credit was severely contracted when the Government appealed to the bank to assist commercial credit, but the bank refused. The Government thereupon issued five millions of Treasury-bills, and a Committee was appointed to apportion the vote. This action of the Government acted like magic in allaying the panic.
This was like the panic which existed in New South Wales when Premier Dibbs took the action which he did -
Nearly ^4,000,000 was advanced, however, Amongst 238 applicants, and the whole sum advanced was repaid. After all expenses were paid there was a clear profit left to the Government of over £4,000.
There is an historical instance of where the Government of Great Britain had to come to the rescue of the people when severe financial stress was in evidence throughout the Kingdom, and the Bank of England had failed to do so. The Commonwealth Government are endeavouring to follow approximately the lines which were then laid down by the British Government, so that they may be in a position to come to the rescue of the banks at some future time. T hope that that event will never occur within the memory of ourselves or of our children ; but, should it come, the Commonwealth Government will be able to allay the fears of the banks in the same way as the British Government did in 1793, when there was extreme financial pressure prevailing throughout Great Britain, and the Government eased the situation by advancing £4,000,000 - a step which, according to Mr. Macleod, acted like a charm in allaying the panic. I could cite, if I liked, other instances of where Governments have interfered just as our Government is interfering to improve the currency of the. country. In the United. States, in 1794, under the terms of Treasury notes well known as “ greenbacks,” the Government came to the rescue of the banks on several occasions. When the gold reserve, which was supposed to stand at $100,000,000, had dwindled down to almost $70,000,000, and the gold-buyers, or those who were engaged in speculative enterprise, either in Europe or elsewhere, through their agency, made such a remarkable demand on the Treasury that the gold reserve of $100,000,000 sank to $40,000,000, the Government again came to the rescue by placing 5 per cent, bonds on the market - in two lots of $50,000,000 each - and the last resource was to buy 3,500,000 ozs. of gold for the price of $62,000,000. By that meansthe, combined effort of buying the gold and the flotation of the United States bonds - the Government managed to tide the country over a very grave and far-reaching financial crisis. That is another instance of where a Government has had to come to the rescue of banks which were unable to cope with an existing trouble. What has happened in Canada? Discussing the question of the inability of banking institutions to cope with crises, Sir John Macdonald, who was Premier of the Dominion for a considerable time, made these remarks -
It is sometimes in the interest of the Government (and the Government should have no other interest but that of the public) to strengthen banks by making deposits. It has been in my experience, looking back, requisite or expedient by several Governments, in times of great depression to prevent universal ruin and universal panic, to come to the help of some of the banking institutions. Governments have on occasions prevented universal panic by acting in concert with strong banking institutions in helping to sustain banks which were not quite so strong.
That is another illustration of where a Government has had to come to the rescue of banks, and by its superior credit enable them to tide over a temporary difficul tv which, I may mention, had vast and farreaching possibilities in the way of misery and injury to the people. What happened in France? When it was found that that superior institution, the Bank of France, was unable to cope with the great stress which the Franco-Prussian war occasioned, the French Government came to the rescue of the bank, and by its action enabled it to cope with the trouble. It authorized the bank to issue the requisite number of inconvertible notes. These notes, which were in circulation for five years from 1870, maintained almost their face value. The only difference was that during that very critical time in 1870 the premium on gold only rose 1.5 per cent., which is a clear proof that by the action of the Government in co-operation with the bank a great crisis’ was happily averted. Again, what happened in that country during the revolution of 1847 ? The Government then had to come to the aid of the bank, the institutions which our friends opposite are never tired of telling us are better left alone, as they can cope with and surmount any difficulties which may arise from causes of a far-reaching character. History teaches us that the banks have shown themselves to be incapable of dealing with a crisis of vast proportions, and always been obliged to appeal to the Government and invoke the aid of the people to help them through their troubles. In submitting this Bill the Government are taking a step which may be described as one almost of a hoary character, and certainly one which is almost belated. What have the Government of New Zealand done in this regard? When they found that during the early nineties that from a variety of causes the Bank of New Zealand was in difficulties, they came to its rescue. They took shares therein, I believe, to the value of ^1,500,000. At any rate, they took such a substantial interest in the welfare of the bank in order to uphold its credit and in turn to maintain the credit of the Colony, that they actually helped to pull the institution through a critical time, and were the direct means of making it one of the most substantial and solvent institutions south of the equator. At present they are actively concerned in its management, because they appoint four of its six directors. Notwithstanding all that we have heard in connexion with governmental interference with banks, experience has not demonstrated that the New Zealand Government has any cause to regret its interference with and control of the Bank of New Zealand by stringent regulations. I could multiply instances of where Governments have exercised a beneficent influence when they have stepped out of their way to do what could not be done by any private institution. I have already referred to what was done by the Dibbs Government in New South Wales in 1893. I do not intend to restate the great advantage which resulted to the people through the Government taking such timely action to preserve the face value of the notes of the banks which were unable to help themselves. Senator Fraser has said, “ There is no need for this measure; where is the urgency?” There is every reason for urgency, because the lessons of history dictate that there is no time for delay ; that rather we have been going backward in the matter of safeguarding the interests of the people by not having taken this step previously. Under this Bill the Government propose to assume control of the note issue, and I would have honorable senators understand that I am not supporting it from any fantastic reason. If I thought that private enterprise might safely be intrusted with the further issue of bank notes, and that the public interest would be amply safeguarded, I am doubtful whether I should advocate this measure. But history teaches us that wherever private institutions have had control of the paper currency they have not acquitted themselves sufficiently intelligently to confer universal advantage upon the people. Why have the Government control of our gold currency? For the simple reason that, whilst it was in the hands of private individuals they showed themselves hopelessly incapable.
– There has been more villainy in connexion with State paper currency than in connexion with any private note issue in the world.
– What has been the experience of private enterprise in respect of the inferior forms of currency? Whilst a silver and .copper currency was in private hands, the people were swindled in a wholesale fashion. Professor Jevons, in dealing with this important province of government - I refer to the issue of a metal currency, which has its counterpart in the proposal of the Government - in his work on “ Money,” in which there is a referenceto Smiles’ Lives of Bolton and Watt,. says -
Bolton complains that in his journey through the country he received on an average at the toll gates two counterfeit pennies for every trueone. The lower classes of manufacturers purchased copper coin to the nominal value of 36s. for 20s. in silver, and distributed it to their work people in wages, so as to make a considerable profit. The multitude of the depreciated pieces in circulation was so great that the magistrates and inhabitants of Stockport held a public meeting and resolved to take no morehalfpence in future but those of the Anglesy Company which were of full weight.
So that, according to this author, the onlybright spot in the phase of manufacture of the baser forms of currency in the Old Country was theAnglesy Company. When Bolton was journeying through the country he found a: number of spurious coins in circulation, which were the cause of the population rising against private enterprise engaged in the production of currency. Consequently the proposal to take this currency out of the hands of private enterprise had a deepseated reason. Private enterprise had shown itself hopelessly incapable of giving to the public a coin of its full face value. Again, it was found that while the Bank of England, under the Restriction Act of 1897, enjoyed the power of issuing notes, it issued them to such an extent that they ultimately depreciated very seriously. During the twenty-seven years which elapsed between 1797 and 1824, the notes issued by it depreciated to the extent of the foreign exchange as against Great Britain, which increased by as much as 20 per cent., whilst gold rose-to a premium of something like £5 10s. 6d. per cent. I merely cite this example to show that where a bank has had liberty to regulate the currency without interference on the part of the Government, it has proved itself’ incapable of giving to the people a currency by means of which they would not be injured in any respect. I might quote innumerable opinions of the way in which the trade and industry of Great Britain were affected as the result of the form of currency issued by the Bank of England. As a further proof that the currency depreciated, I may mention that when the famous Bullion Committee, around which so much discussion centred, was appointed to investigate this matter, its findings were against the Bank of England. It found that the paper currency of the bank had depreciated. So that when my honorable friends opposite declare that the proposed Commonwealth notes will depreciate the currency, I cite, by way of a tu quoque argument, this historical example. Macleod shows very clearly that the premium on gold at that time was considerable, and also that the exchanges had turned so severely against Great Britain as to aggregate 20 per cent, on account of the depreciated paper currency. Whilst I am dealing with this phase of the subject, I would direct attention to the manner in which private banks behaved when they were subject to less interference than that to which they :have recently been subjected. In the United States, especially during the period from 1830 to 1857, when the banks of that country were working under legislation which specially enabled them to play ducks and drakes with the privileges which they enjoyed, they followed the simple modus operandi of issuing notes to almost any amount, with the result that every bank in the Union had to close its doors. At that time the laws of the United States permitted any banking institution to issue notes ad lib. - so long as security was presented to them, even although this security was not too closely scrutinized. As a result, the people enjoyed for a period a spurious prosperity. But the inevitable crash came, and every bank within the United States was compelled to close its doors. These illustrations show that the private banks were quite incapable on those two historic occasions of controlling the currency. Coming closer home, what has happened? We know that, from a variety of causes, a financial crisis occurred in Australia in the early nineties. The magnitude of that crisis was greater than that of some of the crises experienced in the Old Country during the last century. According to one article which appeared in the Banking and Insurance Record, the amount of cash involved in the closing of nine banks was more than £100,000,000; whereas the utmost sum involved in the crisis of 1857 in the Old Country was £57,000,000. So that the crisis experienced in Australia, in proportion to our population, has not been equalled in history. It behoves us, therefore, to ascertain whether the banks in this country did the correct thing in endeavouring to ward off that crisis, which was the cause of such far-reaching misery. I am not here to say that banking, as a business in Australia, has not been properly conducted. But I. do say that, as far as a large section of our banking institutions are concerned, it was formerly conducted upon lines which kept more in view the forwarding of the interests of the shareholders than of safeguarding the commonweal. Mr. Coghlan is very clear in his opinion of the cause which lay at the root of that trouble. In giving evidence before a Select Committee which was appointed in New South Wales to investigate a proposal to establish a National Bank, he said, in reply to question 505 -
At the present time the law relating to banking is ridiculous, and a standing disgrace to a civilized community.
– When did he say that?
– In 1893.
– That statement brought him into disgrace, because his remarks were proved to be absolutely wrong.
-I am not here to discuss what followed the expression of that opinion by Mr. Coghlan. My only object is to give what must be regarded as the well-balanced and mature judgment of a man who then stood - as he stands now - high in the public estimation.
-Colonel Sir Albert Gould. - If he made a mistake, is it not well to at once admit it?
– I leave it to honorable senators opposite to show that he made a mistake. I am endeavouring to prove that the blame for the financial panic in Australia during the early nineties must, in a great measure, be laid at the doors of our banking institutions. Mr. Coghlan further said -
I certainly think it is the essence of good banking that the liabilities should bear some fixed and definite proportion to the original capital and reserves of the bank, and what is more, the reserves should be kept as reserves and not put in the general pool of the business.
I think it will be found that to-day the shareholders’ capital and the reserves of our banks compare very unfavorably with the shareholders’ capital and the reserves of those institutions in 1893 - on the eve of that great financial crisis - if we have regard to their respective liabilities. Mr. Coghlan referred to the necessity of increasing the reserves. He said -
I think, undoubtedly, it was the business of the banks of Sydney, if they knew anything of the science of banking, to have foreseen that a crisis, such as has now come upon us, must ultimately result from the system of trading indulged in by some of them. I think some of the banks have been managed without due regard to the canons of banking.
I am not here to condemn the operations of the banks as a whole, but I do find fault with the way in which banking was conducted at that time, if indeed the same system be not now pursued. This brings me to the consideration of the present position, in order to ascertain how, in the opinion of experts, our banks stand. I find that during the course of the proceedings of the Select Committee to which I have referred, Mr. Backhouse, a banker of experience, gave evidence. He said -
If an English bank had a liability to the public of £6,000,000 it would not consider itself justified in advancing more than £4,000,000 - that is, it would keep 331/3percent.ofits liabilities in cash or liquid securities. I cannot help feeling that too much importance is attached to the proportion of gold to the total liabilities, insufficient importance being given to the proportion of reserve to liabilities, from which circumstances I consider come the whole of the recent failures. We have about £2,000,000 in coin and securities, but make £10,000 a year less out of them than we ought to make owing to careful banking.
I think 80 per cent. of advances to liabilities, i.e., deposits, is very high, indeed. If you divide it by one-half you will bring it within a safe margin. It certainly ought not to be more than 50 per cent.
There is the opinion of a prominent banker bearing directly on the issue before us. It suggests the question whether or not it is wise to pursue a course which may mean, if continued, insolvency for the banks. I find on reference to the Commonwealth Y ear-Book that the proportion of advances to resources is very much in excess of what Mr. Backhouse considers to be safe.
– The honorable senator seems to me to be pursuing an argument that is wide of the question before the Senate. We are dealing with the establishment of an Australian note issue, and not with the regulation of banking; institutions. The honorable senator is pointing out what should be the reserves kept by the banks to meet their liabilities. I do not think that that argument affects the subject-matter of this Bill.
– I shall not further pursue that line of argument if it meets with your displeasure, Mr. President. I thought, however, I was in order in pointing out the way in which banking has been conducted in the past, and how that system must have a prejudicial effect upon the note issues of the banks. It is interesting to observe what is being done by other countries in regard to the issue of paper currency. A considerable amount of scrutiny is observed by the Governments of many countries. In Germany, for example, the Imperial Bank is authorised to issue 250,000,000marks in notes in excess of the coin and bullion deposited, but a tax of 5 per cent. has to be paid on any issue in excess; and according to Macleod, the authority upon which I am relying -
The bank, in the highest sense, is a Government institution. The shareholders neither reign nor govern. They have neither the power nor the essence of power, and the Emperor appoints the President and Council directly. The Government through the Chancellor exercise complete control.
There is an example of a bank not long established, the currency of which is regulated in a very rigid fashion. The Im perial Bank of Germany is in the highest sense a Government institution, controlled by the Imperial Chancellor, and nothing of importance can be done by it in relation to its issue of currency without the consent and approval either of the Emperor or of the Chancellor. I have alluded to what the Bank of France did on two historical occasions. Jevons states -
Sometimes the Government guarantees an issue and also assists the bank with its credit when necessary. During the revolution of 1847, and in the Franco-Prussian war, the Government stood behind the bank and enabled it to meet pressing demands.
