9th Parliament · 2nd Session
The Deputy President (Senator Newland) took the chair at 3 p.m., and read prayers.
Cost of STEAMERS
– I desire, Mr. Deputy President, through you, to ask Senator Needham, in his capacity as member of the Public Accounts Committee, whether he will, at the earliest possible opportunity, lay before that committee the necessity for reporting upon the system of writing down the value of vessels taken over by the Commonwealth Shipping Line, so that honorable senators may be in a position to deal fully and accurately with the budget when it comes before us for consideration ?
The DEPUTY PRESIDENT. - The honorable senator is at liberty to ask that question.
– As, a member of the Public Accounts Committee, I can only inform the honorable senator that the matter cannot be referred to the committee in the way he suggests, but I would point out to him-
The DEPUTY PRESIDENT.- The honorable senator is not in order in going beyond a reply to the question submitted to him.
– I simply wish to quote the provisions of the Committee of Public Accounts Act 1913, which govern the matter.
The DEPUTY PRESIDENT. - The honorable senator must merely reply yes or no. The Standing Orders do .not permit him to proceed any further.
– -My reply to Senator Kingsmill is that the matter may be referred to tho Public Accounts Committee by either branch of the legislature, and I refer him to section 3, paragraphs c and d, of the Committee of Public Accounts Act 1913 for guidance as to the steps he should take: to have the subject brought before the committee.
– Is it a fact, as .reported in the press, that the Government have decided to postpone the first sale of building leases at Canberra to the 25th October, and, if so, who arrived ‘ at that decision, when was it made, and why did the Minister for Home and Territories inform the Senate on tho 17th July that it had not been decided to postpone the sale of these leases?
– Because, on the date referred to, it had not been decided to postpone the sale. The decision to postpone the sale was arrived at at a. Cabinet meeting held subsequently.
SenatorGRANT. - Is it not a fact that it was announced on the16th July inthe Victorian press that it had been decided to postpone the sale of these leases? When was the decision arrived at to postpone the sale?
– I ask the honorable senator to give notice of that question.
– Has the Minister the information for which I asked a few days ago in reference to the application of P. J. Farrell for a pension?
– The information is not yet to hand.
– Can the Leader of the Senate say when the Public Service Bill will be again considered, and if it is the intention of the Government to complete the Commonwealth Bank Bill before other business is taken?
– The Government propose to complete the Commonwealth Bank Bill before proceeding to the next item on the notice-paper.
The following papers were presented : -
International Convention relating to the Simplification of Customs Formalities and Protocol of Signature, signed at Geneva, 3rd November, 1923.
Iron and Steel Products Bounty Act- Statement by the Minister for Trade and Customs of reasons for allowing the use of certain imported articles in manufactures (tractors) on which bounty is payable.
League of Nations -
General Conference on Freedom of Communications and Transit, held at Barcelona, 10th March to 20th April, 1921 - Official Instruments approved by the Conference.
Second General Conference on Communications and Transit, held at Geneva, 15th November to9th December, 1923 -
Records and Texts relating to-
Convention relating to the Development of Hydraulic Power affecting more than one State.
Convention and Statute on the International Regime of Railways.
Convention and Statute on Maritime Ports.
Convention relating to the Transmission in Transit of Electric Power.
General Discussions of the Conference.
Quarantine Act - Regulations amended -
Statutory Rules 1924, No. OS.
asked the Leader of the Government in the Senate, upon notice -
If a temporary officer has been engaged for a number of years, on special and important work, cannot this officer be appointed to the permanent staff?
– The appointment of a temporary employee to the permanent staff is dependent upon the circumstances of the particular case and upon eligibility under thePublic Service Act. Returned soldiers are accorded preference.
asked the Minister representing the Postmaster-General, upon notice -
– The answers to the honorable senator’s questions are as follow: -
In Committee (Consideration resumed from 25th July, vide page 2517), of amendment by Senator McDougall:
That the following new clause be inserted: - 4a. Section 7 of the principal Act is amended -
– In discussing this amendment last Friday, Senator Lynch said that the Labour party had not been of any assistance to the fanners of Western Australia, and he asked for my opinion of his statement. I shall give it in definite terms. The Labour party, whether in power or in opposition, in this Parliament, or in any State Parliament, has always aimed at assisting the farmers and the men on the land generally. I remind Senator Lynch that during the trying times of 1911-12, when Western Australia was passing through a period of drought, the Labour Government that was then in power did everything that it could do to alleviate the distress of the people in the country. Numerous water trains were sent to every dry part of the state.
– I ask the honorable senator to connect his remarks with the matter now before the committee.
– I submit, sir, that I am only doing as Senator Lynch did on our last day of sitting. You were not then in the chair, but you may recollect that he discussed this very matter, and asserted that the Labour party had done nothing to help the farmers.
– If the honorable senator does not keep quiet, I shall give him some more of the .same kind of medicine.
– I am not afraid of Senator . Lynch’s threats. I submit that this amendment is proposed for the purpose of assisting the men ou the land by the establishment of a rural credits system, and I suggest, sir, that by no stretch of the imagination can it be said that, in replying to the strictures on Labour made by Senator Lynch, I am not discussing the matter before the Chair. I remind that honorable senator also that the Industries Assistance Board of Western Australia does a work which may well be compared with that which would fall to the lot of an administrative body in charge of a rural credits system. The object of the amendment is -to enable the Commonwealth Bank to assist farmers. Honorable senators opposite have contended that the Commonwealth Bank already has the power to do so. It was chiefly because such help was not forthcoming that the Western Australian Labour Government came to the assistance of the men on the land through the instrumentality of the Industries Assistance Board. But there is another reason why the amendment should be accepted. The Treasurer (Dr. Earle Page), as Leader of the Country party, stumped Australia during the election campaign of 1922 and promised that a rural credits system on the lines proposed in the amendment should be provided. Why, then, should provision for it not be made in this bill?
– Too many promissory notes are lying around. It ie time some of them were redeemed.
– I also consider that it is time that some of the election promises made by honorable senators who support the Government were fulfilled. I said during the election campaign that the provision of a rural credits system was part of the policy of the Labour party, and I desire to provide it through the Commonwealth Bank. If Dr. Earle Page and those who follow him do not desire to fulfil their election promises, I- assure them that I desire to fulfil mine. The Labour party at all times, whether on the Treasury bench or in opposition, doe9 everything it can to prove that it ie, and will always remain, the friend of the man on the land.
Question - That the proposed new clause be added - put. The committee divided.
Question so resolved in the negative.
Proposed new clause negatived.
– Before moving my amendment, which is in print, I desire your direction, Mr. Temporary Chairman, as to whether I shall be in order in moving the first portion, and, if that is carried, subsequently moving the proviso.
– I suggest that the honorable senator move the new clause as a whole, and then ask the Chair to put it in sections.
