4th Parliament · 2nd Session
The President took the chair at 3 p.m., and read prayers.
asked the Minister representing the Minister of External Affairs, upon notice -
What is the estimated area of land immediately available for settlement in the Northern Territory suitable for -
– The answers to the honorable senator’s questions are -
– Does the Minister mean by “in the course of a day or two “ before Parliament is prorogued?
– That I cannot say.
asked the Minister representing the Attorney-General, upon notice -
– The answers to the honorable senator’s questions are -
– Hear, hear !
asked the Minister representing the Minister of External Affairs, upon notice -
– The answers to the honorable senator’s questions are -
Debate resumed from 13th December (vide page 4250), on motion by Senator
That this Bill be now read a second time.
– After being privileged to listen to the very exhaustive address delivered last night by so experienced an authority on banking matters as Senator Walker, one might reasonably feel doubtful whether anything new was left to be said on this subject. In venturing to make a few remarks to the Senate, therefore, I can scarcely hope to bring forward any fresh matter. I can only hope to present some points in a somewhat different light. The first point that occurs to me in considering the question is this : Having regard to the provision of the Constitution which affords equal representation to the States in the Senate, one is forced to the conclusion that if this Chamber fulfilled the functions for which it was designed, this Bill would have been dead long before it reached us. The framers of our Constitution and the people who approved it clearly intended that equal representation should be afforded to the States as a protection to State interests. I wish to draw a distinction between State interests and State rights. It is frequently said, I think erroneously, that the Senate is the custodian of State rights.
– What does the honorable senator mean by State rights ? Does he mean the rights of one State as against another ?
– I will endeavour to explain the difference. The rights of the States which form this Union are fully set out in the Constitution itself, and the guardian of those rights is the High Court. This Senate has np claim to be regarded as the guardian of State rights. But equal representation was afforded to the States as a measure of. protection to State interests. There is clearly a wide distinction between interests and rights, and I am dealing now with those things which we call State interests. But here we have clear proof of equal representation being used in the interests of a party as against the interests of the States. I do not think it is possible to deny that the interests of the States are interfered with by this Bill. Every State in the Union, without exception, and irrespective of whether it is represented in its own affairs by a Labour or by a Liberal Government, has protested against that portion of the Bill which deals with Savings Banks. We cannot ignore the fact that the States, speaking through their local authorities, the State Governments, have made those protests in clear and unmistakable terms.
– We have heard that sort of thing so often that it has lost all sting.
– The party opposite ignored “that sort of thing” before the 26th April _ last, but they had it brought home to them very forcibly.
– I would sooner be loyal to the Commonwealth than loyal to the States.
– No man can be loyal to the Commonwealth who is disloyal to the Constitution. The Constitution did something more than create a Federal Parliament. It insured to the States the right to control their own affairs, and it is an outrage upon that Constitution to assume that the Commonwealth can obstruct the States in the discharge of their proper functions. I shall venture to say that the States have, by means of authorities which we must all recognise, clearly expressed their protest against the Savings Bank provisions of this Bill. I am now drawing a clear distinction between the general bank proposals and the Savings Bank provisions. When I look for evidence in support of the contention which has been, or which will be, advanced, that the Bill represents the voice of the people, I am entitled to ask : When and where did they express any opinion in regard to a Commonwealth Savings Bank, in opposition to the opinion expressed by the State Governments ? It is said that the matter was before the people at the last Federal election; but I challenge honorable senators opposite to point to any time when a specific proposal was put before them.
– On every platform.
– Outside the Government party, I naturally look tq the Government manifesto to see what was placed before the electors, and I find that there is no reference to a Savings Bank.
– You should look to the Labour platform.
– I do, and I find no reference to a Savings Bank.
– You will find a general reference to a State Bank.
– I find a vague reference in the manifesto signed by Mr. Fisher, as Leader of the Labour party, and Mr. Watkins, who was the Whip in the other House.
– The election was nearly over when that manifesto was issued.
– The manifesto was issued during the currency of the general election - unless the honorable senator wishes to repudiate it.
– I am only pledged to the platform.
– The only reference I can find to the subject in this manifesto is set out in these words -
With the items already mentioned, our plat. form includes….. a Commonwealth
So far as the electors can be held to have expressed an opinion, they declared themselves in favour of establishing a Commonwealth Bank.
– Did not that cover the lot?
– It may or may not. I have searched the records high and low, and am utterly unable to find any proposition submitted to the electors prior to 13th April, which conveyed the slightest definite suggestion that it was proposed to establish a Savings Bank in opposition to the State Savings Banks.
– I - It was not necessary at all.
– My honorable friend rather suggests that I am stating the matter not unfairly. I have failed to discover anywhere anything which might be regarded as a definite pronouncement that it was the intention of the Labour party if returned to power to superimpose on the ten existing Savings Banks another one.
– You d - You did not find any details set out in connexion with the other part.
– There is such a marked difference between an ordinary bank and a Savings Bank that the public, I think, were inclined to take the view which I take now, that the electors by their votes did not expressly approve of a proposal to establish a Savings Bank.
– It is not a bank at all in one sense; it is simply a receiver and custodian of money.
– I shall be able to show by a quotation from the Prime Minister how marked the difference is between a, bank which lends and receives, and what is known as a commercial bank. I assume that at the time of the general election, the electors had only before them a bald proposition for the establishment of a Commonwealth Bank. Bearing in mind the marked difference between an ordinary bank and the functions of a Savings Bank, it is a reasonable assumption that it never once entered the minds of even one per cent, of the electors that it was intended to establish a Savings Bank to come into conflict with the State Savings Banks. If we are to assume that the votes of the electors on the 13th April, 1910, were an indorsement of the policy of the Government, and did entitle them to speak on their behalf, how much more must we assume that, as a result of the general elections which have since taken place - in Western Australia and New South Wales - the party returned to power is even more closely in touch with the public than is a Parliament such as this, elected twelve months before. In those two cases Labour Governments have, on behalf of the big body of electors whom they represent, declared that the proposal for a Commonwealth Savings Bank was never submitted to the electors.
– But there was no banking proposal submitted in connexion with either of those elections, as you know.
Senn tor MILLEN. - I am saying that there never was a Savings Bank proposal submitted, at any election.
– There was at the referendum when the Constitution was adopted.
– If the honorable senator now raises the point as to whether the Commonwealth Parliament has constitutional power to do this thing, I agree with him.
– I am not so sure about that.
– At any rate, I shall not argue the point. Whatever may be the constitutional rights of Parliament in this matter, I wish to urge strongly that the purpose for which Federation was designed was a twofold one. It was to do those things which no individual State could do for itself, and to do those things which could be better done by a central Government than by the State Governments. The obligation is upon those who support this proposal to show that the Commonwealth can do this business better than the States are doing it. So far no successful effort has been made to show that there is the slightest prospect of a Commonwealth Savings Bank meeting the wants of the people better than they are met by the present State institutions. I wish to remind ‘ honorable senators opposite, whose loyalty to their party is undoubted, of a statement made and signed by Mr. McGowen, whose loyalty to the party is equally beyond challenge. In a memorandum presented to the Commonwealth Government, he says, “ So far the electors have not been consulted on the proposal.” Comparisons are always more or less odious. When we get a statement like that from the Premier of New South Wales, who is the head of a Labour Administration in not the least important State in the Union, and a strong sympathizer with the Labour movement for years, we are entitled to say that there is ample justification for the statement that this specific proposal to create a Commonwealth Savings Bank has never been definitely submitted to ‘the electors.
– You must admit that at the subsequent State elections nothing against it was submitted to the electors.
– There was nothing to urge against it, because the proposal had never been previously put forward.
– You claim that these elections gave a fresher verdict. They did not give any verdict on the Government one way or the other.
– If we are to take the verdict of one or the other we ought to take the verdict df the last election, and Mr. McGowen and those returned with him, in conjunction with the Labour- Premier of Western Australia, the Labour Premier of South Australia, and the heads of Liberal Administrations in other States, urge that this proposal will seriously interfere with the interests of the States.
Apart from the effect which the Bill is likely to exercise, I cordially welcome it. I believe that it is one of the many measures with which we have been treated of late which are going to largely destroy the influence of the Government party throughout the constituencies because of the marked difference between the reckless promises made prior to the general election, and this very homely attempt at the redemption of them. We know that for years past this talk of establishing a State bank - . that is a National bank - has been a sort of dream with which honorable senators have charmed the electors, by means of which they created almost a perfect deluge of hope, on the crest of which they rode into power. What is it that they are offering in redemption of their promise? They promised some institution which was going to break down the power of the vampire banks, which were represented as having their fingers clutched at the throats of enterprise and honest toil - a bank which was going to make easy money and divert an enormous amount of capital from private pockets to the use of the nation. What is offered? No heroic measure is found in this Bill, but simply a proposal to add a twenty-third to the twenty-two commercial banks in existence.
– I suppose that it will join the bankers’ union.
– Which will join the bankers’ union, enter the ring and trust, which we are told has been throttling enterprise for years, and does not in the slightest way hold out a promise of giving cheaper money or giving greater facilities.
– “ Great oaks from little acorns grow.”
– Did my honorable friends tell the electors before the 13th April, 1910, that this Commonwealth Bank, about which they talked so eloquently, might in a century be of some use, but that for the present it would have no practical effect on the industries of the country? When I compare this very homely proposal with the reckless promises made for many years past I am impelled to the conclusion that whilst hitherto my honorable friends opposite offered, as it were, a philosopher’s stone which was to turn everything to gold, they are now presenting- as a redemption of that promise a very ordinary piece of, possibly useful, but very homely, road metal.
– Why does your party shriek so much?
– My honorable friend has surely overlooked what I said just now. But for the effect that the Bill is likely to have on State interests, on the land settlers in the States, and in other directions, to which I shall refer later, I welcome it. It is. one of the things by which the Government party is being brought up to the test. In proportion as it attempts to redeem its promises, every effort has brought home to the electors a recognition of the fact that a promise is one thing and the capacity to fulfil it is another. So far I have dealt generally with the Bill and with the. proposal it contains to establish a Commonwealth Savings Bank.
– I am satisfied with it.
– Of course Senator Buzacott is satisfied. I have’ no doubt about that. But I would remind him that, “ Those whom the gods wish to destroy, they first make mad.”
– Apparently so, judging by the honorable senator’s speech.
– We now have to await the final verdict of the people upon this, Bill, and I welcome it as a measure which will show them1 how impotent are the Government to redeem the promises upon which they have lived, how impossible it is for them to fulfil the pledges which they have made, during the last twenty years.
– That statement is not correct. The Labour party redeemsall its promises.
– I leave Senator Buzacott to square with Senator Stewart the question of whether or not the Labour party has redeemed its promises.
– In what way has it not redeemed therm?
– If there is any person who ought to be quiet on this occasion, it is a representative of Victoria, because it was in this State that the claim originated that the Commonwealth Bank would crush the terrible vampire in the form of private banks. But the institution which it is proposed to establish under this Bill is of soConservative a character that it has wrung, warm commendation from the .London. *“Times. I repeat that if the representatives of any State ought to be quiet from very shame, it is the Labour representatives of Victoria, seeing that they were the party in this State which issued an official manifesto dealing with the proposed Commonwealth Bank - a manifesto which declared, in the most florid language, that the effect of the establishment of the Commonwealth Bank would be to crush out of existence the private banks without granting them comspensation.
– In time it will do so.
– There was no mention of time in the manifesto in question. That was the promise which was held out by the Labour party to the cupidity of its followers. What is its proposal now? Not to strangle the other banks, but to establish an institution which will be conducted on absolutely similar lines, which will transact the same class of business, which will adopt the same safeguards, and which will bring about the same results. Between the realization and the redemption of the original promise, with which thousands of electors throughout Australia were fooled, there is a gulf so wide that I welcome this Bill as the greatest help which the party on this side of the chamber can ask from its political opponents.
– Then why oppose it?
– How does Senator Story know that I intend to oppose it? But I may tell him that, so far as its Savings Bank proposals are concerned, I will oppose it.
– The honorable senator will treat this Bill with the same impartiality as he treats all questions.
– If I were to treat Senator Long with that impartiality, he would be sorry.
– It would only be strict honesty, according to the honorable senator’s statement, for him to oppose both branches of the Commonwealth Bank.
– Not necessarily. At present we have before us a proposal to establish a Commonwealth Bank which will not differ in its methods from existing institutions.
– But it will differ from the stand-point of its ownership.
– If it be only the question of ownership which is at stake, we anight as well start operations in every other branch of business. I wish now to make a passing reference to the way in which the Vice-President of the Executive Council dealt with this question. He urged as a reason for the establishment of the Commonwealth Bank the disastrous financial crisis which occurred in 1893. But I think he entirely overlooked the lesson to be learnt from that crisis. He seemed to think that if a State Bank had been in existence at that time, the people would not have invested their money in these purely boom banks. But he must know that there were opportunities for investing money even then in perfectly sound banks, and that the depositors neglected to avail themselves of those opportunities. Why ? Why did they prefer to place their deposits in these purely boom banks, and to pass over such unquestionably solvent institutions as the Bank of New South Wales and the Bank of Australasia? They did so for the same reason that a section of the people will always put their money into such banks - because of the higher rate of interest which was offered to them. When I speak of “ boom “ banks I speak of those institutions-
– Which are conducted by fellows with crooked noses !
– Senator Guthrie may speak disrespectfully of the Hebrew race if he chooses, but I do not propose to do so. If I were called upon to launch either a criticism or a defence of that race, I should prefer to launch a defence of it. There is another feature of this matter which is well worthy of our attention. It is that the party which has lived for years on an anti-loan policy is going to be the first Government to float a loan.
– The previous Government attempted to do so.
– But I wish now to deal with some of the difficulties under which this general bank of the Commonwealth will start operations. During the first year of its existence, by reason of the fact that it will begin its career with borrowed money, it will be handicapped as compared with a bank which commences operations with the money of its shareholders. The latter institution, on balancing its accounts at the end of the year, would only require to have earned enough money to pay its expenses. But by starting operations upon borrowed money, the Commonwealth Bank will have to face a liability for interest.
– All the citizens of Australia will be shareholders in the bank.
– That is, no doubt, satisfactory to Senator Story, who will not put a penny of his own into the bank ; but it will be no satisfaction to the men who will subscribe that ,£1,000,000 to be told that the whole of the people of Australia are shareholders in the institution. I do not care who are the shareholders in the bank. I say that, at the end of six months, the institution will be called upon to pay interest upon its capital, irrespective of whether or not it has earned that interest.
– But it will not be called upon to pay dividends.
– Let us come down to specific figures. Let us assume that the Commonwealth raises the £1,000,000 capital which is required at 3J per cent. That means that £35,000 a year will have to be paid by way of interest to those who subscribe that capital. Whether the bank has earned it or not, during the first twelve months, it will have to pay it. Consequently, it is idle to talk in a general way about the whole of the citizens of Australia being shareholders in the enterprise.
– It is a fact.
– But the people who subscribe that £1,000,000 will, at the end of six months, present their coupons, and demand the payment of interest.
– They will get it.
– Of course, they will get it; but the Commonwealth will have to pay it, irrespective of whether or not it has earned it.
– The other banks have to pay it.
– No; where a bank is started .with the capital of its shareholders, no interest is paid upon that capital if the institution has not earned a profit. That is the difference. The Commonwealth Bank is to start operations upon the sale of debentures which will carry 3J per cent, interest. A rival institution might start upon the capital of its shareholders. During the first twelve months neither might be able to declare a dividend.
– Do not the banks pay interest to their depositors, who provide the whole of their capital?
– Certainly not. T was instituting a comparison between the Commonwealth Bank, which is to start operations upon a borrowed capital of £1,000,000, and an institution which commences operations on capital which is provided by its shareholders. The former in stitution will have to pay interest upon its capital, irrespective of whether or not it has earned it. But the latter, if it has not earned any profits at the end of twelve months, will not pay its shareholders any dividends.
– Sometimes these institutions do pay their shareholders dividends in such circumstances.
- Senator W. Russell is now falling back upon banks which are conducted fraudulently. I do not propose to bring them into the argument at all.
– They are a factor.
– Of course they are; but I recognise that there is fraud in every walk of life. I say that a bank which is started with borrowed capital will have to charge to expenses during the first year of its existence, the interest which is payable upon that capital.
– Does the honorable senator suggest that the Commonwealth Bank will have to work upon its capital for the whole of the first twelve months of its existence? What will the deposits amount to during that period ?
– The amount of the deposits is immaterial. My point is that during the first year of its existence £35,000 interest will have to be paid upon the capital borrowed by the Commonwealth Bank. Senator Long wishes now to affirm that the bank will earn it.
– Of course, it will.
– Even so, I still direct attention to the difference between a bank starting with borrowed capital, on which it must pay interest, whether it has been earned or not, and a bank starting with shareholders’ capital, that is under no obligation to pay a dividend to those shareholders unless it has been earned.
– While this may be a big handicap for the first year or so, it may be but a bagatelle in a very little time.
– That is quite correct, but I am speaking of the earlier years of the operations of the bank. This bank will start with the handicap that from the moment its doors are open it will be faced with the necessity of paying £35,000 a year in interest, whilst other banks, starting with the capital of shareholders, have no interest charge to meet, and are not required to pay dividends on capital until the money to pay them has been earned.
– It is recognised that in the case of all banks starting in country districts they must expect to conduct their business for the first year at a loss.
– I do not deny that.
I admit that it is quite fair to assume that any bank or big financial business must expect for the first year or two to carry on its operations at a loss. But I still point out that, where shareholders find the capital, that loss is not added to by a payment required to meet interest on capital, and, in the case of this bank, any loss upon the working of the institution for the first year or so will be added to by the interest charge of ^35,000 a year, assuming that the 000,000 will be borrowed at a rate of 3J per cent.
– The bank will not require the whole of the ,£1,000,000 at once.
– Let me tell the honorable senator that a great many people regret that this bank is not being provided with a larger capital.
– Banks do not want all their capital at once.
– If this bank is going to proceed with business on a capital of less than ^1,000,000, what a pitiful creation it is going to be. If it is to be anything like a substantal institution, it will require more than ;£i, 000,000 of capital within a few months of its establishment.
– How many banks are there in Australia at the present time whose capital exceeds that proposed for this bank?
– I suppose that there is hardly a bank in Australia that is not in a position to control a greater amount of capital than this bank will have for the next ten or twenty years.
– How many banks in Australia have a greater capital than
– The banks which started with a capital of £1,000,000? did so when Australia had only one-half its present population, and there were only one-half the business requirements that have to be met to-day. They have added to that capital by their reserves, and the Government propose to come along with this institution as a competitor with banks that are established, and which command, either by way of paid-up capital or reserves, a much larger capital than it is proposed to endow this bank with. It does not matter for my argument whether the capital of this bank will be great or small. I am concerned now merely to prove that a bank starting on borrowed money starts with a big handicap in the obligation to pay interest whether it earns it or not ; whereas a bank started with the capital of shareholders need pay dividends only when they have been earned. The next handicap under which this institution will have to work is a very serious one. An ordinary commercial banking institution attracts to itself the interest and support of a number of commercial men. Its directorate will be composed of men who will bring business to it. They will be men of standing in the financial world, and, because of their association with the bank, will bring business to the bank.
– That is why they make directors of titled persons - to gull the public.
– The honorable senator does little credit to his judgment by an interjection of that kind.
– We see the same thing in prospectuses of private companies.
– The honorable senator might find that kind of thing useful in addressing audiences outside, but, so far as this House is concerned, an accusation of that kind falls very flat indeed. The honorable senator will not find that even his title as a senator will secure for him a position as a director of any bank in this country.
– I do not wish to be one.
– I know sufficient of the life of Australia to be satisfied that the mere attractions of a title do not carry weight with the investing public of this country. I wish to refer now to the second handicap under which the Commonwealth Bank will start. Before an ordinary private bank opens its doors for business, there are always a number of people of good financial position who are prepared to do business with it.
– Does the honorable senator not think that the proposed Commonwealth Bank will have one very big customer, at any rate?
– I was going to deal with that, but Senator Givens has an unfortunate habit of anticipating my most forceful arguments. I was referring to the steps taken in connexion with the creation of a private bank. The course usually followed is for a number of men of substance and standing in the commercial world to come together and decide to start a bank. They put their money into it, and invite others to. become shareholders.
– Are not the bulk of the people of Australia people of substance?
– Judging by his appearance, I have no doubt that the honorable senator is a man of substance. Every man who takes a hand in establishing a private bank becomes an active influence to bring business to the bank which will be profitable. Further than that, every shareholder of a private bank, knowing that his dividends will depend, not on the good name of the Commonwealth as a guarantee, but solely on the success of the bank, will become an active agent and canvasser for business for the institution. Every shareholder and director connected with a private bank becomes a force to compel profitable business to be brought to the institution. Senator Givens, with his great capacity for putting his hand on the strongest point in his own argument, says quite correctly that this bank will start with one very big client. That big client is the Commonwealth, which will naturally transfer to this bank all its banking business. Let us now see what the banking business of the Commonwealth will be worth next year, by seeing what it was worth last year. The net result of Commonwealth banking transactions last year was the payment into the Treasury of about £5,000. Instead of having to pay for accommodation, the Commonwealth of Australia, by arrangement with private banks, was enabled to receive from the banks about £5,000 during the year. If we are to adopt business principles in the management of this institution, that . £5,000 will have to be debited to the Commonwealth Bank. It must be charged by the Commonwealth to that institution. That is certainly the course which any business man would adopt. The debenture-holder of this bank will not be greatly interested whether it succeeds or fails, because he will in either case receive his 3½ per cent. every year from the Commonwealth.
– His money would be safe in this institution, but not in a private bank.
– I should not like to offer Senator W. Russell shares in the Bank of New South Wales below par. I know what his opinion of the solvency of the institution would be if he were made such an offer. The honorable senator would jump for every share I could offer him, and he would not be the Scotchman he is if he did not. Having referred to the absence, in connexion with the establishment of this bank, of factors which contribute greatly to the success of private financial institutions, let me say that if the Commonwealth. Bank had been started under happier auspices, it would have had a prospect of getting, not one big client, but several, namely, the six State Governments, as well as the Commonwealth Government.
– It will get them yet.
– Senator W. Russell is very optimistic about certain things. When the honorable senator says that the Commonwealth Bank will get them, it is clear that he hopes it will get them, and. if he ought to hope that it will get them, surely common sense would suggest that his Government should have striven for them before launching this proposal. They would then have displayed greater, I will not say statesmanship, but business capacity. If an endeavour had been made to launch this proposal, not in a way which will bring it into competition with the State institutions, but in quite another way, it would have been assured, not of the hostility, but of the cordial co-operation of six big clients.
– That is what the Minister of Home Affairs at first proposed..
– That is so; but whilst the Government have indorsed many grotesque things done by the Minister of Home Affairs, in connexion with the one thing on which he was sound they have turned him down. There is still another handicap under which this Commonwealth Bank will labour, and that is the suspicion at least of the exercise of political influence in the control of its management. Honorable senators may say that it is not intended that political influence shall be allowed to assert itself in connexion with this bank.. I shall not argue that. I think that the door is left open to it in this Bill, but that is not the point I am trying to stress. My point is that, in commercial circles, it will be believed that political influence wilt operate in connexion with this bank, and, as a result, we shall find considerable shyness on the part of commercial men in. intrusting their business to this bank.
– It will all depend upon the terms offered. There is no sentiment in business.
– Senator Givens, with this fatal habit of anticipation which is sufficient almost to destroy our unbreakable friendship, has again forestalled what
I was about to say. His interjection brings one to the question : What will this bank offer to people which they are not already in possession of? I am dealing, for the time being, with the general banking provisions of the Bill, and am leaving the Savings Bank provisions on one side. I ask : What will this bank offer to the commercial community which it does not enjoy at the present moment?
– Security, as an attraction, will depend entirely upon the interests behind it. In the early days of Federation, when the honorable senator was a little more of a novice than he is to-day, I heard Senator de Largie quoting from some socialistic writer that a certain amount of capital, at a certain rate of interest, would do soandso, at a higher rate would do something else, and at a still higher rate would commit murder. I say that safety is not the thing involved at all. As Senator Givens Kas rightly interjected, this bank will not attract business unless it can offer better terms than other institutions of the kind to investors. I ask again : What will this bank have to offer that the commercial community cannot at present command ? First of all I suppose I am merely announcing a truism when I say that the cream of a bank’s business is its discount business. There is to-day in Australia more money offering for ordinary commercial discounting, than there are men offering bills to be discounted-. There is not the slightest difficulty in obtaining discount on favorable terms. There has never been any difficulty in finding money for that purpose. The bankers tumble over each other to get that kind of work. But the crying need in Australia is not for short loans, not for the discounting of ordinary bills; it is for money for longer periods for developmental purposes. Can this Commonwealth Bank offer any inducement in that direction? Can it venture for a moment to meet that need? If it does so it is going to place itself in exactly the same position as the banks of this country were in prior to 1893. There was never a question, as far as the majority of the Australian banks were concerned’, as ‘to their solvency. But what they had done was this. They had received considerable sums of money at call, and they had lent an undue proportion of that money out for long periods on nonliquid securities. The result was that when the demand came from the depositors to be paid the cash which they had deposited, the banks were not able to meet that .demand - not because they were not solvent, but because they had invested the sovereigns which they had received on loans to farmers, to settlers, to graziers, to builders, and so forth.
– How was it that the sovereigns did not come back into the banks in the ordinary course of circulation?
– The idea which Senator Rae is advancing by his interjection is that a very limited amount of currency is sufficient for carrying on the commercial transactions of the country. So it is in ordinary times. But when a panic sets in, when people are actuated by fear, there is only one thing that will satisfy those who have a legal demand upon a bank, and that is gold. In 1893 the real trouble was that the banks had lent out large sums of money for developmental purposes. There was a great demand for such loans. As the result of it there sprang up a class of institutions known as land and finance agencies. They were designed to meet this demand, and they met it to a large extent. The ordinary banks, having command of ample funds, provided largely by deposits at call, also sought to meet the same demand’. They likewise made advances on non-liquid securities. But they did so beyond the margin of safety. The result was that when the demand came for a refund of a very considerable amount of those deposits at call, the banks could only say, “ We are very sorry, but we have lent your money to Farmer So-and-so, and Grazier So-and-so, who have employed it in constructing dams and tanks, and in buying land and machinery. The security is good, but it is not liquid, and we cannot give you your money at the present moment.” What will be the position of the Commonwealth Bank? It is. not going to meet that demand for loans for developmental purposes.
– Neither did the Bank of New South Wales.
– It did meet the demand to a certain extent; it tried to do so in common with the other banks. The result was, as I have said before, that all the banks which were in this position when the demand for gold came found that they had placed themselves in a cleft stick. Is this Commonwealth Bank going to be caught in a cleft stick of that description? This proposed bank has to do one of two things. On the one hand it may refuse that class of business, which, as a proper bank, it ought to refuse, because it is not proper banking work. If it does that, it is simply going to remain one of the ordinary banks, sharing in the discount business that is to be done in Australia, and in no sense meeting the demand for a bank of an entirely different character. On the other hand, if it does meet this demand, and makes such advances to farmers and settlers, the bank is going to place itself in the same position as the Australian banks in 1893. Having in times of prosperity obtained advances, will it lend them out on securities which are not liquid?
– Largely on fictitious values.
– The values were not fictitious. The simple answer to the honorable senator’s statement is that land values in Australia to-day are higher than they ever were before.
– They were inflated values before 1893.
– We cannot say that they were inflated then, when we find that they have been going up ever since.
– Melbourne property values were inflated.
– We are talking about different things. Land values throughout Australia to-day are, I say again, higher than they ever were at any other time. There will, of course, always be a little fluctuation in any country, but in a young country like ours there can only be one story to tell. Whatever may be the fluctuations from year to year, taking it on the whole, land values must go up.