The Bank of Belgium is a national bank, and has practically the exclusive right to issue notes, which are legal tender. Take next the case of Japan. Some people are inclined to look upon Japan as a somewhat negligible quantity as a nation in relation to such matters as finance, but I find that the Bank of Japan is modelled on the Bank of Belgium. The Government subscribes one-half of the capital and the Mikado appoints the president. The Russian Bank is exclusively a Government institution, managed by a Committee of the Treasury. In Canada bank notes are secured by a first lien upon the entire assets of the banks of issue, and there is a double liability on the part of the shareholders. There is also the further safeguard in Canada that a 5 per cent, redemption fund is levied upon the banks for the purpose of redeeming the notes of any bank that may become insolvent. In other words, whenever the insolvency of a bank occurs 5 per cent, of the profits of the remaining banks is immediately demanded. I may further mention that in Canada no dividend in excess of 8 per cent, is permitted to be paid except the reserves of a bank are 30 per cent, of the total liabilities. In Australia the banks hold only about eight or nine million pounds in reserves, and their paid-up capital is only about £17,000,000, while the net liabilities to the” public are about £70,000,000. It will therefore be seen that there is a- wide disparity between the security given to the notes of the Canadian banks and the security attaching to the notes of the Australian banks. The guarantee in Canada is a vast improvement upon that existing here. In the United States the banks have to deposit bonds of States as a guarantee for the notes supplied to them ; so that the notes at present in circulation in the United States have the national credit behind them. That is to say, for each note issued by the Treasury at Washington the banks have to purchase United States bonds and deliver them to the Secretary of the Treasury under seal. The practice is so exacting that it works out in this way : If a bank requires $9,000 worth of United States notes, it must place 3)12. 000 Wu. rn 01 bonus with the Treasurer. This gives some idea of the precautions resorted to in the United States,” especially since the improved banking legislation of 1864, to guarantee to the public using United States notes that they shall receive their full face value.
– But they do not prohibit the issue of notes by private banks.
– That is so. There are private bank note issues side by side with the State note issue. Senator St. Ledger was very forcible in condemning this” measure.
– On the contrary, I commended a good deal of it.
– The honorable senator said, by way of interjection to-day, that it was intended to secure a forced loan. I freely admit that 1 do not regard that as a blot upon the proposal, lt the public credit is valuable, it should be used in the interests of the public, and not for the special benefit of a few in the shape of higher dividends. I am afraid that in this matter Senator St. Ledger will not find himself in very distinguished company. We have Sir Robert Peel, as Prime Minister of England, declaring himself in favour of the Government assuming the issue of paper currency.
– I am aware of that.
– Well, how does the honorable senator feel in opposition to John Stuart Mill, who was most emphatic in laying it down that it was within the province of the Government to issue its own currency, and to secure whatever profit might accrue therefrom. Ricardo, another economist, gave expression to the same opinioin. Sir John Macdonald, of Canada, went so far as to say that it is the exclusive privilege of a Government to exercise the right which the Government now in charge of Commonwealth affairs propose to exercise under this Bill. ve have also. Professor Jevons, a very keen student of economics, giving expression to the same opinion. The great statistician, Mr. Tooke has said that it is the unquestionable province of the Government to issue currency. Professor Price, and even Governor Neaves of the Bank of England, have expressed themselves in the same way. The opinion of Governor Neaves is worth quoting, as showing how the British Government interfere with the Bank of England in the transaction, of its business, and especially in relation to its note issue department. We have it on the authority of Professor Jevons that a former governor of the Bank of England gave expression to the opinion that the bank had no longer any control over its issue department; that it was merely the trustee of the Government, in order that the security for the payment of its notes should be reserved for that specific purpose. That was the statement of Governor Neaves of the Bank of England. It is very clear that the “ cave dwellers “ to the left of the President are very much out of date in refusing at this day to give thi* privilege to the Government of the Commonwealth. Professor Cairn expressed the view that the British Government have sole control of the issue department of the Bank of England. If, unfortunately, Senator St. Ledger does not find himself in this company, our sympathies may go out to these men, who have held a contrary opinion.
– My point is that this Bill is not necessary, and legislation which is not necessary is unsound.
– I admit that whatever Senator Walker has to say on financial matters commands respect’ in this Senate from his standing as a financier. But the honorable senator has unfortunately committed himself to a course which I am afraid will not stand the acid of careful analysis, and his financial authority will be ‘lessened if we closely inquire into what he proposes ‘in connexion with this measure. The honorable senator has said that the proposed gold reserve of ‘2’5 per cent, is insufficient. He has circulated an amendment to raise it to one-third, with a very laudable desire that there -shall be no question of the repayment of these notes in the international currency, gold, which all nations have agreed to accept. .The honorable senator was not correct in saying that a gold reserve of 25 per cent, will be insufficient. In the first place, let me say that 25 per cent, is to be the minimum reserve held in gold. It will be found, in actual operation, that the real gold reserve for these notes will be very much more than 25 per cent. I propose to show how that will come about.
– If the reserve is to be increased, does that not show that 25 per cent, is not sufficient?
– I propose to show that the actual operation of this measure will in future bring about such a state of affairs as should entirely allay any fears the honorable senator may have on the ground of the insufficiency of the proposed gold reserve. According to official papers of the Queensland Treasury, the Treasury note issue in that State on the 30th June, 1909, represented ,£1,550,000. The population of the State at the last census was 552,000. The population of the Commonwealth at the same time was 4,275,000; so that, on the basis of population, if we are to accept it as a guide to what might happen in the future, it will be found, when this Bill is in full working order, that the circulation will not be confined to £7,000,000, but will reach nearly £12,000,000. I am a neophyte in matters of finance - it takes me all my time to finance my own simple affairs - but it appears to me that if Queensland, with her population, finds it absolutely necessary for her commercial transactions to have a note issue of £1,500,000, it is reasonable to suppose that the larger population of the Commonwealth will require a note issue in the neighbourhood of £11,935,000. Some allowance must be made for the fact that in large and congested centres of population it is found that a medium of exchange - a phrase that expresses so much, and sometimes means so little - is not required to the same extent as in sparsely-populated districts.
– Does the honorable senator mean to say that the actual note circulation in Queensland represents £1,500,000?
– That is the value of the notes issued.
– That includes notes held by the banks, and not in the hands of the public. The value of the notes’ in actual circulation is only about £400,000.
– As I understand the matter, the Government do not intend to make any distinction between notes required as till money and those circulated throughout the country through the agency of the banks, or in private hands. Assuming that in Sydney, Melbourne, Adelaide, and other large centres of population, as the result of our highly organized system of credit, it is possible to avoid the employment of a* large number of notes per head of the population as a medium of exchange, there would still remain a substantial percentage of gold in the Treasury under the proposal submitted by the Government. Speaking in round figures, if £12,000,000 of notes are required for the Commonwealth, on the basis of the Queensland experience, then, according to the provisions of this Bill, which were referred to and found fault with by Senator Clemons, the proportion of gold held in the Commonwealth Treasury will be not less than 56 per cent, of the notes in circulation. That should satisfy Senator Walker.
– The honorable senator is aware that, beyond an issue of £7,000,000, the Government must have a sovereign in hand for every £i-note issued.
– That is what I am taking into account.
– And if the issue is increased to .£10,000,000, there will be a gold reserve of 50 per cent. ; but to commence with, it is proposed that the gold reserve shall be equal only to 25 per cent”, of the issue.
– If my calculation is correct, if shows that if Senator Walker’s proposed amendment were agreed to, an unnecessarily high percentage of gold reserve would be required.
– Not necessarily.
– I may be wrong, and I do not wish to be dogmatic on the subject ; but I think we are entitled to say, in view of the experience of Queensland, and notwithstanding that the population of that State is very much scattered, and must be served by a note issue, the requirements of the Commonwealth will be something like £12,000,000 in notes. If that calculation be correct, the percentage of gold retained in the Commonwealth Treasury will be 56, and not 25, of the total issue. I find that Senator Walker is, unfortunately, in conflict with some of the notable financial experts in the banking world.
– Experts sometimes differ.
– I am aware of that. We know that Senator Walker is associated with one of the largest, most prosperous, and soundest of the banks established in the Commonwealth. When a Select Committee inquired into this very matter in New South Wales, and it was sought to have the position clearly outlined, Mr. George Miller, a former manager of the Bank of New South Wales, which has the distinction of Senator Walker’s association, gave evidence on this very point. This is what he had to say in regard to the amount of coin that should be held as against every note issued by any banking institution - 1515. What proportion of gold would you think sufficient as a reserve to meet the redemption of bank notes? - My opinion is that an average of 3s. 6d. is about a fair thing to hold’ for redemption of bank notes, or, to put it in another way, 5s. as against money at call and 2s. 6d. against notes.
Unfortunately, experts differ. Here we find a director of this institution, acting in the capacity of a legislator, who does not ask for a gold backing of 25 or, possibly, 56 per cent., but who would be perfectly satisfied for his own bank to have a reserve of 12 J per cent. It will be seen that after all the proposal of the Government has some very weighty support in the statement of the late Mr. George Miller that a reserve of 12 J per cent, would be ample in respect of the notes issued. Yet Senator Walker, a director of the bank, is asking this Parliament, with a credit superior to that of the Bank of New South Wales, or of all the banks of Australia, to require a deposit of, not 25 or 45 per cent., but a higher percentage.
– According to the last article the insurance and bank directors think that a gold backing of 33^ per cent.: is too little.
– In the world of commerce credit counts for a great deal, and on the authority of those who have applied themselves diligently to research, we know that in actual practice a very small percentage ‘ of gold is required to sustain the commercial volume of business in a country. According to Professor Jevons -
Mr. Inglis Palgrave in Notes on Banking in Statistical Journal in r873, after inquiry, found that the amount of Consols and Bank of England notes held by the bankers of the United Kingdom did not exceed 4 or 5 per cent, of their liabilities, or 25th or 20th part. Mr. T. B. Moxon, of Stockport and Manchester, subsequently made an elaborate inquiry into the same subject, and found that the cash reserves did not exceed 7 per cent, of the deposits and notes payable on demand. He points out that even of this reserve a large proportion is absolutely necessary for the daily transaction of business, and could not be parted with. Thus, the whole fabric of our vast commerce is found to depend upon the improbability that merchants and other customers of the banks will ever want simultaneously and suddenly as much as a twentieth part of the gold money they have a right to receive at any moment during banking hours.
Here it is shown, on the authority of an economist of note, that, in ordinary times, 5 per cent, is sufficient to sustain the vast volume of commercial business which is done in Great Britain. I regret that the complete proposal of the Government has not been submitted, because I apprehend that it may happen in Australia, as it has happened in the United States, that men, or bodies of men, from various influences, may have designs on the Commonwealth Treasury, and act in such a way, either in concert or otherwise, as to drain it of its gold reserves. Therefore, I regret that the Government has not submitted its full proposal which includes the establishment of a Commonwealth Bank, which would have control of issues and deposits, enter into commercial life in the same way as the banks to which I have referred, and so control the discount rates as to frustrate the attempts of any men, or set of men, who might endeavour to bring this legislation into disrepute, and drain the Treasury of gold. We know that one favorite expedient for keeping gold in a country, and it is adopted by the Bank of England, is to raise the discount rates. I am sorry, I repeat, that the complete proposal of the Government has not been brought forward, to enable the people of the Commonwealth to enjoy the benefits of this long-delayed reform, which, I am sure, will make for their prosperity and happiness, and prevent a recurrence of the misery which was experienced in the early nineties.
– - I desire to express my very great regret that the criticisms of the Opposition have not met with the unbounded approval of Senator Lynch. It seems to me that if an honorable senator on this side rises to attack a Government measure he is wrong, and that if another honorable senator rises here, and says a kindly word or,’ two regarding it, that also is wrong in Senator Lynch’s eyes. I think that it may be< taken as some evidence of bona fides when members of the Opposition are found approaching a measure from different stand-points, some of them, as in the case of Senator Clemons, not being hostile to the Bill, but offering suggestions for the smoother working of it. Surely it ought not to be held as a sin on the part of the Opposition, but rather as something for which they are to be commended, that they can approach a measure with their minds so open that, whilst not wishing to denounce its main principle, they still feel it obligatory upon them to show wherein it is defective. I want to approach the discussion of the Bill in that spirit. As regards it main purpose, I have no objection. Dealing on the Address-in-Reply with the proposal outlined in the Governor-General’s Speech, I intimated that I was not at all opposed to the issue and control of the note currency of a country by the Government. I occupy that position now. ‘I do not know that any honorable senator on this side objects to the principle of this measure. It seems to me that a number of the arguments to which we have been treated have altogether missed the mark. The objection, so far as I understand it, from the Opposition generally, certainly from myself in particular, is not to the main proposal, but is directed to the question of whether the provisions of the Bill are designed to carry out the proposal in the best possible way. I do not dispute the appropriateness of the State control of the paper currency. On the contrary, I think that the proper authority to control it is the State. Nor am I going to’ raise the question of the soundness of the proposed note issue, which seems to me to De quite beyond doubt; indeed, I should regard it as a great waste of time to impugn the capacity of Australia to meet a very much larger amount than is covered by the Bill. The point I wish to make is that this issue, if my views are correct, is largely going to fail, because the Government are ignoring what ought to be their first consideration, and that is the public convenience. We have to remember the purpose for which currency is required. It is an instrument for private and public convenience, and so long as public convenience is the main objective, the Government will be on perfectly safe ground. But on looking into the Bill I am brought face to face with the fact that the Government, instead of regarding the public convenience as the main objective, the goal at which they ought to aim, are rather minimizing that by their effort to make a Treasury profit. Let me point out, in regard to statements that have been made as to the possible depreciation of the currency, that there can be no danger of depreciation so long as the Government limit their efforts to the currency. Every time there has been a crisis in regard to paper or other money in a country, it has always arisen through the Government yielding, under pressure of circumstances probably, to the desire to con- vert the currency into a source of profit to the Treasury. That is just where I think the framers of this Bill have gone astray. There is, as I shall endeavour to show, a distinct effort to secure a maximum of profit to the Treasury, and in doing that the Government are going to minimize the convenience to the public. It is on the extent to which the public are convenienced tthat the success or failure of this note issue will depend. When the Bill first saw daylight, it certainly sinned to a very much greater extent than it does now. It contained proposals which I am very pleased to say have been eliminated, largely as the result of the arguments addressed to the Government by members of the party to which I belong. That in itself might have caused Senator Lynch to be a little more moderate in his denunciations of the Opposition. It was, I repeat, largely the criticisms from the Opposition benches elsewhere which induced the Government to modify what we regarded as its more objectionable features, and that they were objectionable is shown by the fact that the Government did accept the suggestions which were thrown out and which are incorporated in the Bill now before us.
– It has only been verbally improved, after all.
– Does my honorable friend say that when the Government, for instance, struck out the clause which compelled the banks to retain a certain number of notes available for the payment of any demand made to them there was not something more than verbal in that alteration? Under the Bill as it originally saw daylight, a bank was bound to pay in notes of any denomination which a claimant might ask for. That would have compelled the banks to keep in till money an amount of Treasury notes quite out of proportion to their ordinary business requirements. To say that that alteration was a mere verbal one is to take up an attitude which I am unable to understand.
– I meant not in regard to that amendment, but in regard to the benefits which will accrue under the Bill.
– When we speak of benefits, we have to draw a big distinction between a benefit to the citizens and a mere benefit to the Treasury. I admit that the State ought to control the paper currency of a country, and by that phrase I mean the notes ; I exclude, of course, cheques, although it is the State which controls their issue to a very great extent. It does not handle them, but by legislation it can control even that form of paper currency. This measure errs in not granting facilities to the public, and without them the success of the note issue will be in jeopardy. It has been alleged here that the note issue will be for the convenience of the public. That sounds strange side by side with the fact that the Bill contains provisions compelling people to accept the notes. If it is a convenience to me to do anything, there is no need to pass a law to compel me to do it. If it is to my convenience and to that of ordinary citizens to use these notes, compulsion is not requisite. But there is underlying this measure clearly a fear that it will not be for the convenience of the people that they should use the notes, and therefore the Government introduced the element of compulsion. The fact that the Bill does make the notes legal tender, in other words, compels the people to use them, shows that its authors felt very grave doubt as to whether or not it does meet the public convenience.