– I shall do so. I move -
That after clause 4 the following new clause be inserted: - “ 4a. Section seven of the principal. Act is amended -
by inserting after paragraph (h) thereof the following new paragraph : - ’ (hh) to establish and conduct a Homes Building Department;*, and (6) by inserting at the end of the section the following proviso : - ‘ Provided that when the Bank as mortgagee takes possession of any land, it shall be sold by public auction within two years of the date of the taking of possession.’ “
Despite all the praise lavished upon the founders of the Commonwealth Bank and those who have been in control since its inception, the bank has steadfastly refused to establish a homes building department. ‘The Commonwealth Bank, through its savings bank branches, has collected approximately £40,000,000, not one penny of which has been used for the purpose of erecting homes. To-day, and for a long time past, the erection of suitable homes for the people of this country is and has been a question of great importance. The scarcity of dwellings is apparent, not only in the Commonwealth, but throughout the world, and our present position is probably due in a large measure to the fact that during the great war home-builders and others were engaged on other work.
– Does the honorable senator know of any trading bank undertaking that class of business ?
– I cannot say that I do. It does not concern me in the least if the Bank of New South Wales, the Commerical Bank, or the Union Bank is not undertaking this work; but it is the practice of the savings banks to transact this class of business. The state savings bank of New South Wales has, I understand, a homes building department, towards the funds of which a certain sum is voted every year exclusively . for the purpose of homes construction. That would be a legitimate field for the investment of the money received from small depositors. The Commonwealth Bank has established at almost every post office throughout Australia a savings bank branch for the receipt of deposits, mainly from small depositors. Not one penny of the amount so received has been utilized in the erection of homes.
– That business ought to be left wholly to the states.
– The state savings banks, the much despised private enterprise concerns, the War Service Homes Department, and a number of other organizations, have from time to time interested themselves in the question of home building, but despite all their efforts they have so far failed to cope with the growing demand for housing accommodation. I think I am quite safe in saying that houses were never so scarce as they are to-day; that notwithstanding the operation of a Fair Rents Court in some of the states, and various other devices that from time to time have been employed, rents were never higher, and over-crowding never more prevalent than is the case to-day. Yet we find that the national bank, which ought to be the bank of the people, is doing absolutely nothing towards the erection of homes. That is not the only direction in which the bank could very advantageously invest at least a few of the millions that are at its disposal. It must be remembered that the bank collects, not one or two, but many millions of pounds from the people. Nothing would assist more to promote the health of the people than the provision of well-constructed homes. Individual effort in thousands of cases is not possible. That has been recognized even by this Parliament, to the extent that it has approved of the erection of war service homes. It was realized that the returned men frequently could not be expected to provide homes for themselves, and this Parliament came to their assistance by establishing a. War Service Homes Commission, which up to date has erected in the Commonwealth about 25,000 new houses. That number, however, is inconsiderable compared with the demand that exists. I may be told that this work is not properly a .function of the Commonwealth Bank. That is a matter of opinion. I do not disguise my belief that there is not a very keen desire exhibited by Ministerial supporters to increase the usefulness or enhance the popularity of the Commonwealth Bank. I believe that many honorable senators opposite would experience pleasure if the Commonwealth Bank were a thing of the past, and the whole of the financial undertakings were handled by the fifteen private banks that now operate in Australia. The Commonwealth Bank should transact trading business, and, through its savings bank branch, engage in home building and any other work that is conducted by a private or a state bank. The time is opportune to test the feeling of the committee as to the desirability of directing the management of the Commonwealth Bank to devote a certain portion of the funds in the savings bank branch to the erection of new homes. T am quite satisfied that unless the directors are instructed to proceed along those lines such action will not be taken by them. I do not join with those who are never tired of praising the work of the Commonwealth Bank. I believe that that bank has been systematically and persistently crucified, and I shall welcome the advent of a government which will so amend the act that the bank will be placed in the position that it should occupy.
– Does the honorable senator’s amendment propose to confine home-building to the savings bank branch ?
– I do not mind from which branch the funds are taken. I do not think that those funds could be used for any purpose more beneficial than the erection of homes. If its funds are used in such a way that speculators will be enabled to make food supplies more costly, the bank will fail to achieve the object at which its founders aimed. The directors should be given a clear intimation that to retain their positions they must establish and conduct a home-building department.
– I hope that the committee will not accept the amendment. If it is the considered view of Parliament that the Commonwealth Bank should commence to> operate as a home-building bank, I suggest that well considered legislation is essential. That legislation could not be confined to a simple paragraph. In the State of Western Australia there is & Workers’ Homes Department working under a Workers’ Home Act. That act is quite an extensive piece of legislation. It provides the manner in which applications must be made, and the order in. which they shall be dealt with ; it sets up the authorities for dealing with applications, and provides all the complicated machinery necessary for the department to carry out its functions. One has only to consider what is involved in making such a scheme effective to realize that a well considered piece of legislative machinery must be passed to deal with :t. Honorable senators opposite are always foremost in denouncing government by regulation. If the amendment were passed the whole scheme would have to be carried out by regulation. Every principle would have to be laid down by regulation. There is none in this amendment at all. It is merely a placard. I can imagine the righteous indignation of honorable senators opposite if the Government had brought in such an amendment, and had proposed that all the machinery to give effect to it should be provided for by regulation. I may point . out, moreover, that practically every : state has legislated in regard to this matter. The housing of the people is primarily the duty of the state legislatures. The Government has already indicated that it proposes to utilize the funds in the savings banks for the establishment of rural credits, but that it will be necessary, first of all, to set up well-considered legislative machinery to provide for the amount of money to be made available, and the way in which it may be used. The amendment is premature, ill considered, and provides no machinery by which effect may be given to it. Therefore, I advise Senator Grant to withdraw it. If he declines to do so, I shall certainly ask the committee to reject it.
– I hope Senator Grant will not withdraw the amendment. I hope, also, that honorable senators opposite who think with Senator Grant, and others in this chamber, on the subject will not be influenced by the remarks of the Minister. One reason advanced by him why the amendment should be rejected was that the states were practically doing the work which Senator Grant desires the Commonwealth Bank to undertake. If that is a good reason why honorable senators should vote against the amendment it may also be urged as a good reason why no assistance at all should be given by the Commonwealth Bank to the man on the land. Notwithstanding that state governments are doing a good deal in this direction already, they are not doing as much as the people would like them to do. In Victoria the state savings bank cannot meet the demands of the people. As honorable senators are well aware there is an acute shortage of houses in all the states, and to me there is no subject of greater importance to the people than the housing question. If there is shortage of houses, if the people are overcrowded, we cannot have a contented or healthy community. Overcrowding of the worst description is taking place in the different capital cities of the Commonwealth. There are, we are .reliably informed, many cases where two or three families are living in a fiveroomed house, and we have heard, too, of families being housed in one or .two rooms. We know what that means. Is it any wonder that there is sickness ? The Minister has said that we want well considered legislation to give effect to this amendment. I disagree with him. So far as I am aware, no special legislation was necessary to enable the Commonwealth Bank to engage in the work of building homes for returned soldiers.
