9th Parliament · 2nd Session
The President (Senator the Hon. T. Gi vens) took the chair at 11 a.m. and read prayers.
Motion (by Senator Pearce) agreed to-
That the paper, “ Report to the League of Nations on the Administration of the Territory of New Guinea from1st July, 1922, to 30th June, 1923,” laid on the table of the Senate on 17th July, 1924, be printed.
– Can the Go vernment indicate)when the Public Service Billwill come up for consideration again?
– Not at present. It will depend upon the progress made with the Commonwealth Bank Bill,which we desire to get through at the earliest possible moment. Next week I shall be in a better position to answer the honorable senators question.
Bill read a third time.
Debate resumed from 17th July (vide page 2179), on motion by Senator Pearce -
That the Bill be now read a second time.
– I shall not attempt to deal with this bill as an authority on banking. Yesterday I was quite struck with Senator Pearce’s remark that he did not pose as an authority on banking or finance. It recalled to my mind a most amusing incident which took place many years ago when Sir Henry Parkes was Premier of New South Wales. On that occasion Mr. Thomas Brown, a young farming member, had just been returned to the Legislative Assembly for a country constituency, and as he had an excellent knowledge of land matters, the newspapers had referred to him as an, authority on land questions.
The distinguished old leader of the House approached Mr. Brown where he was sitting on the cross benches, and said, “ You are Mir. Brown.” “ Yes,” said the modest young member. “ I read that you are an authority on land matters,” continued Sir Henry. “Well” replied Mr. Brown, “ I do not think that I can make that claim, but I certainly come from a country district, and I am a practical farmer with some knowledge of the needs of a farming community.” “I am glad to hear you say that you are not an authority,” said Sir Henry, “ because with a very long experience in this Parliament I have watched the careers of men who have come here as authorities on land matters, and I have generally found them to be damned scoundrels.” I do not know that the same can be said of those who claim to be authorities on banking. At any rate, I was pleased that Senator Pearce did not pose as an authority. It is a subject to which I shall address myself very briefly. Although Senator Pearce gave us a rather good exposition of the bill, he seemed to be relying on remarks made by some one in another place, and as he brought those remarks under the attention of honorable members in a formal way, I have taken the opportunity to peruse them. I found in the speech delivered by the Treasurer (Dr. Earle Page) in another place, a magnificent conglomeration of material out of which a good address could have been prepared. But after spending hours in going through it, I came to the conclusion that if Ministers are so pressed for time that they cannot assimilate the provisions of a measure they have to introduce, they ought not to load Hansard with a tremendous quantity of extract matter which it is impossible to digest, and which has practically no bearing on the bill under consideration. I should like to have the issue clarified so that the discussion which takes place here will be upon an absolutely fair basis, and it will not be necessary to demand a division because a point has not been made perfectly clear. I should like Senator Pearce to say whether I interpret the intention of the Government correctly when I declare that, with the passing of this bill, there will be a complete transformation in the administration of the Commonwealth Bank, The bank was originally brought into operation to come into competition with private banks. At any rate, that was the deliberate intention of the original bill. Therefore, I should like a clear statement from Senator Pearce whether it is now the intention of the Government so to transform the character of the Commonwealth Bank that instead of its being an institution in competition with private banks, it will be, as described by Dr. Earle Page, a central banking authority, or a bank of banks. If that is the case, the purpose of this bill is so to alter the whole of the operations of the Commonwealth Bank, that it will be no longer a competitor with the private banks, but rather a support or a strength to them. It seems to me that the purpose of this bill is that, in ordinary matters of business, the private banks shall transact the business of the community and reap the profits therefrom ; and that, behind those private institutions shall stand this splendid structure, supported by the taxpayers of Australia, as a place of refuge in those periods of stress and trouble that must be encountered by every financial institution that is carrying on its business under existing conditions. I give the Government every credit for having good intentions. We know, however, that the way to the Opposition benches is paved with good intentions. I believe that the Government, with the best intentions, has come to the conclusion that it is better to leave private trading to the private banks, and to establish a bank of banks which shall be a haven of refuge for the private banks when trouble strikes them. That the banks will be overtaken by trouble is as certain as that sparks fly upward. It is quite impossible under present conditions to conduct banking for a long period without having occasionally to face disaster. The statement has been made by the highest authority in the Treasury Department - the Treasurer himself - that a “ peculiar “ provision was inserted in the original bill, making the Commonwealth responsible for all the moneys due to the bank. I cannot by any stretch of imagination understand why that provision should be termed “ peculiar.”
– It was certainly inserted intentionally.
– It was not only intentional, it was probably the wisest provision in the bill. It was my good fortune to have a seat in Parliament when banking was controlled and conducted by private enterprise. The banking troubles of 1892, and the suspension of the operations of many banks in 1S93, were possibly the most urgent matters that State Parliaments had ever been called upon to consider. I remember vividly that business men who had large accounts in the trading banks were practically cut off without a shilling unless they could claim personal friendship with the managers. The private institutions closed their doors at a given moment, and said, “ We have suspended payments pending reconstruction.” There was not then in Parliament a Labour government, but, fortunately for the people of Australia, there were quite a number of Labour members.. When this disaster overtook the private banking institutions what did they do? In New South Wales they waited upon the Premier and requested him to do in that time of panic what in 1911 a Labour government did in time of prosperity - to make the government and the people responsible for the banks’ liabilities. A bill was rushed through both Houses of the State Parliament in about 33 hours, and as soon as the credit of the people of New South Wales backed up the notes issued by the banks, and the notes were made legal tender, for which the state was, responsible, the banking crisis passed, and the banks gradually resumed their normal business. I suppose that those who are acquainted with what occurred in other states can state that the experience of New South Wales was universal.
– Except in Queensland, where notes were issued by the Government in the same way that they are issued now by the Commonwealth Bank.
– I do not want any one to imagine that Labour’s interest in banking has been confined to one individual. For twenty years before the man who claims to have been the father of the national bank in Australia was a member of the Labour party or of an Australian Parliament, in the forefront of every Labour Platform in Australia was the proposal to establish a national bank in every state in the Commonwealth. I go further, and say that at conference after conference, at executive meeting after executive meeting of our industrial and political organizations, there was developed a system of discussion which has made the average Labour member as well informed as intense study can make a man upon this great question. The success of the Labour party is due, not so much to its organization as to the fact that its members make themselves thoroughly well acquainted with every political question. In 1893, when the private banks collapsed, they did not, in New South Wales, approach members of Parliament as suppliants. I remember a distinguished barrister who refused to come to heel when the bank authorities told him he had to support the measure that was introduced for their benefit. I refer to the late B. E. Wise. Notwithstanding the hurried manner in which it was desired to put the measure through, that brilliant young man for hours debated the matter. He was told that for adopting that attitude he would yet beg for a brief in the streets of Sydney. His business was boycotted, and the prophesy almost came true. He was not a member of the Labour party, but I am capable of giving credit to a man who can take a strong stand. Another distinguished man, when a deputation of the banking authorities waited upon him and told him the way in which he should vote in Parliament, pointed to the toe of his boot and the office door, and said, “If you do not get out I will kick you out.” He practically begged for trade before the crisis was passed. The resources of the private banking institutions are enormous, and I am able to appreciate the influences that they can bring to bear to see that legislation is passed which will suit their ends. It is proposed by this bill to wipe out the Commonwealth Bank in so far as it is a competitor of the private banks.
– That is what is at the bottom of it.
– That position has been made clear by the speeches of those who have had charge of the measure in each chamber. On that issue I want to debate the provisions of the bill. The original bill provided, among other things, that the bank should receive moneys on fixed deposit and on current account, and make advances by way of overdraft or Joan. The following statement was made by the Treasurer in another place -
On the whole, it will be recognized that the Commonwealth Bank lias not been a serious competitor of the other banks. Indeed, it is understood that the policy of the management up to the present has “been not to enter into active’ rivalry -with the trading banks, and in pursuance of this ^policy the interest payable on Commonwealth Savings Bank deposits is, and has always been, lower than the interest paid by the state institutions. It is fortunate the pOliCy lias been such as has been described, because, by reason of that policy, the ^conversion of the Commonwealth Bank into a central bank has been rendered easier.
I join with Senator Pearce in the tribute he paid to the capacity with which the late Sir Denison Miller and the staff of the bank conducted its operations in the early stages of its existence. Being one of the impulsive men of the community, and being anxious to do things quickly, I frequently chafed at the fact that the Commonwealth Bank was not becoming the serious competitor of .the private banks that many who f favoured its establishment thought it would be. At the same time I pay my tribute of respect to the careful management and the firm handling of the bank by Sir Denison Miller. Be nursed the institution in its infancy, and raised it to a high level of efficiency. I venture to say that, if he were alive to-day, his endeavour would be, not only to make it a bank of banks, giving security, if need be, to private institutions iii time of trouble, but to make it a trading bank, which, by reason of superior management and the offering of greater advantages, would quickly absorb the whole of the banking institutions of the Commonwealth, and do that without any constitutional change. By the strength of character which he displayed, I judge that that would be his attitude. Some persons are prone to say that the conditions that existed in the early stages of the bank’s existence lent themselves to the easy earning of profits. Had it been in the hands of a weak or an inferior man, or even -of a big “board, the members of which, “because of their very numbers, would have been at each other’s throats, the chances are that it would not have survived. Strange as it may seem, -when the bill “went through Parliament, in 1911, from .my place in. the Senate I favoured management by a board of’ three members. I refused to vote for a board of five members. The superior wisdom of the leaders of our movement prevailed, and one man was placed in control of the bank. The superior judgment exercised in the selection of that manager gave us a man of whose record all parties can be proud. It would not be altogether out of place to look back and see what were the views of our opponents regarding our adventure in banking in those days. Take Sir Joseph Cook’s statement, on the 23rd November, 1911 -
So far as the great struggling masses are concerned, this is another piece of Dead Sea fruit that the Government are offering them.