– There is such a thing as “ cussedness.”
– I have ample evidence of that in my honorable friend. But an element- of that kind does not operate over a large number of persons, and I cannot suppose that the “cussedness” which my honorable friend refers to is going to be evidenced by a large majority of his party. If, as I assume, they are favorable to the measure, and they are numerous enough to insure the issue and circulation of the notes on a voluntary basis, why do the Government introduce the element of compulsion? That is a clear evidence in itself that the authors and supporters of the Bill do not believe that without compulsion the notes would be a convenient and acceptable form of currency to the people at large. There is another point which shows that the convenience of the public has not been sought, and which evidences, too, a fear in the minds of the authors of the Bill that the notes will not be generally accepted, and that is that they are to be converted only at the Treasury. Why is that to be done? Not to convenience the average citizen - the business or trading man - but to insure a maximum of profit to the Treasury itself. If there be any justification for the State interfering in the matter of currency, it is for the purpose of serving the public convenience. Above all other things,, that ought to be the prime obligation of the Government. But are the Government seeking to insure the convenience of the public when they say that Commonwealth notes shall be convertible only on presentation at the Federal Treasury at the Seat of Government? That provision demonstrates two things - first, that the Bill has not been framed to serve the public convenience; and, secondly, that there is a fear in the minds of its authors that Commonwealth notes will not be generally acceptable. They fear that they will be returned to the Treasury too rapidly, if facilities for their return are provided. Those facilities have been curtailed as much as possible by providing that the notes shall be convertible only at the Seat of Government. These two points prove conclusively that the convenience of the public in this matter has not been considered. Further, the Government seek by the Bill to secure a profit to the Treasury. Ought the chief object of a Government to be the mere making of a profit? - Ought it not rather to be the convenience of the general community ? I know it is said that at the present time the banks issuing notes undertake to pay gold for them only at their head offices. But that is scarcely an argument, because the circulation of the notes issued by a bank is practically limited to the State in which they are issued. Under the present system, there are in the Commonwealth to-day at least six centres, including the head offices, at which those who handle the notes of our banking institutions - except the very insignificant number of such notes which find their way beyond the limits of the State in which they are issued - may legally demand gold in exchange for them. As against that, the Government propose to offer only one centre at which Commonwealth notes may be exchanged for gold. I wish to point out what that means in the case of Western Australia. At present, the holder of a note in that State is only under an obligation, at the worst, to send that note to Perth in order to obtain gold for it. But under this Bill, he will have to send it round by sea, at the expense of some days of time, before it can be presented over the only counter at which gold can be obtained for it. Will that add to the public convenience? In every respect, there has been an effort - I do not say that it is a conscious effort - in the provisions of this Bill, to limit the convenience of the public as much as possible, in order to secure a maximum of profit to the Treasury. The Bank of England has no less than nine branches, in addition to its head office, at which its notes may be converted into gold. There are thus ten centres in a country which is small in area as compared wilh’ Australia, and which is intersected with a perfect network of railways so that the transit of notes from the provinces to the various centres can be effected much more rapidly than it can be here, at which Bank of England notes may be converted into gold. A very curious argument has been advanced by my honorable friends opposite, who are, apparently, never tired of emphasizing that our private banking institutions are out for profit. It. is strange that they should seek to buttress the Government proposal which, ostensibly, is in the public interest, by pointing to the example of institutions which we are told are merely out to make a profit. At the present time, the banks redeem their notes in every State, whereas, under this Bill, the Government propose to have only one point of conversion for the whole of the Commonwealth. But, whilst our banks are bound to redeem their notes only at their head offices, as a matter of fact, they redeem them at all their branches. I have never heard of a country branch, during normal times, refusing to honour the notes of its own bank. Therefore, in actual practice, instead of only six centres, there are 1,700 places at which it has been possible to convert bank notes into gold.
– How many notes could be converted in any one day at any given point?
– That has nothing to do with the question.
– If notes to any considerable value were presented at country branches they would have to send to their head offices for the gold.
– As a matter of practice, any man holding a bank note can get gold for it at any bank throughout the country. So that, whilst our banks are under no obligation to redeem their notes except at their head offices, they have, for the convenience of their customers, paid gold when requested to do so. What does the Government propose to do to parallel that? All that convenience is to be swept away, and the public are to be told that there is only one point on the continent at which they can obtain gold in exchange for Commonwealth notes.
– Will not the Government be as anxious as are the banks to accommodate the public?
– If they are equally anxious to convenience the public, the Bill does not evidence their anxiety.
– The honorable senator is willing to give credit to the banks for conveniencing the public, but he is not equally willing to give credit to the Government for being actuated by a similar desire.
– I am merely stating a fact when I say that to-day the banks cash their own notes at 1,700 places in Australia. The Government propose to sweep away this system and to substitute for it one under which Commonwealth notes will be convertible only at the Federal Treasury.
– Does not the Leader of the Opposition think that the banks will extend the same convenience to their customers when they are using Commonwealth notes ?
– I was coming to that point. The interjection implies that whilst the Government expect the public Treasury to receive all the profits derivable from a note issue, they rely upon the banks to do all the work and incur all the cost of shipping gold from one State to another.
– But the banks are not making a profit out of their note issue.
– They do obtain a profit from it, but it may be that that profit is absorbed in the cost of working. I do not suppose for a moment that they lose money by their note issue. But if the banks are to take up Commonwealth notes, as Senators O’Keefe and Lynch suggest, and as the Prime Minister himself has said-
– The honorable senator has no right to assume that they will not take them.
– I have a right to assume that no institution will penalize itself in order to put a profit into the pocket of somebody else.
– The banks have taken up the State notes in Queensland.
– They did not take them up until the State offered them a bonus for so doing. That is the position there, and it will be the position here.
– Are the Queensland Government still paying a bonus to the tanks ?
-They are in this way: that whenever a bank wishes to obtain State notes it pays one-third of the amount in gold and gives a fixed deposit receipt for two years at 2 per cent. interest for the balance. When the Queensland note issue was adopted the banks there, finding that they were asked to carry all the load and that they were losing money by so doing, resorted to the expedient which I have mentioned.
– That arrangement may be a very happy one for the banks as well as for the Government.
– Of course. In order to get the Queensland notes into circulation the Government are obliged to give the banksin that State money on fixed deposit for two years.
– It is a good arrangement for the banks.
– Yes. The Queensland Government could not have got their notes into circulation without the aid of the banks. Consequently, they had to pay those institutions to circulate the notes for them. The reason is obvious. Speaking some time ago, the Prime Minister quoted Sir Hugh Nelson and expressed the opinion that every self-respecting bank would be prepared to cash Commonwealth notes. I do not suppose for a moment that the banks will place themselves in active hostility to this measure, but it is too much to ask them to incur expenditure in order to benefit the Commonwealth Treasury. But that is what they are asked to do under this Bill, as honorable senators will see if they reflect for a moment upon what takes place at a branch bank in the country. At the present time country branches carry on their business by means of a limited supply of cash and a large number of notes of their own bank. But if this Bill becomes law and the banks take up the Commonwealth notes, what will be the position? For every £100 worth of notes which are likely to be presented, a branch bank will require to keep 100 sovereigns, and it will also require to send down 100 sovereigns to the Treasury in exchange for Commonwealth notes in order that it may be able to pay notes to those who may desire them. Is it conceivable that branch banks will keep £200 on hand with which to meet every £100 worth of business ? What will inevitably happen? They will fall back upon gold, which is a legal tender, and make no effort to put Commonwealth notes into circulation, because the more those notes are put into circulation the more work will be thrown upon the banks, and the greater the proportion of their capital which will be left idle. If anybody can show me that a bank or any other institution will undertake this work although the profit will go into the Federal Treasury, I am prepared to believe that the proposed note issue will be a success. But in the absence of such proof I am forced to conclude that the banks will rely more and more upon a gold currency. They will derive no profit from the circulation of these notes, but they will sustain a loss.
– What will be their loss?
– I cannot say. But that they will sustain a loss isobvious.
SenatorMcDougall.-It will be a very small one.
– I do not care how small it may be. Does the honorable senator expect the banks - especially when we recollect the terms which have been applied to them - to suffer a loss of even¼ per cent. in order to insure the success of the Commonwealth note issue? I do not. If I were a shareholder in a bank my voice would be raised to tell the directors that they were not to dock my dividends and jeopardize the resources of the institution by doing work which the Government ought themselves to undertake at their own expense. I repeat that in order to get their notes into circulation the Queensland Government had to offer a certain inducement to the banks. Unless we do the same thing the banks will not voluntarily undertake the work of handling our note issue, and the result will be that we shall have to fall back more and more upon two forms of currency with which we are familiar, namely, cheques and gold.
– The Government will bear the complete cost of paper and printing.
– Does the honorable senator think that a bank could send gold from Bourke down to Melbourne for nothing ; whilst, at the same time, it had to keep in Bourke a quantity of gold lying idle, to meet Federal notes which were presented ? It is impossible to send gold from one State into another, except at considerable cost. If the banks were to let it be known that they were prepared to cash all notes that came along, and, in addition to that, to give notes for gold, they would have to have £2 in their till to do the work that £1 will do to-day. Why should a bank do that for nothing? It means a diminution of the bank’s profits and a restriction of its operations. I do not think that the banks will do that, nor, in justice to their shareholders, ought they to do it.: The whole of the profit is going into the public Treasury; is it not, therefore, the duty of the Treasury to undertake the work of issuing these Commonwealth notes ? It seems to me to be a monstrous proposition, and one which is bound to wreck the Bill, that the Government, whilst taking all the profit itself, is leaving it for the much-derided and hated private enterprise to provide all the facilities and conveniences which the public at present enjoy.! That is a proposition which, it appears to me, foredooms this Bill to failure. I should like to point out, following the argument that has been addressed to the Senate by Senator Clemons, that the greatest guarantee you could have of the success of the Commonwealth issue would be to make the notes easily convertible. It is a curious thing in regard to all forms of paper money that no one wants gold for a note, so long as it is known that gold can be obtained whenever it is wanted. But what is it the Government propose to do? Assuming, as I do, that the banks are not only under no inducement to circulate these notes, but, on the contrary, will penalize themselves if they do - bearing that in mind - it will follow that there will be considerable difficulty in obtaining cash for Commonwealth notes if this Bill remain unamended. That being so, the very difficulty of obtaining gold for notes will make people disinclined to accept them. On the contrary, however, if the Government were to make arrangements with the banks for the redemption of the notes, or were to provide depots in each State for their redemption, the people who held notes, knowing that they could get gold for them at any time, would not want gold at all.
– The Prime Minister has made a promise in that direction.
– I see no evidence of any promise that has been made by the Prime Minister; and, whilst I should be the last to doubt the word of my honorable friend, he must pardon me if I accept the Bill as evidence that at present the Government have no such intention. If the Vice-President of the Executive Council would now make the definite statement that the Government have, at any rate, determined to establish depôts in each State for the conversion of Commonwealth notes, that would be an authoritative announcement that I should be prepared to accept. As it stands, the Government are seeking to secure all the profits to the Treasury, whilst relying absolutely upon private enterprise banks to give vitality and life to the currency itself. The banks are not likely to take upon themselves a burden of that kind. Consequently, there will be a disinclination to accept the notes, arising from the inability of the public to obtain gold for them if they want it. This disinclination will not be because the public will doubt the solvency of the Commonwealth. I hope that nothing I have said will give any countenance to the idea that the solvency of the Commonwealth is at issue. It is not. But we have to remember, in dealing with paper money, that the whole essence of it rests upon the confident belief of those who hold a note that they can, if they like, obtain cash for it. lt I may, without irreverence, make use of a telling illustration, I remember that some years ago Colonel Ingersoll, in dealing with the greenbacks of the United States, said that every note ought to be in a position to say, “ I know that my redeemer liveth !” That ought to be the position in regard to every note issued with the sanction and authority of Australia; and once every man who holds a note has that confidence, there will not be the slightest trouble. The difficulty which the Government are placing in the way of the successful operation of this Bill is that of obtaining gold. That, I say again, will induce a disinclination on the part of the public to take our paper. If the Government wish to circulate their notes, they will have to unbend a little. They will have to be content with less profit, and to say that, “As we take the profit, we are prepared to face the cost of placing the notes in circulation.” I never heard of such a proposition being made in any Bill as that the Government will insure to themselves all the profit, whilst relying absolutely upon private enterprise to bear the greater part of the expense. I would not be rash enough to make an estimate as to what the profit on this note issue is likely to be. But under the Bill, as it stands, I am confident that, instead of there being £4,000,000 of notes in circulation, there will be a much smaller amount; the reason being that there is no inducement to the banks to issue them. On the contrary, the banks will be penalized by issuing them to the extent to which they do- so. The result will be that if a bank can make a sovereign do all its work, it is not going to put a sovereign into its till, and at the same time send another sovereign down to Melbourne to act as security for a £i-note.
– The banks must have notes in order to do their business.
– I am by no means of that opinion. In the back country of New South Wales we were all paper money people before 1893. After that “we became a gold people.
– Wages in many parts of Australia are paid in notes.
– Yes, but there was an inducement to the banks to issue notes for the simple reason that they could keep their notes unsigned in the bank chambers of their country branches, and they paid no note tax until the signatures were attached, and the notes were issued. The banks were naturally inclined to issue notes to their customers unless they were specifically asked for gold. But under this Bill the condition will be that, instead of the banks being under an inducement to issue notes, there will be an inducement to issue gold. Many a man at present does not care whether he gets gold or notes. The banks give gold if it is asked for, or they give notes, at the discretion of the customer.
– I always ask for notes.
– I always ask for gold. Senator O’Keefe is, perhaps, in the habit of carrying large sums of paper money about with him. I, being a person of limited means, have very little money to carry about with me, and I take gold. Perhaps, also, I have the feeling that to have gold seems a little more respectable !
– Then has not the honorable senator some lack of confidence in the present notes?
– No; it has become a habit with me to carry gold, just as it has become a habit with Senator O’Keefe to carry notes.
– I did not ask for notes while the bank failures were troubling; the country.
– No, I do not suppose that the honorable senator was rushing round looking for notes at that time. Unless the Government increase the conveniences to the public under this Bill, they cannot expect it to be a success, and cannot expect their notes to be widely circulated. The only way by which they can make a success of the measure will be by offering increased facilities as compared with those enjoyed by the public today. Since this Bill was first introduced amendments have been made in it which have eliminated the original proposition, giving the Government full control of all the money obtained from the issue of notes. As it stands now, the money obtained will have to be invested. I venture to say, however, that the profit that can be made out of two or three million pounds’ worth of notes is not going to be so large that it ought to weigh against the convenience of the public.
-Colonel Sir Albert Gould. - None of the money obtained is to go into the Consolidated Revenue fund at all.