– Yes, there was. The War Service Homes Act is an extensive piece of legislative machinery.
– Assuming the Minister’s statement to be correct - I was not in the Senate when the bill was passed - the fact that the legislative machinery is available should make it comparatively easy for the Commonwealth Bank to undertake the kind of business referred to in the amendment. Certain members of this Parliament look upon the Commonwealth Bank as an institution which should mainly concern itself with the financial position generally of Australia, and the position of the associated banks. That is a matter of great importance, I admit, but the housing question overshadows everything. Governments all over the world are making efforts to overcome this shortage. If we carried this amendment it would be an instruction to those entrusted with the management of the bank that the business of housing the people should be gone on with by the bank not in a small way, but in a very extensive way. We know what mass production means. We have had evidence recently in South Australia of how economies may be effected by mass production. The Labour candidates knew, anterior to the elections in South Australia, how the people were handicapped by -this housing difficulty, and they promised that, if they were returned with a majority, and were entrusted with the reins of government, they would tackle it in a businesslike way. The South Australian Labour Government has done so. Recently, tenders were accepted for 1,000 houses at a cost of a little over £600 per house. I have been amazed at the illustrations of the houses, the dimensions of the rooms, and the class of building to be erected for the money.
– 1 thought the honorable senator favoured the day-labour system.
– I am not, for the moment, concerned about whether the work is to be done by day labour or contract. I am pointing out the advantages of mass production in house building, and suggesting that it should be considered in connexion with this amendment. Suppose we decided that the Commonwealth Bank should be empowered to proceed at once with a housing scheme, and to deal with it in a practical businesslike way. If it called for tenders on lines similar to those adopted in South Australia, and if the people were assured that it was the intention of the Commonwealth Bank to go in for mass production which would provide houses at a little over £600 each, as against the present cost of £1,000, what a splendid advertisement it would be for the BrucePage combination f The people would thoroughly appreciate any effort made in this direction. The housing problem is a people’s matter, and in no circumstances should it be made a party question. We ask those who are interested in the welfare of the people and who are concerned about their health, to aid us in inducing the Government to do something in the direction outlined in the amendment.
– I approve of the amendment. Honorable senators seem to lose sight of the fact that we are dealing now with a principle and not with details. When the Commonwealth Bank was established, it was intended to set up an institution that would look after the interests of the working classes of Australia and in which they would have every confidence. The Commonwealth Bank has been successful in providing splendid homes for- returned soldiers, and if its operations were extended to enable it to provide homes for the people generally, it would give the people further confidence in it. The people cannot have the same confidence in private banks. We all know that the exchange difficulty has brought about such a condition of affairs that he who runs may read the signs. These ^institutions which admit having amassed huge sums of money, are now asking the Commonwealth Government to come to their assistance in a great financial crisis. When we see these things happening it is our duty to make the Commonwealth Bank a model of stability upon which the poorer classes can rely when they seek to borrow money for the purpose of building homes. Theglorious work done by the bank in building homes for the soldiers is a monument to the ability of the men who carried out the work. Senator Pearce tells us that we must leave this matter to some other form of legislation, but I contend that ii is our duty to tell the proposed board of directors of the Commonwealth Bank to. do certain things and try to make good. Of course if they do not make good they can be shifted and some one else can be told to carry - ou the work. If this amendment is carried it will give the board an opportunity to make good in one direction. If the Commonwealth Bank makes good in the direction of building homes for the people it will be a monument to this Parliament for all time. I am afraid that, because of- the proposed legislation, the people are beginning to lose a certain amount of confidence in the bank. However, when this bill is passed I hope that something will be done to give the people. some idea of the stability of this great concern. Its creators intended that it should be a people’s bank, and it will only succeed in becoming a people’s bank by following on the lines indicated in the amendment.
, - The object sought by the amendment is praiseworthy, but the same cannot be said of the means Senator Grant has taken to accomplish it. Senator Findley has rightly said that the housing problem is essentially a non-party question, but when he was making that wise utterance I was rather wishful that he would address himself to his colleague, Senator Grant, who went out of his way Jo say that Ministers and honorable senators on the other side were rather stony-hearted in regard to a proposition of this kind. There is no need to apply such a remark to any honorable senator. Quite apart from political aspects, governments elsewhere have embarked on this great reform with marked success. New Zealand has done so. The Imperial Government did so 25 years ago. Various Australian governments, without regard to political affinities, have gone in for some instalment of the reform. But, while we all acknowledge that it is a problem that has to be tackled, we have all to ask ourselves what is the best way to tackle it. . If Senator Grant succeeds in persuading the committee that the best way to do it is by overloading the Commonwealth Bank - and it will be overloaded, even if- it is confined exclusively to its own functions of handling the main problems affecting the finances of the country - he will defeat the end he has in view. Instead of doing something to ease the housing problem, he will only succeed in rendering the Commonwealth Bank less effective in fulfilling the purpose for which it is designed. It is clear to every honorable senator that it should be the object of both the Commonwealth and the states to cut out at every turn and opportunity the practice of duplicating activities. Efforts are now being made by state governments, in co-operation with the Commonwealth Government, to unify the collection of taxes, and to ha%re uniformity in the construction of roads. The avowed purpose of these efforts is to save the taxpayers’ money. Senator Grant’s proposal, however, is a fresh effort to get back to the point from which we are already making desperate efforts to get away. Instead of being successful in reducing rents, and bringing homes within the reach of those who require houses at a reasonable value, we would only succeed in increasing costs over and above what they would be if the matter were left in the hands of the state authorities who now control it. I realize with Senator Grant the insufficiency of housing accommodation in Australia. In this connexion, I must sound a personal note, in order to show that honorable senators who support the Government are not so indifferent as Senator Grant suggests. I recently had occasion to discuss the housing problem with a prominent member of the present Ministry. He agreed with me that something ought to be done, but he was faced with the position to which Senator Pearce has already referred - whether the Commonwealth would be justified in embarking on a policy which would necessarily mean wedding itself to duplication, just at a time when desperate efforts are being made to get away from a system which leads to a waste of the taxpayers’ money. I have not the slightest doubt as to the necessity for more Senator houses in the urban areas of Australia, because, following upon the chat I had with a prominent member of the Ministry, I came in contact with the activities of the Victorian state savings bank in the direction of building houses. The Public Works Committee was informed that houses were being built by the state savings bank on a capitalized basis of something like 17s. 6d. a week, which would mean that, in 30 years, the purchasers would be the owners of their houses. The committee was informed on undoubted authority that those homes commanding a capitalized rent of 17s. 6d. a week were commanding in other instances a rental of something in the neighbourhood of 30s. a week. It is clear that in Victoria, as elsewhere, there is ample room for the adoption of a thoroughgoing policy of building houses. Of course, the evidence on the point is conflicting. For instance, I recently read the report of the Fair Rents Court of New South Wales, which showed that over a long period not more than 500 applications had been dealt with. Apparently the Fair Rents Court has not succeeded to the extent its originators anticipated) that is to say, it has not succeeded in bringing houses within the reach of people who want them at a reasonable cost. However, the fact remains that in the congested urban districts of Australia, there is a margin sufficiently wide for the extension of our endeavours in the direction of seeing that more houses are provided for the people. Although the state governments have embarked upon housing policies, there is almost unlimited room for state and Commonwealth Governments to step in and meet the demand which has not yet been overtaken. In my opinion there should be a conference between the Commonwealth Government and the state governments, rather than that we should get back to the system of duplication, and then have to make a desperate struggle to get away from it. There should be progress in this direction. Other countries, with infinitely less resources than Australia, are embarking on housing schemes. Sir John Sulman the chairman of the Federal Capital Advisory Committee, is now on the continent of Europe, and, according to a cable report, he says that Holland is spending £24,000,000 in town planning. projects and housing schemes. It is true that Holland made a lot of money out of the war, in which it did not participate, hut it is quite clear that despite its necessarily more limited resources itis more active than Australia is in thisbranch of social reform. And this despite our professed ideals, and our desire to see them carried out. I merely rose to commend, in part, what Senator Grant had said, and to say that this problem should be tackled in earnest by every citizen, so that we may rid ourselves of those shanties which now disfigure the landscape in every Australian suburb. These shanties and the lanes in which they are built are a disgrace to civilization. It is impossible to rear a wholesome healthy race in them. Even if this proposal does no more than arouse the public to a sense of our responsibility in this direction, some good will be achieved. Although I am not prepared to support the amendment, I commend it in the hope that it will advance this neglected problem by at least one stage. I ask Senator Grant, however, to keep off party lines, and follow the advice of Senator Findley, who says that this is a question in which the people are interested, quite irrespective of party considerations.