– The bank made a very poor showing in the first two years.
– That is because it was managed by the Nationalists.
– It was managed by Sir Denison Miller.
– Nobody would have been sanguine enough to expect an institution of this nature, launched without capital, to make huge profits in the first few years. The marvellous feature of its history is that it has been so successful a f tei- -twelve years.
– It has had the whole resources of the Commonwealth behind it.
– Yes ; but those resources Iia ve never .been called upon. The bank has never exercised its right to issue debentures. Xt started with no other capital than the credit of the Commonwealth, and that enabled the people to present it with a capital. After twelve years the bank shows a profit of over £4,500,000, and, in addition, there has been a saving of nt least twice that sum to the people of the Commonwealth with respect to their business transactions.
– A splendid record.
– A magnificent record. When Labour starts out on any of its big projects, most of which .are so broad in scope that the mind of the average member of Parliament is unable to grasp their extent, all sorts of gloomy predictions of failure are heard. Sir Joseph Cook further stated in another place, in 1911 -
Those who will benefit from the proposed bank will toe -the capitalists who are engaged in -trading concerns and as speculators, while the small workmen who have placed their little earnings in savings banks have the prospect of finding their interest reduced. … I should like to know where the business of the bank is coming from. I believe he has not the faintest idea where the business of the bank is to be got from. - (Mr. Fisher - From Australians) …. I suppose the Government, going into the ordinary banking business, will naturally expect to develop an exchange business, but I do not see how they are going to do much of that. Are they likely to get the exchanges connected with the export of our wool, for instance?
If there was anything that came to the assistance of the wool-growers of this country it was the Commonwealth Bank. If there was any institution that made possible the organization of the great Wheat and Wool Pools, and the other pools that helped our primary producers so materially, it was this bank, and the fact that we had in existence, not only a bank competent to carry out this work, but officials in the employ of the Government competent to advise it.
– But not, unfortunately, on the question of exchange.
– No, but the very existence of this institution gave us the opportunity to use its machinery in the interests of the producers at a time of stress. In the recent speech by an honorable gentleman in another place, a reference was made to the note issue. I now invite the Leader of the Senate (Senator Pearce) to state openly what experience was gained during the war to warrant the transfer of the control of the note issue from the Treasury to a board. We are not living in an age of secret diplomacy, or of secret arrangements between governments and banks, and I think that the information asked for should be forthcoming. Personally, I agree with the state– ment by Senator Pearce, that although a man may not be an authority on banking, his Ministerial experience gives him some knowledge of such matters ; and I say unhesitatingly, from my knowledge of the note issue, that there is no justification for the insinuation that the experience already gained has rendered it necessary to make the proposed change of control. If the necessity exists it is only fair that an explanation should be offered. Either too little or too much has been -said. When the Commonwealth Bank -was inaugurated, many people believed that the Labour party was not to be trusted in matters of public business.
They affected to believe that the control would be handed over to the Trades Hall, which would “ cut up “ the people’s money. But Labour had an overwhelming majority in both branches of the Legislature at that time, and I am not too old to believe that the hand of Providence does take a. part in the affairs of men. During those three years a guiding hand led my party to do things, the magnitude and possibility of which were almost beyond its comprehension. We builded better than we” knew, and all that we did proved of such enormous advantage to the community during the stress of war that the present Government and its supporters have set out to destroy it.
– Is the honorable senator criticising the bill on the ground that it takes away from the bank some of the powers given to it by the Labour Government, of which the honorable senator was a supporter?
– I thought that when I commenced my speech I made it clear that I intended to attack the bill on the ground that the Government proposed by it to remove the Commonwealth Bank from competition with the private banks, and to make it a central bank that would be a stay to the private institutions. I am now endeavouring to show that the Composite Government, which was brought into existence by the most miserable and petty bargaining that ever disgraced any body of men, has already destroyed three valuable institutions brought into existence by the Labour party. Consider, first, the Commonwealth Woollen Mill. Of course, the Government did not actually destroy the mill, but it gave it away to its friends - an act of corruption unparalleled in the history of Australian government.
– The honorable senator is spoiling his speech.
– I must be truthful, whether honorable senators opposite like it or not. The Labour party established this mill and the Commonwealth Clothing Mill for the purpose of providing material for our soldiers, and for members of the Public Service, and during the war years the mill earned sufficient to enable it to be run at a loss for the next twenty years, if necessary. The Government closed the clothing mill and the Commonwealth Harness Factory, and in the most underhand and corrupt fashion deliberately gave the Commonwealth Woollen Mill away.
The DEPUTY PRESIDENT (Senator Newland). - Does the honorable senator accuse the Government of corruption? -
– Absolutely !
The DEPUTY PRESIDENT. - Then I ask him to withdraw the statement.
– If you, sir, will give me any reason why I should withdraw a statement, the truth of which is so patent, I shall do so. I say that it was gross and grave corruption.
– I rise to order. The remark is personally offensive to me, and, in the second place, it is not correct. The Government did not give away any public property. I ask that the expression be withdrawn.
– I apologize to Senator Pearce if my remark is personally offensive to him. The Government Harness Factory was another of the institutions established by the Labour party, and it made a huge profit during the war years - sufficient, in fact, to enable it to be carried on for a number of years without profit, but the Government closed it down. Next I come to the Commonwealth Government Shipping Line, called into existence during the war, and now transferred by this Government to a board. Then, again, we have this most monumental piece of Labour legislation, the Commonwealth Bank Act. If I look at this Government with angry eyes, that see evil in all it does, it is because its actions in the past convince me that it is prepared to do anything in the interests of its. friends outside. I believe that the bill represents a determination to prevent the Commonwealth Bank from competing with the private banks.
– Can the honorable senator name one power that the bank has under the present legislation that the Government proposes to take away from it by this bill?
– I can quite understand that a government wishing to attack an institution that has done as much for the community as has the Commonwealth Bank dares not attack it openly; it is skilful enough not to adopt that course. If anything counts in this debate it is the Government’s own words.
On page 32 of the Treasurer’s speech, as circulated by him, I read -
I have now placed before honorable members the proposals of the Government for the complete transformation of the Commonwealth Bank and the Notes Board into a central bank - a bank of banks - a bank of issue, deposit, discount, exchange, and reserve.
– That is all right.
– It nas that power already, a fact which the honorable senator is ignoring all the time.
– These interjections only help me by providing me with more material. I direct the attention of honorable senators to page 15 of the reprint of the Treasurer’s speech, where we have the statement: -
On the whole, it will bc recognized that the Commonwealth Bank has not been a serious competitor of the other banks. Indeed, it is understood that the policy of the management up to the present has been not to enter into active rivalry with the trading banks; and, in pursuance of this policy, the interest payable on Commonwealth Savings Bank deposits is, and has always been, lower than the interest paid by the state institutions. It is fortunate the policy has been such as has been described, because, by reason of that policy the conversion of the Commonwealth Bank into a central bank has been rendered easier.
That surely conveys to honorable senators the definite impression that the intention of the Government is to convert the bank from the purpose which we intended it to serve. I want to make it quite clear that we intended the bank to operate in competition with private banks.
– Will the honorable senator say that the Labour party intended to wipe out the state savings banks; by competition? .
– I say that when we established^ the bank, those of us who supported the proposal believed that we were going to get a Commonwealth Bank in fact as well as in name, and that the bank would -use its resources for the benefit of the whole of the people. The intention of the founders of the bank was that it should be in active competition with private banks. If the people stand up to this Government at the next election well and good. The private banks will triumph. But fortunately there is an election within eighteen months, and if the Labour party gets control of the Treasury bench, as in all probability it will, then I say that the last stage of the private banking institutions of the Commonwealth will be worse than the first.
– There will be no money if Labour gets into power.
– All this talk of trouble coming if Labour comes into power was, I think, exploded by the experience ofa Labour Administration in 1910-11, when we had a majority in both houses. The trading, commercial, and banking institutions never had such a good time as when a Labour government was in power in Australia.
– But it was a different Labour party then.
– Absolutely. The worst elements have gone out of it, and the best remain. If the Minister has any doubt on this point, I suggest that the attitude of his party towards the late Prime Minister should remove it.
– We were free men in those days. We were not controlled by outside executives.
– Evidently the National party has the same opinion of William Morris Hughes as the Labour party has - it is convinced that the best place for him is outside the Government. I repeat that if Labour is returned to power in eighteen months’ time, I can see nothing to prevent the Commonwealth Bank, strengthened as it will be with its accrued profits, from entering into active competition with private banks as safely, as surely, and successfully as it did in 1911. There is every likelihood of a branch of the bank being established in every centre where there is any possibility of doing good trade.
– It will then be in reality a people’s bank.
– Yes, a bank of issue, deposit, and exchange, so organized as to be in a position to buttress other banks, and to use the money deposited with it by the people for the development of this country. Does this Government know the real position with regard to our rural industries? If Ministers are unaware of the actual position, they should certainly make themselves acquainted with it. Do they know that a man owning a farm worth £5,000 is unable to get accommodation from private banks for the successful development of his industry? And are they aware that a business man, with half that amount of capital, in Sydney or any other capital city, can get all the money he requires?
This has been the position now for many years. The commercial interests of the big cities of the Commonwealth have been able to get as much accommodation as they need, for the simple reason that the profits of the private banks are being made in the cities, whilst rural industries are being seriously neglected. Our urgent need is the establishment of a people’s bank that will go into active competition with the private banking institutions, and use the resources of its depositors - if the people have no confidence in it there will be no capital to use - for the legitimate and safe development of rural industries.
– People cannot get the accommodation the honorable senator refers to from the Commonwealth Bank to-day.
– I am quite aware of that. The Labour party has been out of office for seven years now.
– Did they ever get it?