– The money obtained is to be used for investment in securities. The amount of profit, however, will be a mere bagatelle. If the Government issue notes to the extent of £4,000,000, they will have to keep £1,000,000 in reserve. As a matter of fact, they will have to keep more; because if they have to keep 25 per cent. in the Treasury they cannot cash a single note without diminishing that amount. Inasmuch as 25 per cent. is the minimum which they must have, they must in practice keep more than 25 per cent. Consequently, if £4,000,000 in notes are issued, there will not be a great amount of money to be invested. If it be invested at 3 or 3½ per cent., the amount of profit - after all expenses are paid - will not be more than £50,000 or £60,000. Is it worth while to jeopardize the success of the issue, to inconvenience the public, and to make the notes unpopular, for the sake of the few thousand pounds a year to be obtained in this manner? I cannot form an opinion as to what it wouldcost to establish depôts, but I should say that it would not cost the amount which the Government would obtain from the investment of the money which they would be free to invest. But even if every penny obtained in that way were swallowed up in expenses, I should still say that to make this note issue a success it would be worth while to establish depôts, so as to afford greater conveniences for the public to obtain gold for notes. Unless the Government do that I am convinced that there will not be £4,000,000 worth of notes issued. I expect that the banks will be induced to issue gold instead of paper, and that the public themselves will hesitate to take paper when they can get gold. I am as satisfied as a man can be of anything which the future must decide that if this Bill passes in its present form it will not be very long before an amending Bill is brought down to do one of two things, to provide for multiplying the places at which these notes can be converted, or for some arrangement under which the Government will pay the banks, or will offer them some financial inducement to use these notes, as has been done in Queensland.
– I do not pretend to be a banking expert, or to have any great knowledge of finance. But I am one of those who were victimized by banking experts a few years ago.
– The honorable senator can speak feelingly.
– I do feel very keenly on this matter, and I can understand how keenly a man, who is reaching eighty years of age, and still has his hard earnings locked up in one of the banks, must feel. I have listened with interest to the debate, and I should like to say that a few years ago I gave Senator Walker a vote in consideration of his great banking knowledge, and on the strength of what he said in a pamphlet which he issued under the title, “ A Glance at the Prospective Finances of the Australian Federation or Commonwealth.” In that pamphlet, the honorable senator said -
On the principle that the safety of the public is the supreme law(salus populi lex suprema) bankers will not object to the Federal Government having the sole right to issue legal tender notes, convertible into gold in the Federal Capital and in the capitals of all the provinces or States. … As the notes would be a legal tender throughout the length and breadth of Australia and in Tasmania, they would become in time a very popular form of currency, and the circulation would, in my opinion, undoubtedly go on increasing in even a greater ratio than the population.
– I still hold the same opinions.
– In view of that statement, the honorable senator ought to be a hearty supporter of the action that is now being taken by the Federal Government.
– Not necessarily of the details of this Bill.
– I said that the notes should be convertible in each of the State capitals.
– I believe that at the time that pamphlet was issued Senator Walker was sent to this Parliament because of the great financial knowledge he possessed. Unfortunately, in common with others, he has had to submit to the demands of party politics, and has never had an opportunity to utilize his great financial ability in placing the finances of the Commonwealth on the sound basis he laid down in the pamphlet from which I have quoted. This question is only one of the confidence of the people, and they have every confidence in the present Government. One plank of the Labour platform is the establishment of a Commonwealth National Bank, and the confidence of the people in such a proposal has given the Government the power which they have behind them in the Federal Parliament to-day. As one of the victims of the banking crisis, I should like to say that many of the banks, at the time, should never have closed their doors, and some that did ought never to have been allowed to open them again. The directors of one of those banks, under a reconstruction scheme, filched their depositors of 2S. 6d. in the £1, and compelled them to take up shares in the bank.
Sitting suspended from 6.30 to 7.45 p.m.
– I have said that the stability of the currency is all a matter of confidence, and not of gold or of paper. The people of Australia are a very confident people, just as are those of the country from which Senator Walker and I come. The story goes that a countryman of ours went to a bank and asked the manager for an overdraft, and when the manager said, “How much do you want?” he said, “ How much have you got ?” It will be admitted that that man had plenty of confidence. I say that the people of Australia are a confident people, and I may add that the people of countries not far removed from Australia have also shown that they have confidence, not in a bank, or even in a Government, but in a trading firm. I hold in my hand a £1 note issued by the firm of Burns, Philp, and Co. When this firm require a means to pay for services rendered in the South Sea Islands, they go to a printer in Sydney and get him to print off as many notes as they require. This note is inscribed, “ Pay the Bearer on demand the sum of One Pound sterling;” Such notes are negotiable all through the
South Sea Islands, and are regarded there as equal to gold. When the holder of one of these notes requires gold for it, he must come to Sydney or Brisbane to get it ; but there is no outcry on that account, because the people who handle this paper money have every confidence in the firm issuing it. They know that, it is not legal tender, but it is regarded as being just as good. The traders pay wages, and the company pays for services in these notes.” Their issue has been a great factor in the development of the South Sea Islands and their trade. I believe that a paper currency issued by the Government in Australia would assist largely in the development of the Commonwealth. It might be utilized in the building of the Federal Capital, the construction of railways, and the supply of the public conveniences to be found in other countries. One honorable senator has said that if the holder of one, two, or a hundred of the proposed Australian notes wanted gold for them in Brisbane he would be unable to get it. I may say that there need be no fear on that account, because arrangements have been made between the Government and the banks to exchange the notes for gold up to a reasonable amount. During the interval for dinner Senator Walker told me that he still holds the opinions he held when he published his pamphlet on the subject of an Australian note issue. If that be so, I can only say that he expressed a contrary opinion in his speech on the second reading of this Bill.
– The honorable senator will excuse me, if, by way of personal explanation, I say that I was in favour of the principle of a Government note issue, and I said that if the notes were made payable in each of the capital cities of the States they would doubtless be in great favour.
– The honorable senator also said that the heads of the banking institutions in Australia had met together and had decided to exchange each other’s notes all over the Commonwealth.
– They were willing todo so.
– And the honorable senator added that when that was done there would be no necessity for theproposed Commonwealth note issue which he advocated so honestly in the days gone by. I have no hesitation in saying that it. was because of his advocacy of an Australian note issue that, in common with/ thousands of other people, I assisted to put the honorable senator where he is today. I do not regret having done so ; but it is a pity that he was unable to bring his great financial ability to bear upon any previous Government of the Commonwealth. As a consequence it has been left to a Labour Government to carry the honorable senator’s ideas on this subject into effect. I believe that opposition is shown to this proposal by honorable senators opposite merely because it is a Labour Government that have introduced it. They have tried to pick holes in the proposal, and have referred to the injurious effect it will have upon the Queensland Treasury note issue. We have been told of the loss which that State will suffer in consequence. Quite recently the Queensland Treasurer in his Budget statement referred to this proposal, and showed that he is not afraid that that State will suffer in any way because of it. He said -
The Federal Government have introduced a Bill to provide for an Australian note issue, and this will have the effect of rendering our Treasury Note issue valueless, and the result will be to cause Queensland a loss of about £25,000 per annum. In addition, we shall have to retire within six months of the passing of the Act the whole of the Treasury Notes issued which amount to about £1,600,000. Fortunately, our position is such that we shall be able to -do this without any undue pressure on our resources, and arrangements will be made whereby from the date of the passing of the Act gold will be available at the Treasury for the redemption of every note Queensland has issued.
That shows that the Government of Queensland have no fear of the proposed Australian note issue. Let me say a few words with respect to the conversion of these notes at the Seat of Government only. The Government in their initial venture must be careful to guard against the hostility of those who imagine they are going to suffer from the issue of these notes. If they chose at any time to collect a large number of them and present them for gold at a depot in Perth, for instance, it is possible that those in charge of the dep6t would not be able to meet the demand because it could not be expected that the Government would keep a sufficient gold reserve in each of the State capitals to meet an attack of that kind. But when the banks of the Commonwealth become accustomed to this note issue, and begin to understand that it will not be detrimental to them or to the country, there will be no fear of any such attempt being made to embarrass the Government, and there will then be depots opened in every State capital at which these notes can be converted into gold. In my opinion, it is a pity that the proceedings at the interview between the bankers and the Treasurer were not made public. I do not know what occurred at that interview, but I do know that the authorities of the banks in the different States have agreed with the Treasurer to pay gold for these notes to meet any demand in the ordinary way of business. Of course, in the event of a panic or of an organized attempt being made to interfere with this note issue they would not be in a position to allow themselves to be attacked from six quarters at one time. I have no doubt that when the banks come to find that it is not the intention of the Government to obtain a cheap loan, and to expend the money in an illegitimate way, they will fall in with the idea and admit that the new system will be much better for them than was the old one. I intend to vote for the measure as a preliminary to the establishment of one of the things which the people of New South Wales sent me here to support, and that is a National Bank.
– - One cannot help being somewhat amused by the manner in which our honorable friends on the other side are determined to prove that we on this side are against the proposed note issue, and that, whatever opinions we have about’ the matter, we regard it either as a question of their trying to raise money simply to spend it or as something which is not of any value. Senator McDougall gave one illustration of what I might call the half-truths which may be put before the Parliament, when he told us about a note which is issued by Burns, Philp, and Co. in the South Sea Islands. He explained that if holders want gold for these notes they have to go to Sydney. He had not-, read the note which he held in his hand carefully, because it bears the indorsement that it is negotiable on any of the company’s steamers or at any of their agencies.
– What does that mean? It does not necessarily mean that gold- will be given for the notes.
– Holders can get value for the notes.
– It does not say that at all. It says that the notes may be passed in payment for goods on the steamers.
– I am not prepared to dispute it.
– The notes are only payable at Sydney and Brisbane.
– Then we have two places at which the notes are payable in gold, and they are accepted in payment for goods at any of the agencies of the company, which are spread throughout the Islands, or on board their ships. The statement that a note can only be cashed for gold in Sydney was only a halftruth, because it is negotiable for gold in Sydney and Brisbane.
– Senator McDougall mentioned both Sydney and Brisbane.
– Then I did not distinctly hear what he said. Senator McDougall was very strong about the feeling of the Queensland senators on this subject. I do not know how many representatives of the State have yet spoken, but if men like myself backed Sir Hugh Nelson in 1893 and strongly supported the system which he then adopted of a State note issue, I do not see exactly how we can turn round and object to a Commonwealth note issue based very largely on the same lines.
– Another supporter.
– My honorable friend has apparently so many supporters that he does not want any more, and therefore he laughs.
– I can hardly count them now.
– Senator Walker referred to his attitude on this subject at the Bathurst Convention in 1896. He did not make his position as clear as it might be made, because possibly he was not egotistical enough to do so. I shall now read from the report of that Convention what he said : -
Relative to the suggested Federal Note Issue Department, it may be well to remember that the Commonwealth is bound to legislate for the currency. In Queensland, at the present time, the Government issues convertible Treasury Notes, whilst in the other colonies the banks issue notes convertible into gold on demand, in some colonies notes being a first charge on the assets of the respective banks, whilst in other colonies note-holders do not enjoy any preference over other creditors. The banks find that, where they have to pay duty to the State on their average note circulation, the latter is not a source of profit to them as in the early days it undoubtedly used to be. On the principle that the safety of the public is the supreme law (salus populi lex suprema) bankers will not object to the Federal Government having the sole right to issue legal tender notes, convertible into gold on demand at places to be appointed in the Federal Capital and in the capitals of all the Provinces or States. The Note Issue Department should also be under the control of non-Political Trustees or Commissioners, who should always keep at least 30 per cent. of coin in the Treasury against average note circulation, and who should be at liberty to invest 70 per cent. in British and Australian or Australasian Consols and Exchequer Bills. As the” notes would be a legal tender throughout the length and breadth of the Continent of Australia and in Tasmania, they would become in time a very popular form of currency, and the circulation would, in my opinion, undoubtedly go on increasing in even a greater ratio than the population. By latest returns, the total Bank Note Circulation in the Federating Colonies would appear to be under £3,000,000, to which would have to be added the Queensland Treasury Note Issue : as 70 per cent. of the total amount should bring in a revenue averaging 2¾ per cent. per annum, it is probably not over sanguine on present figures to estimate the net annual profit to the Federal Government at about £50,000.
In the face of a statement of that sort, coming from a gentleman who represents the banking interest probably more thoroughly and more ably than anybody else in the Chamber, it is unfair and unreasonable that Senator Lynch or any other senator should get up and proceed to say that the banks are frightened of being robbed of their profits and are generally opposed to this Bill.
– Who said that?
- Senator Lynch.
– The honorable senator must admit that when the Bill was introduced into the other House it was met with a storm of protest from the associated banks, at any rate in this city.
– I do not know whether it was or not. I understand that the associated banks, or a certain number of bankers, met the Prime Minister. We made an effort on this side to ascertain what took place at the conference, but we were told that no record of the proceedings was kept, and therefore we do not know whether they objected to the measure or not.
– Prior to that we had their statements to the newspapers.
– Coming to a later date, I shall take the last report of the Queensland National Bank, which was presented at the half-yearly meeting held on the 1 8th August. It contains the following reference to the Commonwealth note issue : -
In addition to this large payment, we have, during the half-year, also paid off the balance of our Treasury Notes Deposit amounting to £300,000, which, you will observe, does not now appear in our balance-sheet ; so that since the beginning of the year, we have reduced our liabilities to the Government under these headings by a total of £644,390 15s. 4d. We have felt certain that when legislation with regard to the currency took place, a Federal Note Issue would eventuate, with a probability of no arrangement for till money, therefore, some time ago we made preparations to meet the altered conditions. There can be no question that a uniform issue throughout the Commonwealth is desirable, whether by the Banks or the Government, and it has been evident that every Federal Treasurer, from the first to the present one, favoured a Government issue. Under these circumstances, it is a matter for congratulation that the Commonwealth Government decided to create a Note Issue on such ‘ a sound basis as “ The Queensland Treasury Notes Act,” which has given such general satisfaction for the past seventeen years in this State ; and if facilities equal to those now existing in Queensland are afforded in the different States for obtaining and exchanging notes, the issue should meet with the approval of the community.
In the face of the two extracts which I have read, I think it is reasonable to say that my honorable friends on the other side should cease to gird at us as representatives of the banks in, as one honorable senator suggested, our desire to prevent the Government from carrying out a policy which is approved by the only people who can possibly lose on the. scheme. The banks, which are probably now making a clear profit of from - -,— to ,£120,000 a year, admit that it is reasonable that the Government should introduce this Bill, and that it will be a good thing for the whole of Australia to have a uniform note system. As I supported the system when it was applied to Queensland, so I propose to support the system when it is to be applied to the whole of Australia. I very much share the views which were expressed by Senator Clemons this afternoon, when he said that it was not so much a question as to whether the Government or private individuals should issue bank notes as a question of whether the notes would meet the convenience of the public. If the notes do not get to the people when they are wanted, or get filthy, dirty, and vile, so that they cannot be handled with anything like comfort, the note system will be unpopular, and ineffective, and eventually the notes will be at a discount I am very glad to see that since certain suggestions were put forward to the Government in another place we have had a promise from the Prime Minister that depots will be established in various parts of Australia.