– I always listen with a good deal of attention to Senator Lynch’s remarks. I understood him to say in the speech he has just delivered that although he realizes that Senator Grant’s proposal is good and sound, that the housing problem is forcing itself upon the consideration of even the most conservative countries, and that the ramshackle buildings which now exist must give way, in the near future, to more comfortable homes for the people, he does not propose to keep pace with the spirit of the times, because the rate of progress is too fast for him. He feels that he can commend Senator Grant’s proposal, but cannot vote for it. I am surprised that Senator Pearce did not accept the amendment. He could have done so without interfering in any way with the bill or the functions of the bank. The bank now advances money in every capital city of the Commonwealth for the purposes of home building. I believe that if the people generally knew that by depositing their money in the savings bank branch of the bank they would be providing a fund which would be available for the purposes of house building, they would be much more ready to give their money to the bank than they are now. They might even do so with the hope that at a later period they would be able to obtain an advance to build a home for themselves. Senator Lynch said something about the results which had followed the operations of the Fair Rents Courtin New South Wales. I assure him that that court has done an immense amount of good, but it is not powerful enough to keep rents down. Circumstances over which neither the Fair Rents Court, nor any other court, has control, have caused the increased rents in Sydney. One of the principal reasons is that during the years of the war, many builders were not engaged in their ordinary occupation, so the usual number of new houses was not built. Consequently, it has been necessary to overtake that leeway. Another cause of the housing shortage in Sydney, and,in fact, in the other capital cities of Australia, is that the legislation of this Parliamentand others is compelling the people to gravitate towards centres of population. That may not be the intention of our legislation, but it is the effect of it. I venture to say that Sydney in particular is growing at a rate which no one contemplated, and which could not possibly be kept pace with. Although Sydney is extending so rapidly, it is an unfortunate fact that the development in the rural areas of New South Wales is only going on slowly. On the one hand, very little development is noticeable in our rich agricultural and pastoral areas, and on the other, the metropolitan area is increasing by leaps and bounds. That is an inevitable result of the class of legislation that this Parliament is passing. Our factory system is being developed under such conditions that if a labourer remained in the country for long, he would need to have his brains brushed on removing to a city before he could get work there. We should make some attempt to ensure that the wages and living conditions in country districts are such that working people will not be tempted to live in the cities. The enormous growth and extraordinary development of Sydney, and other capital cities in Australia, merit the closest attention of the Commonwealth and state governments, which should be devoting much attention to devising ways and means to house the people properly. Even if the gentlemen who are appointed to the proposed board of directors of the Commonwealth Bank were house-building enthusiasts, they would not be able, adequately, to meet the position. If a provision such as that desired by Senator Grant is incorporated in the bill, people will be more ready to deposit their money in the bank. Even those people in the community who, during the war years, refrained from banking their money with a view to having it handy in case of need, would be willing to become customers of the bank if a home building orE. partment were attached to it. I ci.___ understand why any one should desire to prevent the establishment of such a department. Almost as many honorable senators on the Government side of the Senate as on this side are favorable to the proposal, which makes the opposition to the amendment still more inexplicable. Giving effect to the views which Senator Grant has in mind will not in any way overload the proposed board, for its members will take care that they do not carry one ounce more of responsibility than they can properly discharge. The inclusion of the amendment in the bill will be taken by the board as a polite instruction from Parliament that attention must be given to the important work of building hemes. That the bank is a most efficient financial concern for financing home building was proved by our repatriation experience. Two or three years ago, when people generally were clamouring for the building of homes for returned soldiers, the bank came to the Government’s assistance, and in consequence of its splendid handling of the situation, many more homes were made available than would have been the case had it withheld its help. So far as I know it assists in building homes even now. Senator Pearce. - It advances money on mortgage, in the ordinary way, for home building.
– Not only should it have that power, but it should also be equipped with power to build houses to meet the shortage. The carrying of Senator Grant’s amendment would give it the necessary extra power. Parliament in agreeing to the amendment would be saying in effect, “ Please take notice, Mr. Directors, that this is a polite intimation that you must exercise all the power you have to provide homes for the people.” Senator Lynch told us of the large amount that is being spent in Holland for home building. I direct the attention of honorable senators to the enormous scheme which the MacDonald Government in Great Britain has under consideration. It is proposed to spend £9,000,000 a year for the next 40 years to provide reasonably comfortable homes for the people in Great Britain. No one can say that the re-housing of the people is a more pressing problem here than it Is in Great Britain, but that is no reason why we should lag behind. We should step right out in front, and set an example to the world. It is of no use for honorable senators to commend the amendment, and then vote against it. If they agree with the. views expressed by Senator Grant, they should vote for his amendment. I know of no more important work that the Government could engage in at present than this. We are all aware that the private banks advance money for home building. As a matter of fact, they are much more ready to lend money on mortgage to erect dwelling houses in the cities than they are to lend it for agricultural and pastoral development. That is certainly the case in New South Wales. No great difficulty is experienced in obtaining money to build a house in Sydney, but there is trouble in obtaining an advance for agricultural and pastoral purposes.