– The banks .before 1893 lent money on other things than land values.
– I am not discussing the Melbourne land boom, which was a gamble, pure and simple. I am dealing with sober banking. I have endeavoured to show that this Commonwealth Bank cannot meet what is a great need in Australia to-day unless it places itself in the same position of jeopardy as the private banks did in 1893. That is not intended. It is not meant that the bank shall do such business. The Prime Minister himself has expressed the hope that this bank will deal with ordinary bills of exchange and liquid securities, acting ultimately as a bank of banks, and not as a mere moneylending institution. It is a remark of that kind which I venture to say brought forth the comments of commendation from the London Times. It was because it was made clear that this Commonwealth Bank was not going to be of the slightest use in promoting land settlement, and was not going to supply what is a great need in Australia, but would be a mere ordinary conservative commercial bank conducted with due regard to the ordinary re: quirements of financial business with all the known safeguards, that the Times was able to commend the proposal.
– It was a very doubtful compliment.
– Senator Blakey can now go before his friends in the country and say that the London Times and the Labour party are on the same platform. Surely he should derive some pleasure from that. I regret that we cannot discuss this matter free from party influence, because it is really extremely serious in itself. I have already affirmed that I approach the subject from the stand-point of one who believes that the great need of Australia is a means of providing cheap capital for those who are upon the land, or who are prepared to go upon it. This bank is not going to do that, and cannot do it. If it does, it will be overburdened with assets of a non-liquid character, with the possible result that when there comes a period of comparative insecurity, it will probably be met with some such crisis as occurred in 1893. It is of no use to tell a man who has put his money into such an institution, “ Oh, you need not worry, because you have the credit of the Commonwealth behind this bank.” He will say, “ I do not want your credit. I want my money.”
– Under this Bill we are not even giving the security of the Commonwealth. The Bill expressly prohibits a person from suing for his money.
– That is one of those little grotesque provisions which I really cannot undertake to explain. Apart from that, I say that a man who has a deposit in a. bank is only satisfied with the credit of the bank when he knows that he can get cash from the bank. But the moment he knows that he cannot get cash, his faith in the bank disappears.
– A man who is doubtful about a bank will want his cash earlier. ,
– That is an .admission that there may be a time when the depositors will want their cash. Whether the depositors want their cash to-day or tomorrow may delay a crisis, but will not avoid it; and I may say that this bank will avoid a crisis only by avoiding doing what other banks have, done in the past, namely, the lending of money on non-liquid securities.
– The Parliament of Victoria decided that three days might avoid a crisis in 1893.
– I do not see the relevancy of that interjection.
– They recognised that delay is important sometimes.
– I say again that it was because these banks had lent money on non-liquid securities, money which had been deposited at call, and could not meet the demand for a refund of those deposits at the time of the crisis, that they were not able to withstand the storm.
– I do not think there was any shortage of coin. There was a shortage of confidence.
– The people who went to the banks and asked for their money did not ask to be paid in confidence but in coin.
-People would not ask for coin if they had confidence in their bank.
Senator -MILLEN. - Senator Rae may build up an imaginary bank on a basis of confidence, but that is not enough for a man who says to a banker, “ I lent you £1,000 three months ago, and want it back,” if the banker says, “ We cannot pay it to you.”
– Is this to be a bank of confidence?
– Confidence consists in a belief that when you present your demand it will be honored. The moment it is seen that such demands may not be honoured - and no one can say that such things will not happen again - there comes a run on the bank. I invite Senator Rae to show me wherever such a crisis has occurred and has not affected the position of the best constituted bank in the world. Does any one doubt the solvency of the Government of England? Yet what is the position of consols to-day? They are going round at something like a discount of 25 per cent.
– Is there not a reason for that?
– Of course there is a reason for it. There is a reason for everything. There is even a reason for Senator
– Oh, yes, it is.
– Does any one doubt the solvency of the British Empire? Not in the slightest degree. Yet you see British consols selling to-day at .£75.
– It is not impossible for any country to go bankrupt as the result of a disastrous war.
– Senator Rae surely does not mean to suggest that the solvency of the British Empire is for a moment in question. But there are factors which all the talk about confidence of honorable senators opposite will not smooth away.
– The point is this : A nation which had to pay £500,000,000 or ,£600,000,000 for a great war would not finish with its credit as good as it was when it started.
– The credit of Great Britain to-day is higher than ever it was, and yet her paper is selling at a discount of 25 per cent. I have endeavoured, during the last half-hour, somewhat ineffectually, I am afraid, to show that this bank is not going to meet the great needs of the people of Australia in assisting them in the development of this country. . It will be merely a commercial bank, sharing with the existing banks the business of discounting commercial paper.
– We never claimed” that the bank would be a key to a commercial paradise.
– The honorable senator’s party did on the hustings. This bank is only likely to be effective in proportion as it goes outside the scope of ordinary banking business. I venture to say that if the remarks of Senator McGregor had been uttered before the Times made its comments on this Bill, they would never have been published. In his secondreading speech he said that there was lying at call in the banks of this country £50,000,000, that there was no reason why such a large proportion of these deposits should be kept locked up, and that they could be lent out to assist the people of the country. If it is intended that we should follow his suggestion, and lend out an undue share in these non-liquid forms, then, incontestably, the Commonwealth Bank will, sooner or later, be confronted with a crisis like that of 1893. It is because the banks keep so large a share of the deposits in their vaults that they are solvent. That makes what is called a strong position. In proportion as the Commonwealth Bank departs from that policy and reaches out for the dividends to which Senator McGregor referred, it will incur risks, and, sooner or later, we shall be overtaken by a national calamity. So far as I can judge, the Bill will provide another ordinary commercial bank, having to take its chance in competition with the existing banks. It will certainly have advantages in its favour, and it will have to face big handicaps.
– It will have very big opposition.
– Yes; and that is coming, in my opinion, in the most serious form, not from the existing banks, but from commercial men themselves. I think that there will be a considerable amount of hesitancy on their part in intrusting their business to a bank which will be so closely in touch with politicians. It will be an ordinary bank competing with the existing banks. It will start under the difficulties to which I have referred. I venture to say that for some years to come it will be found to be most expensive as a form in which the Commonwealth Government may discharge its business. No public advantage can be’ derived from its existence for very many years. Whether the advantage which may come in the course of time will compensate for the loss which will be associated with the first few years of its history, time only can answer.
I want now to return to the Savings Bank part of the Bill. Federation was clearly designed to give the people something which they could not get when they were governed by separate State organizations. What does this Bill offer which the people have not to-day? They have Savings Banks. It cannot be pretended that the Commonwealth can offer them a better Savings Bank or a higher rate of interest on their deposits, or lend money to borrowers at a lower rate, than these Savings Banks charge. It cannot create an additional pound for investment. All that it can do is to come into competition with the State Savings Banks, and share the amount of deposits already available. I intend to follow the deposits which the States control, and see in what form they are invested. But, before doing that, let me point out that the State Banks are so eminently successful as they are, offering the maximum advantage to both borrowers and lenders, simply because they work free_ from the expense incidental to competition. The proposed Savings Bank will at once bring into their respective arenas the element of competition. The State Banks, hitherto, have been able to offer a maximum of interest to the depositors, and to charge a minimum of interest to the borrowers.
– Is there not competition in New South Wales between the Savings Banks?
– There is, and there is not. The competition is in well-defined lines, but there is no competition of the character which I think will be set up under this measure. Because, whatever happens, it makes no difference to the State Government in which Savings Bank a man deposits his money. In this particular case, however, there is going to be competition. The State Governments have already declared that they will fight to retain their institutions. It has been stated by the Prime Minister that the Commonwealth Bank will do no injury to any person, because it is not likely to get the savings of the people unless it offers greater advantages. Is it going to do that? There is only one form of greater advantage which people will recognise, and, that is, a higher rate of interest. .
– With greater security.
– There is no greater security offered as between the Commonwealth and New South Wales. But I understand now why the honorable senator thinks that there is reason to doubt the solvency of New South Wales and South Australia. Is it because of the particular colour of the Government in power that he thinks that the credit of the two States has gone down? No one has a right to question in the slightest degree the solvency of any State. And if there is a doubt at all as to the solvency of a State like New South Wales, on what sound business reasons did the Prime Minister lend money to that State?
– I did not say that it was insolvent.
– No, but the honorable senator said that the credit of the Commonwealth is greater than the credit of New South Wales.
– The credit of the whole Commonwealth, including New South Wales, is greater than the credit of New South Wales.
– Theoretically, my honorable friend can draw what comfort he likes from that remark. There is no honorable senator here who would not be prepared to lend money to New South Wales as readily as to the Commonwealth. If it is good enough for the Commonwealth to lend money to the States, surely it is good enough for the citizens of those States to lend to their Savings Banks. In proportion as the Commonwealth Bank offers to depositors a higher rate of interest it will be prevented from lending out the money to borrowers at the rate of interest already charged. At the present moment depositors are getting from the Savings Banks the last possible penny of interest which can be paid, and similarly borrowers are getting money at the lowest rate of interest which it is possible to charge, the difference between the two rates averaging about 8s. per cent. A Savings Bank has ordinarily to receive sums at call from persons whose deposits are necessarily limited, and to lend out the money to the State Government, or on mortgage, or in some other form to land-holders. The Commonwealth Bank can only come into competition with the State Savings Banks if it offers the same rate of interest, or a higher rate. If it does that, it cannot offer the farmer money at a cheaper rate than he is getting it for now, because there are no big profits to cut into. When the difference between the rate paid to the depositor and the rate charged to the borrower is a matter of only 8s. per cent., how can the Commonwealth Bank give greater advantage to lenders, or greater concessions to borrowers? All that it can do is to come into competition with the existing institutions with the effect of raising the expense, both to them and to itself, with the result that both lenders and borrowers will be penalized in future.
– Do you mean to say that there are no other functions which this State Bank can discharge, and the other State Savings Banks could not discharge?
– If the public are to be honestly and frankly dealt with; if this bank is not to be subsidized by secret means, there is no possible way in which it can pay more to borrowers and still charge less to lenders, unless in some way or other the difference is made up by a tax on the community. There is possibly a way in which the bank can be subsidized without the’ public becoming aware of the fact. At the present moment the Post Office is receiving ,£33,000 a year for the service which it renders to the State Savings Banks. It will be possible for the Commonwealth Bank to come along and say, “ We will get that service from the Postal Department; the salaries of the officers who render the service will be a charge against the Postal Department, and we will not pay a single penny for it.” That is the way in which we can subsidize our Savings Bank at the expense of the Post Office. At the present time every postal official who devotes some time to the business of the State Savings Bank earns for his Department a certain sum representing the total amount which the taxpayers have to find to cover the Postal Estimates.
– What will become of the auditors if they do not draw public attention! to the matter?
– It will not affect the auditors.
– It cannot be fairly called a secret thing.
– It will be a secret transaction in this_sense that it will not figure in the accounts. I want now to deal with what I think is a larger aspect of the matter, and that is the effect which the creation of this bank will have on the State Governments. South Australia is, I think, the only State in which there is not a direct guarantee from the State Governsment for the solvency of the deposits lodged with the State Savings Bank.
– No private Savings Bank, such as the one in Tasmania, has a guarantee from the State Government.
– According to a paper which was laid upon the table of the other House by the Prime Minister, the Savings Banks in Tasmania are guaranteed by the State, so far as their deposits are concerned. I am merely quoting from a statement which was made by the Prime Minister. He says that the States guarantee only the Government Savings Banks.-
– But in Tasmania there are two banks which are not guaranteed by the State - one in Launceston, and the other in Hobart.
– Those institutions are enjoying a right which Senator Millen is not prepared to extend to the Common-, wealth.
– I am not questioning the right of the Commonwealth in that connexion, but I am questioning the expediency, in the public interest, of launching an institution which will compete with our State Savings Banks.
– Does not the honorable senator think that the right which is enjoyed by a number of citizens in Tasmania should be equally enjoyed by the National Government ?
– I have not questioned that. If Senator Lynch has been present and heard my remarks-
– I have been present throughout the whole of the honorable senator’s speech.
– Then the honorable senator has misunderstood it. The position I take up is that the Commonwealth has no right to interfere unless it can do something for the people which the State Governments cannot .do, or which the State Governments cannot do as well as can the Commonwealth. A private individual has a right to start a butcher’s shop, but does Senator Lynch wish the Commonwealth to do that? The whole purpose of my address has been to inquire what advantage the public will derive from the establishment of a Commonwealth Savings Bank. If Senator Lynch says that He does not care twopence for the public advantage so long as he can aggrandize the Commonwealth, I join issue with him at once. Now let us see what happens to the deposits which are handled by the Savings Banks in the several States. In the first place there has been paid into those banks approximately £50,000,000.
– I think, it is nearly £60,000,000.
– The last information which I obtained from Mr. Knibbs stated the amount at a shade over £50,000,000.
– It is fully £60,000,000 now.
– At any rate, the chances are that the proportions with which I propose to deal will not vary very much. Out of that £50,000,000 I find that £40,000,000 have been invested in public securities, and the balance has been advanced to settlers and to the smaller occupants of land. What will happen if the Commonwealth, by entering into competition with these institutions, depletes them of some portion of their funds? To the extent to which the States have borrowed from the Savings Banks .they have avoided the necessity for going upon the London market. In other words, these banks are the great instruments which all State Governments have used for the purpose of raising money locally. I would remind honorable senators that ‘some time ago Mr. Fisher, in dealing with the question of the transfer of the State debts, emphatically laid it down that he would never, sanction the Commonwealth going upon the London market in the capacity of a seventh borrower, and that some means ought to be devised for stopping the financial competition which now takes place between the States. He further argued that borrowing in London ought to be controlled by the Commonwealth, and that the local markets should be left to the States. I say that that is a sound policy. If we are going to make the Federal authorities a medium for borrowing abroad, we ought to leave the home market to the State Governments. In other words, we ought to leave to them the Savings Banks - the institutions which gather up the savings of the people. If the Commonwealth embarks upon this sphere of enterprise, it must do one of two things. It must either fail to get the Savings Banks’ depositors, or it must get them. If it fails to get them, it will not do so without having put both the States and the Commonwealth to considerable expense. If, on the other hand, it succeeds in getting them, what will the State Governments do? A demand will at once be made by the depositors in the Savings Banks for a refund of their deposits, in order that they may transfer them to the Commonwealth Savings Bank. The State Governments will then have to raise the amounts with which .to pay those deposits. How can they meet .such a demand ?
– They may borrow from the Commonwealth.
– I - If they are deprived of the use of the post-offices throughout the Commonwealth the depositors will have no option but to withdraw.
– I think that the States will devise means of overcoming the difficulty, but it will be an expensive matter, and will diminish the advantages which are now offered to the people. But the States will be obliged to hang on to their Savings Banks.
– If the depositors withdraw their deposits from the State Savings Banks, will not that be an indication that they prefer, to deal with the Commonwealth Savings Bank?
– Undoubtedly. But if they withdraw from those institutions they may bring about a crisis in State finance. If that result should not ensue we shall have established . a competitor which must increase the cost of their management.
– For the Commonwealth Savings Bank to absorb the State Savings Banks will be a slow process. It will not be accomplished within twenty-four hours, as the honorable senator seems to think.
– My point is that the States have used the Savings Banks as a means of borrowing locally. They have used them to the extent of £40,000,000. We all know that one of the reasons underlying the marvellous recovery which was made by France after her war with Germany was that her national debt waa so largely held by the small people of the country - by the average citizen, whose wealth did not require many figures to represent it. Our State Savings Banks correspond with the institution which rendered such signal service to France. Nobody can question that hitherto the deposits in those banks have been judiciously used. Yet it is now proposed that we should launch an instrument which will not only confer no advantage upon the citizens of Australia, but which will aim a deadly blow at the whole basis of State finance.
So far I have dealt with this question from the stand-point of the amount which has been loaned by the Savings .Banks to the State Governments. But what about the balance, which has been advanced to farmers and settlers? Surely if any Government is competent to deal advantageously with farmers and settlers’ it is the State Government, which finds the land for them in the first instance. In all the States some sort of settlers bank system is in vogue. In one State it takes the form of the Credit Foncier Bank, in another of a Savings Bank, and in a third of the settler’s bank, and each of the institutions discharges similar functions. They draw money from small depositors, and lend it out on easy terms to the settlers of the country. All that money is derived in some form or other from the Savings Banks, which are under the control of die States. In New South Wales it has been found that, to a limited extent, .the State, having control of this money, can make advances to these persons upon better terms than can ordinary banks, because if a settler makes default in payment, the Crown is his landlord, and is thus able to step in and resume possession. But what would happen if the Commonwealth occupied a similar position? It would have foreclosed upon a security which would be valueless. The land laws of the States would deny to it the right to exercise the powers which the States have reserved to themselves. Consequently, it can never offer the same advantages to settlers that the States can offer.
– Not in connexion with that particular class of security.
– Will the honorable senator mention any other form of security ?
– Freehold land.
– Does the honorable senator suggest that the Commonwealth can advance money on freehold land more advantageously than can the States?
– But the honorable senator was dealing only with one class of security.
– Is the Commonwealth Savings Bank going to pay more interest to those who lend it money than is paid by the State Savings Banks?
– In Tasmania, the private Savings Banks pay a larger interest than do the Government Savings Banks.
– But, while the rate of interest in the Savings Banks may vary to a small degree, there is a difference between the amounts upon which interest is payable.
– In Tasmania, they pay 3 J per cent., as against 3 per cent, which is paid by the banks guaranteed by the Government.
– That is a very fine advertisement for private enterprise. We now have Senator Long declaring that private banks can pay J per cent, interest more than can banks which are controlled by the State. If that be so, probably the State Savings Banks will be able to pay per cent, more than will the Commonwealth Savings Bank. To-day the State Savings Banks are meeting not merely the requirements of persons who have money to lend, but the requirements of those who desire to borrow money. They are, therefore, in a far better position to deal with estates upon which foreclosure has been made than are any private individuals. They can - as has been shown upon a dozen occasions - outstrip most of their other competitors in dealing with land for the reason that if default be made in payment by any individual no trouble can arise in respect of the title or of a transfer. But if the Commonwealth desired to foreclose on a settlement lease or a homestead selection in New South Wales it could not do so.
– The Commonwealth Bank would be able to deal with it.
– Why not?
– Because the land laws of the State would prevent it.
– The Commonwealth would occupy a worse position than would a private mortgagee.
– No. The holders of land are not allowed to transfer without the sanction of the Crown. The State Government is thus able to step into possession of any land in case default should be made in payment by the occupier.
– What becomes of the mortgagee?
– If he has made default, he has to leave the property.
– What becomes of the landlord ?
– The landlord is the State Government, and, in view of the character of our land laws, the State Government is in a satisfactory position to make advances.
– It is a very extreme step for a State Government to foreclose.
– Of course it is. The State Government can advance money wim a knowledge that, even if it should become necessary to foreclose, no complications as to title can arise. A private lender may not advance money as readily, because, if it should become necessary to foreclose, he may find the land laws interpose to vitiate his title. I remind honorable senators, also, that the Commonwealth has not an army of inspectors going about the country, and in a position to make valuations of property, and to see whether clients of the bank are fulfilling their conditions. We should require an army of officers to carry out this work effectively, whilst the States, in their Lands Departments, already have all the necessary machinery for carrying out this class of work.
I desire only to make one other remark upon this Bill. I feel that I should apologize for having spoken at much greater length than I intended. But I wish to say, in conclusion, that statements, more or less vague, have been made to the effect that the Prime Minister has given an assurance that he is leaving the door open for cooperation with the State Governments.
– The statement was very definite.
– It was very definite, indeed ; but I should like to probe intothis promise. If there was any sincerity in it, if there was a real desire to cooperate with the States, what was there to prevent the Prime Minister - having theprotests of the State Premiers before him, and an intimation from them that they wereabout to confer on the subject - from delaying this matter until he had heard what they had to say? Surely one would have thought that the right honorable gentleman would have decided to delay the enactment of the Savings Bank portion of the measure until after his interviews with the State Premiers.
– Why not, if he really desires their co-operation? Surely it was open to the Prime Minister to have said to the State Premiers, “I am anxiousto co-operate with you. I have received your protest. I shall consider it, and I shall hold my hand in this matter until 1 am informed as to what you desire to propose.”
– Will this prevent cooperation ?
– There is no machinery in this Bill for co-operation. If it is to be brought about, we shall have te pass another Bill next session for the purpose. If there were any sincerity in thistalk about the open door to the States,, surely we might have expected that the position taken up by the Government would have been this: They would have said,. “ We desire the co-operation of the States. We cannot secure that co-operation without the passing of another Act of this Parliament, and, therefore, as no time will belost by delaying this portion of the Bill until after a Conference has been held with the State Premiers, we shall delay it until an opportunity has been afforded toconsider a workable basis, and we shall then come down with another proposal togive effect to our desire for co-operation.”
– Could not cooperationbe brought about by an Executive act?
– I invite Senator Long to show me any clause in this Bill which would permit the State Governmentsto come in as partners in the proposed” Commonwealth Savings Bank. That would! require the passing of a special Act; and,, as it could not be passed until next session,, if there were simply a desire on the part of the Government for co-operation with the State Governments, a proposal would be made to delay the enactment of the Savings Bank provisions of this Bill until after the Prime Minister had had an opportunity of conferring with the State Premiers.
– Nothing could be done until next session.
– Nothing can be done now. The Government say that they are anxious for co-operation with the States, but they are taking the road which forbids it. A good deal might have been said in favour of the professed desire of the Government if it had been marked with the sincerity that comes from actions, and not from words. The real position taken up by the Government is that they are going their own road, no matter what the views of the State Governments may be. That is very regrettable, but not remarkable. It is quite in keeping with the attitude usually assumed by honorable senators opposite. From the moment they were returned with their magnificent majority they seemed to think that all power had been vested in them, and that the States were merely to be thrust on one side. They seem to think that they are in no sense bound to regard State interests, to say nothing about State rights, and that the interests of the States are there only until our honorable friends are in a position to appropriate them. It is because I believe that the State Governments are to-day fulfilling their function in connexion with the State Savings Banks, not merely satisfactorily, but much more satisfactorily than they could ever be performed by means of a Commonwealth Savings Bank, that I propose to vote against the Savings Bank provisions of the Bill.
.- I rise with a great deal of hesitation to follow my esteemed friend and leader, Senator Millen.
– The honorable senator need not apologize.
– I do not apologize at all. I have admired Senator Millen’s speech, and have not differed from him in a single sentence which he has uttered.
– The honorable senator is a slave.
– I am not a slave, and I never have been. I have been a free man at all times Buring the forty years I have been in Parliament. I have broken from my friends when I believed it to be right to do so, and I am prepared to do so again whenever it may seem to me to be right. I say that if the people of the Commonwealth were asked whether they approve of this measure, they would give an unhesitating and overwhelming “No” to the question. If honorable senators will read the reports of the debates of the Federal Convention that sat at Adelaide, Sydney, and Melbourne, they will not find recorded in them one sentence in favour of the Federal Government starting a commercial bank or a Savings Bank. We made provision in the Federal Constitution that -
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to - (xiii.) Banking, other than State banking ; also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money.
And I say that not the most radical members of the Federal Convention ever believed that the Federal Government would, under that section of the Constitution, propose to start a Federal Bank. No SuCk thing was ever dreamed of.
– Why does that section appear in the Constitution?
– In my opinion, thi section does not give the power to establish such a bank as is proposed by the Bill. I have the opinion of some of the most eminent counsel in Australia to-day in support of that view.
– I followed the debates of the Federal Convention, and I know that the section referred to was placed in the Constitution for this purpose.
– I repeat that during the whole of the meetings of the Federal Conventions, no one spoke in favour of the Federal Government starting a Federal Bank, or a Savings Bank, at any time. We formed ourselves into a Federation to do things that the States could not do of themselves; to do Federal and National work only, and I contend that the States Parliaments can legislate better for the purpose of dealing with the savings of individuals than can the Federal Parliament. I declare as a man who has been forty years in Parliament, sixty years in Australia, and associated with every phase of life in this country, that the country people if appealed to would admit that. The property of individuals is more in the keeping of the State Parliaments than of the Federal Parliament. This Federal Parliament should confine itself to Federal matters such as defence and other national questions. I urge honorable senators opposite to reconsider this proposal. We ought not to interfere with the States. Their prosperity should be a matter of concern to us as members of the Federal Parliament. We should not injure them, but we shall do so if we duplicate the business which ought to be undertaken by the States. As Senator Millen has said, this Bill will involve the States in considerable expense. They will have to vacate the post-offices, and find other buildings in which to carry on their work, and other officers to perform it. In file name of everything that is good, what necessity or urgency is there for this proposal ? There is none. Honorable senators opposite who belong to the Socialistic party would, in my opinion, do a grand thing which would redound to their credit and glory if, even at this late hour, they were to ask the Prime Minister to be good enough to take the Savings Bank clauses out of this Bill. It is not yet too late to do that. In Victoria alone, there are £^18,000,000 of the money of the people invested in the Savings Banks, and since the Savings Banks of the States have been established, there has never been a shilling lost to the depositors. I can speak especially for Victoria, and I say that the Savings Banks Commissioners are able, sincere, conscientious, and experienced men, who know their business. If they lend money to a struggling farmer, it will be because they know his character, and that he will be likely to succeed. Why should we disturb this business, which is faithfully and honestly carried out by the States? Why should we disarrange all this business of the States, and put the Commonwealth to a lot of expense in doing so? There is no necessity or urgency for it. I look upon honorable senators opposite as friends. Many of them are my friends, and men to whom I can appeal. I am excited, of course, but it is my nature to be excited. I appeal to them now to tell the Prime Minister, or their leaders in the Senate, to take the Savings Bank clauses out of this Bill. So far as the commercial banking provisions are concerned-
– Would the honorable senator leave them out also?
– No ; honorable senators opposite need not take them out if they do not wish to do so. They can go on with their proposal for the establishment of a Commonwealth Bank. It would have to compete with other banks. We have had a banking crisis here. I know it well. I was not in it, thank God. I was a director of an institution some years before the banking crisis, and I told my co-directors at the time what was going to happen. They would not take my advice. I retired from the banking directorship in time to save myself. But I know a little about banking affairs. This Commonwealth Bank will have to compete for business with the other banks. It must be remembered that a number of the Australian banks came through the great crisis with credit and satisfaction. I know perfectly well that some of the banks at that time were carried on by men who ought never to have been connected with those institutions. There were banks whose directors and managers should have been somewhere else than where they were. I could say many other things if I chose, but it would not be to the public interest if I did, and, therefore, I refrain. It must be remembered that banking nowadays has been brought up to a very high pitch. Any one who reads up the article on banking in the Encyclopedia Britannica will see that there have been enormous developments in banking science. I am pleased to know that the banking laws of my native country, Canada, are the safest in the world. The trouble with banks is that when they get an enormous amount of capital they are often puzzled to know what to do to earn dividends. Of course, panics will arise in the future as they have occurred in the past. When a panic comes there may be millions in a bank, and it may all be safely invested on broad acres and Collins-street properties. But can such properties be sold when there is a panic? No. Nobody has money to invest then.Everybody’s idea is to save himself. The strongest institution is not too strong then. Many of our financial institutions in 1893 were perfectly sound. I am not going to mention them, but I know the facts perfectly well. Those banks which were managed from England were particularly safe, with the exception of one or two, whose trouble was that they had not sufficient capital. I will tell honorable senators the reason why. Their managers, being controlled from London, were not allowed to enter into boom transactions. I maintain that a Commonwealth Bank cannot possibly compete against the private institutions. The present banks have their clients, and people who have dealt with them for many years are not going to desert them. There is no necessity for establishing a new bank. It is possible to borrow money cheaper in Australia than in any other part of the world. Honorable senators may be surprised to know tha a man who has half-a-million to invest can invest it better in London than in Melbourne, Sydney, or Adelaide. Probably he will be able to get per cent, more for his money in London than in Australia. I know plenty of men in this country who have sent money to England for investment, because they can get better returns there. Money deposited there can be lent to Germany, or to any other country where it is required.