– On that point I refer the honorable senator to the provisions of the original bill, which he, as a supporter of this Government, will, no doubt, now vote to change. I am not one of those who rage unreasonably against private banking institutions, and suggest that they are all that is evil. I have no such thought in my mind. I really believe that if some unbiased writer set about the compilation of the history of banking in Australia for the last 100 years, the private banking institutions of this country would have more on the credit than on the debit side of the ledger. I am quite prepared to say that in some instances, perhaps, they have taken enormous risks to assist in the development of Australia, and have done much good. But we have to be progressive. This country has now reached the stage when what may have been a safe and sound policy for a small community is not sufficient to meet the needs of a people with enterprises rapidly developing. I admit that the record of our private banking institutions is not one that we need be ashamed of, and I remind honorable senators that when, in 1910, the Labour party came into office with a majority in both Houses, it made no attempt to crush the private banks. If we were the “ wild cats “ that some of our political enemies pretend to believe we are, we could then have wiped the banks out of existence. We did nothing of the sort. We simply established a bank, obtained the services of the best man available, and gave him sole control, with instructions that he was to make a success of the institution. That he did. The bank is now only twelve years old. It is only in its infancy, and it is time we developed its activities. Senator Foll has suggested that it has not assisted very materially in the development of this country. We .all know that for the last four years the management has been under a threat of expulsion. It has been an open secret that the Government contemplated changing the system of control by the appointment of a board, upon which the manager would not have a seat. That has been the position for the last four years. I do not think any one will complain of what happened during the four years of war. The thing that astonishes me is that a Commonwealth-owned institution, starting as the bank did in the face of fierce opposition from all the established private trading banks, should in those four years have so established itself as to earn the eternal and life-long gratitude of every trading bank and commercial man in Australia. A member of another place, when discussing this bill, seemed not quite to “understand the arrangement made by the Labour Government with the banks with regard to the issue of notes. I am not going to pretend te> be an expert myself, but, roughly, the facts are that within six weeks of the outbreak of war, and when the Labour party secured a majority in both Houses, it was up against a critical situation caused by the private banks calling in their securities. A panic had set in. The directors of those institutions, in order to make their position secure, resolved upon a policy of calling in as much capital as possible in order to safeguard their depositors. The Government, using its emergency powers, arranged to issue a. certain number of notes to private banks in return for sovereigns lodged with the Treasury.
– In other words, the ‘ Government lent the money to the banks at a certain rate of interest.
– It amounted to that. The banks complied with the ‘conditions laid down by the Government. I venture to say that the action taken by the Government at a time like that earned the life-long gratitude of the financial and commercial people ‘of this country. The Government, in its wisdom had the notes printed and ready. It was not necessary, as in England, for the Government to pass note issue bills authorizing the private banks to extend their note issues. In Australia the machinery was ready, and it was put into operation immediately to deal with a panic in banking and commercial circles. For every sovereign lodged with the Treasury the private banks received one Commonwealth note, and, in addition, two notes as currency authorized by Parliament as legal tender. This relieved the private institutions from the necessity of putting pressure on their clients; it saved the commercial .and trading community, and, incidentally, relieved the working class people of Australia. Again I say that Labour, in its wisdom, builded better than it knew. We had established a bank not only for a time of peace, but for a time of war”. The bank, during the wai-, rendered extraordinarily good service to the people of this country, and the time, in my opinion, has come when, instead of trying to prevent it from extending its operations, we should see that it enters into active competition with private institutions. The time will come when the Government of the day will take a survey of the situation, and deal with the danger that threatens the development of Australia. What is the crying need of Tasmania, of Western Australia, and of New South Wales? The situation has become so acute, the people are so harassed, that, in New South Wales, they are talking of endeavouring to create another state to get away from their difficulties. Tasmania, 23 years ago, was an independent state. Her people to-day would like to get out of the Federation if they could. All this unrest is due to financial difficulties. We are told that we must expect these troubles; they are the aftermath of the war. If so, I say that a Government seized with the seriousness of the present position must face the situation. If we could take risks in time of war, surely in time of peace we should be prepared to take the same risks, if by doing so we can relieve our primary producers and trading community from the menace of panic-stricken directors of private banks. We know that, when people lose confidence in a private bank, there is a run on its resources and disaster follows. I go further, and say that if a -panic breaks out amongst bank. directors as to the value of their securities the situation of the trading community is infinitely worse. Are we to leave this business of developing our rural industries to the management of private institutions whose directors may be stricken with a panic at any time ?
– Not all at once surely.
– Unfortunately the history of banking institutions shows that there is that danger. My experience of banking authorities is that .they are no more infallible than other people. When the war broke out they knew just as much about war finance and the probable duration of the war as the average man in the street. Frequently we see references to the opinions they express on financial problems. We are told that Mr. SoandSo, the director of such and such a bank is a very high authority on finance. Financial authorities at that time told the Labour Government that it could not raise £5,000,000 on the local market, but nt its first effort, in spite of that declaration, £13,500,000’ was subscribed, although it asked for only £5,000,000. Our opponents did not think it could be clone, but honorable senators are, of course, well aware of the amount which was raised. The men in power at that time had a wide vision and an extensive outlook. The experience of our opponents was confined to managing private businesses, and their chief concern - with due respect to the people who manage such institutions - was the amount of profits which they could pile up. The proposal of the Government in this instance is to appoint a board consisting of eight members to control the bank. I should like the Commonwealth Bank to be managed by n. board of three, consisting of the Governor, the Deputy-Governor, and the Secretary to the Commonwealth Treasury. The proposal to appoint eight members may appear of course a small matter to some, but it means providing eight good jobs for the friends or supporters of the Government.
– The honorable senator should leave that out.
– I would, bq prepared to do so if the Government could convince me that there is any hope of the bank being controlled in the way it has been, but governmental activities are passing from the control of the people through Parliament, and are being placed in the control of boards. Let us look at the constitution of the proposed board.
– The honorable senator is weakening a very good speech.
– I have my weaknesses, and even the distinguished honorable senator who has just interjected is not perfect. The point I wish to make is that the Government propose appointing a board consisting of eight members, four of whom are to represent manufacturing, agricultural, and pastoral pursuits, and two are to have a knowledge of currency matters. If eight men are to be appointed, as is proposed, the Government should secure the services of the most competent men available, irrespective of their individual interests or the businesses in which they are engaged. Can any one imagine persons with an intimate knowledge of the pastoral industry having also a sound knowledge of banking? A sound system to adopt in order to do justice to such a huge banking business would be one under which the bank would become a trading bank and enter into competition with private banks. The members of the proposed board should be appointed because of their knowledge and experience, and not because of the occupations they follow, or the interests they represent. I now wish to return to the statement I previously made, and which did not meet with the approval of some honorable senators, that it is possible, the Government will appoint some of their friends or supporters to these positions. Even though that statement may be denied, I think it will be admitted that the Government are not likely to appoint any of our friends.
– Possibly the honorable senator’s party will some day have an opportunity of appointing some of their friends.
– We have had our opportunities, and I can say to the honorable senator and to the public that an instance cannot be quoted in which any of our friends or supporters were ever appointed to such positions unless they had exceptional capacity.
– Why not give to others the credit you claim for your own party ?
– Because the Government have not left themselves free to give these appointments to men of the greatest ability. By this bill certain limitations are imposed. Under the bill as it stands the Government will have to select for appointment to the board men representing particular interests who may not have the requisite ability or capacity, but who will be appointed because of their experience in manufacturing, agricultural, or pastoral pursuits. Character, ability, and competence to fill these positions should alone be considered in making the appointments. I do not know whether the Government are taking a leaf out of the book of Soviet Russia, whore men arc elected to represent the particular classes with which they work. Th/at is the essence of the Soviet system, and I am rather alarmed to find that certain interests are to be represented on the proposed board of the Commonwealth Bank.
– Bolshevism !
– Yes ; bolshevism in banking. I ask honorable senators if they believe that eight men, with diverse interests, sitting around a table, principally to draw fees, will, in times of intense excitement - when the community is at its wits’ end to know what should be done, and what is likely to happen to-morrow - be likely to act in as safe a manner as a board of three experts, whose duty it would be to conserve not only the interests of the Commonwealth Bank, but the interests of the Australian people. Three men such as I have suggested would form an admirable directorate to control the bank. If a private company is formed, what happens? A certain number of shares are sold, and the shareholders elect the directors. The directors do not interfere, with the management, but merely supervise the operations of the institution. In 1911 the Labour party established the Commonwealth Bank under an Act of Parliament that made the whole of the people of Australia shareholders in it. For a period of three year3 the Australian people appointed the directorate, which was really the Government, and the Government in the case of the Commonwealth Bank acted as do the directors in a private institution. They did not participate in the management.
– Does the honorable senator suggest that the bank was controlled by Parliament?
– Absolutely; and for twelve years the arrangement has worked very successfully.
– The late Sir Denison Miller as governor had unlimited powers.
– I am afraid Senator Foll does not understand me. I have been associated with the honorable senator in this Parliament for seven years, and I do not think I have ever been able to make myself clear to him.
– That is the honorable senator’s misfortune.
– I am not complaining. I am endeavouring to compare a private banking institution with the Commonwealth Bank. A private banking company has its officers, who conduct the whole business of the bank, and even if the directors exercise a controlling influence in matters of policy, they do not enter into details of management. The Labour Government under which the bank was created appointed one man as governor, who filled the position with credit. The Australian people were regarded as the shareholders.
– The honorable senator has exhausted his time.
Motion (by Senator Pearce) agreed to-
That the honorable senator be allowed an extension of 30 minutes.