– That has been the case nearly always.
– Unfortunately, that is true. That condition of things is inseparable from private banking practice. When one contemplates the extraordinary growth and progress of Sydney, and the rapid advance in land values, and remembers also that the private banking institutions are operated for the benefit of their shareholders, one can scarcely complain if the directors of those institutions are more ready to advance money on the security of city property than they are on that of broad acres. I do not blame them for so doing. That is one of the harmful effects of the disastrous attacks that this Parliament is continually making upon our primary producers. I can hardly cavil at the private banks being more ready to advance money on metrololitan than on country securities. It is only ordinary business practice. The prevalence of that custom is all the more reason why honorable senators should support the amendment, and so practically instruct the Commonwealth Bank management to do all that is possible to expedite the building of homes for the people.
– I entirely agree with a good deal that has been said on this subject on both sides of the committee. It is desirable that we should do all that we can to assist the people to obtain comfortable homes. I feel that there is very little difference of opinion in the Senate on that matter. The question is whether the inclusion of Senator Grant’s amendment in the bill would bring any nearer to realization the desirable state of affairs that he has in mind. I think I can show in a few words that that would not follow. The amendment will not do all that Senator Grant claims that it will, and therefore I cannot see my way clear to support it. Section 7 of the act, which Senator Grant desires to amend, confers upon the bank all-embracing powers to engage in ordinary banking business, and there is no doubt whatever that it is authorized to advance’ money to assist people to buy their own homes. As a matter of fact, many of the bank’s customers have obtained advances from it to buy their homes. The bank is doing that class of business to-day, and there is nothing whatever in this bill to prevent it from continuing to do so. I very much doubt whether the inclusion of the amendment would equip it with any larger powers in that regard than it is now exercising. Senator Grant’s intention is, I believe, that it shall be clothed with power to build dwelling houses on an extensive scale in order that they may be sold more cheaply than otherwise would be the case. It cannot be denied that if a comprehensive mass house-building scheme were carried out by the bank, houses would be available at less than they now cost. But I do not think Senator Grant’s amendment would give the bank such power.
– Suppose we carry this amendment, and leave the way clear for the honorable senator to move any further amendment necessary to enable the- bank to enter upon a comprehensive house-building scheme.
– I agree with Senator Pearce that it would be necessary for us to pass a comprehensive bill to enable the’ bank to begin house building on a comprehensive scale. It would require a comprehensive act similar to the War Service Homes Act. It was quite competent for the Commonwealth Bank, acting under the War Service Homes Act, to build a large number of homes, and this it did on the whole fairly well. It was, however, acting under a statute which gave it power and provided the necessary machinery. It would in this instance be necessary to pass a special act to enable the Commonwealth Bank to undertake mass construction. Senator Lynch directed attention to the difficulties which would arise in connexion with duplication, but this is an activity in regard to which it is quite possible to have a duplication of effort without loss of efficiency. The state governments, the Commonwealth Bank or the savings banks cannot advance the whole of the capital required. It is quite competent for the Government, in the legislation they contemplate introducing a little later in connexion with rural credits, if they so desire, to clothe the savings bank branch with power to take up housing on a comprehensive scale. That is a suggestion which I hope the Government will consider.
– Does the honorable senator suggest that the Commonwealth Bank should enter into competition with the state savings banks?
– I do not regard it as competition.
– If the Commonwealth Bank undertook the work it would be competing for the quantity of skilled labour available.
– Possibly), but I am hoping that the quantity of skilled labour in Australia will increase. The depositors’ money at present held by the savings bank department of the Commonwealth hank, which amounts to a very large sum, could be usefully employed in this way. I wish to again point out what is of course abundantly clear, that if the Commonwealth Bank is to be a central bank, as the Government desire, its operations should not be linked up with the business of the savings bank. It is another strong argument in favour of entirely separating the general business of the Commonwealth Bank from the savings bank branch, and placing it under different management. That is the legitimate and right thing to do. It is obvious to any one who studies the question that if the Government is successful in converting the Commonwealth Bank into a central bank - though I am not opposed to the attempt to make the Commonwealth Bank a central bank, I am of the opinion that it will not be - it cannot use the funds of the central bank in this way, because its assets must be kept in a perfectly liquid form. Under this proposal the assets of the bank would be locked up for a long period of years, and that is one strong reason why I believe that special legislation should be introduced to do what the mover of the amendment desires.
– It is well known that in’ a number of the states the housing accommodation is entirely inadequate. When in Adelaide a day or two ago I was surprised at the scarcity of houses in that city, but the Government of that state has entered into a very comprehensive scheme in order to overcome the shortage. The scarcity of material and the high price at which it is being sold is largely responsible for the present position. I am in favour of some of the schemes at present in hand for the construction of homes, and although I believe that every effort should be made to expedite building, I do not think that any advantage would be derived by adopting the amendment moved by Senator Grant. So far as I can see, the construction of homes should not be undertaken by the Commonwealth Bank, and therefore the amendment is not justified. In Queensland the savings bank business which was formerly controlled by the state authorities is now handled by the Commonwealth Bank. ‘There is not a great scarcity of houses in Queensland, as past administrations, as well as the present Government, have always been very generous in making money available for the erection of homes under the Workers Dwellings Act. In many respects the work undertaken by the War Service Homes Department has been creditable.
– According to a newspaper report it was more satisfactory when the Commonwealth Bank was doing the work.
– The Commonwealth Bank was erecting a somewhat superior type of house, and at a lower rate than the War Service Homes Department, but, owing to a controversy between the bank and the architects, building operations by tho bank were .discontinued. After several years experience, the War Service Homes Department found that state departments were able to perform the work more efficiently. “Senator Sir Thomas Glasgow. - That was particularly the case in South Australia.
– Yes. The state departments have .at their disposal the necessary plant, plans, and specifications, and efficient staffs with which to carry on. With Senator Greene, I do not think that a provision covering the construction of homes should be embodied in the Commonwealth Bank Bill, but that arrangements should be made for the work to be done through the savings bank branch. If a new department were established under the control of the Commonwealth Bank it would be some time before it would be in a position to efficiently carry out the work. Honorable senators are aware that under the present arrangement a purchaser of a home is allowed from 35 to 40 years in which to complete his payments, and in most instances this becomes such a burden upon the purchaser that he disposes of the property. Years ago it was customary for purchasers to complete payments within ten to fourteen years, but now owing to the increased cost of building and . the demand for a better type of dwelling they require 35 to 40 years if the weekly contributions are at all reasonable.
– Rings and combines control the prices of all building material.
– That may be so, but the unfortunate purchaser has to carry the burden. The cost is so great that very few will undertake the responsibility. Fair rents courts, have been established, and although benefit has been derived in a few instances, generally speaking the decisions of such courts have been of little advantage to persons renting homes.