– Is that crying “ stinking fish “ ?
– No; what I say is an absolute proof of our solvency.
– Decrying Australia?
– That interjection will not prevent me from telling the Senate what I know to be the truth. I know perfectly well what I am talking about. I am doing the business. I know plenty of wool-growers who do not draw against their wool clips at all. I can buy Australian debentures in London at from 1 to per cent, cheaper than they can be bought in Mel, bourne. Of course, we have had nine or ten of the most magnificent seasons the Almighty ever blessed this country with. Australia, at the present time, has enormous resources, which have been piled up until investors in this country cannot find suitable investments. That is the truth of the matter. The result is that they send money abroad for investment. You can get 7 per cent, in Canada to-day - even up to 8 per cent. - on broad acres, with a margin of 50 or 60 per cent. Honorable senators, therefore, must not be surprised that money goes abroad to be invested. You can buy Melbourne and Metropolitan Board of Works debentures at 1 per cent, less in London than in Melbourne. Compare the Times quotations for Australian debentures with the Melbourne quotations for the same date, and you will see that there is a difference of between 1 and per cent, between them. It must be understood, however, that to the- London price you must add (lie accrued interest, because that is the way in which prices are quoted in London. You must not do that with Melbourne prices. Here the accrued interest is not added to the price. If bad seasons come, and there is a widespread depression, no bank can feel itself perfectly safe. The depositors will run to the bank for their money. They will have their own obligations to meet, and will want cash.
A depositor who does that is not necessarily concerned about the solvency of his bank. He goes for his money because he must have it for his own purposes, not because he is afraid of the bank. I know that during the great crisis in Melbourne several ot the banks were safe enough. I happened to be involved in two of them which broke; but I was perfectly certain that one of them was quite sound. I examined its balance-sheet, and, having satisfied myself, went on to the public platform, and told the public what I thought. In the United States the history of banking has been marked by a want of cohesion amongst the banks. In Canada the reverse is the case. In the Dominion banks are not allowed to lend money on dead securities. That was the difficulty with the banks here. They had millions lent out on land, the owners of which could not pay up “in a jiffy.” A land-owner had to get his crops in before he could pay. Canadian banks are only allowed to lend on growing crops, and on bills. The banks in Australia have too much capital, and their difficulty is to find investments for it. The discounting part of their business is a very small part. Of course, the banks are all keen to get a good bill; but they are not so keen to see the man who wants a big loan on a dead security. They are always mindful of the time when there may be a depression. There is no need for another bank to do commercial business in this country, because, as Senator Millen properly said, this bank cannot be expected to benefit the community at large. If this bank is going to succeed, it must attract business,’ and it can only do that at the expense of the other banks. Australia is almost over-banked now. The losses at the boom time were caused, to a large extent, by wrong-doing. But that is cured, and we shall have no more difficulties of the kind in Australia for the next fifty years, at least. I notice with regret that there is a proposal to reduce the amount of gold to be held to represent the notes issued by the Commonwealth Government. By taking that course, we are entering a gate that may lead us - probably it will be ten, or fifty, years hence - on the road to ruination.
– We shall be all right in fifty years.
– Let me tell honorable senators what depreciated paper money means. About twenty-eight years ago, when I was young and energetic, I travelled round the world for two years, keeping my eyes open all the time. I wanted to go from London to St. Peters-, burg. 1 went to my banker in London and obtained a letter of credit. When I arrived in St. Petersburg, I went to the bank to which I had been introduced, and got a quantity of paper money. I travelled about Russia a good deal, learning much. By-and-by the frost and cold became intense, and there were heavy falls of snow. I thought that I should be frost-bitten if 1 did not clear out of Russia, so I made up my mind to go. I intended to travel down the Neva to Stockholm. But first 1 wanted to change my paper money into gold. I went to the banker, who was the leading banker in St. Petersburg, with my notes. But what did I find? I could not get any gold. No gold was allowed to leave the country. I was refused it absolutely, even at a big discount. On making inquiries, I found that at Helsingfors, in Finland, I could get my paper discounted at a loss of 40 per cent, on the transaction ; and that is what I had to submit to.
– They were too many for the honorable senator.
– This opened my eyes ; but I found that mine was not an exceptional case. The Commonwealth Government will be wise in not departing from an old-established custom. There is really no necessity for the Commonwealth to establish a bank, because its people are quite equal to financing the Government. It is practically only the other day that Victorian loans to the amount of ^£4,000,000 became due, and the Savings Bank and the people of the State came to the rescue of the Treasury and paid off the loan. Our credit went up with a bound ; but if we should have one or two bad droughts, and the bank should have to remit £[3,000,000, or £[4,000,000, or £[5,000,000 to our English creditors, and, owing to the enormous extravagance which is indulged in under the Commonwealth, the gold is not available in the Treasury, what will happen? The news’ will be telegraphed all over the world, and the .English broker will take advantage of the opportunity, when loans to the amount of £[60,000,000 or £[70,000,000 become due, to make us pay 4 or per cent: for the accommodation. I close my speech with an appeal to the Government, who, I believe, are trying to do what they think is right, to reconsider their proposal, and, at any rate, to take the Savings Bank clauses out <pf the Bill.
– We are indebted to Senator Fraser, owing to his large banking experience, and also, to Senator Walker, for very much knowledge. Of course, we could have admired them still further if they had been exercising their enthusiasm, on the right side, instead of being on the side which is fast dwindling in popularity. Senator Millen declaimed against the Labour party for not living up to the professions of political action in which they indulged on the public platform. The proposal to establish a National bank was not originated to-day or yesterday. Ever since the Labour party appeared on the political horizon it has continually preached the necessity for establishing such an institution. And when we find ourselves with a majority in each House of this Parliament, surely there is nothing wrong in submitting this measure? We are seeking to establish a National bank with no shortcomings, with no disabilities, with nothing that will hamper its operations. If Senator Millen insists that our proposal is not in keeping with our professions, he falls very far short of understanding the measure. We are living very much up to our professions of action. When Sir George Reid was in Perth he paid the highest compliment which has ever been paid to the Labour party. He said that one outstanding feature of its actions in politics was that it placed a proposal before the people in such a plain and unequivocal way that there was no chance of misunderstanding it, asking the people to vote for the proposal on its merits, and worked for its attainment with a will which was the envy of other parties. Finding ourselves with a majority in each House, we seek to put into practice one of the many proposals which we have advocated for a long time - in the press when we got a chance, and on the public platform all the time. I find that Senator Millen has some compassion for the existing banks, to which he refers, to use his own words, as the institutions which are about to be strangled without getting compensation.
– No; he did not say that.
– I took down his words as well as I could remember them.
-Colonel Sir Albert Gould. - He said that that was the promise which the Labour party had made to the people of the country. He did not say that you were doing it.
– I do not want to misinterpret Senator Millen. When I was entering the chamber I understood him to say that this was the time to strangle the existing institutions without compensation.
– No, what I said was that, prior to the general election, some of your spokesmen said that you would establist a National bank to do that, and that, as a redemption of that promise, you were putting forward this proposal.
– Who was our spokesman ?
– Your official manifesto in Victoria.
– So far as my recollection goes, I have never heard an official pronouncement from a leader or from an advocate of the Labour policy that it was intended to strangle the existing banks without compensation. It is altogether unnecessary to compensate them, because there are no past services for which they should be compensated over and above what others have done in years gone by without receiving a penny of compensation. In every State individuals and companies have engaged in serving the people, and when the time has come for those activities to be superseded by other forms of service, the individuals and the companies have had to step out without being compensated. We are met with the further plea that it is proposed to establish a Commonwealth Bank in competition with the existing banks, which deserve some form’ of consideration at our hands. If they are entitled to any consideration, they are not entitled to more sympathy than was extended to those who were engaged in services which were superseded either by the State or otherwise. Take, for instance, a place in the interior of a State which was served for years by a line of coaches, or by teams. When a railway service was provided these parties never attempted to look for compensation. On the contrary, they simply moved out into other avenues of employment, and had to jostle in the field of competition for a livelihood, just as we hope that the private banks will have to jostle in competition with the Commonwealth Bank. Again, take the mineral area of Western Australia. In the first instance, there was no water to be had. A number of persons had to go out ahead of settlement and condense water for those who were to follow. But when a water scheme was established, reducing the price of water from 8s. per 100 gallons to 3s. per 1,000 gallons, no attempt was made to compensate those who had sunk their capital and rendered good service in endeavouring to settle a large population on the gold area. The existing banks are not, 1 think, deserving of special compensation for any services which they have rendered, because they have always taken very good care to see that they were compensated. At the same time, I recognise that they have played a very useful part in the develop-! ment of the continent. They were estab” lished to give assistance for which, of course, they have been paid very well.
– Do you not say that competition is the curse of present commercial business?
– Within certain limits,, competition is still the life of trade and commerce; but when it is conducted on lines which increase the cost of the necessaries of life it is simply suicidal. Senator Walker has suggested that the necessities of the Government may oblige them to interfere with the conduct of the Commonwealth Bank. He has also mentioned that the Bank of England is not a State Bank. I propose to show later that, as regards, at least, the issue department, it has been admitted by a former Governor of the bank, named Nields, that it was a Government institution in every sense of the term, that the board was only in charge of the bank in trust for the State, and that every operation carried on by the issue department was carried on by the officials of the bank as representing the State.
-Colonel Sir Albert Gould. - The bank has paid £14,000,000 in> dividends to the public, ranging from 7 to 9 per cent.
– If Senator Lynch wilt read up the real history of the bank, he will not find that to be the case.
– I shall cite my authority in due time. There is one sound reason for bringing forward this Bill, and that is, that there is a great need for al Savings Bank in every part of Australia.. Those who are put to the necessity of dealing with banks, or trading on credit, haveto pay a very high price for the accommodation which they receive.
– The rate is very low in comparison with the rate charged in almost every other country.
– One reason whichshould outweigh all others is that wherever the necessities of the people come into conflict with the necessities of a small section,. the former should prevail. We can all recall instances in this country in which banks have charged as much as 10 per cent, upon overdrafts, ‘whilst at the same time overdrafts were obtainable in Melbourne, and in every other large centre of population, at 6 per cent. I am sure that Senator Fraser will not argue that a charge of 10 per cent, upon an overdraft is calculated to foster industry in any part of the Commonwealth where it may be made. But the fact that that rate has been charged I can vouch for of my own personal knowledge, because I have paid it. On the authority of a Royal Commission which was appointed in Victoria some years ago, to inquire into the working of the associated banks of this State, we know that a higher rate of interest was charged to the farming industry by these banks at a time when the price of produce had declined.
– Bad times will always make dear money.
– I am endeavouring to emphasize the necessity which exists for the establishment of a Commonwealth Bank which will take stock of the position. When depression comes, and the people engaged in any industry are experiencing the pinch, those banks should modify their charges in order to ease the burdens of the people.
– How can they do that if they have no gold?
– The Commission’s report, which was presented to Parliament in 1895, throws a very interesting sidelight on the operations of these banks, and on the way in which those engaged in our primary industries were affected. The report states -
The testimony in respect to the depressed condition of the agricultural interest was of a unanimous character, and it was demonstrated that -while prices of produce during the last three or four years had fallen 50 per cent, the high rates of interest charged by the banks for overdrafts have been maintained at 8 per cent., not brought to 4 per cent.
In the course of the inquiry your Commissioners were pleased to learn from the testimony of many witnesses of the great extent to which the farmers were financially involved. It was evident that many were speaking under restraint from the consequences of being too outspoken.
That last sentence is a most significant one. In regard to the first sentence, I would point out that when the stress and strain came in Victoria, during the early nineties, the associated banks, for which so much sympathy is now sought to be enlisted, kept their rate of interest up to the level of 8 per cent. By establishing a Commonwealth Bank, we hope to alter this condition of things, so that, instead of the artisan or miner of Western Australia being charged 8 per cent, for money, he will be able to obtain it for as low as 6 or 6£ per cent.
– Money may now be borrowed wholesale at 4 per cent., and some even at .3! per cent. But, of course, if the security offered is bad, the borrower must go to the pawnbroker.
– I do not think we need have any misgivings as to the success of the proposed bank when it has once been established. After all, banks are managed purely by experts, who devote themselves exclusively to their work. But it very often happens that a business man, who has made his money in another sphere of life, is suddenly called upon to become a director of one of these institutions, ostensibly for the purpose of instructing the general manager how he may conduct the institution successfully. Yet a bank has to depend for its success upon the brains which are concentrated in one individual, who on no occasion can get any hint regarding its successful working from his directorate. How is it possible for a person drawn from one particular walk in life to suddenly become qualified to advise in the management of a bank? He may have spent all his life in pastoral pursuits. If he cannot bring to the discharge of his duties that knowledge which an expert can bring-
– He may be one of five or six directors, and it is a very good thing to have a variety of interests represented on a bank directorate.
– -He may be a brewer who has ceased brewing beer, and who has only just left the atmosphere of boiling hops. In such circumstances, what knowledge can he bring to bear upon the successful management of a bank ? Consequently, the proposal in this Bill that the Commonwealth Bank shall be managed by one individual constitutes no very grave departure. So far as any bank is concerned, we know perfectly well that there is nothing in the nature of a miracle about it. It is an institution which invites the public to deposit money with it. As those deposits are made, they are loaned out at an increased rate of interest to those who may desire to borrow. So that banking is a system by means of which a number of men trade upon credit. That is all that the Government propose to do. This Bill merely provides that the Commonwealth Bank shall trade upon its credit. Now, there is no combination of banks whose credit can equal that of Australia to-day. Efforts have been made from time to time by various States to tide themselves over difficulties by raising fresh loans. It is often said that a thing is “as good as gold.” I say that the credit of the Commonwealth is even better than gold, because if, to-morrow, the Commonwealth went upon the money market, plenty of persons would be eager to take up our bonds at 3J per cent, above par.
– They would not take them up at per cent, above par
– Certainly; they would take them up at 4 per cent. In my own State, I know that loans floated by the Government have realized 3 per. cent, above par. In other words, the mere naked promise of that State to pay on a certain date has induced the lender to offer £103 for £100 at 3J per cent. Now, there is no earthly reason why we should not utilize the credit of the Commonwealth, instead of allowing it to run to waste, as it does to-day. The establishment of a Commonwealth Bank is one means of accomplishing our object. At the back of that institution will be the resources of 4,500,000 people, in addition to all our material wealth.
– But that is not the available capital of the bank.
– Certainly not.
– We require the gold coin as well.
– Of course, we do. The Government propose that this bank shall be started with a borrowed capital of £1,000,000. If, in the end, a crisis should arise, such as the opponents of the Bill dream about, we shall have resources from which to discharge our obligations to the last farthing. The credit of the proposed bank means the credit of the Commonwealth, and, since credit is the essence of banking, nothing can be wrong with this proposal, because our credit is superior to that of any bank or of any set of individuals. During the financial crisis which occurred in New South Wales in the early nineties, a number of banks found themselves in deep water. The crisis had come to such a pass that very few of the banks were left to weather the gale. As the very last resort, they went to the Government of New South
Wales, and induced the then Premier of the State to introduce a Bill when they were almost in extremis, to declare, for the time being, that their notes must be accepted at their face value. The banks could not themselves negotiate them. They were on the point of closing their doors, and institutions that claimed to be superior to the State found that they could not stand, unless they were propped up by ,the State.
-Colonel Sir Albert Gould. - I know that very frequently the States have been proppel up by the banks.
– At a price which paid the banks very handsomely. On the authority of the manager of the Government Savings Bank of New South Wales, we know that the people of that State, just as was done in other States, withdrew their money from the private banks, and placed it in the State Savings Banks. In the case of very many people who failed to do so, the savings of their lives were shut down upon. Many of them lost all that they had at that time, and from that day to this have never recovered what they lost. The only institution to which the people, in the circumstances, could turn as a place of refuge, in which they might have entire confidence, was the Government Savings Bank. Therefore, on the question of our credit, whenever a strain is put upon it, we can rely upon the Commonwealth Government acting as did the Government of New South Wales on the occasion to which I refer. We need not expect that such a calamity will happen in our case, because there are many safeguards provided in this Bill, and the proposed Commonwealth Bank will be conducted on such safe and sound lines that I have no doubt that it will be regarded in the Commonwealth as the Bank of England is regarded in the Old Country. The Bank of England is a State Bank, so far as the issue department of the institution is concerned. The issue department is a very important part of the institution, and it is controlled to the full extent with regard to the issue of notes up to the value of £8,000,000.
– It is not a State Bank in the sense in which this bank will be a State Bank.
– The issue department of it is.
-Colonel Sir Albert Gould. - The Commonwealth Bank will have no
Dower to issue paper money. That is expressly prohibited. The Government retain that power in their own hands.
– There is a very interesting book in the Library which puts the position of the Bank of England very clearly; and, notwithstanding all that has been said to the contrary, it cannot be disputed that the issue department of the Bank of England is a State Bank. Senators Gould and Symon may consult General F. A. Walker’s book on banking on this subject. The author is regarded as an authority.
– There is a better book on banking than that, and that is Hutchison’s.
– Senator Symon will find the statement made in the work of General F. A. Walker, who is a standard authority on banking in America. Then Professor Pryce, in his Principles of. Currency, refers to the issue department of the Bank of England in these words -
It is not a department of the bank in any sense. It is a self-acting institution of the State working on the bank’s premises and directed by rules laid down by the State, and absolutely beyond the control of the bank’s directors.
I hope that honorable senators who still maintain that the Bank of England is not a State institution, and amongst them is Senator Walker, will listen now to what a former Governor of that bank had to say in regard to one important department of the institution. I find, in the same work, that Mr. Neaves, a former Governor of the Bank of England, said -
The issue department is out of our hands altogether. We are mere trustees under the Act of Parliament to see that those securities are placed there and kept up to that amount; and in no case can any creditor of the bank touch that which is reserved for note-holders.
– That does not make it a State Bank. That is really a. statutory provision that notes which they issue must be protected by securities. Every bank here is in the same position.
– In other words, it is a bank working under a law.
– It is no more a State Bank than is the Bank of New South Wales.
– An ex-Governor of the Bank of England has plainly said that the issue department of the bank is a State institution, and Senator Symon says that it is not.
– It is nothing of the kind.
– Professor Pryce says that it is, and a former Governor of the bank says so. These statements can be found in the authority to which I have referred. Notwithstanding Senator Symon’s extensive range of knowledge, I prefer to believe what an ex-Governor of the Bank of England’ has said regarding his own institution.
– That is exactly the position of the banks here. They have so much coin to protect their note issue.
– I am satisfied that the quotations I have made support the view I take of the matter.
– Will the honorable senator explain who found the capital for the Bank of England to commence with?
– I believe that it was privately subscribed in the first instance, but the bank got its first start by making a loan to the British Government. To-day the British Government have something like £8,000,000 free of interest in that bank. We have to bear in mind that the Bank of England, which has been working under restrictions, imposed in the earlier part of last century, had its charter suspended o» three different occasions, in 1827, in 1837, and in 1866. What did that suspension mean? It meant that the resources of the bank were not equal to the strain placed upon it. The British Government, on one occasion, without the consent of Parliament, gave authority to the Bank of England to issue notes beyond the amount which had previously been authorized. What did that mean? It meant that, by virtue of the Government coming to the assistance of the bank, and permitting it to increase its note circulation to an unlimited extent, the credit of the people of Great Britain was placed behind its notes, and they were negotiable wherever they were found.
– Just as in the case mentioned by the honorable senator in New South Wales.
– In considering this Bill, we should bear in mind the three historic occasions on which the Bank of England, when it failed to stand the shock of adverse circumstances, had to rely upon the support of the Government, and to get the credit of the State behind its notes. Honorable senators who oppose this Bill have a choice of grounds of objection to it. The first objection urged is, in general terms, that the superior management of private banks has been of such a character that no change in our banking system is one of them. The second ground of objection is that the management by a Governor of a purely Stateowned concern is bound to end in disaster, by reason of the exercise of political influence. Let us examine the first objection, that there is no need for this institution because of the superiority of private over State management. We do not need to go outside Australia to find that, in the past, the management of banks has been anything but satisfactory. I shall not lay a general charge of unsatisfactory management against the whole of the private banks, because I recognise that some are excellently managed, with due prudence and caution, by men fully conscious of the responsibility resting upon their shoulders. But it must be agreed that a large proportion of the banking business of this country was carried on in the past on lines which led eventually to the destruction of much happiness and the production of much misery, if not of crime, in Australia. I can recall what happened in the early nineties under the private management of banks. But I know that some of the banks that were badly shaken at that time have been making noble efforts to attain a position of sovereignty. I do not wish that anything I may say should be regarded as a reflection upon the action of the authorities of those institutions. I am prepared to give the highest praise to those who have been in charge of these banks, and who are gradually bringing them to such a position of solvency as will enable them to meet the last farthing of their indebtedness. But in discussing this proposal, we must have regard for the very large section of banking institutions in Australia that were conducted on lines which ultimately led to the irreparable ruin of many people. I take the case now of the Queensland National Bank, and I say that, in regard to that bank, which is now struggling up to a state of solvency and prosperity, I have nothing but admiration for the plucky way in which it is now being conducted. But, at the same time, we need to be warned of these pitfalls, which may be dug in the same fashion in the future as in the past.
– The real- reason for the failure of the Queensland National Bank was that it was too closely connected with the Government.
– I am arguing against the principle advanced by honorable senators opposite, who contend for the superiority of private management as such. We find that the fortunes of the people of
Queensland were largely bound up with those of the Queensland National Bank. It was an ideal example of how a banking institution, which was of first-class importance to the welfare of a community, could be managed by private persons. Let me quote this passage from a report concerning the bank, drawn up in 1896 -
Since the formation of the bank the amount paid in dividends is £1,195,959 17s- rod., so* that those of the original shareholders who stillretain their shares have received £10 15s. 4d. per share of £8 paid. Our estimate of the bank’s position is that the liabilities exceed the assets by £2,435,423, that is to say, the whole of the paid-up capital, amounting to £899,552, the amount to credit of profit and loss account £46,955, the contingency account £160,544, the interest suspense account £75,562 (amounting in all to £1,182,613), have been lost, and there is still a deficit of £1,252,810. In addition to this, we find that since the reconstruction of the bank in 1893 the sum of £747,872 has been written off as bad. Add, as above, £2,435,423, and the total loss amounts to £3,183,295.
– How could that loss have been avoided by any other management?
– The Government of Queensland had £2,360,000 in the bank at the time of the suspension, and the report stated that -
Pending the completion of fresh arrangements we certainly think that the Government should be represented on the board.
But the Government was not previously represented on the board, and it is because the Queensland Government did not insist on adequate representation that they could not dictate the policy of the bank as they, ought to have been able to do at this time of crisis. That is a sample of private banking management in one part of Australia. I will give another instance of the beauties of private management. In the case of the Commercial Bank of Australia, £2,000,000 out of £12,000,000 liability had been converted into preference shares. What did that mean? It meant that this £2,000,000 had been converted into bank capital for the time being, so that the bank had the advantage of trading upon the money of depositors that ought to have been at call. We find, also, that the Australian Joint Stock Bank had £4,500.000 of deposits to pay off in 1906. New South Wales senators are sufficiently conversant with the affairs of that bank to know how they turned out. Every State in the Commonwealth can supply equally unfortunate examples of banking mismanagement.. There is a good case in Tasmania. The Van Diemen’s Land Bank was privately managed. I will quote an extract from the report of a meeting of shareholders called to wind up the institution. The meeting
Was held in August, 1901. The last directors’ report contained the passage -
The directors recommend that from ?18,714 to credit of profit and loss, ?11,671 be appropriated to the payment of a dividend for the half-year at the rate of 9 per cent, per annum and the dividend tax thereon ; that ?2,000 be added to the reserve fund (making it ,?40,000), and that the balance, ?5,042, be carried forward to the credit of next account.
The bank continued paying dividends until it had almost reached the point of insolvency. It paid ?[i 1,000 in dividends when it was quite beyond hope. The amount of deposits was ?[808,000, and the liability was no less than ?292,000. This is what occurred at the shareholders’ meeting
A Shareholder. - “ I have lost everything ; it is my all.”
Mr. Burgess (Chairman). “ I can only hope not all ; not alone for you, sorry as I am for your loss, I am more so, sir, for the widows and orphans. You are a man. You can go to work.”
The Shareholder. - “ I’m too old. I can’t begin again.”
Casting our minds back to the unfortunate occurrences with which Australia has been familiar in connexion with banking in the past, I maintain that we have every reason to turn towards a new system, arid that we are justified in the conclusion, from the experience of other lands, that the establishment of this Commonwealth Bank will assist to ward off similar experiences in Australia in the future. In regard to public banks, Senator Walker, in his speech last night, covered a great amount of ground. He alluded to several important foreign banks. The German Bank, is to all intents and purposes, a State Bank, because the directorate, as well as the Governor, is appointed by the Kaiser.
-Colonel Sir Albert Gould. - It is not a one-man bank in regard to management.
– But” the appointment of the management lies entirely with the Government. The Kaiser would not appoint a manager except on the advice of his Executive.
– Did he tell the honorable senator so?
– We know that the Kaiser is, to some extent, responsible to the Reichstag. We know also that the Bank of France is largely under the control of the Government. That bank rendered great service to the French nation in a time of storm and crisis. In 1870 it was allowed to issue notes to an unlimited amount. And all those notes were ultimately paid off at their face value.
– The trouble with the Bank of .France in 1870 was to keep the people from robbing it.
– That was when the Labour party got the upper hand.
– According to the Dictionary of Political Economy -
The Bank of Germany is even more distinctly than the Bank of France “a State bank.” The distribution of the profits is as follows : - 3^ per cent, to the shareholders, then 20 per cent, to reserve till it reaches ?3,000,000; of the surplus, three-fourths to the State and onefourth to the shareholders. The 3i per cent., if need be, may be made up from reserve. Under this arrangement the shareholders received in 1900 ?6.57,000, being a dividend of 10. g per cent., and the State ?1,041,205, in addition to the note tax of ?125,000. The German Emperor appoints the President and Council of Directory whose office is for life, on the recommendation of the Federal Council, and the Government, through the Chancellor of the Exchequer, exercises complete power of control. As with the Bank of France, the rates of interest are uniform throughout.
We- have heard something about the banks that were established in the United States of America about the middle of the last century. But it is scarcely fair to judge of the working of a system from times that were unusually troublous. Whilst in the Southern States liabilities were openly repudiated, at the same time banks established by some of the States were carried to a very successful issue, and have had a long career. A history of the Bank of Carolina will be found in Horace Whites’ work, Money and Banking. The original capital of the bank was 444,000 dollars, which was afterwards raised to 1,196,000 dollars. On page 379 Mr. White says -
It passed safely through ‘the war, and maintained its high character during that trying period. It preserved its capital intact, paid all its obligations to the State, to private depositors and to note-holders. In 1870, one year before the expiration of its charter the Legislature put it into liquidation. Its history is exceptional in the fact that for nearly sixty years it was conducted with prudence, honesty, and pecuniary profit, and without the spur to private enterprise. The Legislature founded the bank out of its own funds and securities in order to meet the financial disorders of the period 1812.
– It is the exception which proves the rule.
– The case of the Indiana Bank is also referred to.
The partially State-owned Bank of Indiana was founded in 1834 with a capital of $1,600,000, part being owned by the State and part by private individuals, but the State supplied at the beginning $1,300,000 out of the total capital. The State procured the money by a loan negotiated in London. The President and four directors were chosen by the Legislature, and one director in each branch by the private shareholders. The State realized in twenty-five years $3,500,000, equal to over 8 per cent, on the capital invested.