– I thank honorable senators for granting me an extension of time. A discussion on banking opens up the possibility of how, owing to expansion and development, the whole world can suddenly become rich. I do not think it can. Our trading institutions and our mining and rural industries can be safeguarded by a strong Commonwealth Bank entering into competition - I do not mean unfair competition - with private banks. The fact that we can pay higher interest - and we could pay it - and that we have a credit represented not only by the gold in the. vaults of the Treasury, but which includes the last shilling of the last taxpayer of the Commonwealth, should enable us to do it. We are on quite a different footing from that of private institutions, but I realize that my opinions on these matters differ very largely from those of honorable senators opposite. The
Government are now adopting the policy of having nothing to do with collective enterprise. In banking and insurance, and in other enterprises in which money is used, and’ where credits are easily obtainable, there is no safer way than for the Commonwealth to proceed in the manner I have suggested. No matter how silent we remain, no matter how little publicity is gram to the situation, one cannot watch the financial affairs of the world without the most grave misgivings and apprehension. Great Britain’s efforts in paying off her national debt are marvellous and astonishing to men who realize the true position. But no man can study the financial position and feel satisfied. If all goes well and we weather the storm, we shall be fortunate. No financial institution or government is -strong enough to look without grave apprehension upon the financial condition of the world. The financial affairs of the nations are very much like skittles on a board : when two are knocked down in a certain way the others must fall. A banking panic anywhere might lead to the toppling over of financial institutions in every civilized country.
– In the great crisis some of our banks remained open.
– There has never been a financial crisis like the one which we are now experiencing. Never has there been a system of financing so extraordinary as that in which the world is engaging at present.
– Still we are getting on fairly well.
– No doubt we are. I could understand a gallant soldier, like Senator Thompson, declaring, with a brave heart, that he was getting on very well, even whenshells were bursting round him.. It was said of a certain general that he gave his officers his orders and then wentfishing, fearing that there might he a desire to alter his “plans while the battle was proceeding. There may be wisdom in such a policy. The present financial position does not cause any anxiety to those great men who can lift their minds above it. But are we in a safe position at present ?
– The honorable senator is quite right.
– The gravity of the present financial situation cannot be over-estimated. There may be a collapse - and af ter that the deluge. I do not know what it will be, but we should have an organized Labour government proceeding; constitutionally, according to the best traditions of Parliament. I have addressed myself to the bill, and submitted the points which I thought necessary… The Government has done much to destroy the good Labour has done. The Government is now bent on further mischief. I shall oppose the bill, but not for the sake of dragging out the debate, or fighting unnecessarily. The attitude’ of the Opposition will bo to put forward our views, and any amendments we may think are required, in a most expeditious manner, but so that every clause of the bill shall he properly thrashed out on the floor of Parliament. I hope that the Minister will meet me in the samespirit until, of course, he finds that I am no longer doing what I propose to do. If the hill is to he treated in the Senate as it was dealt with in another place where, . under a peculiar standing order,, clause after clause had to be adopted without discussion, all the forces of the Opposition will be used in an endeavour to preserve freedom of discussion on a matter fraught with so. much . serious danger to the people. I do not make this remark as a threat. I do not mean it to be regarded as such. Yesterday I was prepared to meet Senator Pearce in order to expedite the passage of the bill ‘by one day, but I do not think the loss of a day is of muck concern to the Government so long as they can get into recess before Mr. Hughesreturns to Australia. Thomas Campbell wrote -
Tis the sunset >of life gives me mystical lore,
And coming events cast their shadows before.
I see the spectre of a little man coining across the Pacific to take count of what has happened in Australia.
– Let us hope that it will not he his spectre that comes back. I would ratherhave the man himself.
– I do not think that Mr. Hughes will ever “ come back “ in the sense in which athletes sometimes try to come back, but I think he will shortly return to Australia. Before I conclude I wish -to . refer to Dr. Earle Page’s statement that the Bank of . England is a private bank altogether independent of the state. I do not claim that
Dr. Earle Page is wrong in his statement - and he is an authority - but others who have given as much study to these matters as he has seem to think that it is not quite a private institution. For example, Professor B. Price, in Currency and Banking, says -
The act divides the Bank of England into two departments, one, the banking department, -and the other the issue department. The latter is exclusively concerned with the issuing of notes. That operation is carried out under fixed rules laid down in the statute - and the vital point to observe Here is that the corporation called the Bank of England has no voice, discretion, or control over the issue. In the issue department the bank directors have no more authority or right to speak, or act, than any other person in the kingdom. The banking department is’ the Bank of England, pure and simple, as private a bank as any other private bank in the country.
I put that statement alongside that made by Dr. Earle Page. I know that the Standing Orders will not permit me to discuss what has been said in another place, but I have given some attention to this subject. In a position of responsibility I should not’ like to declare that the Bank of England is a purely private institution, and I do not think any one occupying a responsible position should be allowed to make that statement without placing alongside it the contrary opinion of another authority.
– The quotation does not help the honorable senator. It shows that the Bank of England is a private institution on the banking side, and that it is only limited on the note-issue side of its operations.
– Dr. Earle Page has declared that it is a private banking institution altogether independent of the state. I am merely showing that it is not altogether independent of the state.
– The Bank of England is governed by certain legislation.
– So is every bank.
– It would take a very wise man with great knowledge and greater clarity of expression to define exactly the position of the Bank of England in relation to the British Government.
– The Bank of England is like the British Constitution.
– Absolutely. It has grown up. However, I have merely drawn attention to Dr. Earle Page’s statement in order to place alongside it a statement by another authority, and to say that, in my judgment, the Treasurer’s reference to the Bank of England was wide of the mark. I need not remind honorable senators of the grave dangersthat some people feared would come upon Australia when the Labour party assumed control of the note issue, or of the fact that the issue itself was one of the biggest factors that helped the Commonwealth in carrying on the war. Labour builded better than it knew. Control of the note issue enabled the Commonwealth to raise £16,000,000 in the first year of the war without the need for floating loans. The note issue will probably be in safe hands when it is transferred to the board of directors of the Commonwealth Bank, but nothing will prevent the people of the Commonwealth from doing whatever they like with the note issue, the Commonwealth Bank, or anything else.
– The present Treasurer has found that he cannot do what he likes with the note issue.
– I do not want to discuss what the present Treasurer has found, but I venture to say that, in future, Treasurers will be found who will ‘ do what they like with the note issue so long as what they do is in the best interest of the Commonwealth, and meets with the approval of the people. I do not say that weak Treasurers may not be hampered at any time, but strong Treasurers will not allow themselves to be hampered. A Labour Government has already given proof by its handling of the note issue that it would not use it to the detriment of any section of the people. If we are again returned to power we shall conduct ourselves in accordance with the best traditions and the highest ideals of the Labour party. I challenge any one to show that, in our past administration of the huge activities entrusted to our control, we have ever fallen shorts of the highest estimation of -our own supporters,or down to the level ofthe lowest estimation of those who, by appeals to prejudice and spite, try to misrepresent us because we are Labour men. The Government will, no doubt, pass this -bill, but if the people want a.- national bank that will aid (development, and assist private enterprise and rural industries, they will soon have the opportunity to declare their verdict by returning to this Parliament a majority pledged to a Commonwealth Bank that will compete with private banking institutions and pledged to make it, now that it has passed its stages of infancy, the institution which the originators of the Commonwealth Bank, the Labour party of Australia, determined that it should be.
– I congratulate the Leader of the Opposition (Senator Gardiner) upon his speech. I agree with a good deal of what he has said, and as I proceed, shall indicate my points of agreement with him, although my reasons for such agreement may differ from his. I am sorry that he marred a most excellent speech by a reference to political opponents, which was not justified by the actual facts. He thought it necessary, I regret to say, to accuse his political opponents of deliberate corruption in carrying out part of their policy. I do not think I have ever suggested that Senator Gardiner and his friends, in giving effect to the political principles for which they stand, have been actuated by corrupt motives. I have always been prepared to accord to them, as I ask them at all events to accord to me, the credit of honesty of purpose in all my public efforts.
At the outset of my speech I want to utter a word of congratulation, because, later on, I shall have a good deal to say of a critical nature. I congratulate the Government, because they have come down with a proposal to change the method of control of the Commonwealth Bank.
– It is a “come down “ all right.
– I do not agree with the particular form of control the Government are proposing, but it was part of the policy of the National party that the control of the bank should be changed from one man to some other form which would secure the exercise of the opinions and judgment of more than one man. The particular form of that control has never actually been settled by the party. I say with Senator Pearce, and without the slightest desire to utter anything derogatory to the man to whose hands the early career of the bank was originally entrusted, that the responsibility is too great for one man to carry. Sir Denison Miller proved to be, not only a great banker, but also a great Australian, who rose to the emergencies of the enormous strain the war placed upon his shoulders, and carried the burden with entire credit to himself, and real and lasting benefit to the people of Australia. I regret that the strain placed upon him during the war so weakened his stamina that when illness came upon him he was taken from our midst, and that consequently his ripe judgment was not available to assist the Government in their new venture, that of changing the character of the Commonwealth Bank entirely. I am sorry that, before moving, the Government have not more generally announced the nature of their intentions. I was not able to follow Senator Pearce closely when he indicated certain amendments which the Government proposed to introduce in committee, but from the bill under consideration I think there is one very important omission which could only have been deliberate. In making the alteration from control by one man to control by a board it is most extraordinary that the Government should leave to the absolutely untrammelled determination and judgment of one man the power, given by section 34 of the original act, to grant advances on security. I do not know whether the Government have included in the amendments which the Minister proposes to make any reference to that section.
– That is one of the amendments.
– I am pleased to learn that. If the provision were not altered, with one hand the control of the bank would be given to a board, and with the other it would be taken from it. So long as it is intended to substitute the word “ board “ for “ governor,” in section 34 of the principal act, I have nothing further to say on that point.
– That is the intention.
– The Government has already indicated that, in respect to the capital which it is proposed now to grant to the board for the conduct of the business of the bank, it does not intend to occupy a position different from that of a shareholder in a* capitalistic institution. It is probably acting wisely, though in the long run I do not think that it would very greatly matter if this departure from the present practice were not made. The bank will be called upon to pay dividends to the Commonwealth Government. I presume that the rate of dividend will be that which the Government will have to pay for the money; provided, of course, that the profits of the bank are such as will enable it to pay that rate. I think that the Government will, to a very great extent, destroy the usefulness of the board if it perseveres with the peculiar and, to my mind, quite unnecessary stipulations as to who the directors shall be and the quarters of the globe from which they shall come.