– Has not the South Australian Government tackled the matter in a business-like way ?
– Yes, but the working men in that state will have to continue their payments for a great number of years. It would be surprising to know the number of houses that have changed hands owing to the responsibility placed upon the purchasers.
– Those desirous of building have to go too far out of the city to obtain land.
– That difficulty has, to a large extent, been .overcome owing to the modern transport facilities now available.
– But it costs more to travel than formerly.
– Yes, and it occupies more time.
– Why do not the workers in Adelaide erect homes on vacant allotments adjacent to the city?
– The land is not available. That difficulty is common to all the other states. Although in Queensland wc have taxation upon unimproved land values, it has been proved that up to a certain point the increased costs are passed on to the tenant. Notwithstanding what Senator Grant has said from time to time concerning the advantages of taxing unimproved land values, it is interesting to note that, the landlord does not pay.
– How does the owner «f a vacant block pass it on?
– In that case, the owner has to pay. Queensland’s experience has proved that, up to a certain point, the tax can be passed on. The fair rents courts have been shown to be weak, because of the inexperience of the adjudicating’ magistrates, who, lacking the practical knowledge, but possessing certain theories, fix rents at such a figure that building is made unprofitable. In Sydney and in other cities where these courts operate, people will not invest money in house property. The cheapest way to provide homes for the people would be for the pavings bank branch of the Commonwealth Bank to make advances to the state authorities, who possess efficient staffs, and are capable of having houses erected at a minimum cost. I favour the principle that underlies the amendment, but I think that the object aimed at can be achieved much more cheaply and efficiently by allowing the work to be done by the states.
– Senator Grant may he induced to withdraw his amendment when I inform -him that the Government realizes the necessity of giving consideration to the functions of the savings bank branch of the Commonwealth Bank. As has been pointed OUt, it holds a large sum of money, the savings of the people. I have already indicated that the Government contemplates the utilization of a portion of those saving’s in connexion with rural credits, and it is proposed to set up the necessary ‘ machinery to deal with that matter. Home building is another matter which must be considered by the Government. So far, however, the Government has not made up its mind as to the best means to adopt. Two courses are open to it. One is that the Commonwealth Bank itself should establish- a homebuilding department; and the other is to utilize the machinery now operating in the different states. The experience gained in the erection of war service homes showed that it was more .economical, both for the Government and for the soldiers to utilize the state machinery. Whilst agreeing that a certain amount of the money deposited in the savings bank branch of the” Commonwealth Bank should be devoted to the erection, of homes, .the Government may conclude that the wiser course is to make advances to the state organizations. The; different aspects of the matter are being- explored, but I cannot give a definite assurance regarding the course that iff likely to- be adopted. The Government recognizes that the matter in list he thoroughly investigated, and a well-considered proposal brought before Parliament at a later date.
– Senator Pearce may be right in his contention that new machinery would have to be set up to give effect to this proposal. That prospect, however, does not possess amy terrors for me. What I want to see inserted in. the bill is a direct instruction to the management to engage in this class of business. Senator Pearce is doubtful whether it would be wiser to make advances to the states, or to set up a new department, something on the’ line*: of the Repatriation Department. Evidently he- realizes that action is necessary to deal with the present unsatisfactory position. I have no objection to Senator
Findley’s suggestion that the Commonwealth Bank should establish a home building department, and erect houses en masse. I believe that that method would lead to the erection of cheaper and more satisfactory houses. What I had in mind, however, was that the Commonwealth Bank should advance money to those who are prepared to erect their own homes. I am not an enthusiastic admirer of the work that is being done by the War Service Homes Department.
– The Commonwealth Bank at present has the power to make advances in the way suggested by the honorable senator.
– The Commonwealth Bank has been established for twelve years, but it has never exercised that power.
– Yes, it has.
– Does the honorable senator say that the Commonwealth Bank has advanced money to people to enable them to erect their own homes?
– My information on the point leads me to think differently. An examination of its last balance-sheet, I contend, would not disclose an asset in that direction. If such advances have been made the total is so small that a microscope would need to be used to discover it in the accounts of the bank. I am not prepared to deny the accuracy of the Minister’s statement, but if it is a fact, what objection can there be to inserting in the bill a clause directing the management to conduct this class of business? Senator Lynch contended that the insertion of such a provision in the bill would lead to a duplication of work that is now being done by the .state savings banks. Duplication exists at present in the receipt of deposits.
– Manly, New South Wales, is full of empty houses.
– I contest the accuracy of that statement. Senator Lynch admitted that there was unlimited scope for house building. The state savings banks and the private institutions combined are not meeting the de- - mand The time is opportune, therefore, for the Commonwealth Bank to fill the breach. Does any honorable senator contend that the owner of a vacant block of land, similar to that referred to by Senator Reid, within easy distance of
Adelaide, can obtain an advance from the Commonwealth Bank to enable him to build a home on that block 1 I do not think the Commonwealth Bank will make an advance to the owner of a vacant block of land. A great deal has been said regarding the work of the War Service Homes Department. That department at present advances up to £800 for the erection of a home. It takes a purchaser 37 years to complete his repayments at the rate of £1 per week, and the amount paid by him in that period is £1,924. That is what a returned soldier is required to pay to-day for the services rendered to him by the War Service Homes Department, and, in my opinion, it is too large a sum. Senator Greene was doubtful if the amendment would have the effect I anticipate. He said that if he could be sure it would, he would vote for it. T suggest that at least he might give it a trial. I disagree with his contention that a comprehensive measure is necessary to enable the Commonwealth Bank to lend money to a person who owns a ( vacant block of land on- ‘which he is willing to erect a home. The machinery is in existence if the bank will put it into operation. That is what the bank will not do. Unless the directors are told pointedly and plainly that they will have to make way for others if they do not, in my opinion they will not advance money for the erection of homes. I do not mind whether the funds of the savings bank branch only are used, or whether those of the general bank also are drawn upon. On 1st December, 1923, the general bank had funds totalling £29,560,115, while deposits in the savings bank amounted to £40,330,455, a total of £69,890,570. So far as I know, practically none of that money has been lent for this purpose. The time is long overdue for informing the management that they must engage in this class of business, whether it be in competition with the state banks or with private institutions. I do not suggest that the whole of the £69,890,570 should be used for this purpose.
– The whole of that money is already invested.
– The bank should set aside £2,000,000 a year to assist in relieving the housing shortage. I can- not agree to withdraw the amendment. I hope the committee will insert it in the bill.
Question - That paragraph a of proposed new clause 4a be agreed to (Sena- . tor Grant/s amendment) - put. The committee divided.
Question so resolved in the negative.
Paragraph a negatived.