– Where is that promise to be found?
– In the other place, a promise was given by the Prime Minister that, in various parts of Australia, depots will be established where people would be able to exchange dirty notes for clean ones.
– I do not think it is a definite promise. I do not read it so, anyhow.
– It is a matter to be done, I should think, by administrative act. Some twenty or twenty-five years ago, I was in a bank for a few months, and had the privilege, or the disaster, of serving in what was called the note department. My experience was that one frequently required a very fine knife to separate the filthy, dirty, congested notes taken off the dead bodies of Chinamen, and other persons, to find out the value of the whole lot. If people in Western Australia, or Queensland, have to send their notes to Melbourne before they can get clean ones for them, it will make the note issue inconvenient, unpleasant, and thoroughly unpopular. Not long ago, I asked a leading banker in Australia what he thought about the proposed note issue. I do not think that honorable senators wish me to disclose his name, but, in reply, he said, “ Keep your notes clean, give us an opportunity of keeping them clean, and they will be convenient to the public. The notes will be accepted by the public and will pass round without any trouble.” I have seen the statement in the press - and, unless I misread my Hansard, I saw it there, too - that there is a definite promise on behalf of the Government that there shall be established in Australia certain depots where old, dirty, and disgusting bank notes may be exchanged for clean ones.
– Ask the Ministers here if they will repeat that promise definitely.
– They will be fumigated, 1 suppose.
– That is a question for the Boards of Health, is it not?
– The Ministers are silent.
– If the issue of the notes is to.be put into the hands of the Boards of Health, probably we shall get into very deep water, and there will be a good deal of trouble. The Boards of Health are under the control of the State Governments, and I gather, from what the honorable senator said, that the Government propose to put the note issue under the control of those Boards. I ask the Ministers, as suggested by Senator Millen, whether I am not right in interpreting the statements made by the Prime Minister at various times to mean that, in various parts of Australia, there will be depots where dirty notes can be exchanged for clean ones ? I happened to be in the other branch of the Legislature a few days ago, and in reply to a question I heard the Prime Minister explain that he had not promised that depots would be established at which Commonwealth notes might be exchanged for gold, but that he had promised that depots would be established at which dirty notes might be exchanged for clean ones. This is a matter of very great importance, if we are to have a note issue which will be a thoroughly convenient one for the general public.
– It is a matter of administration.
– Of course. But the marvellous thing is that I cannot get an assurance from the Government that they will make it a matter of administration. In the course of his remarks this afternoon, Senator Lynch expressed very great surprise at the different views which are held as to the Bill by honorable senators upon this side of the Chamber. He seemed to think that we ought to have considered the measure at a private meeting, and been prepared subsequently to voice the opinion which was held by a majority. But I would point out that Senators Lynch and Needham have themselves assigned absolutely opposite reasons for supporting the Bill. That being so, surely we may be permitted to advance opposite reasons for opposing it.
– But the honorable senator is not opposing it.
– Then surely honorable senators upon this side of the Chamber ought to be at liberty to advance opposite reasons for their criticisms of it, if they choose to do so. Senator Needham in his remarks conveyed the impression that we have merely to print Commonwealth notes for the whole country to become wonderfully prosperous. On the other hand, Senator Lynch affirmed that we have to put the currency upon a footing, which will prevent a financial crisis arising to the injury of the public. In my opinion he was upon very much sounder ground than was Senator Needham. If we are going to put the paper currency upon a more stable footing than it is now, I have nothing of which to complain. But if the idea underlying this Bill is that we shall print Commonwealth notes merely to provide the Government with money to spend, I am opposed to it. As Senator Rae observed the other day, the difference between the system of borrowing which is embodied in the Bill, and the old system of borrowing is, that under the latter we have to pay interest and to repay the principal, whereas under the former we will not pay any interest and probably shall not have to repay the principal. I am not going into ancient history as Senator Lynch did, but I wish to quote from a volume which was written by a man who at one time used to figure amongst the authors to be read by workers in the library of the Queensland Worker - I refer to Adam Smith. That author’s name, however, was withdrawn from the list some time ago, when my honorable friends discovered in his writings certain statements which they thought were not altogether what they should be. Adam Smith, in referring to paper money, said -
The colony Governments find it for their interest to supply the people with such a quantity of paper money as is fully sufficient, and generally more than sufficient, for transacting their domestic business. Some of those Governments, that of Pennsylvania particularly derive a revenue from lending this paper money to their subjects at an interest of so much per cent. Others, like that of Massachusetts Bay, advance upon extraordinary emergencies a paper money of this kind for defraying the public expense, and afterwards, when it suits the convenience of the colony, redeem it at the depreciated value to which it gradually falls. In 1747, that colony paid in this manner the greater part of its public debts with the tenth part of the money for which its bills had been granted.
Senator Lynch also dwelt upon another point in which he gave expression to only a half truth. He selected quite a number of instances in which Governments have gone to the rescue of banks. But I would remind him that there are other cases in which banks have gone to the rescue of Governments, and it is just as well we should recollect that there are two sides to this question. Adam Smith said that -
The Bank of England, either by voluntarily discounting those bills at their current value, or by agreeing with Government for certain considerations to circulate Exchequer bills, that is, to receive them at par, paying the interest which happens to be due upon them, keeps up their value and facilitates their circulation, and thereby frequently enables Government to contract a very large debt of this kind. In France, where there is no bank, the Slate bills (billets d’état) have sometimes sold at 60 and 70 per cent. discount. During the great recoinage in King William’s time -
I think the King William referred to was William of Orange - when the Bank of England thought proper to put a stop to its usual transactions, Exchequer bills and tallies are said to have sold from 25 to 60 per cent. discount; owing partly, no doubt, to the supposed instability of the new Government established by the Revolution, but partly, too, to the want of the support of the Bank of England.
– Did Adam Smith say anything about the position after the Franco-German war?
– No ; he was in the permanent Bastille then. I quote these two instances, not by way of argument against the Bill, but rather as a reply to honorable senators who are accustomed to rise in their places to denounce everybody upon this side of the Chamber, and who are prone to put into our mouths statements which we have never made. They also endeavour, as Senator Clemons has pointed out, to take the roughest possible road in attacking the banks, when, as a matter of fact, if they were a little more sympathetic, they would overcome their difficulties very much more easily. There are two or three points in connexion with this Bill to which I desire to direct attention. I have already pointed out that if we are going to pass it in its present form, it will not result in the pouring out of a “ golden stream,” which will give employment to everybody. Under it every penny that is received from the issue of Commonwealth notes will be paid into a trust fund. The interest earned by that fund must also be paid into it, so that the most the Government can hope to receive under the measure is a profit of £100,000 a year. That is not a large sum, considering that they will have a revenue of about £12,000,000.
– A profit of £100,000 a year less the cost of printing the notes.
-I am making them a present of that. It is idle to tell the people of Australia that we are going to pour gold into their laps, seeing that under the most favorable circumstances this Bill will return to the Commonwealth a profit of only £100,000 per annum.
– Has anybody said that it will pour gold into the laps of the people ?
– Yes. Senator Lynch spoke of the “ golden stream” which is going to be poured out.
– He never made any such ridiculous statement.
– Honorable senators can look up the Hansard report tomorrow, and if they do not find that he spoke of a “ golden stream “-
– He said a “ river of credit.”
– Are we to understand, then, that it is to be a river of I.O.U.’s? If Senator Lynch did not mean a river of gold, I do not know what he meant.
– The honorable senator admits that he has lost his bearings.
– I do not admit anything of the sort. But Senator Needham lost his bearings when he told us that Canada had a note issue amounting to £8,000,000. He had evidently forgotten to look up the statistics relating to the last few years. Otherwise he would have known that to-day Canada has a note issue amounting to £12,000,000.
– But I spoke of the year 1893.
– The honorable senator was digging in the cemetery of the past.
– I gave my figures and my dates.
– On 31st March, 1908, Canada had a note issue of. £12,000,000. Under the last Act which was passed in the Dominion, the Canadian Government are authorized to issue notes to any amount that they may choose. But for any issue in excess of £6,000,000, they must hold in the Treasury a reserve of dollar for dollar. So that in Canada, with a population which is nearly double that of Australia, the Government are limited to the issue of £6,000,000 worth of notes for which they must hold a reserve of 25 per cent., whilst for any note issue in excess of that amount they must hold a reserve of dollar for dollar in the Treasury. I should not have mentioned these facts if Senator Needham had not interjected that I had lost my bearings. I think that he has lost his. Amongst the matters which have been dwelt upon during the course of this debate is the necessity for stability in connexion with the proposed paper currency. I hold very much the views which have been expressed by Senator Clemons, namely, that the actual amount of the gold reserve is not so important as is the fact that wherever people are likely to demand gold, they ought to be able to get it. Naturally the Queensland system has been much discussed in this connexion, and it may be just as well that honorable senators should be told, not what the Queensland law is, but how it has been administered. The idea underlying Queensland legislation was that the Government was going to get a golden sovereign from the banks for every note issued. As a matter of fact, that did not occur. From the year 1897 up to last year there were three banks - the Queensland National Bank, the Royal Bank, and the Bank of North Queensland - which, according to the official returns, owed the Treasury £388,833 on account of Treasury notes. What had happened was this : The Queensland Government practically allowed the banks to have 10s. for till money, and the other 10s. was left on fixed deposit, for which, I believe, the banks paid 2 per cent.
– That, I understand, was a temporary arrangement entered into during a time of crisis, and the banks have been gradually liquidating the liability thus incurred.
– In 1893 the three banks I have mentioned owed the Queensland Government on account of notes £123,298.
– How much did the banks owe the public in 1893?
– My honorable friend reminds me of the man with a pimple on his nose. He thinksother people are always looking at it ; but they are not. In 1896 the amount owed by the banks to the Government had risen to £354,128. In 1897 the amount had risen to £388,833. According to the official returns, the amount remained at that figure until a few weeks ago, when the Queensland National Bank paid the Government £300,000.
– Is it not a fact that after 1897 the amount was increased?
– It was not increased, but remained at £388,833. That is to say. four years after the crisis, the banks owed the Government 10s. in the £1 on their till money. That continued, as I have said, until the other day. Unless the Bank of North Queensland and the Royal Bank have taken similar steps to those taken by the Queensland National Bank - and I have not been able to see the reports of those two banks - they still owe the Government £88,833. As to the question of bank reserves, we know that the note issue in Queensland is, roughly speaking, £1,600,000. Taking the bank returns we may say that one-half of that amount remains as till money, and one-half goes into circulation. The coin held by the Treasury on the 1st July was £758,000. In other words, it was equal to 10s. in the £1, or 50 per cent. of the whole note issue.
– Not quite.
– It was very close to that. The actual amount of notes issued was £1,579,568, and the coin held was £758,000. That amounts, roughly, to 10s. for every note sent out from the Queensland Treasury.
– Is it not a fact that, at the date mentioned, the Queensland banks were anticipating that this Bill would become law?
– I do not know. The banks did not take me into their confidence.
– It has been stated that the banks made preparation to redeem their notes on the due date in anticipation of this legislation.
– What I have stated was done before this Bill was introduced, and, indeed, before this Parliament met. It is obvious that if the banks had suddenly closed their doors they could not have demanded in full from the Government gold for their notes, nor could the Government have demanded in full gold for the notes issued by them to the banks. As far as the actual position was concerned, the Treasury was holding practically a golden sovereign for every note that was in the hands of the public. Whatever may have been the success of the scheme in Queensland, it has to be remembered that the scheme has been run upon the very safest lines. The administration has been the particular cause of its success - and I should add to that the general prosperity of the country. I am not prepared to say that the present Government are not going to administer this Bill wisely and cautiously. But one thing is perfectly certain - if the Government are going to take Queensland as an example, they will have to increase their coin reserve, which for a long time in Queensland amounted to from 30 to 33 per cent. I have dealt with the matter of clean notes, which I consider to be of considerable importance. The other question to which I wish to draw attention is the difficulty that is going to arise between the Government and the public if they do not see their way to do what Senator McDougall promised - that they would do as soon as possible - establish depôts for cashing notes in various parts of Australia. I do not know to what extent Senator McDougall’s statement can bind the Government, but he made it quite clear that while the Government would not take a suggestion from this side, they would, nevertheless, take the earliest opportunity of doing what has been suggested by administrative act. I was in Brisbane a few months ago, and on a Sunday morning a young Canadian who had just landed came along with some Canadian Government notes in his possession. He wanted to cash them, but could not do so. Nobody seemed to know anything about Canadian Government notes there. I understood that somebody was prepared to cash them at a discount of 2s. 6d. in the £x. At all events, there was the situation of this young immigrant landing and being unable to cash his notes except at a discount. I agree with Senator Walker that we should have in Australia certain depots for cashing notes. I wish to ask the Government whether they cannot see their way, at any rate, to meet the convenience of Australians who are about to travel outside the Commonwealth, lt will not be a nice thing for an Australian who leaves Hobart to go to New Zealand, if he has to send over to Melbourne before he can get gold for the notes in his possession. In the same way, a man leaving Port Darwin for the East will’ not be able to get gold. In the East he will not be able to cash his notes except at a discount of about 2s. 6d. in the £1 Fremantle is another “ jumping off “ place where A ustralians may desire to change notes for gold. It would be a reasonable thing to establish at such places depots for the cashing of our notes. It may seem a very curious thing, but it is a fact, that the present Prime Minister is the author of this idea. When the Treasury Notes Bill was before the Queensland Parliament, Mr. Fisher put the case from the point of view that I am now presenting. He urged the Government to make an arrangement for the cashing of notes at post-offices along the Queensland border, so that people travelling to other parts of Australia might be able easily to get gold for their notes. At page 54 of the Queensland Hansard for 1893, Vol. 70, Mr. Fisher - asked whether the Treasurer would give the concession through the Postal Department to people residing in border towns, who might go out of the colony, of changing a limited number of notes for gold, without coming or sending to Brisbane.
I am sorry to say that the Queensland Government did not accept Mr. Fisher’s suggestion. They said that they did not think it necessary. I suppose that the present Government will say the same thing, though
Mr. Fisher is the Minister responsible for this measure. The matter, however, is of sufficient importance for me to urge upon the Government that if they see any virtue in the proposal at all they will consider it. There are only three places where I consider it very urgent that such depots should be established. I would not even suggest Sydney, because it is not so far from Melbourne, and, moreover, there is a mint there.
– There is a mint in Perth.
– That makes it the more easy to obtain gold for notes in Perth. It would, however, be difficult to obtain gold for them at Thursday Island or Palmerston. I would also add Hobart, these three being “jumping off” places from which people leave Australia, and where there should be facilities for cashing notes. If people are compelled to carry Australian notes abroad, we shall have the unpleasant result that the moment they get only a few miles from Australia they will have to pay exchange on Australian national notes - a thing that the Government does not want, and which we all desire to avoid.
– The honorable senator’s proposal would not overcome the difficulty where Australian notes were taken out of the Commonwealth.
– That is so. If people took the notes out of the Commonwealth that would be their own lookout, but I think that means should be provided for converting them’ into gold at the points of departure from the Commonwealth to which I have referred.