– Why not let the best man win ?
– I am at a loss to understand why it should have been decided to distribute the members of the board geographically over Australia.
– There is the American precedent.
– I was about to say that I presume this provision has been copied from the Federal Reserve Board of America. That board, however, is not the board of a bank, it is not the directorate of a bank, and it has nothing whatever to do directly with the business of banking.
– The South African law contains a similar provision.
– The Federal Reserve Board of America is a body entirely different from that which it is here proposed to set up. I cannot understand what will be gained by this provision. On the contrary, I can see that a very great deal will be lost because of it. It will virtually mean that the real control of the business of the bank will pass into the hands of the small executive which will be appointed under the act. The business of a board of directors of a bank is somewhat different from that of the directorate of an industrial company. Constant supervision is necessary in the former case. I think that the board of - directors of the Bank of New South Wales and that of the Commercial Banking Company of Sydney meet twice a week, and that the board of prac tically every bank in Australia meets at least Once a week. The time that will be occupied in travelling backwards and forwards will be such that the executive at the head office of the bank, wherever it may be situated, will practically control the whole of the business of the bank. A man who is actively engaged in business, and whose opinion would be really worth having in these matters, in 99 cases out of 100 will be deprived of the opportunity to serve on the board. I agree with Senator Gardiner that the Government would be well advised to forgo the special qualifications which at present it proposes shall be possessed by the various directors. I think that the ability, the integrity, and the knowledge of the director should be the sole qualifications, no matter in what particular walk of life he may be engaged. I believe that the members of the board should be drawn from active business circles. I do not think there is any necessity to lay it down that one must be a commercial man and another something else. It may be quite possible to secure four men who in primary industries stand out pre-eminently as men who should be appointed to the board. If the intention of the Government is that the board shall first and foremost assist primary industry, perhaps it would be as well to have on the board four men who are well qualified in that particular phase of industry. I think, too, that the provision that the consent of the currency directors ‘must be obtained to any proposal relating to currency, is both unnecessary and unwise. The alteration which the Minister (.Senator Pearce) SUEgested yesterday does not, in my opinion, at all meet the difficulties that I see surrounding this particular matter. I admit the enormous importance that will attach to decisions on matters of currency, but notwithstanding that I believe that agreement by an absolute majority of the members of the board should be sufficient.
I want, now, to discuss the principles which underlie the bill. Looking at it, I confess that something of the spirit that one can imagine pervaded the soul of our old friend Omar under different conditions, impels one to express oneself in terms similar to those used by him. So far as this bill is concerned, I would, if I could - . . shatter it to hits - and then
Re-mould it nearer to the heart’s desire.
I believe that the bill has been illconsidered. I do not think that it meets the financial needs of Australia. There are pitfalls and dangers of the gravest possible character associated’ with it. The more I look at it, the more satisfied I am that the Government should “ hasten very slowly “ before it places this bill upon the statute-book. Senator Gardiner referred to the complete transformation which he imagines the bill will effect in the Commonwealth Bank. He is right, yet he is wrong. It will be a complete transformation in some respects. In other respects, it will leave the bank exactly where it is now. Senator Gardiner said, moreover, that the bill was being passed with the object of assisting the private banks>. He did not say that it was introduced at the instance of those banks, but he left tho impression that that was his belief. I think that that impression has been created very largely by the remarks of the “honorable gentleman who is primarily responsible for the introduction of the measure. That honorable gentleman has allowed it to be assumed, if he has not stated it in definite terms, that the bill is the outcome of close consultation with the private banks, and that it meets with the approval of the associated banks. With a full knowledge of the responsibility involved, I say without any hesitation that so far as the form and character of this measure ‘are concerned, there has been no consultation of any kind that would be worth a. row of beans, with the associated v,banks. I say, moreover, that the associated banks do not approve of the bill, but that, on the contrary, they are desperately afraid of it. And I think that they have reason to be. Senator Pearce made a statement yesterday which I specially noted, because it furnished the strongest possible confirmation of the idea I have held of what has been the actuating force behind this bill. I gravely doubt whether even the Treasurer has realized the full significance underlying the admission. The honorable senator said that the bill had been introduced to make the Commonwealth Bank a central bank, so that it could guide and control the private banks. That guidance may take the form of control. The provisions of the bill give the Commonwealth Bank the power to absolutely control the private banks, and hold them in a grip from which it will be utterly impossible for them to escape. If I were a member of the party on the Opposition benches, instead of being on this side of the chamber, I should not oppose the bill for a moment. I should grapple it to my “ soul with hoops of steel.” I’ should eagerly accept it, realizing that it was an instrument adapted perfectly to carry out the. policy to which I was committed. Honorable senators opposite have a policy with respect to banking ; they subscribe to it, and believe in it, as they have every right to do.
– It is part of our religion.
– They are proud of it, as they have every right to be, if they believe in it. A plank in their platform to-day is the nationalization of banking. When Senator Gardiner was speaking a short while ago he said ‘that he looked forward to the time when the Labour party would be once more in office, and thus able to take up the work begun by it, for it would extend the activities of the Commonwealth Bank to the point at which it’ would absorb the whole of the present financial institutions of Australia. Before the Government proceeds to put this bill on the statute-book it should hesitate and consider whether the lines it has adopted are the best in the interests of the people. Senator Pearce, in introducing the measure, said he regarded it as the most important piece of legislation that this Parliament would be called upon to consider during the session. I entirely agree with him. I also approve of the concluding remark by Senator Gardiner, who stated that the whole business of finance was in such an extraordinarily difficult position at the present time that we should be very careful what we did. I say unhesitatingly that, in an important issue of this nature, before acting finally, we ought to have the considered judgment of all those men in whose hands the financial stability of the Commonwealth at present rests. Why has such a consultation not been held? Why was there not the fullest and freest public discussion before the bill was introduced? Why was not the country told that the Government proposed, not merely to alter the management of the Commonwealth Bank but 10 take steps to create a central banking system in Australia ?
SenatorFoll. - Does the honorable senator suggest . that the private banks have not been consulted?
– There has been no consultation of any account in regard to the basic principles.
– The private hanks are not the only parties interested.
– But they are vitally interested.
– Did not the Treasurer interview them?
– I am not permitted, perhaps, to say exactly what was the nature of those interviews, or the ground they covered. I simply repeat my statement that, in regard to the things that really mattered, there was no consultation, and no approval was given by the associated banks. It is rather remarkable that in bringing down this bill the Government has not been able to definitely assure us that the measure meets with the approval of the Acting Governor of the Commonwealth Bank.
– The privatebanks have not been very active in disclosing any objection they have to the bill.
– No, because the measure favours them.
– I have a number of objections to the main provisions, but one of my chief objections is that the bill practically perpetuates the present inelastic form of currency.From its very character a purely Government issue of notes necessarily cannot meet the fluctuations of trade and -commerce that from time to time arise. Although I know that my friends opposite have taken much credit to themselves in connexion with the Commonwealth issue of notes, I venture to say that the fact that there is unemployment in this country at present, to any extent worth speaking of, is attributable to our inelastic form of currency.
– The honorable senator is quite wrong.
– I do not profess to be as omniscient as the honorable senator. I . readily take my stand with Senator Pearce and Senator Gardiner, and say with them that I do not claim to he an authority on banking.
– I hope that the Deputy President will allow me to ‘ deal with the unemployment problem on this bill.
– One of the evilsnecessarily arising from the present form of currency is unemployment.
– Has not the policy of borrowing abroad something to do with it?
– Yes, and I hopeto deal with that matter in due course. There is truth in the old saying that that man is wise who knows of a certainty that he knows nothing. The subject of finance has depths which I have not plumbed, and it has aspects on which no one man is capable of expressing a considered opinion. My friends opposite ought to welcome the bill. If the people of Australia return the Labour party to Parliament with a majority, it will be entitled to put its policy of nationalization of banking into effect,, since a political party that appeals to thepeople on a certain policy and is successful, has every right to seek to carry out that policy. Senator Gardiner remarked that, if the Labour party was returned to power, the last state of the private banks would be worse than the first. He is perfectly justified in taking up that attitude in view of the policy of the Labour party, and he should recognize the bill as an instrument placed in his hands to give effect to that policy.
– We do not see it in that light.
– Honorable senators opposite probably will before I have concluded my remarks. It is proposed to appoint a board of eight directors, one of whom is to be an ex officio member of the directorate; I refer to the Secretary to the Treasury. The rest are to be political appointments;
– There will not be many appointments from the party on this side.
– If we are on the Treasury bench, there will be.
Sitting suspended from 1 to 2.80 p.m.
– I have already pointed out that, with the exception of one member, the whole of the appointments to the directorate of the bank are in the gift of the Government of the day, one member only being on it ex officio. Senator Hoare, when I was speaking, said very properly, by way of interjection, that when the Labour party got into power, it also would make appointments to the directorate. That is exactly the point I have been endeavouring to drive home, namely, that the appointment of the members of the board rests entirely in the hands of the Government of the day. I was pointing out also that the policy of the Labour party is the nationalization of banking, and, if the people of Australia returned the Labour party to power with a mandate to carry out its policy, it would be perfectly justified in appointing to the board men who, would assist it in carrying out its policy. That being the policy of the party, if the party received a mandate to give effect to it, it would be justified in using every legitimate means within its power to do so.
– Would not the same remarks apply if the bank were controlled by a governor only?