– They certainly took as much, out of the public as do the private banks in Australia, when they paid 8 per cent, on the capital.
– It shows that, in an experimental period of the history of that country, when even representative government was on its trial, the experience of these two southern States afforded a bright and shining example to some of the authorities whom I quoted earlier. I venture to say that the managers of Australian banks have found themselves so much embarrassed that they would be very much benefited and profited if they took a leaf out of the book of these two State Banks, which carried on with so much advantage to the two States and their citizens. I do not think that 1 need make further quotations in that regard. We have heard a good deal about interfering with the Savings Banks of the States. According to the inquiries I have made, the Commonwealth, through the instrumentality of the Post Office, collected last year £8,000,000 for the States, and received a commission of £33,000. Seeing that a very important portion of the savings of the people is collected by its agency, it is only fair, I think, that the Commonwealth should enter upon a work which, at present, is carried on by private enterprise. In New South Wale’s there ‘is a private Savings Bank, which is competing with the State Savings Bank.
-Colonel Sir Albert Gould. - No; it is a Government bank, with a Government guarantee at its back.
– In New South Wales there is a Government Savings Bank, which pays 3 per cent, to the depositors, and also a Savings Bank which is called the Savings Bank of New South Wales, and which is run and controlled by private individuals, who have nothing to do with the Government or the Parliament of the State.
-Colonel Sir Albert Gould. - - Every trustee of the bank is appointed by the Government.
– Certainly, the bank is guaranteed by the State. In Tasmaniathere are two private Savings Banks, which are run in competition with the State Savings Bank. In South Australia, also, there is a private institution, which is run alto gether apart from the control or authority of the State Parliament. When it is proposed that the Commonwealth shall establish and conduct a Savings Bank, every kind of opposition is urged by honorable senators on the other side. What disqualifies the Commonwealth from entering upon this class of work which private enterprise has taken up in three States, and carried on without any objection being urged by the people?
– The Premier- of your own State objects to this proposal.
– It is a direct reflection on their form of patriotism - and a rather low form, too - when honorable senators on the other side say that the Commonwealth is unfit, or not entitled, to enter this field in the same way as private enterprise has done. Of course, it is the duty of an Opposition at all times to oppose, every measure, whether it be right or wrong, in the public interest. We have had some samples of this kind of opposition, not only here, but elsewhere. In Western Australia, for instance, when highly beneficent proposals were submitted, they were opposed by honorable members actuated by practically the same motives as are honorable senators on the other side. We find, however, that one member of their party, and a member of the late Ministry, too, believed in the Commonwealth entering into a’ business of this description. Sir John Forrest was a sturdy believer in the Commonwealth taking such a step as is contemplated in this measure.
– What proof have you of that statement?
– In 1907, Sir John Forrest attended a Premiers’ Conference in Brisbane, and in him we had a very respectable sample of a good stickler for State rights. I believe that he was the underground engineer who brought about the Fusion. When he attended the Brisbane Conference as Acting Prime Minister, he made some remarks about this very matter. Referring to the statement made on the previous day by the Premier of New South Wales, that, “ owing to the Savings Banks the States were in a far better position than the Commonwealth to raise money,” Sir John Forrest, as reported r.n page 200, said -
It has been urged on the Government several times - and I have had it in my own mind in the interest of the people of Australia, although I have not done anything yet, nor do I know that the Government are going to do anything - but it is within our power to have a Post-office Savings Bank for all Australia.
The Hon. G. Swinburne : It was mentioned Yesterday.
The Right Hon. Sir John Forrest : I have not read the report, but I say it is quite competent for us to establish such an institution, and what a splendid institution it would be for the people of Australia.
That is the view of Sir John Forrest, who spoke on that occasion as the leader of the honorable senators on the left of the Chair, and in the responsible position of Acting Prime Minister, when he said that the proposal embodied in this measure would be a splendid thing for the whole of Australia. I say “Amen” to the sentiment expressed by him. I should like this Bill to contain a provision enabling the .State Governments to utilize the savings which are collected by the Commonwealth Bank. I recognise that the obtaining of money for developmental purposes in the States is allimportant to them, and I should like a guarantee to be given to the State Governments that they could fall back upon the receipts of the Commonwealth Savings Bank. We know that the rate of interest even in the Savings Banks is largely controlled by influences beyond Australia, and that even’ if the Savings Banks were cut off as a source of supply to the State Governments, the latter would be left with liberty to go on to the money market and borrow at a rate in proportion to the security which they could offer; but I should like the State Governments to be assured a fair share of that which will come to the Commonwealth under the operation of the Bill. I look forward to the establishment of a Commonwealth Bank, which finally, I believe, will be the only institution found throughout our areas. It is not economical to have several State Banks existing side by side, as it means a duplication of work. In New South Wales there is a proposal to amalgamate the two Savings Banks. When we attempt to ‘enter a field which has been occupied by private enterprise in every State, we should not be met withsneers from the Opposition, or with ridicule from any honorable senator. I am anxious to make the bank a success, to utilize the credit of the people of Australia in their own interests, and to secure a reduction of the rate of interest which will lead to a kind of independence and prosperity in our industries, great and small, throughout the Commonwealth. I consider that as a means towards that end nothing more effectual can be done than to establish a Commonwealth Bank. We have no reason to fear from the experience of the past that it will .be a failure. Rather have we every reason to fear that, unless stringent precautions are taken, the management of private banks will in the future land us in the same unhappy position as we were in early in the nineties. I hope that this proposal will be favorably entertained by the Senate, and that we shall have one further plank of the Labour party realized - one more promise fulfilled in the long list which we submitted to the people of the Commonwealth when this Parliament was created. The next session will see effect given to the balance of our promises and proposals, and I believe that we shall’ stand before the people as the only party which gave pledges and had the courage and the manhood to fulfil them..
Sitting suspended from 6.30 to 8 p.m.
-Colonel Sir ALBERT GOULD (New South Wales) % [8.0].- During the remarks of Senator *Lynch I challenged some of the assertions which he made in regard to the position occupied by the Bank of England. Before entering into details he was good enough to give us a definition of the functions which are discharged by a bank. He seems to be under the impression! that such an institution may be created by a certain number of individuals banding themselves together to borrow money for the purpose of lending it out at a higher rate of interest. He went further and suggested that there was nothing very difficult in the management of a banking institution. That seems to be his whole idea of the entire system of banking. He certainly declared, amongst other things, that the people who deposit their money with banks do so because of the confidence which they feel in the ability of those institutions to repay their deposits when called upon to do so, and, probably, this is to a great extent correct. But if the proposed Commonwealth Bank be started upon these lines alone we shall soon see a scene of chaos. The Bill assumes that a Commonwealth Bank will1 be established with the aid of capital, which is to be borrowed. When once the loan has been redeemed the Government will have acquitted themselves of all responsibility in this matter, because they do not undertake to guarantee the solvency of the institution to the general public. Indeed, the Bill is particularly cautious in that respect, inasmuch as an early portion of it sets out that no person shall be entitled to sue the Commonwealth in respect of any money which may be due by the bank. Clause 33 is very definite upon this matter. It reads -
The Commonwealth shall be responsible for the payment of all moneys due by the bank. Provided that nothing in this section shall authorize any creditor or other person claiming against the bank to sue the Commonwealth in respect of his .debt or claim.
That clause takes away from the public any power to recover moneys by legal process which may be due to it by the bank.
– No. It provides that a creditor must sue the bank authorities, and not the Commonwealth authorities.
– What is the good of the Government accepting responsibility if that responsibility cannot be enforced by law?
-Colonel Sir ALBERT COULD. - Any claimant must first of all obtain a judgment against the bank. But, even then, where does the liability of the Government come in?
– Under the clause which the honorable senator has read.
– But it will still be within the power of Parliament to say, “ We will not vote you any money to meet that judgment.” Personally, I think that it would be better to provide that when once a judgment has been obtained against the bank it must be satisfied by the Government. During this debate a good deal has been said in regard to the proposed capital of the bank. This is to be £1,000,000 - a very small sum for an institution which aims at becoming a National bank. We have been told that it will be a bank in which other banks may place their reserves, if they so desire, for safe custody. But is it probable that any private bank in the Commonwealth - and especially banks with a much larger capital and resources - will use this bank as its banker? Some time ago an honorable member stated by way of interjection that there were no banks in the Commonwealth which have a larger capital than that which the proposed bank will have. If honorable members will take the trouble to turn to page 867 of Vol. IV. of Knibbs’ Year-Book, they will there find the names of all the banks which are doing business in the Commonwealth. There are twenty-one in all, and of these the Bank of Australasia has a paid-up capital of £1,600,000, iri addition to which its reserves amount to £1,727,471. In other words, it has iri capital and reserves a sum °f £3,300,000. The Union Bank of Australia has a paid-up capital of £1,500,000, and reserves amounting to £1,328,000, or, approximately, £3,000,000. The Bank of New South Wales has a paid-up capital of £2,621,000-
– But it has’ been in existence nearly 100 years.
-Colonel Sir ALBERT GOULD.- I know that. The Bank of New South Wales has a reserve fund of about £2,000,000. It has a total in paidup capital and reserves of £5,000,000, in addition to which there is a reserve liability of shareholders amounting to £3,000,000. That institution has £10,000,000 in gold and Commonwealth notes in its vaults which is available at any . moment that it may be required. The Commercial Banking Company of Sydney has a paid-up capital of £.1,500,000, with an equivalent amount in its reserves. The National Bank of Australasia has a paidup capital of £1,498,220, with a reserve of £238,000. The Commercial Bank of Australia Limited has a paid-up capital of £2,212,000, with a small reserve. The Bank of Victoria has a paid-up capital of £1,478,000, and £248,000 in its reserves.. I pass over all the banks which have a paid-up capital of less than £1,000,000 sterling, and come to the Bank of New Zealand, which has a paidup capital of £2,000,000, and a reserve of £864,000. It will be seen, therefore, that there are seven banks doing business in Australia which occupy an immensely stronger position than that which the proposed Commonwealth Bank will occupy. The total amount of their paid-up capital and reserves is £30,000,000.
– From what has the honorable senator been quoting?
-Colonel Sir ALBERT GOULD. - From the Statistical Register, 1 901- 10. These are the banks with which the Commonwealth Bank will come into competition. I do not intend to raise the question of whether or not the proposed Commonwealth Bank can be established constitutionally. I assume that the Government have satisfied themselves upon that point. But then the question arises, “ Although it may be constitutional to establish this institution, is there any necessity for its creation ? “ I know that the desire to establish a National bank has been a dream of the Labour party-. They hold the idea that they will be able to call into being an institution which will be valuable alike to the people and to the Commonwealth Government. But “ Is there any necessity for the establishment of this bank in Australia at the present time?” What are its possibilities as compared with other banks ? It will be the twenty-second bank in Australia, and it will have to fight its way just as any ordinary bank has to against the competition of other financial institutions. There is no royal road by means of which the Commonwealth Bank will be able to offer to its depositors higher rates of interest, than are paid by other banks, nor will there be any possibility of it lending money upon more favorable terms. To attempt to raise the interest to depositors, and at the same time to reduce the interest to borrowers, would be to court failure. Senator Walker, in his exhaustive and able address, quoted a statement of the dividends paid by the different banking institutions in Australia, and, according to the figures he gave, they ranged from £3 18s. id. to £1 8s. Ad. per cent. Those dividends were reckoned not merely on paid-up capital, but on paid-up capital plus reserves. I may be told that bank reserves are largely built up out of profits made from time to time. That is true, but they are also made up, to a great extent, by premiums paid on shares issued to shareholders. When a bank is paying good dividends, and is in a very prosperous condition, and it is considered necessary to increase the capital, it is very natural that a premium should be paid upon its shares. I take, for instance, the case of the Bank of New South Wales, whose shares are £20 paid up. But these shares on the open market bring anything from £43 to £46 each. That is to say, that the man who purchases shares in this bank gets a return of between 4 and 5 per cent, on his outlay, and very naturally, when the bank desires to increase its capital, it may justly ask for an increased price for its shares by way of premium. This premium is added to the reserves, and becomes a portion of the banking capital, from which the profits are made. We find that all these private banks are managed, not by some Pooh-bah, but by boards of directors. The shareholders have an opportunity to re-elect these men as they retire from the positions they have occupied, or to elect others to take their places. In every instance it will be found that the men who have been appointed as directors of our banks are men of experience in business. The directors of our leading banks are men whose word and business acumen can be trusted. Many people strive in vain to secure positions on the directorate of a bank, and though they may be highly estimable and worthy citizens, the bank shareholders have not sufficient confidence in their business capacity to intrust them with this particular class of work. I ask honorable senators whether they imagine for a moment that the shareholders of a bank take the trouble of appointing directors, and incur the expense of paying for their services, unless the services they render are regarded as of some value in the control and management of the affairs of the institution. It is perfectly true that the general manager of a bank is always a man of great experience and knowledge. He may have worked his way up from the lowest rung of the ladder, showing by his aptitude and ability his fitness to occupy the highest position in the bank. He has associated with him able subordinates, who are often competent to give very valuable advice. But in every case we find a board of directors having supreme control, and in a position to exercise their powers in such a manner as to make or mar the bank or its general manager. It is recognised as of great value to have in such positions men with a knowledge of business affairs, and men who know something of the standing and position of the people who may desire to do business with the bank. It is not always wellknown people who come to a bank for assistance. People who are just making their way in life go to a bank for accommodation, and it is well to have some one connected with the management who is able to express an opinion as to the honesty of a client and his ability to carry out what he proposes to do. There may be men of more means who are blunderers, and, in the interests of the success of a banking institution, it is necessary that those in authority should have some information concerning the people who come to it for assistance. If honorable senators take the trouble to inquire into the position of the whole of the banks which have been cited here in support of this proposal to establish a Commonwealth Bank, they will find that in every instance the president, governor, or general manager has associated with him a number of men who assist in the control and management of the bank. This is the practice of banks which have been in existence for centuries, and not merely of banks established yesterday or within comparatively recent times. I challenge “the “VicePresident of the Executive Council to mention an instance of a bank in any part of the world which is conducted exactly on the lines proposed for the management of the Commonwealth Bank. No such bank has been referred to during the debate. Certain banks may be called State Banks, because, to a certain extent, the State may have some control over them, but they are not State Banks such as the Commonwealth Bank will be. Senator Walker was at very great pains to give us the benefit of quotations from various authorities as to the position of different banks. I have taken the trouble to consult the Senate documents published by the United States Senate, and I propose to quote from one on banking currency systems, with particular reference to the Bank of England. A report is given of questions addressed to the Governor and directors of the Bank of England, with the answers given to those questions, and from this report I make the following quotations -
The bank was established in July, 1694. lt has exclusive privileges. The stock is fully paid p.
There are two half-yearly general courts for receiving half-yearly reports and for the declaration of a dividend. There is also an annual court for the election of governors and directors. The Government has no voice in the management of the bank, nor does it own any stock.
That is very definite.
The capital of the bank is provided by stockholders in the form of stock of the value of £100.
At the time this report was made, the stock was valued at £267. That increase in value was due to the fact that the bank distributes dividends amongst its shareholders ranging from 7 to 9 per cent. These dividends are regarded as entitling the holders of the stock to a considerable premium upon their shares. Of course, the bank has certain privileges granted by the Government, and it has the advantage of looking after the whole of the Government stock and transactions that may be necessary in connexion with Government financial matters. In the reply to another question, I find this statement made -
The supreme control of the affairs of the bank tests with the governor, deputy governor, and court of twenty-four directors, who are elected annually by the stockholders.
The directors, in addition to attending the weekly meetings of the court, serve on various committees appointed by that body.
It is customary for the governor and deputy governor at the close of their first year of office to be re-elected to the same positions for a further term.
The governor, whilst directing the general policy of the bank, and controlling and supervising the whole of its affairs, devotes his attention more especially to the business of the head office, whilst the deputy governor concerns himself more particularly with the business of the branches, and with the upkeep and maintenance of the bank’s premises.
The court of directors meets once a week: Subsidiary committees are held as required.
There is no actual inspection or supervision by the Government, but by the Act of Parliament the bank is required to furnish weekly statements of their position to the Chancellor of the Exchequer and to the Commissioners of Stamps and Taxes.
Then reasons are given for the changes which were made in 1844, and the statement is made -
The original proprietors’ capital in 1694 was £1,200,000, and has been increased at various times between 1694 and 1816, bringing the total up to £14,553,000, at which figure it still remains. The increase in capital has mostly been for the purpose of advancing moneys to the Government. In 1816, when the last increase in the bank’s capital took place, the Government debt due to the bank was £14,686,800. In 1834, the Government paid off a fourth of the outstanding debt by the issue of a certain sum of reduced 3 per cent, annuities, to the bank, bringing the outstanding debt of the Government down to the figure at which it at present stands.
Have the obligations . of the bank to the public or to the Government been changed from time to time?
No, not in any important particular.
Are you required by law to invest your capital, or any part of it, in any particular securities. If so, in what class and to what amount ?
In the replies to these questions by the manager of the Bank of England, there is not a single word to justify the contention that the proposed Commonwealth Bank and the Bank of England are on the same footing. They differ from each other as much as any private banks will differ from the proposed Commonwealth Bank.
– Who made any such claim?
-Colonel Sir ALBERT GOULD. - I have heard it asserted over and over again that the Commonwealth Bank was going to stand in a similar position to that of the Bank of England. Senator Lynch contended that the Bank of England was a Government Bank. As a matter of fact, it cannot be so regarded in any sense, although the Government have, in times of crises, suspended the bank’s charter to enable a greater quantity of paper to be issued than would otherwise have been legal. That, however, is a power that has been very seldom used. Senator Lynch also alluded to the action of the Government in New South Wales during the great financial crisis. It is true that the Government did come to the assistance of the financial institutions, enabling them to make their notes legal tender for a certain period.
– Six months.
– - That was done because the Government realized that it would be a very serious thing to have the banks toppling -over. There was a possibility of arresting the topple, and the Government did that, not by passing legislation which was to remain in operation for all time, but by providing that the banks might pay out paper instead of sovereigns until the public excitement subsided. That was quite right. The honorable senator argued, also, that there would be no run on a Government bank, because of the great resources behind the Commonwealth. We recognise that the Commonwealth Government have immense taxation powers. But when people fear that they are going to lose their money, they do not stop to reason. A man does not say, “ 1 know that there is no reason for me to excite myself, because the country is perfectly sound.” He wants his money there and then. Some of the Australian banks which had to go into liquidation nearly twenty years ago would have been able to weather the storm had it not been that depositors insisted upon sovereigns being handed over to them immediately. Some years ago there was a Tun on the Government Savings Bank in New South Wales. The more hotheaded among the people feared that the bank was going to fail. Some of them rushed with their money from the Savings Bank to the Commercial Bank and the Bank of New South Wales. Sir George Dibbs, however, as Treasurer of the State, said that the Savings Bank would not be allowed to repudiate a sixpence of what it owed to its depositors, and that stopped the run. Senator Lynch asserted, in reply to an interjection of mine, that one of the two Savings Banks in New South Wales is a Government institution, whilst the other is not. As a matter of fact, both are State banks, but neither is controlled entirely by one individual. Let us take the Post Office Savings Bank in the first instance. The last Statute passed by the New South Wales Parliament affecting the bank was enacted in 1904. That Act provided for the appointment of three Commissioners, one of whom was to be President. These gentlemen hold office during ability and good behaviour. The President has to devote the whole of his time to the duties of his office. The bank is not one of deposit and issue, as proposed by the Federal Government. It is, however, guaranteed by the Crown. The section with regard to that part reads -
The repayment of all deposits in the bank, whether made before or after the commencement of this Act, and the payment of interest thereon, shall be payable out of the funds of the Commissioners held under this Part, and is guaranteed by the Crown. Any liability arising from such guarantee shall be payable out of the Consolidated Revenue Fund.
In that instance the Government have straightforwardly accepted the responsibility for the bank. The other bank is officially called the Savings Bank of New South Wales, but is generally known in Sydney as the Barrack-street Bank. The Act of Parliament governing that institution provides -
The Governor shall continue to be President of the Savings Bank, and the whole affairs and business thereof shall continue to be managed by the trustees, the number of whom shall not exceed eighteen, and of whom one shall be Vice-President. And all such trustees shall be appointed, and such Vice-President named by the Governor, with the advice of the Executive Council, and such appointments and nominations shall be notified in the Gazette.
It is also provided -
It shall be lawful for the trustees at a meeting convened solely for the purpose to nominate to the Governor, and for the Governor, with the advice aforesaid, to appoint some fit person to be managing trustee who unless already a trustee shall become an additional trustee and a member of the corporate body, but shall not vote on any question affecting his personal interests.
Provision is made that four trustees shall form a quorum. So that, in this instance, there is regulation not by one individual, but by eighteen trustees, four of whom must be present when any business is done. There is also a managing trustee, who occupies a position similar to that of a general manager in an ordinary bank. Then arises the question how far this bank is directed by the Government. The law provides -
It shall be lawful for the trustees to borrow, and for the Governor, with the advice aforesaid, to guarantee the repayment of any money, the loan of which it may at any time become necessary for the said trustees to negotiate in order to meet the demands of depositors. Provided that no such loans outstanding at any time so guaranteed shall exceed the sum of Fifty thousand pounds without the previous advice and consent of the Legislative Assembly.
So that Both of these Savings Banks exists under a State guarantee, and each is controlled by a number of experts permanently appointed. Their duties are far less onerous and responsible than will be those of the officer who will occupy the position of Governor of the Commonwealth Bank. He will have nobody to advise him, and be under nobody’s control. 1 doubt whether the Government of the day will be able to control him. He is to continue in office during good behaviour. I .do not know whether the Government would consider it to be “ good behaviour” if he did not accept their advice in any particular. Governments come and go. What this Government may do to-day a future Government may upset. This Government may possess all the imaginable virtues. But can they guarantee that their successors will be equally virtuous? It certainly would be disastrous if we allowed politicians to pull the strings through the Government of the day ; but, on the other hand, it may be mischievous to allow the Governor to be absolutely unchecked and uncontrolled. He will occupy a most trying position. He will have to direct the bank on strictly business lines, and to deal with all phases of banking that come before him from time to time. I presume that the bank is going to discount bills, to grant loans on ordinary mercantile securities, to issue letters of credit, and to arrange exchange business. Are not the Government rather overloading a single individual by expecting him to do so much? Take the system of management adopted in connexion with the Bank of France. The American authority from which I have before quoted says -
No charge has ever been made that the bank favoured or aided any political party. There is never any claim that politics enters in any degree into the management of the bank. Except for the renewal of the charter in 1897 no legislation affecting the bank has been enacted since 1857. There is no sentiment for any change in banking methods nor for any new legislation. It should be added that neither the Governor nor Deputy Governor is permitted to be a member of either body of Parliament.
Has the Government any interest in the ownership of the bank? Does it own any hares?
No; tha bank is a private establishment.
Then the capital is entirely private properly ?
Yes. All the shares are divided between 30,000 shareholders, of which about 10,000 have not more than one share.
How often do the shareholders meet?
Once a year; the last Thursday in January.
What do the shareholders do at this meeting?
They are told about the business of the bank during the year, and are called upon to elect or re-elect the regents or censors.
How many regents and censors are there?
There are fifteen regents and three censors. Five regents and three censors must be chosen from among the commercial and industrial classes, and three regents must be taken from among the general paying treasurers.
That shows that the Bank of France is entirely a .private institution. An apposite remark was quoted by Senator Walker from President Thiers, who cried, “Thank God that the Bank of France is not a political bank.” It is entirely independent of the Government. Then take the case of the Bank of Germany. The following information is given : -
By whom are the shares of the Reichsbank owned ? - It is all private ownership. The shares are held mostly in Germany and Holland, and distributed in small lots. The Government owns no shares.
Will you kindly describe the organization and management of the Reichsbank? - We have, so to speak, three boards : First, the Curatorium ; second, the Direktorium (president and directors) ; third, the Central Ausschuss
What is the law in regard to the division of your profits? - Shareholders receive 34 per cent, dividends and one-fourth of the excess, the Imperial Government receiving the other three-fourths. Upon that basis they received dividends of 8.22 per cent, in 1906, 9.89 per cent, in 1907, and 7.77 per cent, in 1908. Two-thirds of the total profits in 1907 went to the Government. The shareholders received $4,450,000. The Government received $8,627,000.
It is here shown that the Government receive a large sum out of the profits of the bank, and, no doubt, that materially assists the Chancellor of the Exchequer. At the same time, it should be borne in mind that the bank has certain privileges and rights which enable it to realize, not only a fair amount of dividend for itself, but also-, a fair amount of profit for the Government, in return for such concessions. Again,, take the Bank of Switzerland -
The National Bank has for its principal objects to regulate the money market of the country, and to facilitate payments and transfers of money. It undertakes without cost the serviceof exchequer of the Confederation so far as the latter will delegate it to the bank. It has a capital of 50,000,000 francs, in 100,000 shares, of 500 francs each. Two-fifths of this amount was subscribed by the cantons, one-fifth by the existing banks of issue, and two-fifths by the public.
Here, again, is a bank which is spoken of as one of the State banks of the world, but in which two-fifths of the capital is held by private individuals, who, of course, receive dividends on their investments, and one-fifth by other banks of issue -
How is the bank managed? - There is a bank council composed of forty members named for four years; fifteen are designated by the meeting of the shareholders, and twenty-five by thefederal council.
Not one of the banks which we have heard described as State institutions is conducted on the lines on which the Ministry propose to conduct the Commonwealth Bank. In every case, the bank has the advantage of the assistance of men drawn from the general public and stockholders, who have a natural interest in its solvency and efficient management. In the face of these facts, is it reasonable to ask the people of the Commonwealth to establish a Commonwealth Bank under the condition proposed? Have the Ministers had the advantage of consulting experts in the law of banking? These honorable gentlemen may be very skilful and able, but can one of them lay claim to be an expert on the subject with which the Bill deals? The only member of the Government who has indicated a scheme bymeans of which a substantial capital could be provided for the bank - the only Minister who has suggested a means whereby the co-operation of the States could be secured - is quietly set on one side, and not one word is heard from him. I ask if he sees eye to eye with his colleagues in regard to this measure?
– He is quite satisfied.
– I venture to think that, could we get his opinion definitely and clearly with regard to his own proposal and that of the Government, we should find that he is not satisfied. This is not a subject for amateurs .to deal with. I do not deny the ability of Ministers to gain knowledge. But have they consulted the men who could guide them? I do not question the constitutionality of the Bill. If their idea is to establish a bank in competition with other banks, they have many difficulties to surmount and a great deal of business to build up. In Australia, we have twenty-one banks, but how many branches do they possess? According to Knibbs, there are, in Australia, 1,924 banking establishments. The number in each State is enumerated, showing that branches are distributed throughout the Commonwealth. If the Government hope to establish a National bank, they will have to overtake the business which is done by these branch banks. In nearly every case they will have to erect their own building and appoint their own officers. They will have to overtake all this country business before they can claim to have a truly National bank. If a bank has an office in Sydney or Melbourne, and nowhere else in Australia, what is to become of its exchange business ? It will have to establish branches, not only in the State capitals, but in the principal towns in Australia. There may be many small places where possibly it would not be worth while to establish a branch, because banking facilities are already provided. The Government talk of paying 3^ per cent, on a capital of j£i, 000,000, but they will find that for a considerable period the bank will make very little profit. When a commercial bank sees fit to establish a branch in a town it does not expect the branch to immediately return a profit. It realizes that it will have to wait for one, or two, or three years before the branch can become self-sustaining. So it must be with regard to the Commonwealth Bank. Its establishment will not convenience the public by one iota. We shall merely have another bank competing with the existing banks, and I presume that it will obtain a certain amount of business. We are told that it will have one big customer in the Government. If I were convinced that it was really necessary in the interests of this country to establish a bank, I should not object; but that has not yet been proved, nor has it been proved that there is any demand for the establishment of a bank of this kind.