– Does the honorable senator contend that they would be at a discount at those places.
– No j but that they would be at a discount in places outside of Australia. There is only one bank’ note in the world that is not at a discount somewhere, and that is a Bank of England note. The reason is merely that the Bank of England is known to be a sound bank, and that England is a. moneylender all over the world. If one wishes to send money to England the banks will almost pay him to do it. I have not much more to add to what I have said, but’ I should like to refer to the fact that some very remarkable penalties are provided for in this Bill. There is, for instance, a penalty of fourteen years provided for a forgery of these notes. I find that in 1893, when a Treasury-bills Bill was be- fore the Queensland Parliament, containing a provision imposing a penalty of penal servitude for life for the counterfeiting of Treasury-bills, the present Prime Minister had the following remarks to make on the subject -
Mr. FISHER said that our system of correct ing people who had made mistakes had not had the best effects. The clause provided that persons guilty of certain offences should be guilty of felony, and should be liable, on conviction, to be kept in penal servitude for life. It was necessary to deal in a humanitarian spirit with people who made mistakes in life -
I like the word “ mistakes “ - and he did not think persons guilty of the offences stated in the clause should be sentenced to such severe punishment. He moved the omission of the word “ life,” with a view to inserting the words “ five years.”
When a member of the Queensland Parliament, he thought that five years’ penal servitude was a sufficient penalty for forgery, but now that he is Prime Minister of Australia nothing less than fourteen years will satisfy him.
– That is not correct. The honorable senator must know that the penalties stated in the Bill are the maximum penalties.
– The penalties to which Mr. Fisher objected in the Queensland Bill were also maximum penalties.
– But the honorable senator has just said that in this case nothing less than fourteen years’ imprisonment will satisfy the Prime Minister. That is not fair, because under this Bill the penalty imposed might be less than five years.
– It might be supposed that the Prime Minister thought that the penalty should not be less than five years. He recognised when in Queensland that the maximum penalty for counterfeiting Queensland Treasury-bills should be five years, and in this Bill he fixes a penalty at not more than fourteen years. I mention the matter because later on something may be said on the subject in Committee. I propose to support the Bill, but I have drawn attention to one or two matters which I think will require consideration in Committee. I am not very hopeful that any alteration can be made, but I have some slight hope that a means will be provided through the postoffices or through the banks to enable people to get gold for Commonwealth notes when they are on the point of leaving Australia for a round-the-world tour or something of the sort.
– Notwithstanding the chorus of approval with which this measure is met from every quarter in this Chamber, we cannot forget that in the earlier stages a good deal of hostile criticism was hurled at it by the newspapers, by financial authorities throughout the Commonwealth, and in the Federal Parliament itself.
– By reason, not of the Bill itself, but of what many members of the party opposite said about it.
– Honorable senators were drawing largely upon their imagination. Instead of dealing with the Bill as it stood, they dealt with a great number of imaginary possibilities which no one but themselves ever thought about.
– The Bill before the Senate is not the Bill as it was introduced.
– I am well aware of that, and it is not a Bill which will be nearly so effective as it ought to be. Probably that is the reason why so many honorable senators on the Opposition side are supporting it so heartily. There has been a great deal of talk about this measure which, after all, is a very simple one. It is merely an attempt on the part of the Government of the day to give stability to our currency. No one will dispute the fact that the credit of the Commonwealth is much better than the credit of the strongest bank or combination of banks that could be suggested.
– The whole must necessarily be greater than the part.
– Just so, and the security of the whole must necessarily be better than the security of any part or number of parts. We are all agreed upon that. I look upon this measure as the first step towards a change which I believe will do a very great deal of good for those countries which adopt it. I refer to the demonetization of gold. I know that that is a proposal which will be looked upon_ as gross heresy by a great number of people. The world has been worshipping the golden calf for thousands of years, and like every other image the golden calf requires a great deal of homage to be paid to it in the form of tribute from the masses of the people. I do not know whether honorable senators have gone into the question minutely, but if they do they will find that a gold currency is an exceedingly expensive one, and although it costs very much more than a paper currency, it is not one bit more effective. My banking friends in the Senate will claim that our whole financial system is based upon gold. Nothing of the kind. If every creditor in the Commonwealth demanded payment in gold to-morrow there would be universal bankruptcy, and no man would be able to pay his debts. We are told that the knowledge that there is so much gold in the banks prevents a panic. But when there is a panic, what is the use of it? It is of no earthly use, because it cannot be got at.
– Would anything be of any use in a time of panic?
– Nothing would be of any use; and that is just why I say that paper is as good as gold. So long as there is no panic, a paper currency is good enough ; but the moment a panic arises, neither paper nor gold is of any use.
– Would the honorable senator say what he means by “paper”?
– I mean the kind of paper which the Commonwealth Government propose to issue.
– Paper which, because of the name on it, is worth having?
– The name of the Commonwealth Government will be upon this paper, and all the resources of Australia will lie behind it. I say that that paper, in the hands of Australians within Australian territory, will be as good as gold.
– Will it be as good as gold outside of Australia?
– I am dealing now only with internal commerce ; and, so far as that is concerned, the Commonwealth paper currency will be as good as sovereigns, and will be very much cheaper. I wish the people of Australia to understand that a gold currency costs a very great deal of effort and labour, and that it is the great masses of the people who have to carry this unnecessary burden upon their backs. The currency objective of Australia, in my opinion, ought to be to demonetize gold, and to establish a sound paper currency which would be equivalent to a gold currency within the boundaries of the Commonwealth. I think it is quite possible to do that. There are some men who have the opportunity to hoard up money ; but to the great mass of the people, that opportunity never comes. It does not matter what they expect or hope from the future; to 97 per cent, of the people the opportunity to hoard gold never comes. What happens when a man gets a sovereign ? He cannot eat it. If he tried to do so, he would find it tough and indigestible. He cannot drink it; though the Golden Calf was ground into powder, and people were compelled to drink it. He cannot eat or drink it. It will not protect him against the elements; and he cannot build a house with it. He can only exchange it for such commodities as he requires in everyday life, and he could do exactly the same thing with a duly accredited paper note.
– No; he could not.
– My honorable friends here are the victims of the gold superstition. It will die hard, no doubt, as every other superstition has done; but that it will die I am sure. The moment the people discover what a burden it is upon them, they will cast it aside.
– If the honorable senator’s argument is sound, the Government do not need a gold backing for their proposed paper money.
– That is just exactly what I believe. I should go further, and would not even ask the banks to give gold in exchange for these notes. I should be quite satisfied if they gave Government securities. I should not ask for their gold, because, from my point of view, in that respect, this Bill elevates gold into a position of importance which I think it ought not to occupy.
– The honorable senator will not crucify Labour on a cross of gold.
– I would not crucify Labour, or anything else if I could help it. I think the gold superstition has done very serious harm. As I have said, a man cannot eat or drink or wear gold. So far as the internal commerce of Australia is concerned, a paper note is as good as a sovereign. It is the resources of the country which give value to the note. Take the capital of the banks. What proportion of their liabilities does the gold coin in their vaults represent?
– About one in six.
– About a fifth or a fourth, I think.
– The proper way is to take the assets and the liabilities. The liquid assets represent 10s. in the £1.
– I know that in the case of one of the banks, and one of the strongest of the number, too, the proportion of liquid assets is about 6s. in the
– Some of the liabilities are not due for a considerable time, remember.
– I am well aware of that. Would any man in his senses use an expensive tool for work which could be equally well done by a cheap tool? I fmd that the golden token costs more than one hundred and twenty times as much as the paper token. Let us ascertain the expenditure in producing 5,000,000 sovereigns. Suppose that labour is hired at 10s. per day, it takes two days to earn a sovereign. According to that computation, the production of 5,000,000 sovereigns woud occupy 10,000,000 days. I think I am very much below the mark when I say that the gold in a sovereign could be got out of the ground in two days. It costs, I think, very much more when we take the large number of men who are working in alluvial fields, and get very small remuneration for their work. We have to bear in mind, too, the number of duffer mines, and the amount of capital sunk therein.
– A good deal of that work would continue if you did not have gold for your currency.
– Yes. I do not think that the price of gold would be affected in any degree. In any case we have 10,000,000 working days at 10s. a day to produce 5,000,000 sovereigns. To produce the same amount of money in paper would cost about £30,000, or 10,000 working weeks at £3 per week, but to produce the sovereigns would take 1,666,000 working weeks at £3 a week. Let honorable senators reflect for a moment what a waste of human endeavour is involved there; what a burden the system is 011 the great mass of the people, who, of course, have to pay for it. We have thousands and thousands of men continually working to produce this medium of exchange, which might very well be supplanted by one winch would cost 120 times less, as I have just pointed out.
– Where would Western Australia be if you did that?
– I am not troubled about that. I think that we on this continent, indeed the whole of the world, would be much better off if this superstition were killed and sound paper money were introduced. With regard to external commerce, I know quite well that the Australian notes would not run beyond our jurisdiction, and thai if the balance of. trade were against us in other countries we should have to pay either in gold or in commodities.
– Very often little gold changes hands.
– In good seasons, when we are producing largely, and getting good prices, the export of gold is comparatively small. It is only in bad seasons, when we cannot send away enough commodities to square the ledger, so to speak, that there is a demand for gold.
– There is another reason why gold is exported in bigger quantities.
– It is a fact that nearly all our gold-fields have been discovered in bad times. Iron is a much more valuable metal than gold. With iron you can plough the field, cut down the forest, and hew the metal out of the mine, but with gold you can do none of those things.
– It is very portable.
– It may be put in a very small compass, and that is one reason why it is universally used as money. A few days ago I was reading in Plutarch’s Lives about that great law-giver, Lycurgus. He became so horrified at the evils of money that he established an iron coinage. He fixed values in such a way that it took big lumps of iron to represent a very small sum. Money became such a nuisance that nobody would keep it on the premises, and the result was that, although the republic of Sparta, owing to that law, could not trade with its neighbours, yet its internal commerce became greater than ever, and its production of the arts - a production forced upon it by the fact that it could not carry on business with the surrounding people who demanded gold - became greater than ever. This currency question is, I suppose, as old as history itself. But I think that we, living in the twentieth century, and with a greater knowledge than our forefathers possessed, and with more stable government, we ought to be in a position to abolish this expensive medium of exchange, and to substitute for this costly tool something which will cost very much less. I .think it was a mistake on the part of the Government to withdraw the original clause 11 from the Bill. What means will they now have of forcing their notes into circulation?
– Make them payable in cash in every State.
– We cannot shut our eyes to the fact that, no matter how favorable the “banks may apparently be to this scheme, in their heart of hearts they are bitterly opposed to it, and will do everything in their power to defeat it._
– If it meets the public convenience, people will call for the notes.
– When a man goes into a bank with a cheque, in nine cases out of ten he takes what is given to him.
– Is it not the business of the Government to provide the machinery for issuing the currency ?
– The Government took the machinery out of the Bill.
– That clause was one to compel private enterprise to provide the machinery.
– The original proposal was a very clumsy one, but it could have been altered, instead of being withdrawn. At present, there is nothing in the measure to compel the banks to take a single note. If they are so minded, they can boycott the issue wholly, and do all their business in town and country with fold. I do not say that they will do so, ut my opinion is that they will reduce their note issue to the lowest possible limit ; will take as small a quantity of notes as they possibly can; discourage the use of the notes in the more populous centres, doing all their business there by means of gold, and that only in the outlying portions of the Commonwealth will notes be used to any extent. In that way they will not discredit the Commonwealth but will accustom the people to gold. A very large number cf the people are just as much bound to the gold superstition as even our financial authorities are. They think that nothing is of equal value to gold. I think that there ought to be inserted in the Bill a modified clause - which would not put the difficulties in the way of the banks which the original clause 1 1 did, but would compel the Government note issue to be circulated. There is one point more which recurs to me. and that is in regard to the forced loan business. If honorable senators will only examine the thing, they will discover that it does not really matter very much what the Government do with the money which is received from the banks for the notes. Suppose that the sovereigns are invested in Government securities. If there is any sudden demand for gold, the Government would have either to sell the securities, or to find gold in some other way. They have provided for that by taking power to sell Treasury bills if there is any sudden demand. If the Government put the money into some profit-earning enterprise, of, say, into the Capital Site, what would happen? Treasury bills would always be there to meet any sudden call for gold. When we examine the thing, it really does not matter to the banks or the people how the Government deal with the money. This fact remains, that the Government will be liable for the money, and will find gold if it is ever required. I am in favour of the general scope of the measure, but I think that it should be amended in the direction I have indicated.
.- Every one on this side of the Chamber has been twitted time after time with being opposed to the measure, but I am not. I was in favour of a similar proposal when it was introduced into Queensland, where, I believe, it has proved a success. I see no reason why the present proposal should not be made a success. At the same time, I think that greater facilities should be given to the public to obtain gold for the notes. Senator Stewart has said that gold is an idol, that every one falls down and worships it.
– There is a lot in the allegory of the golden calf.
– There may be. But we find that gold is a medium of exchange which is. recognised throughout the world. I have been in countries where it was possible to obtain for a sovereign much more than its value in paper money. The sovereign is good in every part of the world. In some countries one can obtain 22s. 6d. in silver for it. So that it appears to be a world-wide idol. Incidentally, I may remark that gold has done a great deal more for Australia than all the legislation which we have enacted. It has been suggested by various speakers that the proposed Commonwealth notes should be convertible in each State capital. I quite agree with that contention. If the Government wish to popularize this measure, they will consent to insert in it a provision under which a man will be enabled to obtain a sovereign for a Commonwealth pound note, or five sovereigns for a Commonwealth five-pound note, in any State. I recollect a financial panic which occurred in the country from which I hail, when a number of depositors rushed to the banks and withdrew their money. But when those institutions did not close their doors within a few days, the people regained confidence in them, and returned their money to them. If the Government can devise some scheme under which the holders of Commonwealth notes will be able to convert them in any State, they .will remove from the Bill one very great disability, and create confidence in the value of those notes. I have long held the opinion that a bank note issued in one State should be convertible in any part of the Commonwealth. Up till a year or so ago the banks were in the habit of charging exchange upon their notes. But we must always remember that they are commercial institutions. If I purchase at any post-office a money order payable in Great Britain, I have to pay 2 per cent, exchange upon it, and in the same way the public have been required to pay the banks for the accommodation which they received. I am perfectly satisfied that the latter institutions must have made a large sum out of the issue of their notes - a much larger sum than has been stated here. I can recollect a time when gold was very scarce in Australia, and when it was the fashion for people to carry bank notes. Many a man who was possessed of £50 or £60 in bank notes has had the misfortune to have his home destroyed by fire. In such cases the notes have been destroyed. In the same way, perhaps, £2,000 or £3,000 worth of bank notes have gone down in .1 shipwreck. All these losses represented a profit to the banks; but in future they will represent a profit to the Commonwealth. At the same time, I doubt whether the Commonwealth will make £100,000 a year profit out of its note issue. Government enterprises are not usually conducted as economically as are private enterprises. Large salaries will probably be paid to Commissioners to supervise the working of this scheme, and in administering it the same amount of oversight will not be exhibited that would be exhibited if it were in the hands df private enterprise. We have also to remember that the banks will be in no way obliged to force Commonwealth notes on their customers. Unless they are offered an inducement to put those notes into circulation, they will not attempt to do so. Senator Chataway has pointed out that Queensland banks have hitherto received from the Government of that State a certain percentage of Government notes, which they call “ till “ money, and upon which they have had to pay only ros. in the £1. Consequently, they have had an inducement to put the State notes into circulation. But it is not human nature for the banks to undertake work of that character, and to permit all the profit to go to the Government. Before the Bill finally passes. I trust that the Ministry will devise some plan under which the circulation of the proposed Commonwealth notes will be assured. In my opinion, some place should be appointed in each State at which dirty notes may be exchanged for clean ones. We all recognise that dirty bank notes and books are a source of infection. Whenever the Bibles in our Courts of Law become dirty they are replaced by clean ones, and something should certainly be done by the Government to prevent the continuance in circulation of dirty Commonwealth notes. Of course, it may be urged that the same objection is applicable to our gold coinage. But in reality it is not, because it is very easy for the holder of a gold coin to dip it into boiling water, and thus destroy all germs. I intend to support the second reading of the Bill, and in Committee I hope that the Government will accept any amendment which will effect an improvement in it. Although they affirm that the measure is perfect, to my mind there is nothing perfect in this world.