– I shall deal with that point in a moment. Under this bill tremendous power is placed in the hands of the bank by giving it absolute control of the note issue. The bank may use that power, if it wishes to do so, to check the operations of the private banks, and aggrandize the operations of the Commonwealth Bank. It is true that the Government having, I presume, realized the danger, now proposes that the consent of the Treasurer of the day shall be necessary for any special issue of notes to the Commonwealth Bank. If the Treasurer of the day is in favour of the nationalization of banking, he will be entitled to use the power given to him under this bill to assist the Commonwealth Bank to become the kind of bank he desires. I repeat that this is an extremely dangerous power to put in the hands of any board or governor of a bank, especially when the appointments to the directorate are solely and wholly controlled by the Government of the day. Senator Gardiner has stated, and I think with perfect justification, from his point of view, that when the Labour party comes back to power, the last state of the private banks will be worse than the first, that is, if the party has its way.
– We would abolish them.
– I do not take the slightest exception to that indication of policy. No doubt the Labour party would use the instruments placed in its hands to give effect to its policy.
– I said nothing at all about abolishing the private banks. I showed that, during the two years of Labour administration following the establishment of the Commonwealth Bank, our purpose was that the bank should go into active competition with the private banks in a business way.
– The same thing.
– I cannot see any real difference between what Senator Gardiner is saying and what Senator Hoare stands for.
– There is no difference at all. One is a straight-out declaration, and the other a roundabout way of achieving the same end.
– These interjections are gradually showing exactly where we stand. We are getting a little nearer the point I have been trying to drive home. We see something of the real dangers that lie behind the proposals of the Government.
– Real danger to whom?
– The danger from the point of view of the associated banks. I do not suggest that the Government, in submitting this bill, has the slightest desire to assist in the nationalization of banking. The objective of the Government, I believe, is something quite different from that.
– Nevertheless, I am quite satisfied that the Government proposal is a definite and deliberate step towards the nationalization of banking in Australia.
– We on this side have not the honorable senator’s faith.
– I am simply put- . ting my point of view, and stating what, in my opinion, may be the effect of the bill. Whilst Senator Gardiner was speaking, and pointing out that the dangers to which I have referred did not follow on the assumption of office by a Labour Government, in the early history of the ‘ Commonwealth Bank, Senator Pearce reminded him that the Labour party then was not the same as the - Labour party of to-day; that it had not to obey the dictates of outside executives.
That is exactly the position, and I remind Senator Pearce that in that interjection he emphasized the very point I am endeavouring to make now. I pass on to deal very briefly with the question of a central bank. The Government has, in the most definite terms, stated that its real objective in connexion with the bill is the establishment of a central bank. That is an admission that the Commonwealth Bank at present is not a central bank, or a bankers’ bank, and it is an indication of the desire of the Government to effect a radical change in the banking policy of the Commonwealth by creating in Australia what is known as the central system of banking. Personally, I am not satisfied that the central system is desirable in this country. Many arguments may be directed against it, though, no doubt, some cogent reasons may be advanced in its favour. But the point that I am particularly concerned with at the present moment is that without any real public discussion of this most important question, affecting in a very vital way the whole structure of finance within the Commonwealth, the Government comes down with this bill, which is a direct attempt to set up in Australia a central system of banking, which has no parallel in the world. You may search the records of the world without finding a central banking system of the kind proposed to be established by the Government under this bill. You may. also look through the very fine memorandum which the Treasurer read in another place, and which, I venture to say, bears the impress on every page of it that whilst the voice was the voice of Jacob, the hand was the hand of Esau. Whilst I appreciate very highly the capabilities of the gentlaman to whom I have referred under the name of “Esau,” I differ fundamentally from him in some of his ideas in relation to banking. I do not think it is fair that without any public demand or discussion of this vital question, which has never been settled in any other country except after the most exhaustive discussion, we should be asked in this hurried way to agree to an entire change in the Australian system of banking, because that is what this bill really means, and adopt a system which has no parallel or counterpart in the world. You may go where you please, and examine every central banking system in existence, and you will not find one in which the whole of the directorate is appointed by the Government of the day, and in which the whole of the capital is found by the Government, and which has a monopolistic control of the note issue. This being so, I want to know on what authority, and on whose . advice, did the Government determine that this was the right system of banking for Australia. I want to know who have been urging this particular system of banking.
– That is what we want to know.
– Well, I amasking. The banks have never asked for or demanded it. As far as I know, it is something entirely new. It is not embodied in the policy of any political party. It was not in the National party’s programme, and again it was not in the Country party’s programme. It is true that the programme of the latter party contained a very attractive plank outlining what it was intended should be done with this great institution. We were told that the Commonwealth Bank was to be made, to the primary producers, one of the most fertile systems of financial assistance it was possible to conceive; that it was to assist the struggling settler on the land, that it would render help to all the great cooperative societies of primary producers, and be used in various ways to assist them in the marketing of their products abroad. But, sir, all these things have been abandoned in favour of a policy which, as I say, no political party or outside financial authority has demanded.
– They have not been abandoned. It will still be possible for the bank to do all the things mentioned.
– I am coming to that point.
– The Economic Conference, for one, recommended the change.
– I am not saying that the Economic Conference did not.
– The honorable senator said that nobody had recommended it.
– I said that nobody in Australia had done so, and I think I am right in that. Senator
Thompson, by his interjection, has supplied me . with the opening to the next part of a few remarks which I want to address to the Senate on this measure. He says that the Commonwealth Bank will still be able to do all these things. In reply, I say definitely that it is utterly impossible for a bank to carry out the functions of a central bank, and at the same time to be in open competition with private trading hanks doing the same class of business. It cannot be both.
– Does the honorable senator suggest that the Bank of England and the Bank of France do not engage in general banking business?
– They are central banks’.
– The character of the business they conduct is entirely distinct from the business conducted by joint stock banks. On referring to page 26 of the Treasurer’s speech, I find that the South AfricanCurrency and Banking Act of 1920 provides the most recent example of a central bank. Most elaborate details are set forth as to how the central bank of South Africa is allowed to conduct its business. If we turn to page . 27 of the speech we find-
– The honorable senator should read paragraph 1. I thought the honorable senator said that they do not issue notes.
– I did not.
– The honorable senator said that no central bank has the control of the note issue.
– I did not say that.
– The honorable senator should refer to Hansard.
– I do not want to create any misunderstanding. I have no object to serve beyond doing what I conceive to be my duty. I am here to point out what I consider are the dangers and difficulties surrounding the Government proposals. I did not say that no central bank controlled the note issue, but that there is no central bank which combines the three features of the government holding the whole of the capital, appointing the whole of the directors, and having a monopolistic control of the note issue. That is a very different matter.
– Have otherbanks in Great . Britain representation on the directorate of the Bank of England ?
– The Bank of England is a private bank.
– It has control of the note issue.
– Yes, but not. the sole control. It has control of its own note issue. A majority of the directors of the South African bank are drawn from existing institutions. The South African bank is controlled by eleven directors, six of whom are described as commercial and industrial representatives, who must be, or have been, actively engaged, three in commerce or finance, one in agriculture, and two in other industrial pursuits, and they are elected by the stock-holders. Three directors, who are described as the government representatives, are appointed by the GovernorGeneral, and two directors, styled the governor and deputy-governor, are also appointed by the Governor-General. The majority of these eleven directors are appointed by the stock-holders of the bank.
– The Government of South Africa have now removed the representatives of other banks from the directorate.
– They may have removed the representatives of the banking institutions, but, according to the information supplied by the Treasurer, six of the eleven are elected by the stockholders of the bank. The reprint of the ‘Treasurer’s speech, from which I am quoting, shows that the bank is forbidden to have a direct interest in any commercial, industrial or other undertaking, to advance money on mortgage, draw or accept bills payable otherwise than on demand, and to accept money on deposit; for a fixed term or allow interest on credit balances on current account. That shows that this central bank, which the Treasurer states on page 2© is the last example of the establishment of a central hanking system, is deliberately and definitely prohibited from carrying out many of the functions undertaken by ordinary banking institutions. The reason is that the two branches are mutually destructive. It would be quite impossible. If honorable senatorsconsider the position for a moment, they will see that a central bank cannot hold its assets in a sufficiently liquid . condition to be the “ shadow of a rock in a weary land” when the fierce sirocco sweeps over the financial desert, if it is itself involved in the financial problems of other banks. What causes the financial catastrophes which arise- from time to time i Generally it is over-speculation in. various directions; financiers and others are out in their estimates; the banks as a rule have advanced money on mortgage to finance enterprises which have gradually gone on to the rocks. If a central bank itself has its assets tied up in that class of business, it cannot perform the functions which a. general and central bank should perform. There is abundant evidence in the Treasurer’s speech of the intention of the Government - I think it is a perfectly right intention - to convert the Commonwealth Bank into a- central bank, and that it should as far as possible withdraw from- active participation in the ordinary “business of banking and devote itself entirely and exclusively to the proper functions of a central bank.
– - Would that prevent it doing any private business?
– In the ordinary -sense of the term it would. The Bank of England does a little private business.
– The Bank of France does an enormous private business.
– The Bank of France is a rather different institution.
– Is it not doing both classes of business?
– It is a rather different business altogether. There are a good many factors in connexion with the whole of the financial arrangements, of France which are not applicable to a country such as Australia. The business of France is so entirely different, and the operations in the two countries so distinct, that a comparison cannot very well be made. In my judgment, there is one way in which it would be possible to a. large extent” to enable the Commonwealth Bank to function in both ways.
– The honorable senator’s time has expired.
Motion (by Senator Foll) agreed to -
That the honorable senator be alowed an extension of 30 minutes.
– I thank the Senate for the courtesy extended towards me, and I shall endeavour to complete my remarks within the time allotted. There is a way in which it would be possible to make the Commonwealth Bank function as a central bank, and largely assist in the establishment of rural credits and matters of that kind. Any assistance we can give to the primary producers of Australia through this institution by loaning money at the cheapest rate for the development of ‘ the country should be encouraged in every possible way. It must be remembered, of course, that the financing of enterprises in the country is necessarily of a less liquid character than is that in connexion with city loans. The Leader of the Opposition (Senator Gardiner) said that it was much easier for people in the city of Sydney to raise a loan than it was for those in rural districts. That position arises, to a large extent,, from the necessity which is placed upon every banker to keep a good proportion of his investments in a liquid form.