– The object of paragraph b of the new clause proposed by me, which is now before the committee, is to prevent the bank from being a land-owner longer than is absolutely necessary. I saw a return furnished not long ago of the condition of affairs in New South Wales.There are in that state the western, central, and eastern divisions. The eastern division is the most thickly populated. The central division is populated to a less extent. In the far west the population is sparse, and consists chiefly of leaseholds. The return showed conclusively that very many of the leases were in the hands of large financial institutions, including certain banks. I have the impression that the banking authorities do not fully utilize land that comes into their possession by foreclosure on their victims, and in asking the committee to insert this proviso my desire is to limit the term for which the bank may hold properties. I am not- submitting the amendment with a view to preventing the bank from lending money. If the security is good enough banks will advance money against any property, but a bank should not lend money merely on the off chance that a drought will force the holder of a leasehold to surrender, and that at some future date the bank will be able to recoup itself for the advance and interest charges.
– The honorable senator’s amendment also includes house property ?
– Certainly it does. It is absolutely wrong, in my opinion, that a bank should be permitted by any act of Parliament to hold on to land as mortgagee in possession for an indefinite number of years. It may be the opinion of certain honorable senators that my amendment will prevent a bank from lending money as freely as it has in the past. That may be quite true, and perhaps it would be as well if a bank did not lend money so freely to its customers. If the bank is satisfied as to its security, and if it has money available, I do not for a moment imagine it will be prevented from lending money even when confronted with this provision. As, in my opinion, a bank does not make the fullest possible use of pastoral, farming, and other properties that fall into its possession, the amendment would have a salutary effect. It would compel the bank to dispose of a property as soon as possible, and enable the land to be held by the real owner, who would make the best use of it.
– I hope the committee will not accept the amendment. I am rather astonished that Senator Grant should have moved’ it. I was always under the impression that the honorable senator was a believer in the nationalization of land. The Commonwealth Bank is a Government institution. If it became the owner of any land, that land would virtually be the property of the Commonwealth Government, through the instrumentality of the Commonwealth Bank. The honorable senator’s amendment insists that land which comes into the hands of the bank shall be re-sold within two years, and pass again into private ownership. What is the reason for this sudden conversion on the part of the honorable senator to the principle of private ‘ ownership in land ? I am astonished that, as an advocate of land nationalization, he should refuse to allow the state to remain in possession of land for more than two years. I suggest that he again read Progress and Poverty, or consult with his friend, Mr. Huie, and get back to the right track. Apart from the honorable senator’s strange falling from his high ideals, the amendment is a very serious one, and, if carried, would seriously damage the business of the Commonwealth Bank. If the bank were required, within two years of land coming into its possession, to re-sell the land at public auction, whether the market was good or bad, its business in the making of advances would be seriously interfered with.
Senator McDOUGALL (New South Wales) 5.3]. - The Minister’s grim joke at Senator Grant’s expense is entirely out of place. I take it that Senator Grant’s desire is to make the Commonwealth Bank stable. The Minister is not so old as I am, and probably has not had the painful experience of having been robbed by the private banks. 1 say, advisedly, that one of the reasons for the reconstruction of the banks many years ago was because they had advanced the full value against certain properties. They had no right to do that. If banking institutions were obliged, within two years of foreclosure, to dispose of the land in respect of which an advance had been made, they would not overload properties.
– This amendment will not affect the private banks at all.
– I am aware of that, and therefore I do not think it is well placed, but I certainly approve of any principle designed to safeguard the people from rotten investments by directors of private banks. I know of one instance of a high official in this Parliament who many years ago bought a block of land for £20, and re-sold it a few days later for £40. Shortly afterwards, when he met the purchaser, he asked him what made him give £40 for the land, and was informed that it was quite all right, because the buyer had got an advance of £150 on the land from the Joint-Stock Bank. That land is still unoccupied, and is not worth 150 pence. If we inserted in our banking legislation some provision such as Senator Grant suggests, banking authorities would be wary of advancing money on fraudulent valuations. Tho land to which I refer is in the possession of a man whose money was invested in the bank that advanced £150 on it. He had to take that or nothing in return for his money, and actually he got nothing, because the land is worth nothing. I was one of those unfortunate individuals who suffered at the hands of a reconstructed bank, and that bank is among the number showing great trading profits for the year just completed. I have seen unfortunate old men and women almost crying for the money they had deposited with banks that subsequently ceased operations. Many of these people lost their life savings. Therefore, I support anybody who stands up to advocate the inclusion in our legislation of wise provisions to put a stop to this class of investment, which is a disgrace to any institution. It is the only solution of the difficulty and will not interfere with the operations of the bank. A provision which will serve to compel the bank to get rid of a liquid asset in two years, will make the bank officials very shy of advancing more money than ought to be advanced on a particular security.
Senator FINDLEY (Victoria) f 5.6]. - I have heard nothing to convince me that the amendment is in the right direction. It should be remembered that we are dealing not with a private financial institution, but with a bank that belongs to the people. In these circumstances we must view the proposal in a way different from that in which we would regard it if the bill were dealing with private institutions. Under it, if money were advanced by the Commonwealth Bank on land on which buildings were erected, the bank would be compelled to sell the land and the buildings by public auction, within two years after default by the mortgagor. But it might not be of advantage to the bank to sell within that period. It might be better for the bank, and for the people of Australia, as shareholders of the bank, to retain the buildings for an indefinite period. It might get more out of them in the way of rentals than could be obtained by submitting the property to sale by public auction.
– There might be a slump in property at the time that the property had to be sold.
– The amendment is losing sight of the interests of the unfortunate mortgagor. - He is interested all the time in what is done by the bank.
-Those who get into deep water, financially, receive better treatment from the state or the Commonwealth than they do when they are in the grip of private financial institutions. It is the duty of the Government to help unfortunate people who need assistance when they are in deep water financially.
– But the amendment would have the very opposite effect.
– It would shut out these unfortunate people. I know that many people who have settled on the land in Victoria have got into arrears in their payments to the state, but because the land they hold belongs to the state the Government has not sold them up, but has given them . breathing time to get out of their trouble. On the other hand, private institutions are run in the interests of the shareholders, or. of a particular section of the community, and they look at such matters from a different stand-point. I have heard nothing, so far, to warrant me in voting for the amendment. I should say that those who are entrusted with the management of the Commonwealth Bank would do nothing to injure the customers of tile bank, but would rather be actuated by a desire to do the right thing in the interests of the bank and the people generally. If we say to the bank officials, that under no circumstances can they retain possession, for more than two years, of land or buildings of which the bank is for the time being the owner, as mortgagee, we shall place the Commonwealth Bank in a different position from that occupied by private financial institutions. It might militate against the success of the Commonwealth Bank to place upon it limitations which aTe not imposed upon the private banks. Therefore, Senator Grant should consider whether it would be advisable, in these circumstances, to force his amendment to a vote. If I were given accommodation by the Commonwealth Bank, in respect to certain land and buildings, and lost the possession of it to the bank under circumstances over which I had little or no control, I might, if given a little time, extricate myself from my difficulties, but Senator Grant says that no time must be allowed for me to do so, and that the bank must realize on the property in two years. He will not allow the bank to determine the best time in which to sell.