– I do not like to strike a discordant note in this debate, or to interfere with the chorus of approval-
– Does the honorable senator call it a chorus of approval, seeing that the principles of the Bill are being torn to pieces?
– I listened attentively to the speech which was delivered by the Vice-President of the Executive Council in introducing this measure, and I think that his utterances were more remarkable for the things which he left unsaid than for those which he said. For example, he declared that the Commonwealth had power to deal with the currency question under the Constitution. It needed no ghost to tell us that. Under the Constitution we are empowered to do a good many things which we are not doing. But the Vice-President of the Executive Council omitted to tell us whether there was a universal demand for this measure on the part of the people of Australia. He did not say whether the public will be better served by the issue of Commonwealth notes than they are at present. A friend of mine, in speaking of this Bill, remarked to me, “ Well, it will not do very much harm.” That statement may be true. But I think that we have not to consider whether a law will do very much harm, but whether it will do good to the Commonwealth as a whole. Nor did the Vice-President of the Executive Council point out whether any defect existed in the present issue of Australian bank notes. To my mind, those notes form an almost ideal currency.
– Does the honorable senator think that it is ideal, seeing that the public are called upon to pay commission in order to get those notes exchanged in each State?
– That is one of the slight defects which I recognise in that currency. In fact, it is the only defect that 1 can see.
– Exchange is not charged now.
– It was a defect which I am glad to say the banks themselves have recognised and have remedied.
– It was charged until this measure was suggested.
– No doubt the threat of this kind pf legislation brought about a number of changes. The currency that we have to-day is the result of experience. The banks have ascertained exactly what is needed to finance the public in their business transactions. The currency has developed according to the necessities of the Commonwealth. It expands and contracts- automatically. During harvest time, a large number of bank notes go out to be used by the farmers. No sooner are their transactions over, than the notes flow back into the coffers of the banks. It is a thoroughly elastic system. It has not been shown that the proposed new system will be as flexible in working as is that at present in operation. The notes in use can be exchanged for gold in any township in the Commonwealth where there happens to be a branch bank of any sort. They are not legal tender. They are acceptable at will. Nobody is bound to take them. If a person has a thousand £i notes made up of the issues of pretty well all the banks of Australia, and puts them to his credit in his own bank, he can draw a cheque for 1,000 sovereigns against them directly. That in itself is a very great convenience. The public will only hold notes as long as they have confidence in them. If confidence departs, the notes immediately go out of use. I do not know that anything can be more convenient than the currency we have to-day. What reason is there for abolishing it and establishing the Commonwealth currency in its place? The Vice-President of the Executive Coun cil really gave us no reasons. I hold in my hand a copy of an address delivered by Mr. Clement A. Davis, President of the Institute of Accountants, Victoria, in which, in a very cool, calm, dispassionate, manner he discusses this question. At the end of his address, he gives some extracts. I shall read one with regard to the difference between the issue of notes by banks and by a Government. This passage is from a book written by Bonamy Price, formerly Professor of Political Economy in the University of Oxford. He says -
How does this paper currency make its appearance in the world ? By two processes. They are issued by a bank or by a Government. A bank’s object in issuing notes is to pay a portion of its debt with pieces of paper which cost little. If its depositors ask for payment it presents to them this paper, and it is accepted ; thus the bank meets its claims, and is able to keep its profitable loans to debtors undisturbed. But how comes it that depositors are so graciously ready to accept payment in such a form? Because they find that the public will repeat the process, and be ready to take them in turn, in discharge of what is due by the depositors. But what makes the public so disposed to take a promise instead of the realty due? The reason given above - the transfer of a debt performs the work as successfully as coin, supposing always that the confidence in the bank or the issuer remains unshaken.
That is exactly the point. As long as the public have confidence in notes, they are taken, and there is no trouble about them.
– As long as Australians have confidence in Australia, there will be confidence in Australian notes.
– Professor Bonamy Price continues -
Notes issued by the Government have a different origin. They are instruments for obtaining supplies for its wants without paying for them.
The Vice-President of the Executive Council did not exactly say that that was the object of this Bill. Some people have called the proposal a forced loan. Senator Needham admitted that it was such - that it amounted to getting money without paying interest upon it. This writer proceeds as follows : -
But a Government would encounter much difficulty in carrying out this operation on an extensive scale; the security it can offer for payment is far inferior to that offered by a bank. A bank must pay its debts, the sum promised on its note, or become liable to all the pains of insolvency ; its business is arrested, and its property seized by the decree of a Court of law. In the case of a Government note, there is no one to go to prison, or to have his property sequestrated, if it fails to meet its engagements. And this fact leads to a second. By the very nature of his business a banker’s great object is to retain the command of the means which he acquires with his notes. His one desire is to make a profit out of them, but not to lose or waste them. A Government lies under no such feeling. Considerations establish the conclusion that the Government is a bad direct issuer of notes.
I do not see what the Commonwealth is to gain by this transaction. The idea seems to be that the Government will issue 4,000,000 £1 notes, and that a million sovereigns will be kept in reserve.
– More than £1,000,000 must be kept in reserve, because the Government must never have less than onefourth.
– If the Government issue £4,000,000 in notes, they must hold a reserve of 25 per cent.
– They must never have less than 25 per cent.
– I am taking the minimum.
– They must always have a margin for requirements over 25 per cent.
– Granted that the Government had £3,000,000 on which they gained interest at 3 per cent., that would give them £90,000, out of which they would have to bear the cost of printing, the expense of issuing notes, and the salaries of the staff. I do not think I shall be exaggerating when I say that the expenses would come to about £10,000 a year. So that if the Government go to the farthest limit that they expect, they will only gain £80,000 per annum.. The States at present impose a tax of 2 per cent, on State bank paper, which yields about £80,000 a year.
– And there is £25,000 received by the Queensland Government.
– That’ brings the total to £105,000. So that Australia, as a whole, is not going to gain from this proposal. The coffers of the Commonwealth Government may be swollen to the extent of> say, £80,000, but the States will lose that amount. The proposal simply means taking money out of the coffers of the States and putting it into the coffers of the Commonwealth. I do not see that any great gain is accomplished by that process. Another writer, Conant, says -
A Government paper currency has rarely been issued to promote the convenience of commerce, and has seldom contributed to that end. Experience as well as theory has proved that Government paper money is essentially different in character from banking paper, and opens a Pandora’s box of evil for every nation which uses it. The difference between a Government paper currency and bank notes is not one of experience or accident merely, it is a difference which is fundamental. Banking paper is based on business transactions, and is limited by their demands; Government paper is based upon the will of the State, and is limited only by its necessities. The almost invariable rule of Government paper issues is that one begets another until the entire volume exceeds the legitimate demands of business, upsets values, and goes beyond the reach of restriction of the metallic standard.
I do not see why we should have these two forms of legal tender. Bank notes are not legal tender. Nobody is bound to accept them. One of the objections that has been made to the issue of legal-tender notes is that they may be used in payment of debts, thus making them practically equal to gold. I admit that in Canada and the United States notes are issued in this manner, but we must not forget that bank notes are also issued in the United States and Canada though they are not legal tender there. As a matter of fact, the bank issues are larger than the State issues. I should like to know why, in Australia, the banks should not also issue notes. It has been said, that behind the Commonwealth issue will be the whole resources of Australia. That is quite true. But, that being so, why should not the effect be to bring the Commonwealth notes into greater favour than are bank notes? Why not allow the two issues to circulate side by side, as is done in Canada and the United States? If the Commonwealth notes are found to be so much more convenient, and are regarded as being so much safer than ordinary bank notes, would not that very fact give them a preference, and bring them into circulation to a larger extent than bank notes? That would be the case if the boast made be well founded. No complaint can be made with regard to the stability of the bank currency at present in use. I find that the sworn returns for March of this year show that the portion of the assets of the banks consisting of coin and bullion amounted to £28,995,084, which, when compared with the value of the notes in circulation totalling £3,735>663, shows that each £1 note held by the public is represented by £7 15s. id. in specie.
– The honorable senator is becoming very green in his old age. Is he not aware that the assets referred to cover the deposits in the banks as well as their note issues?
– I am aware of that, and I quite expected the interjection ; but I say that when the notes of the banks are, as they are, a first charge on those assets, it is right to say that those assets are behind the notes.
– Even if we allow for deposits at call, there is still a backing of 10s. in the £i in cash to cover both notes and deposits.
– According to Acts of Parliament the notes of the banks are a first call upon the assets of the banks, and I therefore say that on the figures given they are covered by about 775 per cent. These figures are, to my mind, very satisfactory. With regard to the reserve of 25 per cent, of gold to be held by the Treasury, I admit that in prosperous times it would be an ample reserve, and that in such times it might be found that a reserve of only 12^ per cent, would be sufficient. But the wise man makes provision for the future, and recognises that hard times may come. I find that in Canada, where the note issue amounts to ^17,994,874, the coin held in reserve amounts to ^14,329,828 ; that is to say, the Dominion notes have a backing of 86 per cent, in specie. In France there is a big issue of notes, with a backing of 83 per cent, in coin. In Austria there is a backing of 85 per cent, for the note issue, and for the issue department of the Bank of England there is a gold reserve of something like 64 per cent. I am very glad to find that a provision has been included in this Bill for the establishment of a trust fund. The securities will not be easily realized in times of stress, but still the proposed fund is a very good thing. Even with this fund the measure will not provide a better backing for the proposed Australian notes than that provided for the existing currency. I do not think that the currency it is proposed to establish under this Bill will be any more readily convertible than are the notes of the existing banking institutions, because the banks all take each other’s paper, and wherever in any township in the Commonwealth there is a bank, gold can be obtained for a bank note.
– At a price.
– No ; I think that at the present time it is possible in any township in Australia to present a bank note for £1 and get a sovereign for it.
– If I take Victorian £1 notes to Western Australia I cannot get sovereigns for them.
– Has the honorable senator tried that lately ?
– Not within the last three months, I admit.
– I believe that the banks have become a little more liberal in that respect. They have been wise in so doing. I admit that it was a mistake for them to keep up the charges for exchange so long as they did. I believe I am stating a fact when I say that it is now possible to present a bank note at any bank in the Commonwealth and get a sovereign for it.
– The system of exchange is only the system adopted by the Government in connexion with postal notes.
– It is exactly the same. I wish to know whether this proposal will improve the existing condition of things. As the Bill stands now it is proposed that these Australian notes shall be convertible at the Treasury only. I think that is the weak part of the proposal. I wish to emphasize the position taken up by Senator Millen. The Government will be well advised if they will facilitate the cashing of these notes. I have heard of cases where, when there has been a run on a Savings Bank, and people have gone to the bank in frantic haste for their money, and have been shown the sovereigns, they have said, “Oh, they are there all right,” and have not taken them away. It is simply a question of confidence. People must be made to feel that if they hold any of these Australian notes they will be able to get gold for them wherever and whenever they require it. I understand that Senator Walker intends to submit an amendment in this direction, and I hope that the Government will arrange to have a centre, at any rate, in every capital city where these notes can be cashed. I do not know that there has been any objection urged to that suggestion, unless it was that: stated by Senator McDougall, that the Government do not wish to be attacked with regard to their note issue from six different centres. If there be anything in that statement it indicates that the banks are hostile to this proposal, and disposed to lay their heads together in order to embarrass the Government in the way suggested. I have spoken to several banking people on the matter, and I do not think they have any objection to the proposal,, or that there is any likelihood of any attempt being made deliberately to embarrassthe Government by presenting large numbers of the notes for cash at different centres. I hope that when the VicePresident of the Executive Council replies to the debate he will be able to assure the1
Senate that there will be some centre established in every capital city at which notes can be cashed if the public require gold for them, and also that there will be depots established where evil-smelling and dirty notes can be exchanged for good, dein paper. I have had some experience of the necessity for this. I travelled through Italy at one time, where it is difficult to get either gold or silver. One gets small notes of the value of one franc, and they are often so dirty and evil-smelling that one hesitates to handle them.
– They represent filthy” lucre with a vengeance.
– Yes, they are filthy. I notice that the Vice-President of the Executive Council said that he would be pleased if 5s. notes were issued here. I hope that notes of so low a denomination will hot be issued, because that would only lead to dirty notes being passed from hand to hand.- I think that the lowest denomination stated in the Bill - a 10s. note -is quite low enough, and it would do no harm if we provided for the issue of. no mote of a lower denomination than £1. . If the public are to have confidence in this currency, they must be given facilities for getting gold for it whenever they require it. One writer, I notice, has said -
Paper may be declared to be redeemable in coin ; that promise may even be borne upon the face of the paper, but if provision be not made so that in fact every holder of a note may obtain therefor at will metal coin money the paper is inconvertible. In the economic sense, no paper money is convertible where the immediate and unconditional redemption of it is not at all times within the choice of the holder.
I believe that is a perfectly sound doctrine.
– There are. only two places in the United States where greenbacks can be cashed for gold.
– That does not make it right, nor does it prove that the public would not be better convenienced if there were more places at which they could get gold.
– The public convenience does not count with the supporters of this Bill.
– I do not wish to labour the matter further. I am anxious that the public shall be convemenced as far as possible, and I press it upon the Government for the reason that there is nothing which will tend more to popularize these notes in the eyes of the public than facilities for exchanging them for- gold whenever they require to do so. So far as stability and convertibility are concerned, the proposal is not as good as the existing system, because there is to be only one place at which the proposed Australian notes can be converted into gold. I think that only one reason has been given so far for this proposal. It is not contended that the present currency is a dangerous one, or that it does not meet public requirements. It is not said that it has been a failure in the past, or that it fails to meet public convenience in any way ; but it is said that this proposal is made because the Government want to make money out of it. The Vice-President of the Executive Council did not refer us to any instance in which a Government currency has been a conspicuous success. I have heard the experience of Queensland referred to over and over again, and though I may be wrong, my impression is that if there had been a law in Queensland making the notes of the banks a first charge on their assets, there never would have been any issue of Queensland Treasury notes. I believe that it was because such a provision was not included in the banking legislation of the State that the Treasury note issue became necessary. I cannot profess wide reading upon this matter, but I have studied it as fully as I could. I believe that the experience of history is against a Government currency. Leone Levi, in his History of British Commerce, speaks of the disastrous results of the French assignats. I do not quote them, because I know that they were convertible into real estate, and not into gold, whilst the proposed Australian note will be convertible into gold on certain conditions.