-In the cities a very valuable exchange business is carried on.
– That, too, has to be considered. Every honorable senator knows that it is necessary for a bank to keep a good proportion of its- finances in a fairly liquid state, and it is impossible to tie up the whole of its resources in country securities. If the Government propose to proceed with the bill as it is now drafted - I shall be sorry if they do - they might consider the desirability of separating the management of the savings bank branch from the general branch of the .Commonwealth Bank, and setting up two branches under different management. If that were done, the Commonwealth Bank could then perform the functions of a central bank and the money deposited in the savings banks throughout the country could be used, to a large extent, to assist in financing country enterprises.
– As it is now.
– Yes, and if the practice were extended very useful work could be done. In connexion with the note issue, both as regards what is proposed and what has been done in the past, it is of course Very easy to see that under this bill the bank, in exercising its powers of re-discounting, will be able to relieve the financial position at a. time such as the present, or in any similar circumstances in the future, by actual discounting. Apparently it is to be assumed that the policy of the present Notes Issue Board will be changed, and that in re-discounting paper of the other banks the central bank will be prepared to issue currency to the banks to the extent they require in the shape of notes. What reason have we for believing that the policy of the existing Notes Issue Board- will be changed by what the Government are now doing ? I think Senator Pearce said, and that it was also said in another place, that this bill does not in any respect change the law in relation to the exchange position, but leaves it exactly where it is to-day. Australia is now passing through one of the most critical times it has experienced for many a long day, and this bill will not improve the position, although I understand that the Notes Issue Board has made a more or less death-bed repentance and is now proposing to allow the banks to have a little currency to help them to finance the wool clip, and that in all probability we shall not actually experience that crisis which was looming a little while ago.
– How could this bill change the position ?
– The honorable senator’s interjection brings me to a suggestion I was about to make.. I do not believe that the position should be tackled in the way the Government propose. ‘ My idea is that we need in Australia a very much more flexible form of currency than we have. Nine-tenths of our difficulties arise from an inelasticity of currency that is very largely inseparable from and unavoidable in connexion with a note issue controlled as it is in Australia. In the future the same position may arise just as easily as it has arisen to-day. Everything will depend on . the policy pursued by the eight men who are controlling the central bank. Having absolute control they will be able to do just as they please. I have already pointed out the danger that may arise from the stand-point of the note issue being used as a lever to bring about the nationalization of banking, but it can also be used, as I believe it has been used, to bring about a state of financial stringency in Australia,- which is utterly and absolutely unjustified. I have the greatest respect for the members of the Notes Issue Board. I have had from one and all of them personal kindnesses, for which I am extremely grateful, so that I have no quarrel with them good, bad, or indifferent. But I believe that their policy, which they have carried out from the beginning with a fixed determination for which they deserve a great amount of credit, has been a dead-weight upon the enterprise of Australia, and has brought in its train many difficulties which would not have been experienced had their policy been different. I am sorry that time does not permit me to demonstrate from the records of the country the results of the policy for which the Notes Issue Board has been directly responsible, but I may briefly state the position. We have had in Australia during the last few years an era of production which should have left the country in a state of great prosperity. Before the war the utmost we received for our wool clip was from £23,000,000 to £26,000,000 a year. To-day we are getting for our wool from £50,000,000 to £60,000,000 a year. In addition we have received something like” £20,000,000 in the shape of a bonus earned by the realization of Bawra stocks. Compared with pre-war times our wheat has brought in greater returns It is true that in some districts the dairying industry has not flourished during the last few years and that the returns from meat have fallen, but unquestionably the production in Australia, as expressed in pounds, shillings, and pence, is now immeasurably greater .than it was in any pre-war year. Yet there is financial stringency on every hand.
– Is not the increased production set off by the increased payments for interest on the war debt?
– To some extent it is, but by no means entirely. Thy greater part of our war debt is owing in Australia. In our trade figures we find an increase of practically 100 per cent. Our bank deposits, including savings bank deposits, also show an increase of 100 per cent. Yet we are’ financially tied up ; it is almost impossible to get money. This fact, I believe, is very largely due to the deliberate policy of deflation carried out with a persistence and determination which, as I said before, is altogether creditable to the consistency of the gentlemen in control of the note issue. I do not know that I can usefully occupy the time of the Senate with a detailed examination of the position, but I do say that the bill will not materially alter it, and that the special power which is to be given, presumably, to the same men who are on the Notes Issue Board to-day, to control the note issue as members of the board of directors of the Commonwealth Bank, is a very potent warning that we shall have a continuation of the present policy. At the present moment the position in regard to exchanges is that every wool-grower, dairyman, or wheat-grower, loses 3 per cent, of the value of the products he has despatched overseas. I do not believe that it is beyond the wit of man to devise means for remedying the existing state of affairs. We are now living in abnormal conditions, entirely different from those which obtained in pre-war times. We have now large balances in London and the difficulty is to get them out to Australia. If things were normal shipments of gold from Australia would cease, and possibly gold would move tr> Australia, enabling the banks to increase their gold reserves, upon which they would proceed to operate.
– Has the honorable senator any idea of what the balance in London is now ?
– Of course the banks always keep about £10,000,000 or £15,000,000 in London to meet current obligations, but I believe there is now an excess of from £30,000,000 to £35,000,000. The remedy of the free trader is to throw people out of employment and import all the goods required to make up this balance, or cease entirely our borrowing in London. ‘ I confess that I feel the gravest concern in respect of the position, because in this new bill we are perpetuating the present form of note control while providing no real remedy for the exchange position. I think the Government could relieve the position materially by passing a general banking bill on the lines of Canadian legislation, which maintains the Government note issue but also gives the banks, subject to certain conditions, the right to issue their own currency. I believe that if this were done it would clear up the position in Australia in a very short space of time. Even to-day if the Notes Board would purchase securities from the banks in London, deposit the money, if necessary, with the Bank of England, and issue notes here in Australia, it would help to relieve the position here very materially.
– Would the honorable senator throw on the banks the responsibility for the issue of the notes?
– A note issue of the kind proposed in this bill or of the kind existing at the present time, is not sufficiently flexible to meet the changing seasonal needs of a country like Australia, which has a seasonal crop, and where large movements of currency are inevitable.
– Would the honorable senator throw the responsibility on the banks ?
– I would, subject to certain safeguards, which are embodied in the Canadian law. Conditions in Canada, from a banking point of view, are in many respects similar to those in Australia. The Canadian system has worked admirably, and there is no trouble there such as we are experiencing to-day. The adoption of the Canadian provisions would be of vast assistance. However, the main thing I want to impress upon the Government is that what they are proposing in this bill - the establishment of a central bank - is such a complete departure from the- present financial system of Australia that it is worthy of some further investigation before the country is definitely and irrevocably committed to it. I see no reason why this matter cannot be thoroughly thrashed out by the people who are best fitted to discuss it. It would be infinitely better for the Government to hold up this legislation for the time being, to approach the subject with a perfectly open mind, independent altogether of the legislation they are now proposing, and to give honorable senators and the financial institutions of the country an opportunity to investigate the matter thoroughly and say what is best for Australia to do. It may be found that the best course to adopt is to leave the bank as.it is at present. The Commonwealth possesses full constitutional power to pass a general banking law, and it may be advisable to pass such a law providing for a change in the present system to some extent, particularly in the direction of making possible a more elastic currency than we possess to-day. The Government would be well advised to refer thebill to a royal commission, to investigate the whole matter and bring up a report. The Government could then base its legislation on the fullest expert advice available in Australia, and, if necessary, outside Australia. I do not believe that it would be necessary to go outside Australia. In my opinion we have in. Australia ample banking experience to guide us. I contend that the bill, which involves a very serious departure from our present banking system, was brought down before those who are “best fitted to advise the Government were called upon to express an opinion regarding it. I have no fault to find with the ability of the gentleman who controls the. Department of the Treasury. I have always held the highest possible opinion of him. But I do say that he has had no practical experience of ‘banking. I believe that the Government is relying to far too great an extent upon his advice. The Treasurer of the Commonwealth also has had no personal experience of banking or of commerce. Unless and until we have placed before us much more cogent reasons than so far have been advanced for the introduction of this bill it ought not to be proceeded with. The one thing that is sticking in my mind - and probably it is in the minds of other honorable senators - is the exchange difficulty. I have not had the time to discuss that matter as fully as I should like. I have abundant material prepared regarding it, but it would take me a long time to place it before honorable senators. It is a dreary subject, and I do not want to weary honorable senators with it at present I should far sooner suffer the inconvenience attendant upon the existence of the Notes Issue Board until the matter has been thoroughly thrashed out than rush into this legislation on the bare chance that the new hoard will reverse the policy of the old. The only thing which the bill will do in relation to exchange is to create a new board to deal with that matter. I anticipate that the four members of the Notes Issue Board will be appointed to the new board, and two of them will always have the right to veto any proposal. It would be very much better to leave them where they are for the time being, and to have a very careful investigation made into this most important matter. If the Government does that it will earn the best thanks of the community.
– (By leave.) - I desire to makea personal explanation. I feel quite sure that Senator Greene does not wish to intentionally misrepresent me, but during the course of his remarks he said that he was so impressed by a statement that I made when moving the motion for the second reading of the bill that he had taken down my words and that - they were as follow: -
This bill is to make the Commonwealth: Bank a central bank, to guide and control the private banks.
On that the honorable senator proceeded to build up a large portion of the argument which he subsequently used. I felt sure that I had not used those words, and I thereforeobtained from Hansard my uncorrected proofs. In that portion of my speech, where I dealt with the phase of the matter referred to by the honorable senatorafter discussing the question of exchange and other difficulties,
I said -
A consideration of these factors forces us to realize that the important function of banking can be properly performed only with the guidance and control of a central bank.