– The public sent us here to do it.
– Was the honorable senator sent here to establish a bank on such insecure and unsatisfactory foundations? Was he sent here to establish a bank which would take up the business of the State Savings Banks ? I heard an honorable senator say, when he was talking about State privileges, that he is loyal to the Commonwealth, and that, if it is a question of being loyal to the Commonwealth or to the State, he will be loyal to the former all the time. I have yet to learn that loyalty to the Commonwealth means disloyalty to the States. How do honorable senators acquire their seats? They, secure their positions here by obtaining the confidence of the people that, if they are elected, they will, at any rate, take care that the State interests are not neglected or thrown on one side. Senator Millen claimed that the High Court is the protector of the rights of the States; but I go a step further, and say that it is the duty of every man who comes into this Parliament as the representative of a State to see that it receives fair play and justice; -and whenever any action is proposed, although it may be to the aggrandisement of the Commonwealth, or of honorable mern.bers of this Parliament, to ascertain if it will be fair to his State. When the Constitution was framed, it was distinctly provided that only matters of general concern should be undertaken by the Parliament of ; the Commonwealth, and that, except where they were expressly taken away, the rights and privileges of the States should be retained.
– Did not the people give us the power to deal with banking?
– I do not suppose that it entered the mind of one member of the Federal Convention that a grant of this legislative power would lead to the establishment of a. Commonwealth Bank of this description. If it is established, of course, we wish to see it made a success. We do not desire to alienate six great customers in the States; but that is what the Government are deliberately seeking to do. The States made certain protests, and submitted certain representations, and when the Government are accused of paying no attention to the views of the States, they reply, in the words of a prominent Minister, “ We read their letter to you all.” The States have a real interest iri this project. It is not a matter which affects any private bank, but one which affects the States. Between ^£50,000, 000 and £60,000,000 are deposited in the State Savings Banks, and nearly the whole of the money has been expended in the development of the States. Suppose, for instance, that in New South Wales the people have deposited in the Savings Banks £25,000,000. The greater portion of that sum has been laid out in the improvement of the State.
– But this Bill does not propose to interfere with that.
– We are not going to confiscate it.
– No; because it cannot be confiscated. The Government propose to withdraw from the States the privileges which they have enjoyed of having branches of the Government Savings Banks established at the post-offices. When a man goes to a post-office with a pound or two at the end of the week or the month, and says, *’ I want to bank this money,” he does not raise a question as to whether it is a Commonwealth or a State Bank. It is a Government Savings Bank, and that is enough for him. He thinks that his money will be perfectly safe there. He may discontinue making any deposits with the local Savings Bank;
– ‘How can he do that, when they will not take a deposit from him unless he gets a new book ? You think that the people are all fools.
– When a man goes there and says, “ I want a new pass-book,” and he is given one, he is quite satisfied.
– Will not the ordinary depositor be allowed to choose for himself as between the State Savings Banks and the Commonwealth Savings Bank?
.- Exactly. But I say that, in the interests of the States, it is undesirable that undue competition should be raised in connexion with the small savings of the people.
– The State Savings Banks will only pay depositors interest upon their deposits up to a couple of hundred pounds, yet they are now making a fuss about this proposal.
.- In New South Wales a depositor receives interest upon the money deposited with the Savings Bank up to £200. and at the Post Office Savings Bank, upon deposits, up to £500. Now, I hold that when a man> has accumulated £200 or £500 he has attained the object for which Savings Banks are established. When he has £200 or £300 of his own why should he not invest it in some other form of industry?
– The honorable senator wishes to make the Savings Banks a gathering Form of institution to feed the larger banks.
– No. A depositor is quite at liberty to buy a little property with his money, or to put it to whatever other purpose he may choose. I know that the States have a perfect right to continue their Savings Banks, as long as they may see fit to do so. I would also remind the Government that they have a right, if they see fit, to establish a bank of issue and deposit alongside the Commonwealth Bank, and thus to become a competitor with it. How much wiser would it have been for the Government to have invited the States tb become a partner in this scheme. To my mind, no necessity has been shown for the establishment of the proposed Commonwealth
Bank. It has not been proved that the institution will be a strong one. It has not been shown that it will be the bank of banks. In my opinion, its creation will merely add another bank to those which are already doing business in Australia. I do not think that it will injure existing institutions. I have no doubt that after it is established it will be prepared to do business in a fair way with the other banks. But we are proceeding upon wrong lines, and we shall not be able to give effect to the desire of the Government. To attempt to interfere with the States Savings Banks will be a serious mistake. Already the States feel aggrieved at the action of the Government in this connexion.
– Then the honorable senator’s face ought to be wreathed with smiles.
.- I look to this Bill as another means of assisting me when I have to woo the suffrages of the electors again. I am indeed glad that it has been brought forward, because it will enable me to expose the hollowness of the pretence .of the Government, and the insufficiency of the means which they have taken to give effect to some of their hustings pledges.
.- I have not the slightest objection to the Government establishing a Commonwealth Bank to compete with other banks in the matter of general business. Of course, this institution will have to overcome the initial difficulties with which it will be confronted just as other institutions have done. We all know that in the earlier years of their existence many of our banks lost a good deal of money, and it was only by good finance that they eventually managed to succeed. I would like die VicePresident of the Executive Council to inform us whether the staff of the bank will be under the control of the Public Service Commissioner. I take it that, as the bank will be a Government institution, the employes connected with it will be public servants. Will they be placed upon the same footing as clerks and employes in other banks, who are liable to be summarily dismissed? If so, will they have the right to appeal to the Arbitration Court ? I take it that they will. My great objection to the Bill is that the operations of the proposed Commonwealth Bank will not be confined to general banking business, but that it is intended to establish a Commonwealth Savings Bank in each State on the lines upon which the States themselves have established their Savings Banks. Nobody has ever re*, quested the Commonwealth to create a bankto compete with the Savings Banks. la Queensland the Savings Bank has assisted: materially to develop the country, not only by lending the Government of that State money, but also by constructing railways. When the last election campaign was inprogress no Ministerial candidate, to my knowledge, ever suggested that the Government proposed to establish a Commonwealth Savings Bank in opposition tothe State Savings Banks. I maintain that we have been sent here to see that theStates do not encroach upon the rights of the Commonwealth, and also to insure that the Commonwealth shall not encroach upon? the rights of the States. But we have already deprived the States of powers which< they have previously enjoyed. By the Australian Notes Act, for example, we deprived Queensland of £[30,000 per annum.. We have squeezed the States in many directions.
– D - Does not that moneyfind its way back to Queensland?
– No. We have takenfrom Tasmania and Queensland a certainamount of revenue which does not find itsway back to them. The Commonwealthspends that revenue.
– Do not the Statescomprise the Commonwealth?
– Why has Tasmania,, with a population of 100,000, the same representation in this Chamber as Has NewSouth Wales with a population of thirteentimes that number? Ever since the present Government have been in power they haveendeavoured to usurp the rights of theStates.
– We are carrying out the powers intrusted to us by the Constitution.
– But not in thespirit of the Constitution. A man may be very powerful and strong, and may abusehis power. I maintain that the Commonwealth Parliament is abusing its powersunder the Constitution. The party opposite went to the people of the States somelittle time ago to ask them to intrust them> with additional powers.
– And will again, with the help of God.
– I am glad to hear it. What reply did our honorable friendsget on the last occasion? The people of the States told them that the Federal Parliament was exceeding its powers;, and they (refused, by a majority of about 250,000, to give them the additional powers for which they asked. They said to our honorable friends opposite, “ We distrust you. You have not done what we thought you would do. You have exceeded your powers, and you are now grasping for more.” Senator Rae entered the Senate after the last election.
– And will after the next, too, if he has luck.
– The honorable senator will if he has a lot of luck. He was sent here to look after the interests of the State of New South Wales.
– We shall do it, too.
– I maintain that you are not doing it, and you are doing everything in your power to misrepresent the States.
– Good old State Rights.
– I am a States Righter. I was sent here to look after the rights of my State, and I remind you that this is the States House.
– Will the honorable senator address the Chair?
– I am addressing the Chair, sir.
– No. The honorable senator is addressing other members of the Senate as “ you.”
– If you, sir, allow interjections to be made I must reply to them.
– I am continually asking honorable senators not to interject, and pointing out that interjections are al ways disorderly. I ask Senator Sayers to address the Chair.
– Ifthe interjections are stopped I shall not transgress the Standing Orders.
– Why get angry?
– Because I feel angry. I feel that honorable senators are betraying their trust as members of the Senate.
– The honorable senator is responsible only for himself.
– I am responsible for what I say here. The Government and their supporters at the referenda asked that more power should be given to the Commonwealth Parliament, but by a majority of about 250,000 the people of the States refused to give those additional powers. The only State that agreed to give them was Western Australia. I propose to show that honorable senators opposite are misrepresenting the wishes of the people of their States. In New South Wales and in South Australia, where there are Labour Governments, they have protested against the Savings Bank provisions of this Bill. I understand, from statements which appeared in the press, that not only the Labour Government of Western Australia, but also the whole of the State Labour party, which is connected with the Federal Labour party, denounced this Government for including a provision for a Commonwealth Savings Bank in this Bill. The Queensland Government have also protested, and, so far as I know, the feeling in opposition to this proposal in Queensland is unanimous. The same may be said of Victoria, and also of Tasmania. Yet we are told by honorable senators opposite that they are representing the wishes of the people of their States. I say that they are misrepresenting them.
– The honorablesenator should let the New South Wales people settle that matter.
– I have as much right to say what I am saying now as the party opposite have to introduce the Bill before the Senate. I think that it has been introduced as an act of revenge. The Prime Minister stated during the referenda campaign that if the people did not accede to the Federal Government’s requests, he would give them something which would bring them to their knees. The people of the States did refuse to do what the Prime Minister asked them to do, and, in view of what has taken place since, they will refuse to do so again by a majority of probably 500,000, instead of 250,000. No reason has been given why, in a Bill to make provision for the establishment of a Commonwealth Bank to carry, on ordinary banking business, provision should be inserted for the establishment of a Commonwealth Savings Bank.
– What is the use of giving the honorable senator any reason? He would not accept it.
– The Vice-President of the Executive Council chooses to be insulting. He is one of the most insulting men who ever sat in a Parliament. Heis low and contemptible.
– Order ! The honorable senator must withdraw that expression.
– Very well, sir. I withdraw the expression, but I shall use it again if Senator McGregor again makes the same remark to me.
– I ask honorable senators not to interject. The speaker objects to interjections, and the Minister in charge of the Senate has the right of reply to the debate.
– I was asking when the country had demanded the inclusion in this Banking Bill of provisions for a Commonwealth Savings Bank? I stated that I believed this was done for the purpose of injuring the States Savings Banks.
– What is the honorable senator talking about? Sir John Forrest favours it.
– Senator Lynch is a Very great supporter of Sir John Forrest, and I suppose that, therefore, he favours it.
The I RESIDENT. - Order ! I must again ask honorable senators on my right to cease interjecting. Senator Sayers ob-, jects to interjections, and has asked that he be heard in silence.
– I do not object to interjections if I am allowed to reply to them.
– Stick to the truth, and we will not interject.
– I ask Senator Blakey not to continue his interjections.
– I shall reply to the honorable senator unless he withdraws that statement. He has said that I should stick to the truth, suggesting that I am telling a lie. I am waiting for the honorable senator to withdraw the statement.
– I did not hear Senator Blakey say anything out of order.
– Is it in order for Senator Blakey to tell me to stick to the truth ?
The PRESID’ENT. - If Senator Blakey made the statement which Senator Sayers asks should be withdrawn, it is the duty of the honorable senator to withdraw it.
– In deference to you, sir, and the Senate, I withdraw the statement.
– There has been no request from any State or any public body, and no demand made by any section of the press, that the Government should include Savings Banks provisions in this Bill. We do not find the ordinary banks carrying on the business of a Savings Bank, but, in this Bill, the Government are going beyond the intentions of the Honorable King O’Malley, and are proposing to inaugurate a Commonwealth Savings Bank in opposition to the States Savings Banks. They are going a step further.
– That is better than going to “ your uncle.”
– I suppose that going to one’s uncle means adopting a borrowing, policy, arid in this connexion I wish to say that I see no difference between, going to the people for £[i, 000,000 to establish this bank, and paying 3J per cent, for it, and going into the money market and asking for £[1,000,000 at 3 i per cent. In both cases a loan policy is adopted. I do not object to borrowing money for reproductive works, but honorable senators opposite profess that theY can get sufficient revenue without going into the loan market. I maintain that they are going to the loan market under this Bill for £[1,000,000, at 3J per cent., with, which to start this Commonwealth Bank. I do not object to that half of the Bill at all, but the Savings Bank provisions were certainly never asked for by any one.
– Here is the Labour manifesto issued in Victoria at the last election, with photographs of the three Labour candidates upon it.
– I have said that nomembers of the Labour party outside this. Parliament have asked for the establishment of a Commonwealth Savings Bank, whilst the whole of the Labour party in Western Australia, and not merely the Labour Government in power there, have protested against it. Surely there is some little ability amongst members of the Labour party outside this Parliament, and* they have as much right to be heard as members of this Senate. There might be some excuse for what is proposed if the Government were in a position to say that the people of one-half of the States were in favour of the establishment of a Commonwealth Savings Bank ; but,- so far asI can learn, they are all opposed to that proposal, though I think that is the only part of this Bill to which they are opposed. But they have included in this measure a clause which will operate against the interests of all the States. By so doingthey have set the States up in arms; against them. That is not the way in which a judicious business man would start a new enterprise. He would not set several of his largest customers against him.
– Have we made opponents of the customers of this bank?
– The Government have done so, because every State in the Commonwealth is opposed to it. I shall not labour the matter further. My object is to protest against the Savings Bank clauses of the Bill. In Committee I shall be able to do something more. I maintain that these provisions are against the best interests of Australia, and especially against the best interests of the States, which are already rendering excellent service to the people through the medium of the Savings Banks. It has been said by the Prime Minister that, for the time being, he will allow the States to use the postoffices, as they have hitherto done. At first, it was stated that the post-offices would not be permitted to be used by the States. Now, however, it is announced that they are not to be evicted. They are to have a few months’ notice.
– Who said so?
– That statement has been made by the Prime Minister since this Bill has been before Parliament. But is that the way to deal with State Governments? Surely we ought to try to work smoothly with them, and not set ourselves up in opposition to them. It has been assumed that the States would help the Commonwealth Bank. But what we are now doing will not tend to cause them to work in that direction. It will tend to make them adverse. The Senate would be very shortsighted if it allowed these clauses to go through. It is useless to say that the States will not suffer from losing the use of the post-offices for the transaction of Savings Bank business. If a tradesman is in business in Collins-street, and is forced out by his landlord, so that he is compelled to commence in another part of the city, a certain number of his customers will not follow him. They will continue to trade where they have been accustomed to do business. That is the position in regard to the Commonwealth and the States. If we force them out of the post-offices, many of their customers will cease to bank with them. Again, I do not think it is fair that the Commonwealth should enter into competition with the States in these matters. If the Savings Banks were being conducted by private individuals, who were making fortunes out of them, the Commonwealth Government might very well say that the profit derivable from this business properly belonged to the public. But, at present, whatever money is made out of the
Savings Banks by the States is spent in developing the States themselves. Now the Commonwealth is to enter as a competitor.
– Why object to the Commonwealth doing what private individuals can do?
– I do not object to the Commonwealth doing anything within its own domain. But I object to its entering into competition with the States and trying to injure them. The States themselves believe that that will be the result. There must be some truth in it. There would not have been a unanimous outcry against these provisions, and a request to the Labour party to drop them, unless it were believed that an injustice was being done. I hope that, even at this late hour of the session, honorable senators will insist on some amendment erasing the portion of the Bill to which I have directed attention.
– I shall not speak at any length upon this measure, though I consider it to be of sufficient importance to justify a debate at reasonable length. The Leader of the Opposition, and some who have followed him, have laid particular stress upon one feature of the Bill to which the honorable senator, who has just resumed his seat, has so strongly objected - namely, the Savings Bank clauses. I notice, however, that, while nearly every honorable senator opposite who has spoken has said that he had no particular objection to the other portions of the measure dealing with the commercial side of banking, they have all devoted a considerable amount of time, attention, and argument to urging that the Bill cannot possibly be a success, that it is wrong, lock, stock, and barrel, and that it is bound to result in failure. While speaking in this lugubrious fashion, and condemning it, they say that they do not object to it ! Senator Gould said, for instance, that this Bill cannot bring about the establishment of a successful banking institution ; that this bank will never be able to compete with the other banks. In many ways he made out that the whole scheme is bound to be futile. One observation made by Senator Millen showed, notwithstanding that he claims to lead the party in the Senate which represents those who are possessed of all the commercial ability in the Commonwealth, that he had a very crude notion indeed of the cause of the bank failures in 1893. He argued that they were due to the fact that money had been lent on bad securities, and that, therefore, there was a shortage of coin in the banks. I do not recollect the exact details as to the amount of coin which the banks had in their coffers at the time. I have not looked up the figures. But, if my memory serves me rightly, there was a superabundance of money in Australia at the very time when the banks were toppling down on every hand. A shortage of coin was not the cause of the failures, any more than a shortage of grain at the time of the great Irish famine- was the cause of that disaster. When thousands of people were being starved, shiploads of splendid food were being sent out of the country. In like manner, in times of the greatest stringency, the shipments of gold and bullion to other parts of the world are exceedingly large. Consequently, Senator Millen’s idea that there was a shortage of sovereigns hardly gives support to his claim to pose as a banking expert. As a matter of fact, we know that the bank failures were due to a general withdrawal of confidence in the institutions. That lack of confidence led to a run upon them, and the run led to their failure. Senator Millen said that it is impossible to run a bank on confidence. If there is one thing that is more certain than another in connexion with this subject, it is that you cannot run any bank without confidence; and it is perfectly certain that it was the withdrawal of confidence which led to the suspension of the banks. I remember that at the time of the banking crisis, Premier Dibbs, of New South Wales, had a conference with the general managers and chief directors of the banking institutions of that State. A Bill which some time previously he had offered to have passed, to secure the greater safety of those institutions, was presented to them again. He said to them, “Although you rejected this Bill when it was offered to you some time ago, I will introduce it into Parliament again under one condition. That is, that you allow it to be clearly understood that you will not permit any bank in this city to fail.” Forthwith they agreed to his terms, with the result that the City Bank, which was then tottering, was prevented from suspending payment. It was the guarantee embodied in that measure, which Sir George Dibbs, with the aid of his majority in Parliament, carried, which prevented all the other banks, no matter how large their capital, and how great their securities, from toppling over, as others had done a little while previously. That shows that it requires no expert to make clear the fact that the safety of banks, and of all other financial institutions, rests primarily upon confidence, and by no authority can that security be guaranteed in such a war as to restore confidence better than? by a National Parliament. I do not intend to take up the time of theSenate by replying to all the arguments that have been brought forward. But I wishto say something about the Savings Bank clauses of the Bill. I, in common withother members of the Opposition, trust that there will not be any conflict of interestsbetween the States and the Commonwealth. I think that honorable senators oppositeare very largely raising a bogy in making such a terrible song about this aspect of” the measure.
– Especially after thePrime Minister’s pronouncement.
– Notwithstanding the protests of the State Premiers, who, perhaps^ have a very meagre and superficial knowledge of this measure-
– They know what it. means all right.
– Notwithstanding all their protests, I think that a modus vivendiwill be found by which we shall be able tohave a perfect understanding between the Commonwealth and the States; so that, instead of there being any cut-throat competition, these institutions will become part and parcel of the general scheme within a short period of time. I wish to reply particularly to two objections that have beenraised. One is that no section of the people has asked for this portion of the Bill, and the other that it is not wanted, that the requirements of the Commonwealth are amply met by existing State institutions. In the first place, as Senator E. J. Russell remarked just now, by way of interjection, the Political Labour Council,, which is the political representative of the Labour movement in Victoria, has several times demanded that there shall be established a State Bank, with unlimited powers.. Surely “unlimited powers” is wide enough to express everything. In regard to the contention that these provisions are not required, I may remind the Senate that complaints have been repeatedly brought forward that persons situated in theFederal Capital Territory are unable to> bank their savings at the present time. Anexplanation made by one of the responsible Ministers disclosed that the State of New South Wales has no power to establish branches of the Savings Bank outside its. own borders. Every honorable senator knows that the area embraced within the Federal Capital Territory is legally and technically no longer part of the State of New South Wales. It is just as much separated from New South Wales technically and legally as if it were in another part of the Commonwealth altogether.
– Would the honorable senator confine the Commonwealth Savings Bank clauses of the Bill to that Territory?
– I simply say that there is one instance to prove that we require to give the Commonwealth Government power to establish Savings Banks. As works in connexion with the Federal Capital are proceeded with, there will be thousands of men, the majority of whom belong to the working class, for whom Savings Banks are supposed to be specially instituted, who will require to have such an institution there. In addition to that, we have an enormous area of over 500,000 square miles in the Northern Territory. It is part of the policy of this Parliament, and of this Government, to settle and develop that Territory. There, again, is a Territory which will have no power, until a separate Constitution is granted, to institute anything of the kind for itself. Then we have the Territory of Papua, which is being rapidly developed. This Parliament has under its direct jurisdiction an enormous area which it is its primary business to devise means to settle and develop, and, of course, Savings Banks will be a necessary feature of modern development. That shows that for portions of the Commonwealth, for which no State could provide such institutions, this measure will be necessary. I wish to say a few words regarding the State Savings Banks. In New South Wales we have an institution which is not a Government institution at all. When the run on the private banks occurred, a run commenced on that large and flourishing institution known as the Barrack-street Savings Bank.
– The Government appoint the board to manage the bank, and guarantee its solvency.
– The honorable senator, who was also a member of the State Parliament at the time, will recollect that when the run did commence, the Premier, Sir George Dibbs, mounted the steps of the bank!, and announced to the assembled crowd that a Government guarantee was be hind the institution. That at once stemmed the rush, and the institution has sailed on peacefully ever since.
– There has been a run on the bank since then.
– What really kept the institution secure and safe, and prevented the run from becoming serious, was the fact that the Premier of the State had publicly announced that, although it was a private institution, in a sense, a Government guarantee was behind it. In any time of crisis it is to the State that the boasted wellmanaged private institutions, whether they are in France, or Germany, or Russia, or Italy, look. It is to the State that they come for security and guarantee. It was the Banking Act of 1893 which not merely stopped a temporary run on the whole of the banks in New South Wales, but prevented them from- crumbling to dust, because it made the bank notes a legal tender for a limited period. It was the exercise of the powers of the Government and the Parliament of the State which saved the banks from utter ruin. The most solvent institution in the State could have been dragged down by the panic-stricken population if Parliament had not sat up all night to see that necessary legislation was passed as swiftly as possible, with the Governor waiting, before the ink was actually dry on the Bill, to give his assent. That sort of legislation shows how absolutely necessary it is that there should be a State or Government behind even the boasted wellmanaged private institutions if they are to survive times of public peril and crisis. While the Ministry and party are pledged to the leading principles of the measure, in my opinion its details should be open to reasonable amendments. We should, as far as possible, avail ourselves of any commercial or business knowledge possessed by honorable senators, no matter where they may sit. As regards details, there should be no hard-and-fast adherence to the Bill as printed. I agree, to some extent, with the criticism which has been levelled against vesting the management of the bank in one man. I do not know why that proposal has been made. Notwithstanding the terrible Caucus, about which we hear so much, I cannot claim to have any knowledge of this system having been indorsed by the whole party. I should very much prefer to see a board of directors appointed, though I am not particular as to the name by which they should be called. I believe that in the case of a measure of this kind there would be greater safety in numbers ; but in matters of detail we should welcome any improvements which may be offered in calm and reasonable counsel. I think that members of the Opposition rather defeat any aim which they may have in that direction by showing a bigoted hostility to the principles of the Bill. We are told that no other country has a bank on the lines of our proposed bank. But that in itself is not a reason for condemning the proposal. There are many institutions which Australia has led the world in establishing. While I do not possess that “jingoistic” spirit which imagines that everything at does is necessarily the best, yet I consider that the fact that a precisely similar institution does not exist anywhere else is no argument why we should not establish such an institution. A very large proportion of the enormous sum, aggregating about ^60,000,000, which is deposited with the Savings Banks, both State and semi-private, goes to assist in building up the business of the private banks.
– Does it?
– Yes. An honorable senator on the other side said that it was right that when the savings of an individual exceeded £[200 or £300, they should be’ invested elsewhere. Notwithstanding that a large proportion of these savings is invested in Government securities, a good deal of the funds finds its way into the private institutions, and helps in a great measure to build up their profits. I think that if, instead of that, we combine the ordinary banking business with the Savings Bank business, the one institution, even though it should keep separate accounts, will tend to economy, to build up the business of the bank, and in every way to help it to become in time the largest and greatest institution in the Commonwealth. The argument on the part of honorable senators opposite, that it is not proposed to start the bank with as much capital as is possessed by some of the larger private institutions, seems to me to embody the idea that the Bill is like the laws of the Medes and Persians - never to be altered. Surely, as experience accrues, Parliament will be at liberty to amend the measure if that should be found desirable, by widening the powers of the bank or increasing its capital ! On several occasions many of the larger banks have increased their capital, and there is no reason why, if ^1,00*0,000 is found insufficient for the Commonwealth Bank, it should hot be increased at a future period. Senator Gould thinks that his party will score very largely at our expense by the disunion which he sees being maintained! owing to some imaginary - largely newspaper - friction over this matter. I ami afraid that he cannot lay that balm to his wounded soul. I expect that, long before the next election, it will be found that the Commonwealth and the States, in regard to the Savings Banks and all other branches which come under the purview of this Bill, are sailing along practically harmoniously, and promoting the best interests of the people of the Commonwealth, which we may claim to have as much at heart as those who are fighting this Bill in the imaginary interests of the States.
– - I do not object, in one way, to the establishment of a Commonwealth Bank. As long as I can remember, the establishment of a State or Commonwealth Bank has been a plank of the Labour platform. But I do think that it devolved upon the Government to prove that there was a want to be supplied in this way which the present banks did not supply. I have not heard any information given to show that it is necessary to establish a bank for that reason. It is a fair question, I think, to ask whether the existing institutions give all the banking facilities which are required by the public. If they do not, I take it that there is room for another bank. But if it is desired to help the public to get cheap money, why should .we not go into the pawnbroking business ? A great many poor persons have to avail themselves of that system, and to pay a heavy rate of interest on the money which they get. Why not give them some assistance?
– Will you support a Bill for that purpose?
– Again, there are a good many money-lending offices which fleece very heavily those who apply to them. Why not start money-lending offices ?
– Will you support us?
– Let the honorable senator wait until I get into office, and then he will see what I shall be prepared to do. I cannot promise the Minister any support whatever in that regard. If the Government desire to provide facilities to enable people to obtain cheap money from ordinary banks, why not take action in that direction ? Such. action would relieve many persons of their liability to pay exorbitant rates of interest. Some of them pay as much as 100 per cent.
– Are they paying as much as that?
– Yes. I have seen cases reported in the press in which that rate of interest has been payable. So far as the proposed bank is concerned, it is like a chip in porridge - it will neither do much good nor much harm:. But I cannot understand why the Government have not adopted the suggestions of the great financial authority to be found within their ranks. In connection with the proposal to establish a National Postal Bank, that gentleman recommends that its capital should be represented by 12,000 shares of £1,000 each, of which at least 6,000 shares should be in the hands of the Commonwealth Government, while of the balance no State Government should hold more than 1,000 shares. Then I find this proposal -
That the Commonwealth and State Governments holding shares shall be jointly and severally liable in respect of all transactions of the bank.