– There were a number of good reasons why the French assignats were not good money.
– I am aware of that. They could be used for the purchase of real estate, but when inquiry was made it was found that the real estate was not there to be purchased, and we need not wonder that the assignats were a failure, and resulted in disaster.
– They were forced into circulation.
– That is so, and. I admit that the circumstances of their issue were altogether different from those surrounding the proposed issue of Australian notes. I have found, in the course of my reading on the subject, that the principal countries that have adopted paper money have suffered for it. For instance. Russia had a paper currency for a very considerable time; but it redeemed its paper money by giving £2 in new bank notes for every £y in old State notes. I think that a paper currency has also existed in Spain, in Norway, in the Transvaal, where they issued the bluebacks ; in Cape Colony, which had a very disastrous experience; in the Argentine, where they experienced a very bad time; and in Brazil, which, I believe, had a similar experience. History does not seem to me to encourage us very much in regard to the proposed note issue.
– Does the honorable senator say that those cases are analogous to the present proposition?
– I do not say that they are altogether analogous, because we have nothing which corresponds exactly with the conditions in the Commonwealth. We have had no war, no extraordinary event.
– Except Queensland.
– Queensland was an exception. I put it to the honorable senator that if the notes of the Queensland banks had been a first charge on their assets, there probably would not have been an issue of Government notes there.
– And the State had to pay the banks to circulate its notes.
– The Queensland Government had to tide the banks over a crisis.
– That crisis would not have arisen if Queensland had had legislation similar to that which existed in the other States. I do not think that anybody can deny that statement. I do not consider that there is any danger with regard to this proposal, while good seasons last, and everything is prosperous with us. I do not think that the danger will be very great at any time if the public feel that they can go to the capital of their State and get gold for their notes. That, in my opinion, would be more likely to give confidence to the people than anything else. But if that is not so, and there does come a time of stress, and the people have not money, then things will happen. It is always in a time of stress that there comes temptation. No matter what Government may be in power, if there comes a time of stress and difficulty, there may be a little temptation to over-issue these notes for the purpose of getting themselves out of a temporary trouble.
– How can there be an over-issue of the notes if the banks will not take them?
– If a time of stress should come upon us, it will not be the man who can go out with his sovereigns and buy up the notes at the depreciated value who will suffer, lt is the poor people who will suffer.
– The poor widow and the poor orphans.
– We have heard that gag over and over again. Nobody can deny that if there did come a time of stress, those are the persons who would be most likely to suffer. I for one do not wish to see them suffer. That is the time when the vultures would flourish. That is the time when they would swoop down upon the people, in order to make money out of them. I do not say that that time is likely to come upon us. But we can no more expect to be free from times of stress and trouble in the future than we have been in the past. It is then that the greatest care will have to be taken in the administration of this measure to see that, instead of being a blessing, it may not become a curse. As the motion for the second reading is going to be carried, it would be useless to attempt to oppose the Bill at this stage. But when it goes into Committee, I shall assist to make it as perfect as possible. I do not agree with Senator McGregor that it is a perfect measure. If it were, I should be glad to put it into a glass case and exhibit it as a curiosity.
– In the opinion of some persons, the Ten Commandments are not perfect.
– The honorable senator never had the Ten Commandments.
– He must have had them, because he has broken nearly all of them.
– Because he has not been able to depreciate them. I do not believe that this measure is perfect; and if any amendments are proposed which, to my mind, will make it better, I shall support them.
– I am sure that the Government must congratulate themselves upon the very marked way in which even the members of the Opposition have supported this measure.
– - Your own supporters ought to congratulate you too, 1 think.
– They are all supporting the Bill with the exception of Senator Vardon, who delivered some lamentations. Every one seems to be quite satisfied that it is the right thing to do. I desire to say a few words with regard to the objection that there is no provision for the establishment of depots at which dirty and disfigured notes can be exchanged for clean notes, and also the objection that there is only one place - the Treasury - at which notes can be redeemed iri gold. Honorable, senators must bear in mind that, to a very great extent, this is really an experimental measure. It has nothing in common with some of the disastrous attempts to foist paper money upon the public, which have been described by Senator Vardon and others, because, before the notes can be issued, sovereigns must be paid into the Treasury, and, consequently, there will be no possibility of an over-issue. To some extent, this is an experiment. We must allow legislation of this kind to go into operation before all that may have to be done can be done to make it as convenient as possible to the public. In clause 32, we provide for the making of regulations ; and 110 doubt regulations will have to be made to deal with some of the difficulties which have been pointed out. I do not propose to make a lengthy reply to the criticisms which have been levelled at the Bill. I hope that honorable senators will allow the Bill to go into Committee, and pass it as rapidly as possible, as there is a lot of other work to come before the Senate.
– But we are on this Bill now.
– In Committee, the honorable senator will have every opportunity to explain the position which he occupies with respect to the Bill j and, so far as lies in my power, I shall endeavour to reply to his criticisms.
– The honorable senator promised to reply to my question as to whether the Prime Minister promised to establish depots for changing dirty notes for clean ones.
– I have explained that clause 32 provides for the making of regulations.
– I asked if the promise made was going to be kept.
– I have stated that this is experimental legislation, that as soon as difficulties arise they will be remedied, and that if it is necessary to establish depots, that will, no doubt, be done.
– The honorable senator cannot give a promise.
– I have already made a statement, and the honorable senator is getting me to repeat it.
– The honorable senator did not say anything.
– Wherever depots are necessary for the exchange of dirty or defaced notes for clean notes, the probability is that they will be established.
– The probability.
– In this world, everything is problematical.
– We all die; that is not problematical.
- Senator Chataway has said that in this world there is nothing perfect, and Senator Sayers repeated the statement. The Government do not claim that this measure is perfect, or that they are perfect, or that everything they do is perfection. But what they do say is, “Bring the measure into operation,” and when the difficulties arise, I hope that we shall have the power, and also the courage, to deal with them. In that way, depots will be provided, and also, if necessary, means for exchanging notes for gold. Everybody has talked about the responsibility of the existing banking institutions, and some honorable senators have said that we have no right to imagine that they are hostile to the Government, or to the measure. If they are not hostile and a customer or a member of the public goes to a bank with a number of Australian notes to be exchanged for gold when he is about to leave the State, the Government have a right to assume that he will be accommodated. Until the banks have shown that they are hostile to the Government, and to- this kind of legislation. there is no justification for the statement that it is necessary to have, in every capital, a place for the exchange of notes for gold. If the banks carry out their functions, and do their duty, there will be no necessity for us to do anything further : but, if the banks do not act in that way, then, under clause 32, we shall have the power to make regulations ; and I hope that we shall also have the courage to act when the occasion arises. I do not think that I need make any further reply to the speeches of honorable senators.
Question resolved in the affirmative.
Bill read a second time.
In Committee :
Clauses1 and 2 agreed to.
Clause 3 (Definitions).
– May I suggest that progress should now be reported, as I have an amendment to submit?
– In my opinion, the Bill contains no provision of a very debatable character until we reach clause 6, which deals with the denomination of the notes, and the place of issue. When it is reached, I shall ask the Committee to report progress. I know that Senator Walker has an amendment to propose in clause 3, but for the present I must adhere to the text of the Bill as it is.
– Will the honorable senator agree to the clause being postponed ?
– No ; but I am prepared to take a test vote on it.
– I move -
That the clause be amended by the addition of the following words: - “Commissioners” means the Commissioners for the Commonwealth Note Circulation.
– What does the honorable senator propose to pay them?
– I propose that the Commissioners shall be the Treasurer, and two persons not members of Parliament.
– What does the honorable senator propose to pay them?
– That will come under the regulations which Senator McGregor has been talking about.
– I urged the appointment of Commissioners many years ago in the Convention which met at Bathurst.
– That was the one flaw in the honorable senator’s speech on that occasion.
– The Minister of Defence would not say that if he occupied a seat upon this side of the Chamber. It is not wise that the Treasurer alone should act as a Board in connexion with the issue of Commonwealth notes. I would remind honorable senators that in private banks the note department is a very important one. If the Government issue four million £1 notes, that will involve four million entries. Then each note, as it comes in, will have to be cancelled. All this will mean a tremendous amount of work.
– Does the honorable senator want Commissioners to do that sort of work?
– I do not wish to be long-winded, but I say that, in theinterests of the community, the note circulation should be under the control of a Board of Commissioners, of which the Treasurer should be the Chairman. The Treasurer ought to be only too happy to have two gentlemen associated with him to divide with him the responsibility. We’ have to recollect that possibly notes may be forged. In such circumstances, one man ought to be very glad of the assistance of others. Then notes may be lost-
– But these matters would not come before the Commissioners.
– I suggest that the clause should be postponed.
– No, let us proceed with its consideration.
– I am anxious to improve the Bill, and I am not offering any factious opposition to it. But I would again suggest to the Vice-President of the Executive Council the wisdom of postponing the further consideration of this provision.
– I do not think that the VicePresident of the Executive Council has recognised the force of the point which has been raised. This is a definition clause, and whenever there is a possibility of a new provision being inserted in such a clause, it is customary to postpone its consideration, just as it is customary to postpone the consideration of the title of a Bill. I do not understand why the Vice-President of the Executive Council objects to the adoption of that course. By-and-by the proposal of Senator Walker may be defeated, and, if so, the clause will then go through in the ordinary way, just as will the title of the measure. But until we have decided upon the merits of the scheme which has been outlined by Senator Walker, it is not reasonable to adopt the definition clause.
– I desire to point out to Senator Walker what the adoption of his proposal would mean. He has already stated that under this Bill, after allowing for ordinary expenditure, the Commonwealth will make a profit of not more than £50,000 annually. Seeing that there are bank managers in Australia who are in receipt of£5,000 a year, we could scarcely expect to secure the services of two Commissioners for less than , £3,000 a year each, which would represent12 per cent. of the profit to be derived from this scheme. Surely, if we can trust the Treasurer to deal with about £16,000,000, subject to the will of Parliament, we can trust him to deal with £4,000,000, especially when he is hedged about with the provisions which are contained in this Bill. Consequently it is ridiculous at this stage to attempt to pile up such expenses as will make any attempt to benefit the public abortive. If any amendment be made in the clause, it will be as easy to recommit it at a later stage as it is to postpone its consideration now. If we are going to take a test vote upon it, let it be taken at this juncture. There is nothing in the measure which is entitled to serious discussion until we come to clause 6, and when we reach that provision I shall be quite willing to report progress.
– May I suggest that the VicePresident of the Executive Council should reconsider his decision not to postpone the consideration of this clause. PartIII. of the Bill relates to the issue of Treasurybills. Now, the question of who should have the custody of those Treasury-bills is a very big one. Under the Queensland Act the appointment of trustees is specially provided for, their names are mentioned, and their duties are set forth. I think that we ought to have time to consider whether we shall leave not only the circulation of the Commonwealth notes, but the issue of Treasury-bills entirely to the Treasurer. In Queensland the issue of Treasury-bills is vested to a great extent in responsible officials. If we agree to this clause now, it will be idle for us to discuss PartIII., because the matter to which it relates will practically have been decided. Though the Queensland Act does not provide for the appointment of special Commissioners to assist the Treasurer, it places the issue of Treasury-bills under thecontrol of two very important officials who, by virtue of their position, are regarded as the guardians of the interests of Parliament, and therefore of the people. That is the object which Senator Walker has in view. Nothing substantial can be gained by resisting the suggestion that the consideration of this clause should bc postponed until the question raised by Senator Walker has been decided. The Vice-President of the
Executive Council has declared that he will take a test vote upon the definition clause.
– This is not the proper place to do it.
– Let the clause pass, and the honorable senator can move at a later stage for its recommittal.
– Will the Minister of Defence promise to recommit it?
– The Minister of Defence has told us that we can recommit the clause, but he will not promise to assist us to do so. The importance of vesting in Commissioners the control of the issue of Treasury-bills, and of safeguarding the circulation both of those bills and of the Commonwealth notes, is a subject upon which there has been a great deal of discussion. We do not wish the matter to be debated upon the definition clause.
– Then discuss it upon clause 4.
– I hope that the Government will give way upon this matter. They will not gain any time by pressing their point now ; on the contrary, they may lose time.
– In all probability the proposal which I have outlined will be defeated at a later stage. Its insertion will be moved as. a new clause to follow clause 4. If there be one person in the Senate who wishes to assist the Government in making this a good Bill, I am that one.
– I must express my surprise and regret that the Government have not seen fit to consent to an adjournment. There has been no undue delay in discussing the question, and- we have passed the usual hour for adjourning. I say so much, although I am not in favour of the amendment which Senator Walker has outlined.
.-Senator Walker knows that this is not the proper place at which to move his amendment. The proper place is after clause 4. If he likes to wait until that clause is reached, he can then submit his amendment, and I will agree to report progress.
– The procedure suggested by the Government should meet the difficulty.
Clause agreed to.
Clause 4 agreed to.
Amendment (by Senator Walker) proposed -
That the following new clause be inserted : - “ 4A. The Governor-General shall authorize the appointment of a Board of Commissioners who shall be known as ‘ The Commissioners for the Commonwealth Note Circulation,’ to consist of the Treasurer (as Chairman) and two Commissioners not being members of the Commonwealth Parliament.”
Motion (by Senator McGregor) proposed -
That the Senate do now adjourn.
– I wish to ask whether the Government have any objection to producing a map which was some time ago in the possession of the Department of External Affairs, and which was forwarded to that Department by the South Australian Government in connexion with the papers relating to the Northern Territory. The map was a duplicate of one presented to the South Australian House of Assembly when the transfer of the Northern Territory was under discussion there. The map showed an alternative route for the line of railway, suggested by Mr. O’Loughlin, the Minister handling the matter in the South Australian Parliament, which railway ran outside the Territory itself. I suggest that the map might be made available for honorable senators when we next deal with the Northern Territory Acceptance Bill. I should also like to know what business is to be proceeded with to-morrow.
– I make inquiries of the Department of External Affairs as to the map referred to by Senator Millen, and if it be available I will have it placed in the Senate chamber. To-morrow I intend to move the second reading of the Northern Territory Acceptance Bill, though I shall not make a speech upon it.It may also be necessary for me to lay upon the table papers respecting the Budget.I may have to make a few remarks introducing the matter in order that honorable senators may be able to discuss the Budget ata later stage.
Question resolved in the affirmative.
Senate adjourned at10.34 p.m.
Cite as: Australia, Senate, Debates, 6 September 1910, viewed 22 October 2017, <http://historichansard.net/senate/1910/19100906_senate_4_56/>.