– “ Guidance “ and “control” were the only two words I stressed.
– The honorable senator said that the’ words which I had used were “ to make the Commonwealth Bank a central bank to guide and control the private banks.” My words were -
A consideration of these factors forces us torealize that the important function of banking can be properly performed only with the guidance and control of a central bank.
I did not stop there. Further on I said -
And banking can be raised to perfection only by the action of a central bank working alwaysfor the good of all.
Later I said -
As time goes on, and the bank gains the confidence not . merely of . the public, but, what is perhaps more desirable, the confidence of all the private banks, the latter will look to the centralbank for . leadership and guidance in all complicated financial crises, whether of exchange or any other phase of the phenomena of finance.
I contend that those words have a meaning entirely different from that which the honorable senator endeavoured to import into them.
– I also desire to make a personal explanation. I had no intention whatever of misrepresenting in the slightest degree what the Minister (Senator Pearce) said. I hope that I did not convey the impression that the Government had the slightest intention of controlling the private banks.. What I endeavoured to point out was that the power, to control is conferred by the bill, and I thought that in what Senator Pearce had said there was some confirmation of that one fact.
Motion (by Senator O’Loghlin) negatired -
That the debate be now adjourned.
– I have made a fairly careful scrutiny of the bill, and it appears to me that one of the main alterations that the Government desires to make is to alter the form of management of. the bank. There are a number of other alterations of greater or less importance, but that appears to me to be the principal one. I regret to notice that certain alterations that would effect a vast improvement in the act are not proposed. A very large number of people in the Commonwealth for many years made strenuous and continuous efforts’ to secure the establishment of a Commonwealth. Bank, believing that such a bank would meet the need’s of the community, which were not being properly met by the private banking, institutions. To my mind, they have been greatly deceived. I find that the clause which sets out the powers of the bank provides, amongst other things, that, the bank shall have power to acquire and. hold land on any terms. I take that to- mean that if the bank makes an advance upon landed property, it will have the right to foreclose upon its victim and hold on to the land indefinitely. That, I contend, is not the proper function of a bank. In maps showing the pastoral and agricultural districts of New South Wales, large and valuable areas are marked as the property of some of the banks, as mort gagees in. possession. A bank in possession of land does not make the fullest possible use of it.
– It sella it as soon as it can for the amount which it has advanced upon it.
– I do not think that the banking companies of New South Wales do anything of the kind. If the honorable senator will take the trouble to examine the position, he will find that those companies own immense areas of the most valuable land in that state.
– Any banking company will sell such land to the honorable senator for the amount which it has, advanced upon it.
– That is not the point with which I am, mostly concerned. In my opinion it is not the function of a bank to be a land-owner. If I had my way, I should prevent a bank from holding on to land for other than a limited period] - perhaps for twelve months or two years..
– The banks would not take land as security under those conditions:
– The amount advanced would probably depend entirely upon the nature of the security.. If the banks were debarred from holding on to the land for an indefinite period, they would, I dare say, advance a less amount, than they otherwise would. What is the position to-day? Instead of being banking companies, they are, in effect, large landed companies. The honorable senator must be aware that that is one of the main sources from which they derive : their enormous profits. I intend, if possible, to secure an amendment of the law prohibiting any banking company, even the Commonwealth Bank, from acquiring land and holding on to it as the mort. gagee in possession for an indefinite number of years. After eighteen months or two years, it is time for a bank to realize on its land,, and.,, if it loses on the transaction, the responsibility is entirely its own. The Government does nob propose,, in this, bill, to interfere with this position, and I intend later to try to remedy it. The savings: bank branch of the Commonwealth Bank has collected £40,330,455 mainly from, people, not in a very strong financial position. In
Queensland the state savings bank has been taken over by the Commonwealth Bank, and, in the other states, savings bank branches of the bank have been established. But the business of those branches has not been extended in the directions that would be most beneficial to the people. “Why has the Commonwealth Bank consistently omitted to provide what may bc termed a homebuilding section?
– That could not be done in Queensland, for the state government has the call, at a certain rate of interest, of 70 per cent, of the deposits.
– It would be interesting to know what the taking over of the Queensland state savings bank has meant to the Commonwealth Bank. No question is of more pressing importance in Australia than the erection of homes for the people. Rents were never so high as they are to-day, and, despite all the efforts made to combat the evil of overcrowding, it waa never more prevalent than it is at the present time.
– Is not that a state matter ?
– The; Federal Parliament has provided homes for thousands of returned soldiers and sailors, thereby recognizing that it is not entirely a matter for the states. I should like to know where and how the moneys deposited in the savings bank branches of the Commonwealth Bank are used. The information supplied in the balance-sheet published up to the end of December last may meet the requirements of the Banking Act, but I should like to know in greater detail in what channels the money has been employed. The Government is indifferent to the overcrowding in the cities, and the difficulty in obtaining homes, if it is a good policy for the state savings banks to enter into this business - and they have not gone into it to a sufficient extent - the Commonwealth Bank should do so, but there is no provision in the bill to achieve that object. With all due respect to the late governor, “and to the present management of the bank, I should like to know why it persistently refuses to pay more than 3£ per cent, interest to the depositors when the state savings banks throughout the Commonwealth, on similar deposits, pay at least 4 per cent. I do not charge the management with the desire to damage the savings bank branch of the business, but it seems to me that the right thing to do is to pay at least as high a rate of interest as is now paid by the state savings banks. In committee I shall endeavour to have a clause inserted providing that the rate of interest shall not be less than is paid by the state savings banks. Although it was the desire and belief of those who established the Commonwealth Bank that it would gradually replace the private banks, those who have had charge of the institution up to the present time have refused to enter into serious competition with the other banks, and have deliberately tried to strangle the savings bank branch of the Commonwealth Bank by paying onehalf per cent, less interest than the state savings banks. Many people on realizing that they were thus being deprived of interest, have transferred their deposits in the Commonwealth Bank to the state savings bank. A management that persists in such a policy should, to my mind, “be sharply reprimanded, and I am not sure that it should not be replaced by men who would give this branch of the Commonwealth Bank a fair deal. Had the bank been given proper consideration, the amount standing to the credit of the savings bank branches would be at least double the present total. The security offered by the state savings banks is equal to that offered by the Commonwealth Bank, and why should the management, apparently with the concurrence of Parliament, be permitted, year after year, to allow this practice to continue ? The bank was inaugurated practically without capital, and although for a year or two its balance was on the wrong side of the ledger, it must be remembered that since that time the profits have been substantial. During the first, second, and third half-yearly periods there’ were nominal debit balances, but in June, 1913, the profit amounted to £2,222. Every halfyear since that time the profits have gradually increased, until last half-year the accumulated profits amounted to over £4,465,659.
– What was the profit of the last half-year.
– I am unable, at the moment, to say.
– I think it is slipping.
– I should think it would slip.
– We are getting back to normal times.
– It is due not to that, but to the fact that the management refuse the depositors in the savings bank branch the same terms as the other banks give.
– In Queensland there is now no option, and the people are worse off than ever.
– The Commonwealth Bank is the loser by reason of the taking over of the state savings bank in Queensland. It is proposed in the bill that the capital of the bank shall be £20,000,000, consisting of the following : -
To ray mind that is a most extraordinary provision. The bank was established, in effect, on the credit of the Commonwealth, and despite all its shortcomings, it has been so well organized that it now baa accumulated profits amounting to £4,465,659. Whilst I agree with the idea of placing to capital account the sum of £4,000,000 from the bank reserve fund and the redemption fund, I am at a loss to understand the reason for the proposal to borrow £6,000,000. It was not necessary at ‘first to do this. The credit of the Commonwealth was sufficient. Parliament has deliberately expressed an opinion in favour of robbing the hank of one-half of its annual profits and placing the amount to the credit of the National Debt Sinking Fund. To my mind, that is an entirely wrong procedure. The profits of the bank ought to be used by the bank for the extension of its own business. Everybody recognizes the difficulties that confronted the late Sir Denison Miller in the establishment and early work of the bank, and it is, I think, admitted that the bank has made wonderful progress. I do not admit that it should not have established a savings bank branch. Though the hank has made substantial progress, and is doing fairly well at the present time, it is now pro posed in this bill to displace the management and create a board consisting of eight persons to control the bank’s operations. In addition, what are known as local advisory boards are also to be constituted. When the bank was under the control of one man, the opinion was . held by some people that a better system would he to appoint a ‘small board. The Government has gone very much to the other extreme now, and proposes to appoint a board of eight persons, a number quite unjustifiahle, in my opinion. I suggest, but I am afraid the Government will not accept the proposal, that the employees should ‘have some say in the management of the bank.. I am aware that the Government is not enamoured of the idea, but I remind the Senate that it is the practice in many industries to allow employees to take a hand in the management, and I think that if this system were applied to the Commonwealth Bank it would be a stop in the right direction. I see no reason why two persons who have been associated with agricultural, pastoral, or other primary industries should be appointed to the directorate. A. man may be an excellent sheep-breeder, he may have a sound knowledge of horses and cattle, and, generally, be a first class farmer, but in financial affairs he may be very much at sea. I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
Message reported from the House of Representatives that it had agreed to the amendment1 made by the Senate.
The following papers were presented : -
Defence Act - Regulations amended - Statutory Rules 1924, Nos. 92 and 93.
Naval Defence Act - Regulations amended - Statutory Rules 1924, No. 04.
Northern Territory Acceptance Act, and Northern Territory Crown Lands Act (of South Australia) - Proclamation, dated 11th June, 1924, resuming portion of the Alice Springs Telegraph Reserve, Northern Territory, together with statement giving reasons for the resumption and sketch showing area resumed.
Senate adjourned at 3.55 p.m.
Cite as: Australia, Senate, Debates, 18 July 1924, viewed 22 October 2017, <http://historichansard.net/senate/1924/19240718_senate_9_107/>.