This was to be a kind of co-operative business between the Commonwealth and the States. But there is nothing of that character in the Bill which we are now considering. Then it was provided -
That the Board of Management of the bank shall consist of a Comptroller-General, representing the Commonwealth, and one representative from each of the subscribing States.
Here was a board of management which was going to control the bank and the manager. Then there was this proposition -
That the Treasurer of the Commonwealth shall be entitled to attend all meetings and inspect all proceedings of the Board of Management.
That the General Post-office in each capital shall be the head office of the bank in that State, and that any post-office within the Commonwealth carrying on the business of a moneyorder office may be constituted a branch of the bank.
Then we were told -
That the regulations requisite for controlling the bank reserves shall be drawn up by the Board of Management of the bank and the Council of the Associated Banks of Australia, and approved by the Governor-General in Council.
Further, it was provided, with regard to a sinking fund -
That the trustees constituting the board shall be Chairman- The Comptroller-General of the National Postal Bank, the Chief Justice of the Commonwealth, the President of the Senate, the Speaker of the House of Representatives, the Auditor-General, and the Chairman of the Associated Banks.
Here we have elaborate provisions for the establishment of a bank and for safeguarding its management and operations. But none of these powers are contained in the Bill which is now under consideration. Clause 7 of the measure reads -
The bank shall, in addition to any other powers conferred by this Act, have power - (a) to carry on the general business of bank- ing;
Those are exactly the lines upon which an ordinary bank, under a charter, conducts its business. During his speech this afternoon, Senator Lynch stated that the people are paying too high a rate of interest for their money. Does he mean to imply that the proposed Commonwealth Bank will offer better terms than can be obtained at present? I have no doubt that it will be able to secure plenty of business, provided that it offers better terms than do the other banks. I have not the slightest doubt that there will be any number of individuals anxious to obtain overdrafts from this bank, who find it impossible to obtain them from other banks. In South Australia there is a stamp tax, and every cheque that is drawn has to bear an impressed stamp. Will cheques drawn in every State have to be stamped in the same way?
– Not if they are State stamped.
– Then the Bill will come into unfair competition with other banks, because, whilst those banks will have to pay stamp duty upon their cheques, the cheques of persons banking with the Commonwealth Bank will escape that tax. It seems to me that if the bank is to carry on its business legitimately, wherever a State stamp tax is operative these cheques ought to be stamped in the same way. I would also point out that when the South Australian State Bank was established it was really a loan bank. It was urged at the time that its creation would have the effect of reducing the rate of interest which obtained in that State, and that it would confer many advantages upon the people. But interest, like everything else, is affected by the law of supply and demand. When money is plentiful the rate of interest is low; when money is scarce the rate of interest is high. Then, again, the proposed bank is to be governed by one man, whose powers are to be absolute. There is to be no board of directors. In the case of an ordinary bank the shareholders elect a board of directors, who appoint a manager. But it is for the board of directors to shape the policy of the bank, and to declare how its business shall be carried on. The manager has simply to give effect to their policy. Under this Bill, however, the Governor of the proposed Commonwealth Bank is to he absolute. He is to decide everything for himself. He is to be appointed for a certain term, and is to continue in office during good behaviour but no provision has been made as to the salary which shall be paid him. The other day, when the Industrial Registrar was to be appointed, his minimum and maximum salary were clearly set out in the Bill. But when the Government are about to appoint a man to so important an office as that of Governor of this bank, not a word is said as to the salary which is to be paid to him. When we ap-. pointed the High Commissioner his salary was fixed in the Bill authorizing his appointment. But here the Government have departed entirely from that principle.
– Are they going to call for applications for the position?
– I do not know whether the Government have a man in their mind or not.
– I think that they have.
– If the Governor of this bank makes a mistake, as the result of which losses are incurred, those losses will have to be made good by the general taxpayers. Senator Gould has already referred to that very peculiar provision - clause 33 - which affirms that if a man has any claim upon the bank he cannot sue the Commonwealth, but must sue the bank, although the Commonwealth has to make good any loss which may accrue. I enter my protest against the Savings Bank’ clauses of this Bill. I do not object to the other portion of it. If the Government choose to enter into banking business, and if they can do it better than can other banking institutions, they will get the business. If the Bill be confined to that business it will not accomplish either much harm or much good. But my own opinion is that its provisions in respect of the establishment of a Commonwealth Savings Bank will work unjustly to the States. The Government of every State has protested against the establishment of a Commonwealth Savings Bank, but no attempt has been made to reply to their protest. I am aware that Mr. Fisher has said it is peculiar that the depositors in the Savings Banks are remaining quiet. But if they are not protesting, the State Governments are doing so, and surely those Governments are voicing their views.
– Should not depositors be allowed to choose between the State Savings Banks and the Commonwealth Savings Bank?
– We have a right to consider that the State Governments, when they protest against this legislation, represent the voice of their people.
– I will not say that.
– I will. It is a fair inference to draw in a case of this sort. So far as Savings Banks are concerned, sufficient facilities already exist in the Commonwealth. These State Savings Banks are popular, and I know that they are paying a reasonable interest, and that their funds are safely invested. I have never heard any complaint of their mismanagement. They possess the confidence of the public, and that fact is shown by the amount of the deposits which they hold to-day - over £[60,000,000. An average of .£15 per head of the population is held by the State Savings Banks. This shows that use is being made of these banks, and that the public have confidence in them and in the way in which their funds are invested. I wish to know why the Government should desire to establish Savings Banks in competition with those carried on by the States. I have so far heard no reason for it. The VicePresident of the Executive Council, in introducing the Bill, drew upon his imagination to inform us as to how banking came into being, and was developed. But I failed to hear from him any reason why the Government should desire not only to go in for the business of a general bank, but also to mop up the business of the Savings Banks of the States. Is it because they realize that the capital of £1,000,000 proposed to start the Commonwealth Bank is too small? It looks as if they desired to rake in the savings of the people for the use of this bank. They expect, probably, to receive a larger amount from Savings Bank depositors than from ordinary deposits and current account balances.
– When the honorable senator says that the Commonwealth Bank will “ rake in “ the savings of the people, and make use of them, does he not see that the State Savings Banks might do the same?
– The State Savings Banks are not doing that. I remind Senator Barker that this Bill does not provide for a maximum deposit, nor for a maximum upon which interest shall be paid. It seems to me that it is proposed merely to draw money from the State Savings Banks. What is to be done with the money which is to be paid into the Commonwealth Savings Bank ? Does Senator Barker know ?
– The same as is done with other moneys.
– The honorable senator may suppose so; but is that provided for in the Bill? The State Savings Banks invest the money they receive in a certain way-
– D - Does the honorable senator not think that the money received by the Commonwealth Savings Bank will also be invested?
– If so, that should be provided for in the Bill.
– The The honorable senator is assuming that the people who will have charge of the Commonwealth Savings Bank will be fools, and will allow the money to remain idle.
– No; I think, on the contrary that they will be rather sharp. They probably know what they are going to do with the money ; but I do not think that Senator Stewart is quite satisfied as to how they will handle the money they receive. Money paid into State Savings Banks is invested on mortgage of freehold property, Government and municipal bonds, and any other security permitted by the Act under which they work. Whatever interest is earned by the banks after paying working expenses is divided amongst the depositors. I find that depositors are to be paid interest under this Bill, but how is the amount of interest to be arrived at? Is it to be paid out of profits of investments, or is it intended that at some time of the 3’ear the Government shall say, “ We will give so much per cent, on these deposits “ ? In the management of the State Savings Banks there is an exact: return kept of the money earned by investments, and after working expenses are deducted, a rate of interest is declared and paid to the depositors. I see no clause in this Bill to provide for anything of the kind.
– A - And the honorable senator assumes that the money will be allowed to lie idle.
– I can quite understand that the Government may take the money and use it in Western Australia, Tasmania, Queensland, or wherever they have a use for money, without keeping it separately invested, and paying interest to the depositors from the interest which it earns. I am viewing this matter as a common-sense business man, and I say that, if this bank is established, it should be run on strictly business lines, and all its funds should be properly invested and accounted for. It has been said that the. post-offices of the Commonwealth will not. be immediately closed to the State Savings. Banks ; but I am inclined to think that theState Savings Banks will in due time get notice to quit.
– In due time, of course.
– I thank the honorable senator. So that, although they may be tolerated for a little while, the States Savings Banks will ultimately have to go out.
– Unless they enter the partnership which is open to them.
– I should like the honorable senator to refer me to any clause in this Bill which offers them a partnership.
– The Prime Minister offered it to them.
– I am dealing with the Bill which is before the Senate.
– You cannot offer anything until you have something to offer.
– When the Government, under this measure, has something to offer, I wish to see provision made to authorize an offer. There is no such power given by this Bill. The Bill is incomplete, and it is our duty to make our laws as complete as possible.
– It will be all right.
– I know that some people will take everything on trust. It is admitted now that, sooner or later, if not immediately, those in charge of the States Savings Banks are going to be given notice that the Commonwealth post-offices are no- longer available for the conduct of their business. I do not believe for a moment that the States will take this lying down. I think that the States Savings Banks may be seriously hampered by the operations of the Commonwealth Savings Bank. If the post-offices are closed to them, and no other facilities are afforded the people for doing business with them, there will be large withdrawals of money from the States- Savings Banks, especially in the country districts. I believe that loss will be caused both to the Commonwealth and States Savings Banks if there is to be this kind of competition between them. We sometimes hear a good deal of criticism of these institutions, but I notice that the working expenses of the States Savings Banks cannot be complained of, because they are really very low. I think it is impossible for a Commonwealth institution, giving the same conveniences and doing the same business, to carry out the work at a lower or as low a rate as the States Savings Banks are now doing. The working expenses of the Savings Bank of South Australia - and I do not say it is better managed than are those of the other States - are as low as 6.4 per cent., according to the figures for last year. The Government have not yet shown how depositors in the Commonwealth Savings Bank are to receive greater conveniences than the State Savings Banks are now giving. Probably they have overlooked the fact that the State institutions have established a means of exchange between the different States, and that depositors travelling from one State to another can, at a very low cost, draw in one State money deposited in another. I find that State Treasurers make use of the Savings Banks funds to carry out local works for the benefit of the public, and if these banks are seriously interfered with this advantage will be lost. What has happened so far in South Australia? I find that the Savings Bank of that State has lent to the State Government £26,231,000, of which £4,797,000 is still owing by the Government. It is clear, therefore, that these banks have been a considerable convenience to State Treasurers when they have needed money. The South Australian Savings Bank has also lent £[1,687,000 to the people of the State, on the security of mortgages of freehold estates, and has £746,000 deposited in the various banks trading in Australia. I say that if that bank is interfered with, it may at once have to cease lending money on mortgage, as its funds may be withdrawn, and it may be no longer able to do so. The fact that it has been amongst the largest lenders of money on mortgage has been the means of keeping down the rate of interest, and, in that respect, the State Savings Bank has done eery good work. I shall be able to refer to the clauses in detail when we get into Committee on the Bill. Clause 47 is a very strange one. It gives the Governor of this bank absolute judicial powers -
Where a person having any money deposited with the bank by way of Savings Bank deposit becomes insane or otherwise incapacitated to act, and his insanity or incapacity is proved to the satisfaction of the Governor, and the Governor is satisfied of the urgency of the case, the Governor may authorize the payment of the money to the credit of the depositor to any person he thinks proper, and the receipt of that person shall be a good discharge to the bank.
I also call attention to the next claus? -
Where a person fraudulently represents himself to be a depositor and presents the depositor’s pass-book, and complies with the rules of the bank, and thereby obtains any money belonging to the depositor deposited with the bank by way of Savings Bank deposit, the bank shall not be responsible for the loss sustained.
If I have a credit account with a bank, and somebody forges a cheque, the bank is responsible for the loss, and has to make it up to me. Why should the Commonwealth Bank shelter itself in this way against paying the depositor, if his name is forged on a cheque?
– Do not the Savings Banks do that now?
– I know of no Sav’ings Bank that is protected in this way.
– If a signature is forged, but the bank-book is produced when the bank pays the money, it is not responsible.
– Surely the bank is responsible under such circumstances. If the Commonwealth is going to establish a bank, it should do it on the same terms as apply to other banks. I shall draw attention to other provisions in Committee.
– I am in favour of the establishment of a Commonwealth Bank. It will be a good departure. If the institution be carefully managed, I believe that its influence will have a steadying effect upon the financial affairs of the Commonwealth. No doubt, a great deal depends on the management. I am satisfied that the bank will receive a large amount of deposits from the people of the Commonwealth, because it will have behind it a greater security than any other bank in Australia. It will have the whole resources of the Commonwealth behind it; and the Commonwealth, as far as we can see at present, is not likely to fail to meet its engagements. Even if it did so temporarily, I am sure that its responsibilities would be met in full ultimately. But the very fact that the bank will attract a large amount of deposits will necessitate finding outlets for the money deposited. That is where the bank’s difficulties will arise. Unless the management be very careful, losses may easily be sustained. As far as I can discover, the bank win enter into competition with the existing financial institutions. It must, at least, pay as much interest on money borrowed as do the private banks, and must give borrowers’ “the same facilities if it is to hold its own. I have heard it suggested that probably the Commonwealth Bank will borrow at higher rates of interest, and lend at lower rates than the private banks. I do not think that it will be safe to attempt anything of that kind for some time to come.
– It would be very foolish to do so.
– It would be a great disaster. The bank will have the right to advance money on land. I may be wrong, but I believe that land values in the Commonwealth at present are largely inflated. 1 should much prefer if the water had been let out of those values by means of an effective land values tax before the Commonwealth Bank set out to lend money on this class of security. I know that private banks are advancing largely upon landed property. Every one of us knows that a land values tax has no more bitter opponents in the Commonwealth than the financial institutions. They are unanimously opposed to anything in that direction, for the very palpable reason that they know perfectly well that a land values tax will temporarily depreciate the value of their securities. They do not wish to risk that even temporarily, notwithstanding that they are sure that ultimately they will be recouped. I would therefore advise very great care on the part of the Commonwealth Bank in respect to advancing money upon landed securities. I am not altogether sure that it is wise to leave the control of the bank in the hands of one man. No matter how capable he may be, it would be better for him to have two or three safe men to advise him in the management of the business. I do not know of a single instance of a bank being run solely by one individual. I never heard of a bank that had not a board of directors in addition to its manager. Control of that kind is necessary in the case of the Commonwealth Bank. The Governor in a few years will have large sums of money to handle. The ramifications of the bank will extend throughout the Commonwealth. I consider it to be absolutely necessary, in the interest of the public and of the depositors, that the Governor should have about him, or should have access to, men capable of advising him as to the conditions prevailing in various parts of the Commonwealth where advances may be wanted.
– Would not the inspectors assist the Governor in that?
– It will be necessary to have inspectors.
– They will not inspect . the Governor.
– With regard to the Savings Bank portion of the Bill, which has especially evoked the criticism of the Opposition, I think that the great body of depositors .ought to be thankful to the Commonwealth for proposing to establish a Savings Bank. In Queensland, the result of State intervention has been that the amount upon which the Savings Bank will pay interest has been increased from £200 t0 £5°°- I am sure that the establishment of the Commonwealth Savings Bank will stimulate the State Savings Banks to greater liberality in the way of interest payments. Why the States are opposed to the Commonwealth entering into this field is quite apparent. Take Queensland, for instance. The Queensland Government, on the 30th June last, had the handling of £2,135,000 of Savings Bank money. That money was on current account in the Queensland National Bank. The bank paid to the Savings Bank 2 per cent, interest per annum on account of that money.
– What were the total deposits against which the £2,135,000 was held?
– I find that the deposits more than equalled the withdrawals in every year during the last ten years, except two. Last year, the deposits were almost £600,000 more than the withdrawals. Of course, it was always desirable to have a reserve, but I think that a smaller one than £2,000,000 might have been kept at account current for the purpose. In 1893, which was the panic year, the withdrawals were greater than the deposits by £400,000. The total sum to the credit of depositors in Queensland is £[6,478,000- Of that sum, £[4>337,°°° is invested in Government securities. The balance, as I have explained, is held on a current account in ‘ the Queensland National Bank, which allows the Government 2 per cent, interest for it. We can all understand the objection of the Queensland Government to anything which is likely to deprive them of the use of any portion of the ,£2,000,000, and I suppose that the same thing applies to every State. In establishing a Savings Bank, we are undoubtedly doing something which may be prejudicial to the finances of the States ; but I am not concerned in particular about that. If the Commonwealth can do the business, it has just as much right as one or all of the States to do it, and get the use of this money.
– Squeeze the States all you can.
– There is no squeezing about the matter. It is the people of Australia who are to be secured. If they prefer the security of the whole of the Commonwealth to the security of a single State, they are quite entitled to do so. Senator Millen asked, I think, how the interest on the money was earned in Queensland. Four million pounds is invested in Government securities, which produce an interest of £[133,000 per annum. The interest allowed by the Treasury on account current to the Queensland Bank amounts to £[40,000 roughly. There are other items which bring the total income up to £[184,000. The amount paid in interest was £161,000, and the expenses amounted to £22,000, making a total of £183,000. There is a balance of £[96,000 to the credit of the profit and loss account. I think that the deposits in the Savings Bank branch of the Commonwealth Bank should not be used in the general business of the bank. We ought to be secured in the same way as is done in Queensland, where the Savings Bank Act provides that two-thirds of the surplus deposits must be invested in Government securities. So far as I have been able to gather, the intention is to use the money of the Savings Bank in the same way as the money of the ordinary bank. That would, I think, be highly improper. Some provision of the kind I have suggested should be made, and I have framed an amendment with that end in view. If there is to be competition for business, and, perhaps, the manager reaching out here and there and everywhere for business, the temptation should be, as far as the Savings
Bank is concerned, taken away from him by some security of the kind I have suggested.
– Would not the whole power and wealth of the Commonwealth be behind the bank, just as it would bebehind the Commonwealth security ?
– I know that, many honorable senators place a greater value on that security than, perhaps, upon analysis, it is entitled to. What are the resources of the Commonwealth in this connexion? The only resource it hasis its power of taxation. Indeed, lt is in a worse position than the States. TheStates have land, railways, and possessions of various kinds, all of which are, more or less, liquid assets.
– And all of which we may tax.
– I venture to say that, if the Commonwealth begins to tax the people to make up a deficit of the National bank, they will very soon begin to object. Notwithstanding that the resourcesof the Commonwealth are behind the bank,, we ought never to forget that the only resource we have is our power of taxation.. If the Commonwealth Bank incurs losses,, we must tax the people to make them up.. There is the whole thing in a nutshell.
– If we invested the money of- the Savings Bank in Commonwealth securities, and it was misspent, we should have to tax the people to make up the loss just the same.
– Undoubtedly. This provision was considered necessary in connexion with the Queensland Savings Bank. Of course, there is this difference between the two institutions, that, whereasthey have no general bank, we will haveone. In any case, I think that a provision of this kind would have a steadying effect’ upon the management of the bank, andwould, probably, give greater confidence to the depositors. I shall be very glad if honorable senators can see their way to support my amendment in Committee. In any case,. I support the second reading of the Bill, and hope that the bank will be a success ;. indeed, I am sure that it will be, if the management is at all careful and efficient.
– - I have a pile of notes on this interesting and difficult question of establishing a Commonwealth Bank; but I do not propose to use them, because a great: deal of that which can be said on the subject has already been said, and we are- pretty familiar with what has not been said. I propose, however, to make a few observations with regard to broad principles only. It has been thrown out from the other side that the Commonwealth Bank is part of the financial policy of the Labour party, and, also, that some honorable senators on this side are not opposed to a Commonwealth Bank. Putting the two things together, we are asked, “ Why do you oppose the establishment of the Commonwealth Bank?” The answer is, that no National bank has ever been established on the lines on which this bank is to be built up. During the long years that the Labour party were ‘ in Opposition, when they devoted themselves to the question of public finance, they never gave an intimation that the bank was to be constituted and managed on the lines now proposed. For a long time the Minister of Home Affairs was regarded as the financial oracle, or, at any rate, to some extent, the spokesman of the financial policy on which, when the party came into power, such a bank would be constructed. A reasonable anticipation was formed by political parties, and the public generally, that if the Labour party did get into power, either that scheme, or a scheme something like it, would be adopted. But contrast the policy and the constitution of a bank foreshadowed by a prominent member of the Ministry with the proposal” now before the Senate. It is evident that the constitution for the National bank which is now proposed is almost in the nature of a leap in the dark. The proposal of the Minister of Home Affairs was put forward at a Labour Conference in Brisbane, and so much did the party think of his policy for the foundation of a Commonwealth Bank that it was made the subject of a parliamentary paper. Both the party in power to-day, as well as their supporters and the general public, had reason to anticipate that any proposal for the constitution of a National banE would follow on the lines sketched in that paper. But this measure practically turns down the whole of that scheme. For that reason alone this Chamber has a right to reject the Bill, because, until it was placed before us, we had received no intimation that such a radical departure was contemplated from the policy which had been foreshadowed by a leading member of the Government. Up till the beginning of the present session, the only announcement which had been made was that the Ministry intended to establish a Commonwealth Bank.
– Blessed are they who expect nothing?
– The trouble is that Senator Givens and his friends did not preach that doctrine before the general elections.
– Precisely. The honorable senator did not make that very suggestive remark on the public platform, nor did he give us any intimation that this was the kind of Banking Bill which the Government intended to introduce. Whilst I admit that there are some sound principles embodied in the measure, I intend to vote against it on the first opportunity for the reason which I have stated. There- is another aspect of this question to which I desire to refer. The history of National banks, and especially of that of the United States, is a warning to every Parliament in the world to be exceedingly careful in establishing and managing such institutions, and in determining how far they should be related to the financial policy of the Government itself. I do not believe that in the history of either its success or failure any National bank in the United States has been founded upon the principle of a one-man control. Besides their close relation to the State Governments, each of these institutions in America was subject to an independent and outside control. This circumstance saved some of them when others were tottering to their fall. I admit that this form of control often attracted a bank to financial shoals, where it was wrecked. But I repeat that there is no instance upon record in which the management of these banks was subject to the control of one man. We must all recognise that the greatest financial genius ever born will, at times, make mistakes. ‘ That is the radical defect in this Bill. The Government will not listen to the advice of some of their most faithful supporters by guarding against what may prove to be a very grave error. Of all the nations in the world to-day the two soundest from a financial stand-point are the United Kingdom and France. Now, it is indisputable that these two countries have been largely enabled to strengthen ther financial position as a result of the advice and co-operation of those two great banks - the Bank of England and the Bank of France. Every honorable member will hope that the Commonwealth Bank will discharge similar functions in the case of the Commonwealth to those which the Bank of France has discharged in the case of France, and which the Bank of England has discharged in the case of England. Both these institutions are almost entirely free from political influence, and in every one of their departments of management, they are’ aided’ by an assistant governor and officials of the highest repute in the financial world. In connexion with ‘the Bank of England, there has never been a oneman control.
– Is it not a fact that both England and France had to go to the rescue of those two banks at one time or other?
- Senator Walker, in giving us his interesting history of those banks, pointed a moral by which the Government should profit.- If they are determined to found a Commonwealth Bank to assist them in their financial policy, why should they not seek to give effect to a principle in its management which has been found so beneficial in the case of these two banks, which, in their respective countries, have done almost as much for their financial development as have the Army and the Navy. There is only one other remark that 1 desire to make. It has reference to the proposed establishment of a Commonwealth Savings Bank. I do not intend to repeat the protests which have been uttered both here and elsewhere in regard to that proposal. I merely wish to say that I heartily indorse them. I believe that the Government are taking a step which is tantamount to the digging of their own political graves - graves into which they will fall “ unwept, unhonored, and unsung.” Every State Premier has protested against the Savings Banks clauses of this Bill. The Leaders of the Labour party in three of the States are unanimous in their opposition to them. Do the Government think that they understand Labour finance better than do the State Premiers or that they understand the duties and obligations of the State Premiers to their own parties- in the respective States better” than they do themselves. There is not a single Minister or supporter of the Government who is game to put forward any such claim. Sometimes the objection is made that these people, though in office, do not represent the people of the States. But they are the official and responsible representatives of those people, and have been placed in power to give effect to a certain financial policy. I believe that in th< three States which have been referred to they truly represent the financial ideals of the State Labour parties.
– To give effect to a policy.
– I “hope the honorable senator will not draw such finnicking distinctions. Whether it be a policy or the policy, we find Labour Ministers here speaking with one voice, and Labour Ministers in the States speaking with another.
– The honorable senator is indorsing the financial policy of the State Labour parties.
– I am indorsing very strongly that part of their financial policy which calls upon the Commonwealth Government to keep their hands off the State Savings Banks. I have been asked by the most prominent of my constituents to make as vigorous a protest in this matter as I can. I should be only too willing to do it at much greater length were it not for the condition of public business in this Parliament. I can only describe the provisions in this Bill for the establishment of a Commonwealth SavingsBank as a “bolt from the blue,” hurled by the Government at the people of Australia. The establishment of such an institution was never mentioned in any statement of their policy. It never, at any stage, formed a part of the Labour platform, State or Federal, objective or fighting. No mention has even been made of it in their political campaigns, or in their manifestoes. There . has never been a single indication that when the party got. the power, they would put their hands on the States Savings Banks. I challenge, honorable senators opposite to refer me to any official utterance ever made on behalf of their party before the introduction of this Bill to indicate that El-ey had the slightest idea of putting their hands on the Savings Banks of the States. I repeat the expression which is the only one that fits the occasion, that it came to us like a “bolt from the blue.” When, a political party proposes to make a great change in connexion with any important portion of its policy it is usual to indicate to the people who will be affected by it. what change of policy is proposed, and the. evils it is intended to guard against or remove. The reason for this is that we have, a democratic form of government which rests on the will of the people, and the will of the people cannot be expressed upon. any political policy until the leaders of the political party submitting it have explained it in such a way that the people will be able to form a judgment as to whether they will benefit by it or not. What opportunity have the people of Australia had prior to the introduction of this Bill in another place, of knowing that the Government intended to enter into competition with the State Governments in connexion with the means afforded for the investment of the savings of the people? It might be advantageous, though I confess I cannot see a single advantage likely to follow from it, but even if it could be proved beyond the shadow of a doubt that the State Savings Banks are not fulfilling their purpose completely, that they are hampering the performance of some Commonwealth function, or control a business which could be better conducted by the Commonwealth, the Government would still be bound, before they took this course, to let Parliament and the people know that they intended “to do so, and to ask upon so important an issue for the verdict of the people. I say that this is a policy born in the da,k. The people have never been consulted upon it, and, for that reason, it seems to be worthy of being stigmatized as the wholesale, shameful, political larceny of one of the great advantages at present possessed by the people of the respective States.
– It is now about half-past eleven o’clock, and I understand that the Government intend to go through with the Bill to its completion. I shall not therefore occupy more than a very few minutes. I have nothing but the warmest approval for this Bill. It is an excellent measure, and carries out a part of the platform of the party to which I belong. In saying that, I do not affirm that it is a perfect Bill, or that it could not be improved in some of its details, by the adoption of suggestions offered after discussion. It is for this reason I rise to protest against such a measure being, by the aid of a complacent Opposition, rushed through a jaded Senate at this hour of the night.
– What can we do?
– It has been arranged between the Government and the Opposition to push the measure through.
– The honorable senator is quite wrong. I should welcome an adjournment, as I think every other honorable senator would.
– But the honorable gentleman wishes to close the session as quickly as possible, and to get away.
– Hear, hear.
– I see no reason why the session should be closed at once, and important Bills like this passed without adequate discussion and criticism. It is ridiculous to expect that at this hour of the night a Bill of such vast importance will receive the consideration it is entitled to. I have said that I have nothing but the warmest approval for the Bill, but I am one of those who believe that the function of a Parliament is to discuss and criticise. We should let no legislation pass that is not as nearly perfect as the collective wisdom of this Parliament can make it. But, under present circumstances, the collective wisdom of Parliament has no chance to perfect any Bill.
– Who has monopolized the time?
– I certainly have not done so, and as I regard it as a perfect farce for me to attempt to properly discuss this measure under existing circumstances, I shall content myself with having uttered my protest, and will sit down.
– I desire to reply to some of the statements which have been made as briefly as I possibly can. So far as the Commonwealth commercial banking proposals of the Government are concerned, honorable senators have, with very few exceptions, expressed their willingness to accept them, it may be with some modifications. But they have endeavoured, as far as possible, to point out difficulties and disadvantages that they think might arise from the establishment of an institution of this description. They went from Dan to Beersheeba, from Russia to Switzerland, from Italy to Germany, from Prussia to America, and all for the purpose of finding out imaginary difficulties which might follow the adoption of any proposal of this kind. I wish to say here that the condition of things prevailing in any other part of the world has not the slightest influence with me, or, I believe, with the Government, when we are carrying into effect a plank of the Labour platform. This is a plank of the Labour platform. If there was not the slightest semblance of a National bank in any other part of the world, it would still be the duty of every honorable senator on this side to support this measure. That is the position so far as the general principles of Commonwealth banking embodied in this Bill are concerned. I admit that honorable members may differ as to the details of the measure. Then 1 come to the portion of the Bill which has been most vigorously discussed, and has met with the most strenuous opposition - that which provides for the establishment of a Commonwealth Savings Bank. The idea that the Commonwealth intends to lay hands on any State institution is absurd. It is not our intention to touch any interest or institution that legitimately belongs to the States. We simply desire to extend greater facilities to the general population of Australia. Can any one seriously object to that ? Of course, I can imagine a fossil of a bygone age saying, “ My father was satisfied with a wooden plough in years gone by, and I do not want anything better.”
– Show us the iron plough which the Government propose to substitute before burning the wooden one.
– The additional facilities which we propose to provide for the people will not detrimentally affect any of the State Governments, or interfere with any of their functions. The statement has been made that if a Commonwealth Savings Bank is established and becomes successful, it will take away millions: of money from the people of the States to be invested somewhere else. Undoubtedly as deposits begin to come in they will have to be invested somewhere, if we are to pay interest to the depositors. Suppose the et- feet is to cause the State Savings Banks to increase their rate of interest. That cannot be to the disadvantage of the depositors. Suppose, on the other hand, that the effect is to decrease the rate of interest. That will be all the better for the Commonwealth, arid all the better for those State Governments who want to see developmental works carried out. What happens at the present time in connexion with the investment of Savings Bank funds? The money is invested in suitable securities. So it will be with the money deposited with the Commonwealth Savings Bank. Probably some of it will be lent to the State Governments, and will assist them in their developmental policies. Is it supposed that the Government will send the money away to Japan, or to some other foreign country ? Will they not invest it where it will be of the most advantage to the people of Australia? Where could we get ‘better security than in Australia itself? I do not believe that there is any country in the world that offers such good security as Australia does.
– Yes; America and Canada.
– I do not believe that the security in Canada and the United States of America is as good as that in Australia. Any one who knows the financial history of America is aware that there have been great financial disturbances there, such as have never occurred in this country. I believe our security to be better than that of any other country in the world. That is what I think of Australia. At the present time the State Savings Banks do not invest all the money of their depositors in the States in which the money is deposited. Take South Australia, for instance. I know, on the best of authority, how the Savings Bank money of that State is invested. Bear in mind, the Savings Bank in South Australia is the most successful institution of the kind in this country. It is the Savings Bank that has the largest number of depositors per 1,000 of the population, and the highest amount of deposits per individual. At the present time the South Australian Savings Bank has over £[6,000,000 of deposits. Of that sum, £[96,829 is invested in Western Australian securities, .£96,925 in Victorian securities, and £[2,895 in Queensland securities. Is it supposed that any one in South Australia objects to the investment of that money outside the State? What will happen with deposits in the Commonwealth Savings Bank ? We may liken the Commonwealth and the six States composing it to a great water-conservation scheme. We have in these States what may be described as great financial reservoirs by means of which we are able to fertilize the whole country. Suppose that the Commonwealth undertook the whole of this work. If a financial drought occurred in any particular part of Australia, the Commonwealth, by means of its bank, would be able to direct a flow of capital to that portion where it was required. The institution would thus be for the benefit of the whole Commonwealth. Some honorable senators say that the States should be allowed to co-operate with us in the work. I can assure them that, as the Prime Minister has already stated, the Commonwealth Government is prepared to receive the co-operation of the States at present. The only reason why that is not provided for in the Bill is simply that we desire the States and the Commonwealth to come together in the near future, and to arrange conditions which will enable them to work amicably together. Every one, I believe, has faith in the stability of the Commonwealth. I do not wonder, however, that the Premiers of some States have objected to the establishment of the Commonwealth Savings Bank, because they have been under the mistaken idea that they will not be able to make so much money out of their own Savings Banks as they do at present. But nothing of the kind is likely to happen. There is, for instance, a Labour Premier in Western Australia who has joined his complaints to those of the other Labour Premiers. Then, the Honorable John Murray rushed to Sydney, had a consultation with the Labour Premier of New South Wales, and alarmed him and that weak individual, instead of coming to his fellow Labourites in the Commonwealth Government, took the advice of the Premier of Victoria. I can assure honorable senators, however, that when this Commonwealth Savings Bank is established, if any State Savings Bank in the near or distant future is disturbed or in any way put out of existence by this Commonwealth institution, it will be in the interests of the country, because the people would not allow anything else to happen. What would be the position then? Suppose that Mr. Scaddan had aland settlement scheme, and wanted £300,000 or £400,000. for the purpose of putting settlers on the land. Instead of going to the State Savings Bank, as he does now, he would come to the Commonwealth institution and get the money. He would be the security; he would be the borrower ; and it would be better for the depositors in the Savings Bank, the settlers on the land, and everybody else concerned. In ordinary circumstances, it will take some time for these conditions to come about. I am sure that when Labour Governments are established in all the States and come together with a Labour Government in the Commonwealth they will be able to make such arrangements with each other that the Savings Banks of the States will have nothing to dread in amalgamating or cooperating with the Savings Bank of the Commonwealth.
Question - That the Bill be now read a second time - put. The Senate divided.
Majority … … 10
Question so resolved in the affirmative.
Bill read a second time.
Clauses 1 to 3 agreed to.
Clause 4 -
In this Act, unless the contrary intentionappears - “ the Bank “ means the Commonwealth Bank of Australia established by this. Act, “the Governor” means the Governor of the Bank.
– I move -
That before the words “’ Governor of the bank “ the words “ Chairman of the Board of” Directors “ be inserted.
I strongly object to the use of the title “Governor” in this clause. It is a spurious imitation of the title of the head of the Bank of England to give that title to the manager of the Commonwealth Bank. I believe that it ought to belong to the chairman of the board, though, of course, if there is no intention to have a board my amendment will be defeated. This designation is apt to be confused with the title of Governor of a State. I do not see why we should not allow the word “ Governor “ to belong to a Government official.
– He will be a Government official.
– There is a great difference between the Governor of a State and the Governor of a State Bank.
– The Government cannot accept the amendment, because, in their opinion, a Commonwealth Bank is entirely different from an Ordinary commercial bank. In selecting the governing body of an ordinary bank there are the shareholders of the bank from whom to select the directors, and the result is that men with a certain amount of commercial knowledge and a very direct interest in the bank are chosen. The managing director is also selected from the shareholders. In the case of the Commonwealth Bank, however, the whole community is the owner, and the Parliament, or the Government, is really what stands in the place of the directors, though we do not want any political influence to be used in an institution like this one, and, therefore, give the power to the Governor of the bank. He will be subject to an inquiry by the Auditor-General, and will have to make a report every six months, showing the condition of the affairs of the bank. It will be entirely different from an ordinary commercial bank, and to make this amendment would alter the scheme of the Government. I hope that Senator Walker, if he is defeated on this occasion, will not press his amendments in clauses .11 to 16.
Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [11.55].- I think I understood the Minister to say that, in relation to the Commonwealth Bank, the members of the Ministry will stand in the position of the directors of a bank. Did I understand him correctly?
– - No; not in that sense.
– The honorable senator said, I think, that the Government will be in the position of the directors of a bank. That simply means that, by virtue of their political position, the Government will be entitled to a full knowledge of the inner working of the Commonwealth Bank and the state of the accounts.
– Certainly not.
.- If that is the kind of bank which is to be established, we are well on the road to having a purely political bank - a bank governed and guided by men who, by virtue of the political positions they hold, will be entitled to the fullest knowledge which any director can have of the affairs of a bank.
– You know that I did not mean that at all.
– I only know what the Minister said.
– I do not believe in one-man rule. I do not think it has proved altogether a success in the case of the Public Service, and I remember that, in the case of the Railways Commissioners in New South Wales, a good deal’ of trouble arose out of the fact that the three Commissioners had equal powers, and that the Chairman had no power of veto. This led to trouble, and eventually to the abolition of the system, and the appointment of a Chief Commissioner, with the power of veto. Nevertheless, it seems to me that, if the Governor of the bank cannot consult with the Ministry, or any official body, on the working of the bank-
– If you have looked through the Bill, you will know that, on questions of management, such as the establishment of branches in other countries, and in other matters, the Governor of the bank has to consult the Treasurer.
– I have carefully read the Bill more than once. I am aware that the Governor will have to consult the Treasurer in regard to the establishment of branches throughout the Commonwealth, and on certain other matters, but that, it seems to me, is not giving him the benefit which a board of advice would give in the practical, every-day working of the institution. Even though he had supreme power, and could override the board, the fact that he had some responsible advisers would, I think, be an advantage.
-Colonel Sir Albert Gould- - Under the Savings Bank Act of New South Wales there are three Commissioners, one of whom is the President.
– Although I have no particular love for the number three, yet I do think that in every walk of life the placing of very large powers and responsibilities in the hands of one man puts him, and those over whom he presides, or whose destinies he affects, in an unenviable position. I shall support any proposal to place the management of this institution under the. control of a board.
– I do not think that Senator Rae was present when I spoke upon this subject previously. However, I am not going to repeat what I then said. But I would point out to him that the Governor of this bank will have the appointment of all the officers of that institution, and if he be the right man in the right place, he will select officers with special-knowledge of their work. If that be done, and anybody is required. to advise him upon special branches of work connected with the bank, he will be able to obtain that advice from his own staff.
.’ - M - May I ask the VicePresident of the Executive Council who the Governor of the bank is to be?
– I can assure the honorable senator that I have not the slightest idea, although I have been present at every Cabinet meeting which has been held.
– I thank the honorable senator. May I ask him further whether the Government propose to appoint to that position a man who has had banking experience?
– We should be acting very unwisely if we did not.
– I join with Senator Rae in my opposition to the proposal to hand over the management of this institution to one man. How frequently do we hear complaints that too much power has been placed in the hands of the Public Service Commissioner. In order to do away with those objections, have we not just passed the Arbitration (Public Service) Bill ? Further, the Governor of the Commonwealth Bank may consult the Treasurer upon any matter. To my mind, that is the first step towards political patronage. I desire to know who is to be the final head of this institution. Is it to be the Governor, or can the Treasurer override that officer?
– He can do so only in cases which are provided for in the Bill.
– Then the Governor may do as he chooses.
– I hope that the Government will agree to the suggestion of members of the Opposition that a board of directors should be appointed to manage the proposed Commonwealth Bank. I regard the passing of this measure as the commencement of a banking system which will prove of immense value to the Commonwealth. I see no difficulties in the way of the Ministry agreeing to the appointment of a board of management. I disagree entirely with the view that a board should be appointed for the purpose of curtailing the powers of the Governor of the institution. Realizing the enormous possibilities of the bank, the Government will be acting wisely if they take a wider view of the position than they have hitherto taken. They will suffer no loss of dignity if they recognise the fact that the proposed one-man control of this institution is the only portion of the Bill against which reasonable criticism has been levelled. I support the suggestion which has been thrown out by members of the Opposition that a board of management should control the proposed bank, but I shall not support any effort to put up a prolonged “ stone wall.”
– One of the main objections which I entertain to a one-man control of the proposed Commonwealth Bank has reference to loans and securities. If ‘ the management of this, institution be placed in the hands of one man, he will have power to grant any loans he may think fit upon whatever securities he may deem fit. I entirely agree with ‘Senator Gardiner that while we do not wish to see his authority curtailed in any way, in the matter of loans and securities, we ought certainly to strengthen his hands.
– May I ask the Government to reconsider this clause?
– I have said all that 1 intend to say upon it.
– Is not the Vice-President of the Executive Council open to reason? Many of the Government supporters themselves view this clause with suspicion. Members of the Opposition have based their objections to the Bill upon the ground that it contains a dangerous and absolutely unprecedented form of management in that it commits the .whole of the control of this institution to the hands of one man. If it were not for the late stage of the session, and the absolute physical impossibility of continuing the fight, the Government would not get this clause through. The Opposition have been beaten bv physical weakness, and not by force. We were twitted at the conclusion of the debate on the second reading, because we did not further exhaust our physical powers in discussing the Bill. I feel that in the passing of this measure physical weakness will prevail over reason and the real desire of the majority of the Committee.
Question - That the words proposed to be inserted be inserted - put. The Committee divided.
Majority … … 2
The bank shall be a body corporate with perpetual succession and a common seal, and may hold land, and may sue and be sued in its corporate name.
– I direct attention to the fact that in the next clause the bank is given power “ to acquire and hold land on any tenure.” I think that in order to make the Bill symmetrical the words “ on any tenure “ should be inserted after the word “ land “ in the clause now under discussion.
– I see no necessity for the amendment suggested.
Clause agreed to.
Clauses 7 and 8 agreed to.
Clause9 - (1.) The capital of the bank shall be One million pounds, and shall be raised by the sale and issue of debentures in pursuance of this Act. (2.) The capital of the bank shall be availble for all the purposes of the bank.
– In my speech on the second reading I said that I thought that instead of the bank issuing debentures to provide the capital the Government should put a certain sum of money into it as shareholders do in the case of a private bank, and let it be conducted on ordinary business principles.
– What would the honorable senator suggest as a fair capital to commence with?
– I should suggest that the Government should put £250,000 into the bank at a time until the amount of £1,000,000 is reached, because the bank should not be called upon to pay interest on the full sum of £1,000,000 if it does not require it. To give effect to what I suggest I move -
That, after the word “be,” line 2, the words “ supplied by the Government of the Commonwealth,” be inserted.
The clause would then read “ The capital of the bank shall be £1,000,000, and shall be supplied by the Government of the Commonwealth.”
– If the honorable senator will look at clause 10 he will see that it covers his proposal.
– Not at all. This is going to be a loan, and I am proposing that the money should be actually paid over by the Government to the bank - that the Government should put the sum of £1,000,000 into the bank as an investment. I have already said that I do not object to the principle of a Commonwealth Bank, but I wish to see it placed on a thoroughly business footing. It would be better for the Governor of the bank to have the responsibility of paying his expenses out of the moneys of the bank. He might Be tempted to be extravagant if he Knew that the Federal Government would find funds if he were short. Let this institution be conducted on sound business principles. What would be thought of a private bank starting on a big credit? People would have no confidence in it.
– Senator E. J. Russell has suggested that, under clause 10, the proposed capital of the bank might be provided out of the Consolidated Revenue. Nothing of the kind. Clause 10 makes provision merely to cover the expenses of the establishment of the institution.
– It provides for advances to the bank of money which may form the capital of the bank.
– If the Bill is to pass under that delusion, let it pass.
– I think honorable senators need feel no alarm. Clause 9 provides that the bank may issue debentures to the amount of £1,000,000, and then clause 10 provides that the Treasurer may furnish the money necessary for the Starting of the bank. When the bank issues its debentures it will be able to refund advances made by the Treasurer. There may not be a large amount of capital required at first, and we know that it is not the practice of private banks to call up all their capital if it is not required. Those who would like this bank to be a success will hope that the whole of the amount of capital provided for will not be required.
Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [12.28 a.m.]. - I do not think that the transposition of clauses 9 and 10 would help the VicePresident of the Executive Council in this matter in the slightest degree. The capital of the bank is to be £1,000,000, and under the Bill it is to be raised in a certain way.
– But not all on one day.
.- That is so, but I point out that clause 10 does not provide that the Treasurer shall be required to find the capital required by the bank, and advance the money from the Consolidated Revenue, but to make advances to the bank to meet the expenses connected with its establishment.
– Those advances will be repaid by the bank.
– Of course, we know that all money advanced to the bank is to be repaid ; but clause 10 makes provision only for advances to meet expenses incidental to the establishment of the bank.
Sitting suspended from 12.30 to 1.15 a.m. (Friday).
.- Clause 10 of the Bill enables the Treasurer to provide the money for the establishment of the bank and defray any expenses that may be necessary for carrying on its business. As I take it, the very object of the Bill is to avoid the necessity of devoting any portion of the Consolidated Revenue for this purpose. But the Government realized that it was necessary, to make provision to defray, prelimin ary expenses. For that purpose, clause gr with which we are dealing, comes to the assistance of the bank. All that I can say is that, if the clause be not amended, and if the Treasurer considered that he was justified in taking from the Consolidated Revenue £1,000,000, or any lesser sum, he would be seriously misreading the intention of the Bill. I feel quite sure that if Ministers refer this clause to their Law Officers, they will find that it does nol contemplate raising capital, but only the payment of preliminary expenses. It is quite clear, to my mind, that the only money that can be utilized as capital is that which will be raised by means of debentures. Senator Walker, however, would permit the Government to provide the capital out of the Consolidated Revenue. It would not be necessary to raise £1,000,000 straight away. I dare say that a fourth of that sum would be sufficient in the first instance. As the business of the bank increased, the capital would have to be added to.
– The idea is that the Government shall go kite-flying to establish, the bank.
– I doubt whether that would be justifiable. Besides, a great many individuals who go kite-flying do not alwayssucceed in their object.
– There is no kiteflying about this.
– The Government are going toraise money by means of a loan. I urge the Committee to accept the amendment,, and leave upon the Government the responsibility of raising the capital to enable the bank to be carried on. While we realize that the Government have resources behind them, we must also realize that if a person* goes to the bank for his money he will expect to get gold if he asks for it.. There ought always to be sufficient coin inthe vaults of the bank to meet all legiti-mate demands.
– If the Government are going, to raise money for this bank by the sale of debentures, they will have two stocks on the market, namely, Government stock, pureand simple, and Commonwealth Bank stock. The bank stock would not go off so readily as would the Government’s own. stock, because the owners of bank debentures would have to exhaust the resources of the bank before they could come on the Government. I am anxious to see the bank established on a good basis. I have been a general manager of a bank myself, and can speak with knowledge as to the responsibility which a manager feels in regard to whether things are likely to go right or wrong.
Question - That the words proposed to be inserted be inserted - put. The Committee divided.
Majority … … 9
Question so resolved in the negative.
Clause agreed to.
Clause 10 agreed to.
Clause 11 -
The Bank shall be managed by the Governor of the Bank.
Senator Lt.Colonel Sir ALBERT GOULD (New South Wales) [1.28 a.m.]. - Early in the evening, Senator Walker submitted an amendment on clause 4, and he has also given notice of an amendment on clause 11. His object in regard to clause 4 was to constitute a board of directors in addition to the general manager of the bank.
That the following words be added, “ and there shall also be a Board of Advice consisting of five members, with whom the Governor shall, from time to time, consult.”
It may be urged, of course, from the other side, that this is rather like a proposal which was considered a little while ago. I protest most earnestly against the idea of running the bank with one man. It is not right to leave one man to determine every matter which arises, and to say that there shall be nobody whom he can consult.
– As I do not intend to pro- ceed with my amendment to insert a new clause after clause 11, with regard to the appointment of a board of directors, I feel at liberty to say a few words about this amendment. If the Government do not ac cept it, they may be very sure that, when their successors come into office, this measure will have to be considerably modified, whereas, if the amendment be adopted, there is every chance that it will continue operative for a considerable time.
Question - That the words proposed to be added be added - put. The Committee divided.
Majority … … 5
Question so resolved in the negative.
Clause agreed to.
Clauses 12 to 18 agreed to.
Clause 19 verbally amended and agreed to.
Clause 20 agreed to.
Clause 21 -
The Head Office of the Bank shall be situated in such place as the Governor thinks fit to appoint.
Amendment (by Senator Rae) proposed -
That after the word “ place “ the words “ within the Commonwealth “ be inserted.
Amendment agreed to.
Clause, as amended, agreed to.
Clauses 22 to 34 agreed to.
Clause 35 - (1.) The Governor may establish at the head office of the bank, and at such other places as he thinks fit, a department, branch, or agency for the receipt and repayment of deposits and the transaction generally of the business of a Savings Bank. (2.) Branches or agencies for Savings Bank business may be established at any place notwithstanding that the bank has no branch or agency for general banking business at that place. (3.) Separate accounts shall be kept by the bank in respect of the Savings Bank business of the bank, and for that purpose any receipts or expenditure of the bank referable to both ordinary business and Savings Bank business shall be allotted in such proportions as the Governor thinks fit.
– I move -
That the following new sub-clauses be added : - (4.) The money received under the authority of this portion of the Act shall be invested and dealt with in manner following, that is to say -
Two-thirds part thereof at the least shall be invested in the purchase of or by way of loan upon the security of Commonwealth or State Government. Debentures or Treasury Bills issued under the authority of any Government Loan Act or Act authorizing the issue of Treasury Bills. (5.) The annual account of all deposits received and paid under the authority of this Act and of all expenses incurred during the year, together with a statement of the total amount due to all depositors and of how that amount is invested or held, shall be laid before both Houses of Parliament in each year.”
I recommend the acceptance of the amendment to the Committee. It will be in the interests of the bank that the Savings Bank deposits should be dealt with in the same manner as other moneys in the possession of the bank.
– The latter portion of Senator Stewart’s amendment is already provided for in connexion with the production of balance-sheets. But I wish to show that this amendment, although probably moved with the best of intentions, is the very thing about which the State Premiers are somewhat alarmed. At the present time, the funds of the Savings Banks in the different States are available to the Government in connexion with land settlement and development. What they fear is that a large amount of the savings of the people may be diverted from that purpose, and that they may not be able to obtain the use of that money to develop the State in which it has been raised. If the amendment be carried, two-thirds of the money raised in each of the States will be taken from the development of those States and used for the purchase of bonds in connexion with the States or the Commonwealth. I think that that, to some extent, is provided for with respect to the disposition of the profits of the commercial section of the bank, and to counteract the alarm that is felt by some of the StatePremiers we should not hamper the operations of the institution in the direction suggested by the amendment.-
Senator Lt.Colonel Sir ALBERT GOULD (New South Wales) [2.1 a.m.]The greater portion of the debate on the motion for the second reading of this Bill related to the proposal to transact Savings Bank business in opposition to the State Savings Banks. The question having been fully discussed, I propose to content myself by asking honorable members to negative the clause as printed. By doing so we should give clear evidence of the view of the Committee, and a definite reply to the various State Governments who have urged objections against this part of the measure.
Question - That the clause stand as printed - put. The Committee divided.
Majority … …9
Question so resolved in the affirmative.
Clause agreed to.
Clause 36 (Receipt of deposits).
– Under this clause it is provided that any sum not less than is may be deposited with the Savings Bank branch of this institution, and I should like to know whether an unlimited amount may be placed to the credit of any depositor, and whether there is any limit as to the amount on which interest shall be payable?
Clause agreed to.
Clauses 37 to 47 agreed to.
Clause 48 (Bank not responsible for fraudulent withdrawals).
– I ask the Committee to negative this clause. I am surprised that such a provision should exist in the Western Australian State Act, for it practically offers . 1 premium to a man to obtain possession of a depositor’s pass-book, and so to get hold of his money. In all my banking experience I never heard of a bank evading its responsibility in respect of the cashing of a forged cheque, and I certainly think that we ought to negative this clause. We intend to protect our depositors from theft and forgery, and even if there is such a provision as this in State Savings Bank Acts, I think we should take up a higher ground, and vote against this proposal.
– Some time ago we had before us a Bill containing a clause relating to cheques drawn on private banks, and I wish to compare the position that Senator Walker then took up in regard to the responsibility of a private banking company with the attitude that he adopts now in regard to the responsibility of the proposed Commonwealth Bank. There was in the Bills of Exchange Bill a clause providing that if a person so signed a cheque as to afford an opportunity for it to be altered, the private bank on which it was drawn should not be liable for any loss sustained as the result of that negligence. In this Bill, we provide that if a man carelessly leaves his deposit book where some one else may obtain possession of it, present it at the bank, and obtain money belonging to the depositor, the bank shall not be responsible for the loss so sustained. When the Bills of Exchange Bill was before the Senate, Senator Walker, in dealing with the clause to which I have referred, said -
We are asking merely that we should have this danger signal held up, so that persons may be convinced of the necessity for being very careful in the filling up of cheques. If a man is foolish enough to leave a blank before a certain amount in a cheque which permits of fraudulent alteration, the banker should not be responsible for the negligence.
The honorable senator is prepared to make the Commonwealth Bank liable for loss sustained owing to the negligence of a depositor, but he was not prepared to make a private banking institution responsible for the negligence of its depositors.
– The private banking institutions supply their depositors with cheque forms free of charge.
– And we shall provide our depositors with pass-books.
– If a depositor in a private bank so carelessly fills in a cheque as to permit of it being altered, say, from £5 to £205, why should a bank be re sponsible for loss sustained by the depositor as the result of that neglect? The depositor would have clearly contributed by his negligence to the loss sustained. The law has frequently operated very severely against banking companies, but they have never yet taken advantage of a forgery.
– It appears to me that under this clause, the interest of a depositor will not be reasonably safeguarded. A man’s pass-book, for instance, might be removed from his house by a burglar. This matter Ought not to be viewed in the light of anything that Senator Walker may have said on a previous occasion. The honorable senator may have been anxious, though I do not say he was, to safeguard the private banks, and, therefore, prepared to support a clause of which I should not approve. I cannot, on that account, however, indorse a provision which might cause an injustice to an innocent depositor; and I submit that the Minister ought to reconsider the matter, with a view to some improvement.
– I indorse what has been said by Senator Gardiner. I can quite see the difference as pointed out by Senator Walker; but, in any case, two wrongs do not make a right. I suggest that some words should be inserted to provide that only culpable negligence on the part of the depositor shall be sufficient excuse for the bank. There are many circumstances under which a depositor might lose his pass-book; and, though the loss would be infinitesimal to the bank, it would be very serious to the individual. I think the Minister ought to consent to some modification of the provision.
– When a depositor knows that there is such a provision as this, he will be most careful. If the clause were struck out, or Senator Rae’s suggestion were accepted, the door would be open to collusion, by means of which, for instance, a man might deposit £40, and arrange with an equally dishonest friend to have the pass-book stolen and the money drawn, with a view to making a claim on the bank. I hope the honorable senator will see the advisability of not in any way weakening a provision which is for the mutual protection of the bank and depositors.
– As to the idea of collusion, it is remarkable that the possibility is suggested in the case of the poorer classes who use the Savings Bank, and not in the case of wealthy depositors in the general branch of the bank.
– There will be wealthy depositors in this bank.
– A Savings Bank is established primarily for the poorer people.
– An ordinary Savings Bank does not give interest beyond a certain amount, whereas the Commonwealth Bank will.
– If this safeguard is necessary in the case of the Savings Bank it is equally necessary in the general branch, for there is. just as much danger of collusion amongst the wealthy as amongst the poor.
– This clause will catch the wealthy depositors too.
– The wealthy depositors, who have large transactions with the general bank, will be subject to the ordinary banking law, whereas this clause throws the whole onus and responsibility on the small depositors. On the occasion when Senator Walker spoke, as quoted by Senator Pearce, I was strongly in favour of making the banks responsible for any losses. If I, as a comparatively poor man, happen to lose my bank-book, and some one fraudulently forges my signature, I can, under a clause of this kind, “ whistle for my money.”
– A clerk in the bank might be in collusion with some one outside.
– Precisely; and where is the protection to the depositor then? Any such provision as that proposed should apply to both branches of the bank, and the fact that it does not do so shows that the poor are to lie treated with greater suspicion, and. placed under greater disabilities, than are the wealthy depositors. I shall vote against the clause.
– This bank has two branches, and in the case of one this law will be taken advantage of, while it will not be applied to the other. Senator Givens has hit the nail on the head.
– If Senator Givens turns to clause 33 he will see that there, is a very similar provision. Under that clause, if the bank officials notice anything suspicious in the claim of a creditor, they can refuse to recognise it, without making the bank liable to be sued.
– Senator Pearce has quoted Senator Walker’s speech of a few years ago. I was in the House at the time ; and I know that Senator Walker’s proposal was not approved of.
– Senator Walker was in a majority.
– I was against Senator Walker on that occasion.
– Why, the honorable senator voted with Senator Walker.
– So far as my memory serves me, I was opposed to the proposal.
– The honorable senator, along with Senator Gould and Senator St. Ledger, voted with Senator Walker.
– I voted with Senator Walker because I thought the proposal quite proper.
– There is no analogy between the two cases. Many people, even amongst the small depositors, lose their bank books, as I have on two occasions. In the case of an ordinary bank the money is not lost on that account. There will be two laws in operation in the Commonwealth Bank, with the result that a man with hundreds of pounds in the general bank may be reimbursed if Ins name is forged, while the poor depositor in the Savings Bank who happens to lose his pass-book will have no claim.
– Nothing of the kind.
– On the occasion to which Senator Pearce has referred’, we were considering a question involving negligence on the part of a trustee in signing a cheque.
– How did Senator Pearce _vote on that occasion ?
– I voted with Senator Walker, also.
– 1 am glad that the honorable senator was for once on the right side. There is not the slightest analogy between the two cases. This clause provides that where a person fraudulently represents himself to be a depositor, presents the depositor’s pass-book, and secures the withdrawal of money, the bank is not to be responsible to the depositor. We know that a very great many of the depositors in the Savings Banks are working girls and young men. A servant girl may, in the way referred to in this clause, lose the whole of her savings, made, perhaps, with a view to marr, age ; and the
Government propose that the bank shall not be liable to make good her loss. lt would be a very poor consolation to her to ask her why she was not more careful in looking after her pass-book. Except in the case of Western Australia, I do not suppose there is a Savings Bank Act in any State in Australia which contains such a provision as this. 1 point out to the Committee that while the loss to the Savings Bank would be comparatively insignificant, if it were responsible, the loss to a poor depositor might mean absolute ruin.
– Some honorable senators are unnecessarily alarmed as to the results which may follow to depositors if this clause be retained. I realize that it would be a very serious matter for a depositor to lose the results of, perhaps, many years’ savings ; but I point out that whilst such a thing might have happened a few years ago, it is difficult to imagine it happening under the practice adopted to-day by our Savings Banks. Something more would be required than to get a depositor’s book, and go to the bank with it. I speak of the practice at present followed in Tasmania, where a very desirable reform was introduced on the report of a skilled Victorian Savings Bank official. Before a depositor can draw money from the Savings Bank to-day, he has to tender with his pass-book a notice of withdrawal, and the signature attached to it can be compared at once with the signature of the depositor already in the possession of the bank. I am as anxious as any other honorable member of Ihe Senate that depositors should not lose their savings, and I think that the Government might accept the suggestions of Senators Gardiner and Rae, and make the clause a little more liberal than it is.
– I hope the Government will reconsider this clause. I have in mind a wholesale fraud committed on a Savings Bank a few years ago by an officer connected with a banking institution, as the result of which a number of unfortunate depositors lost their money. I direct attention to the fact that the depositor, who, under this clause, would be made the victim, would be without any means of protection, whilst the bank would be able to protect itself. If we pass this clause, it will offer some temptation to officials of the bank to be less alert and careful than they ought to be.
– It is very amusing to notice the great interest which honorable senators opposite take in the poor depositors and the poor servant girls, for whom Senator St. Ledger has so much sympathy. It should not be forgotten that, unless in the case of very small amounts, every Savings Bank depositor must give notice of his intention to withdraw money from his account. In ordinary cases of withdrawals the depositor must hand in a withdrawal slip with his pass-book, and if he should lose his passbook he has only to send notice to the bank not to permit money to be withdrawn from his account until he has recovered it, and the book will be cancelled if it cannot be found. Senators Gardiner and Rae, in their eagerness to protect the poor depositor, overlooked the fact that he is able to protect himself. They have been rather injudicious in rushing to the assistance of those who are opposed to this Commonwealth Bank lock, stock, and barrel.
– I object to have it said that we are rushing to the assistance of any one but the depositors.
– I point out to Senators Rae and Gardiner - because honorable senators opposite are already aware of the fact - that if this clause is not retained this will be the only bank that is not protected in this way. If honorable senators will refer to section 85 of the Bills of Exchange Act they will find a similar provision there, under which, if a forged cheque is presented to a bank, and the banker pays it in good faith, he is not held to be liable to make good the loss to the owner of the cheque. I repeat that no money can be withdrawn from this bank without a signed cheque and the presentation of the pass-book at the same time.
– An examination of Senator McGregor’s two statements makes it appear that he has been trying to mislead the Committee. Clause 33 does not put the man dealing with the general bank in the same position as the man dealing with the Savings Bank branch. It provides that the Commonwealth shall stand behind the bank and be responsible for all its debts, but may not be sued. Under an earlier provision, the bank can sue and be sued ; but, if we pass this clause with regard to the Savings Bank, neither the bank nor the Commonwealth can be sued, because the bank will have obtained immunity.
– Section 85 of the Bills of Exchange Act covers the case.
– Then why was this clause put in the Bill? If what he says is correct, the Minister should agree to eliminate it at once. I would point out to Senator Long that, whether a man is dealing with the general branch or the Savings Bank branch, his money cannot be fraudulently withdrawn by any other person, except by means of a forgery. There can be no answer to my contention that the clause establishes a differential treatment for depositors in the Savings Bank. The Savings Bank branch of the bank will be as much under the general banking law as any other part of it, except so far as we legislate specially to take it out”. Under the Bill as it stands, the forger, backed up by the careless clerk, is to be given free licence to rob the poor depositors in the Savings Bank branch.
Senator Lt.-Colonel Sir ALBERT GOULD (New South Wales) [2.52 a.m.]. - I would remind Senator McGregor that in Committee it is the duty of every honorable senator to assist to make the measure effective, and, therefore, there is no justification for his taunt that honorable senators who are criticising the measure from his own side are joining with the Opposition to block the Bill. When the Minister quotes a section of an existing Act which, he says, covers the case, he proves either that the clause for which he is fighting is unnecessary, or that he has misconstrued the section. The marginal note of section 85 of the Bills of Exchange Act refers to the duty of a banker as to crossed cheques. The section deals entirely with cheques that have been crossed, payable specially to some banker, and provides that if the banker chooses to pay the cheque, in derogation of that direct instruction, he does so at his own risk. It has nothing to do with the forging of signatures. A further proviso lays it down that the banker must make his payment in good faith, and that the cheque must be, on the face of it, a clear and distinct order for the payment of money. If I specially cross a cheque, the banker must pay it in accordance with the crossing. He can do otherwise only at his own peril. Where a man forges another man’s signature to a cheque, and presents it to a bank, and the banker pays it, the banker does so at his own risk, no matter how good the forgery may be. All that Senator Walker wanted to do was to protect a banker who, in good faith, paid a cheque so negligently drawn by the drawer that another man might fill it up for a larger amount. In this case all that a dishonest person will have to do will be to. get hold of a depositor’s pass-book, and then proceed to draw upon the account. It is not fair to the small depositor to tell him that, in such circumstances, he must put up with the loss. On the other hand, if the name of a man who banks with the general branch of the bank is forged, the Commonwealth will have to make the loss good. There is clearly one law for the rich, and another for the poor in this Bill.
– You know different.
– I know that what I have said is absolutely and literally correct, and I challenge the honorable senator to produce any lawyer to say otherwise. If the section in the Bills of Exchange Act protects the Savings Bank depositors, why load the Bill up with this ridiculous surplus clause? There will not be the great sums of money standing in the Savings Bank branch to the credit of wealthy people which the Minister of Defence imagines.
– You took care to protect the wealthy people.
– I want to protect the smaller people, who will undoubtedly become wealthy in time. The honorable senator will find that the great majority of the wealthy men of Australia worked their way up from small beginnings.
– There is no doubt that the Minister is endeavouring, by this clause, to put the Commonwealth bank in a totally different position, in relation to its customers, from that occupied by any other bank in the Commonwealth.
– The Western Australian Savings Bank law is the same.
– It may be, but has it had application since the Commonwealth Bills of Exchange Act was passed? because the Commonwealth law overrides any repugnant provision in a State law. When the Bills of Exchange Bill was introduced, it was sought to make provision to meet a recent case known as Marshall v. The Colonial Bank, where one of two trustees fraudulently operated for some time on a trust account by means of cheques, and succeeded in defrauding the Colonial Bank of a large amount of money. When his co-trustee discovered how affairs stood. an action was brought against the bank to recover the difference between the amount for which the innocent trustee signed and the amount shown on the cheque as altered by the criminal trustee. A judge of the Supreme Court of Victoria decided that the bank was not liable, a view which was upheld on appeal to the Full Court of Victoria; but the High Court, to the astonishment of the commercial community, said that the bank was liable, and the Privy Council supported that judgment. To remove what seemed an injustice it was attempted to insert in the Bills of Exchange Act a provision something like that which I have been discussing, but the Parliament refused to adopt it. Senator McGregor, in saying that other banks are protected in the same way as this bank will be protected under the clause, is not saying what is in accordance with the law, and is unintentionally misleading the Committee. Section 85 deals with the responsibility of a banker in respect of crossed cheques, and, to be protected, the banker must act in good faith and without negligence, and the cheque must not appear to be crossed, or to have had a crossing which has been obliterated, to have been added to, or to have been altered. No one disputes that the banks are governed by the decision of Marshall v. The Colonial Bank, but if the clause is passed the principles of that decision will have no application to the Commonwealth Savings Bank.
– .As Senators Gould and Keating have pointed out, section 85 of the Bills of Exchange Act deals with crossed cheques. We were told that it conferred the same privileges on the banks as the clause confers on the Commonwealth Savings Bank, and punished the careless depositor. But, whereas that section makes it necessary for the depositor to have drawn a cheque before he runs- any risk, under this clause he may have done nothing at all. His bank book may have been lost, or have been stolen from him; but if the person obtaining possession of it presents it with a forged cheque, which is accepted by a careless clerk, or because the forgery is too good to be detected, he may draw out the whole sum deposited, and thus deprive the depositor of a savings of a life-time.
– Notice would have to be given in connexion with the withdrawal of a large sum.
– We do not know what the regulations may be. In all the Savings Banks a depositor can now withdraw without notice sums not exceeding £20, which, to a poor person, might represent the savings of a life-time. In the other case the depositor must have drawn the cheque himself, and it is only when he has done so, and die banker is deceived, that the banker receives immunity. But in this case a poor man, having a deposit with the Savings Bank, might not be guilty of negligence at all. Yet a successful thief might get possession of the whole of his savings. The Commonwealth, in regard to the Savings Bank, should place itself in the same general position as an ordinary bank, and in the same position as it is in itself in regard to the general banking branch of this institution.
– The honorable senator wants to put the Commonwealth in a worse position.
– The example of Western Australia is the only one that has been quoted in support of this provision. But is this progressive Commonwealth Parliament going to be guided by the example of the sand -groping Government of the most unprogressive State in the Commonwealth? I am not prepared to take precedents from the example of that old- groperland Government which has been held up to us for emulation. I shall vote against this clause, because I consider that depositors in the Commonwealth Savings Bank ought to receive the same fair treatment, and be subject to the same general law, as the depositors in the general branch of the business.
– I am surprised that so much noise has been made about this proposal to safeguard the Commonwealth Savings Bank. Deposits for this bank will be received all over the country. Depositors will be able to draw money from any branch or agency throughout the Commonwealth, just as a depositor with a State Savings Bank can draw money from any branch of the bank in any part of the State. A person going to draw money from the Savings Bank might be the genuine owner of an account, or he might not. When he goes up to the counter, however, he has to sign the name of a depositor. In the case of an ordinary bank there is this difference as compared with the method employed to obtain money from the Savings Bank : - An ordinary bank will only accept a crossed cheque when it is passed through an account. That is a safeguard employed by the Associated Banks, which is not available to the Savings Bank. A crossed cheque cannot be cashed over the counter. Consequently the receiver has an opportunity to satisfy himself that the drawer is a genuine person. In the case of the Savings Bank, however, a person willing to commit a fraud might obtain possession of the bank-book of a depositor, hand the book over the counter, and imitate the signature of the depositor. If he did that, the bank would have to pay the money demanded, and without this clause there would be no protection as long as the signature was imitated with some amount of skill.
– The honorable senator has put the strongest argument in favour of this clause.
– I cannot see that. The practice of crossing cheques certainly gives an additional safeguard to an ordinary bank which is not afforded in regard to the method of drawing money out of the Savings Bank. In the latter case, the forger can present himself at the bank counter anywhere in the Commonwealth, and obtain the money of a depositor. What is to prevent fraud in the case of a person entering into collusion with another person to lodge money in the Savings Bank for the very purpose of committing fraud? Suppose that I have £100 deposited in the Savings Bank, and that I enter into collusion with Senator Rae to get that money out of the bank. Unless this clause is retained I should be able, with the collusion of a second person, to get the money, and still hold the bank responsible for it. I am, therefore, of opinion that, unless the clause is retained, there will be nothing to prevent people from “ rooking “ the Government Savings Bank every day in the week, if they are clever enough.
– They would not need fo be very clever, either, because the person with whom the false drawer was in collusion could sign the name.
– Quite so. Another reason for preserving the clause is that it will require depositors to be very careful with their books. We ought not. 1 am satisfied, to wipe out the one safeguard of the safety and solvency of the bank.
– I have heard all that has been said on both sides in regard to this clause, and do not think that the arguments of Senator Lynch and Senator Long do anything more than mutually destroy each other. Senator Lynch points out that a person can go to any part of the country and draw money out of a branch of the Savings Bank, and Senator Long points out that an additional safeguard rests in the fact that it will seldom happen that any one will lose through the operation of the clause. Both arguments cannot be effective in support of the provision. I am doubtful whether any one of them is valid. According to Senator Lynch, the facilities for fraud under the clause are so great that it is absolutely necessary to have some such clause; but according to Senator Long, the safeguards are so great that few people can suffer under it. I may point to a case to show what may happen. A person might be deprived of the whole of his savings by the operation of the clause unless it be modified. It has been stated by Senator Barker that a person could not lose his pass-book and be without it for months without knowing that he had lost it. But nothing is easier. If a Savings Bank depositor had ceased to make regular deposits, he would be likely to lay the book aside, and would not need to go to it. He might not look at it for months. He might have placed it in some receptacle where he was in the habit of keeping it. It might be extracted without his knowledge, and he might not be able to give notice of its loss through not knowing until months afterwards that it had been abstracted. This is not an imaginary case, but conforms with common experience. It is similar to what used to happen in New South Wales a few years ago in regard to elector’s rights. Nothing was more common than for a person who had taken out an elector’s right to remain in full confidence that he had that right until polling-day came, when he would discover that he was quite unable to find it. A person does not look for a thing every day if he does not require to use it, and when he does look for a thing which he only occasionally uses he often finds that it is not there. This Bill allows women to be depositors in their own right, even though they are married. A poor woman may be endeavouring, by great selfdenial and arduous labour and thrift, to lay by a small amount for herself. She may be married to a worthless husband, who, of course, will be quite familiar with her signature. He may know where she is accustomed to place her bank-book, and, through familiarity with her signature, he may abstract the whole of her savings without her knowledge. It is not likely that such cases will occur often, and when they do occur the loss to the bank will be infinitesimal. But looking at the matter from the other side, if such a. case occurs only once, the loss to the depositor may mean ruin. With regard to the manner in which my amendment has been received, I think that it is a rotten and a scandalous thing, that a member of this Chamber should be accused of desiring to help his political opponents when he seeks to improve the machinery of a measure of this description. If the Government think they are going to “ bulldose “ me by declaring that I have moved this amendment in order to play into the hands of the Opposition, they are entirely mistaken, and it is conduct of which they would be heartily ashamed if they had any sense of political decency.
– That is the effect of it.
– I do not care for that. When a Bill has been introduced and read a second time, it becomes the property of the Senate, and I, for one, will submit to no autocratic dictation, whether it emanates from a Government which calls itself Conservative, Liberal, Socialist, Labour, or by any other name. If the members of any Government think that they are going to “ bulldose “ me into treating their measures as if they were like sacred Scripture, to be accepted in every line and word, without being added to or taken from, they have made a very serious error. If we are going to be such wooden automata as that I think that the sooner a change is effected the better for all concerned. If we are not to have the right to discuss every clause which is submitted, and are to be subject to insult, and told that we are deliberately playing into the hands of a corrupt Opposition, which wishes to destroy the Bill, it is time-
– You are doing it all the same.
– I am not doing it, and it is a lie to say that I am.
– The honorable senator must withdraw that remark.
– I shall leave the room.
– Leave the room.
– ask Senator Rae towithdraw the remark.
– If it is asserted that I am playing into the hands of the Opposition it is a lie, whoever says it.
– Will the honorable senator withdraw the remark?
– No. I shall withdraw myself first. I am not going to be bullyragged in that way.
– Senator Lynch has drawn a picture of possible collusion if the clause were rejected. I ask him to look at the other side of the picture, and that is a possible collusion between an employe of a bank and somebody who wished to perpetrate a fraud on a depositor. A depositor’s passbook might fall into the hands of a person who was anxious or willing to defraud him of a portion of his savings, and he might very easily, through the assistance of a corrupt official of the bank, present the pass-book, and make a very successful imitation of the signature, a copy of which would appear in the pass-book, and by so doing enable the corrupt official to pay out to him the amount which is expressed in the cheque presented. I think that collusion of that character is just as likely to arise as collusion of the character to which Senator Lynch referred.With regard to the applicability of the section of the Bills of Exchange Act in relation to crossed cheques, I think that the little crossfiring must have distracted his attention from the contents of that section when I was reading it. It has relation only to the responsibility or non-responsibility of the banker on whom the crossed cheque is drawn for not carrying out the instruction of the drawer with regard to its destination. It has nothing to do with presenting to a person outside a crossed cheque, and that person, subsequently, paying it into his own account. It is not a case of a forgery or an alteration of an amount, but a case where a customer draws a cheque, and so carelessly crosses it that the crossing is not apparent, or has become so obliterated that its obliteration is not apparent. Then, if the banker pays in defiance of the crossing, or at any rate not in compliance with it, and he does that innocently and in good faith, which he must establish, there is no responsibility. The earlier part of the section provides that where a cheque is so crossed the banker must pay the cheque according to the crossing, and if he does not so pay it he is responsible. The only proviso is that if there is no appearance of crossing on the cheque at all, although it was crossed originally, the banker is not responsible, but still the customer has drawn the cheque against his account, and the bank debited his account with it, but if it failed to credit it in the quarter to which he wished it to be credited - but he did not take the proper precaution to direct the bank to credit it - the banker is not responsible. With regard to the possibilities of collusion, there are very many depositors who live at some distance from the Savings Bank. What is more easy for a depositor during the transit of his pass-book through the post to the Savings Bank for the purpose of being made up to lose it? What is more possible than for the pass-book to be stolen during transit? The depositor possibly would not miss the pass-book if he did not come back for ten days or a fortnight. During that period it would be quite possible that a person who had the pass-book could operate against the depositor’s account by collusion, and to a very large amount. I think that the Committee will be very well minded if they will negative the clause. If the Government want to have this protection let them introduce a Bill containing one clause of this character and -applying to all banks, including the Commonwealth Bank. I do not think it is fair, after the affirmation made by Parliament in regard to other banks, that the Commonwealth Bank should be singled out for this privilege.
– Before putting the question I ask Senator Rae to withdraw the remark which he made before leaving the chamber and to apologize to the Chair. I have no doubt that he will do so.
– I withdraw the remark which I made in the heat of debate, and apologize to the Senate.
– While this discussion has been proceeding, I have been glancing through the judgment of the High Court in the case of Marshall v. The Colonial Bank, in which the Chief Justice made a remark which seems very pertinent indeed. In delivering a judgment which made the bank liable in the case of having paid a cheque through fraud to a wrong person, His Honour said that a bank, because of the number of experts in its employ, must necessarily always be in a better position to detect a fraud than the person upon whom the fraud has been practised. It seems to me that there is a great deal in that contention.
I am very sorry that the Leader of the Government cannot see his way clear to accept an amendment which, while not exposing the bank to too much risk, would offer depositors greater security than they will haveif the clause in its present form be retained in the Bill. There is nothing like one’s own personal experience to guide onein coming to a decision upon a knotty point like this. I know of a case which occurred recently, in which a lady lost her bank pass-book. Fortunately, it was found by an honest person, though some dayselapsed before the owner recovered it. Inthe meantime the lady, not being a good business woman, absolutely forgot to follow the instructions for her guidance in> such circumstances, which were printed inside the pass-book itself.
– They were not her only protection. It would still have been necessary to forge her name.
– U - Undoubtedly. Buthad a- dishonest person found the pass-book - a person who could make a colorableimitation of her signature - there was a big chance of fraud being perpetrated. Tomy mind, the position was put very clearly by Senator Rae when he pointed out that, even though a bank pass-book were under lock and key, it might be abstracted without the knowledge of its lawful owner. In? these circumstances, the owner would not be in a position to go to the bank and say, “I have lost my pass-book.” There aremany risks which depositors must incur if all protection to them is to be absolutely swept away - as it seems to me it will be - under this clause, which will free the bankfrom any obligation to pay a depositor hismoney so long as that money has been> paid to another individual.
– But what protection^ has the bank?
– T - The bank, by reason of its having so many experts conducting its business, ought to be in a better position to detect a fraud than is the ordinary depositor. I do not wish to see thebank placed in a false position. At thesame time, I would like to give depositors more protection than will be afforded tothem if the clause be retained in its present form. This is a matter which ought to be discussed quite free from any partisan, feeling.
– There should not: have been any statement made to the effect «hat the Government are penalizing the poor depositor at the expense of the big depositor.
– Q - Quite so. We have :had a great deal of mock heroics in regard to penalizing the poor. servant girl. I have no sympathy with those sort of arguments ; but, after all, they should not have been prompted by the remarks of Ministers. Even now, I would like the latter to devise morrie means by which depositors will be afforded more protection than they will receive if the clause be retained in its present form ; whilst, at the same time, the interests of the bank will be thoroughly safe-, guarded. If the consideration of this provision were postponed for a short time, the Government might be able to see their way out of the difficulty.
– I suggested an amendment at the beginning of this discussion.
– I - If .Ministers can -see their way out of the difficulty, they - will certainly make matters a great deal easier for those who wish to provide safeguards alike for the depositors and the bank. The Commonwealth Bank has no more loyal supporter than myself.. At the -same- time, I recognise that there is need for some alteration of this clause.
– When the Western Australian law -upon this subject was quoted a little while ago, we were informed that that, was the only State in which such a law prevailed, and it was even said that it obtained under groperland Government. I venture to say that there is more than one honorable senator who is a depositor in the Victorian Savings Bank; and, that being -so, I propose to read the Victorian regulation bearing upon this point.
– A regulation, not :a provision in the Act.
– Have not . regulations made under the Act the same force as the Act itself? Regulation 48 of. the Savings Bank Act of this State reads -
Payment can bc made only to the depositor ; personally and on his or her receipt, or to -the bearer of an order, in such form as shall be approved by the said Commissioners, and -signed by the depositor and witnessed if the depositor be a marksman or a minor, which order must be accompanied by the pass-book, But in case ‘any person presenting the pass-book shall unlawfully obtain any deposit or sum of money from the bank during the hours of business, the bank shall not be responsible for the Voss so sustained by such depositor, nor be liable <to make good the same.
I am absolutely certain that a similar regulation is to be found in connexion with every Savings Bank throughout the Commonwealth. Yet the clause under consideration has been attacked as . if it were an extraordinary provision.
– Does the Minister of Defence say that that’ regulation would prevent a depositor from successfully suing the bank?
– There is nothing in the clause about a depositor suing the bank. Probably the honorable senator has not read it. The clause read’s -
Where a person fraudulently represents himself to be a depositor and presents the depositor’s pass-book, and complies with the rules of the Bank, and thereby obtains any money belonging to the depositor deposited with the Bank by way. of Savings Bank deposit, the Bank shall not be responsible for the loss sustained.
– That regulation has been in’ force for thirty years. ‘’
– I have shown that the regulation which I have’ read is the ordinary Savings Bank rule. I appeal to the Committee to -give the Commonwealth, Bank the same opportunity to live that is extended to Savings Banks. The Government are fighting for this clause because they believe it to be a vital one, and even if they are defeated- upon it now they will subsequently endeavour to get it restored to the Bill.
– I would not have risen but for the gratuitous assurance of the Minister of Defence that probably I had not read clause 48. I am quite aware that the regulation which the Minister has quoted bears a striking similarity to that clause. When he read that regulation, which Senator Barker says has been in existence for thirty’ years, I asked the Minister whether he thought it would successfully prevent a depositor from suing the bank. The Minister replied by declaring that clause 48 says nothing about a depositor suing the bank. I am quite aware of that, but I say that if we pass that clause we shall prevent a depositor from successfully suing the bank. The regulation which has been read ‘would not avail the bank, even if it did act upon it. But if the Bill be passed, and payment be made by the bank, that institution will be acting under the authority of a Statute.
– I am rather surprised at the Minister taking up the attitude which he ha» adopted on this clause. We are now legislating for a bank which, we have been led to believe, is going to exhibit extremely high principles. I do not care if every Savings Bank in Australia is covered by the regulation which has been read by the Minister of Defence. I say that there is no general bank in the Commonwealth which has a Savings Bank attached to it. Why should we have one law for one set of depositors and another law for a different set? I hope that we shall arrive at a speedy decision upon this matter.
Question - That the clause stand as printed - put. The Committee divided.
– I find that the honorable senator’s name is not recorded in the division list as reported in the Journal of the Senate,* but under standing order 17$ it is provided that -
If complaint be made to the Senate that a. division has been inaccurately reported the President shall cause the Journals, if incorrect, tobe corrected.
I take it that Senator Barker was sitting, behind one of the pillars, and that his presence was not noted. Under this standing order, therefore, I shall cause the Journals to be corrected.
Question resolved in the affirmative.
Senate adjourned at 4.10 a.m. (Friday).
Question so resolved in the negative. Clause negatived. Clauses 49 to 64 agreed to. Title agreed to. Bill reported with amendments; report (adopted.
Bill read a third time.
Personal Explanation. Motion (by Senator McGregor) proposed -
That the Senate do now adjourn. /Senator BARKER (Victoria) [4.8 a.m.]. -^-1 desire to call attention to the omission df my name from the division as recorded in the Journals of the Senate on the motion for the adjournment of the debate on the - Commonwealth Bank Bill, moved by Senator Gould, on the 13th instant, that is, yesterday evening. I .voted with the Ayes,” but my name is not recorded.
Cite as: Australia, Senate, Debates, 14 December 1911, viewed 22 October 2017, <http://historichansard.net/senate/1911/19111214_SENATE_4_63/>.