– He loses sight of the mortgagor’s interest altogether.
– The matter must be looked at in a businesslike way, yet the honorable senator says that the property must be submitted for sale by public auction in two years, whether the time suitable or not. I am not too pleased with the proposal to sell by public auction. I have heard it said that at times people in attendance at auction sales put their heads together and avoid competition, so that the goods or the properties submitted for sale are secured at a price at which they could not be obtained if the method of disposal were otherwise. If Senator Grant wishes to force his proposal to a division, I think he should give further reasons in support of it.
– As there is a difference of opinion amongst honorable senators on the other side of the chamber, it may be unnecessary for me to say anything on the proposal ‘put forward by Senator Grant, but I want to point out that if the amendment is carried it will destroy the advantage which powerful institutions and banks possess as mortgagees in being able to hold on to a property until the security becomes worth the money advanced on it. In many cases banks have held on to securities and selected a proper time to realize on them to the advantage of both the mortgagees and the mortgagors.
– It is generally in the interests of the mortgagors to hold on.
– Exactly, and if the amendment is carried it will have the effect of preventing the Commonwealth Bank from making advances on many securities, and particularly land securities.
– It is quite evident that honorable senators have not given the consideration that I have to this important subject, and as they are at present not prepared to agree to the adoption of my proposal, I shall not press it to a division. At the same time, I want to say, in reply to Senator Pearce, that he has never heard me advocating land nationalization. I have certainly advocated straightout land value taxation, without grades or exemptions. I want to point out also that Mr. A. G. Huie. secretary of the Single Tax League, in Sydney, is not my instructor. Sometimes I instruct him. However, I know that his views are right, and that he has expressed .them to the great advantage of the people. I am prepared to admit that the Commonwealth Bank, in competing with other banks, would be at a disadvantage if my proposal were inserted in the bill. As a matter of fact, that is the real argument that has induced me not to press for a division. Nothing has been said to make me realize that I am wrong. Although it has had ample time to do so, the Commonwealth Parliament, for some reason, has refused to exercise that section of the constitution which throws upon it the responsibility of passing uniform banking legislation. It has made an attempt, which 1 hope will be successful, to grapple with the subject of bankruptcy and most of the other matters entrusted to it, but it has not yet dealt with banking. When a general banking bill comes before the Senate, I shall move for the insertion of this provision which honorable senators are not anxious to have included in the Commonwealth Bank Bill. I realize that to enforce such a restriction on the Commonwealth Bank, while the other banks had a free hand to “ rook “ their victims as much as they liked, would be hardly fair to the former institution. For that reason I agree with Senator Findley that it would be wise for me not to press my proposal to a division. In any case I am afraid it would not be carried. I am fully satisfied that the discussions that have taken place will ultimately have good effect, and I ask leave to withdraw my amendment.
Proposed new clause, by leave, withdrawn.
Clause 5 -
Section nine of the principal act is repealed and the following sections inserted in its stead : - “9.- (1) The capital of the bank shall be Twenty million pounds, consisting of the following : -
[5.18J.- I move-
That the word “ lent,” sub-section 1, paragraph (b), be left out with a view to insert in lieu thereof the .word “ granted “.
I have a series of formal amendments to this and the next clause. As I intimated on the second reading, the words “ lent “ and “ loan “ should be “ granted “ and “ grant.” The money to be raised by the Commonwealth Government for the Commonwealth Bank is not to be repaid by the latter, but is to be a grant in perpetuity.
– I have not grasped the difference between “ lent “ and “ granted “ or the purpose of the amendment. I am always a little suspicious when what are described as innocent amendments are sought to be made in a bill that is the result of mature consideration and the exercise of care and skill on the part of the Parliamentary Draftsman.
– This is a perfectly innocent amendment.
– I am prepared to take the Minister’s word that it is a perfectly innocent amendment, but his word does not relieve me of my responsibility.
– This’ money, if it Is granted, will not be a loan in the sense that it will be repayable. It will be a grant to the bank in perpetuity, and will become part of the capital of the bank. A loan presupposes repayment and a term for repayment. This money is to be raised by the Commonwealth as part of the capital of the Commonwealth Bank.
– I do not know whether it would be wise to strike out the word “lent.” A period of such financial stress may overtake us that it will be absolutely necessary for the Commonwealth Government to lend money to the bank to enable it to carry on.
– The bank will have the right to ask for this £6,000,000 as it desires it.
– But the Government proposes to make it a grant and not a loan.
– Yes. Any additional money that the bank requires will be lent.
– If we can grant the hank £6,000,000, I do not see why we should not grant it £60,000,000. Of course, my opinion differs from that of Senator Pearce in regard to many matters in the bill. Senator Pearce has intimated that he proposes to ask the Committee to give the management power to advance notes on foreign securities held by private banks in London.
– Not foreign securities.
– Are such securities not foreign to Australia?
– Oh, no.
– By foreign securities, I mean securities which are outside the control and jurisdiction of the Commonwealth Government, Australian courts, and the Australian people.
– I think such power is contained in the original act.
– It may happen, then, that the bank will issue notes on these foreign securities.
– Why not wait till we reach that clause, and discuss it then?
– I hope the honorable senator will not be impatient with me. If he had explained his intentions a little more clearly I should not have found it necessary to speak at this juncture. Surely I am well within my rights in directing the attention of honorable senators to the possibility of this money being used in connexion with advances made against securities held outside the Commonwealth. Since this bill was drafted - and drafted, I take it, after much care and consideration by the Minister who introduced it and by the Cabinet responsible for it - the Minister has come along with what appears to be a trivial amendment to alter the word “ lent “ to “granted.” A tremendous change may he made in the meaning of the clause if we agree to the alteration. I do not know whether such a change would not alter the whole method of making advances to the bank. It will be in the interests of the taxpayers if we delay dealing with the measure altogether until we’ can form a considered opinion on the real effect of this proposed alteration. Of course, £6,000,000 is a small amount in comparison with the magnitude of the bank’s interests in Australia. But in view of the fact that the Minister proposes to introduce an amendment to enable the bank to advance notes against securities held in London, I question whether we shall be wise to grant the bank as much as a shilling of the taxpayers’ money. I prefer that the word “lent” shall be left in the clause. We shall not hamper the bank in any way by leaving it there. To adopt the amendment may be to embark upon a wild-cat scheme of currency inflation on the strength of securities not held in Australia, nor within the control of the Commonwealth Government or Australian courts.
– I do not know that a material alteration will be made in the principles underlying the clause by changing the word “ lent “ to “ granted.” If the money were lent it would amount to a grant.
– My objection to the alteration is that “ granted “ will not amount to “ lent.” A loan may amount to a grant, but, in my opinion, a grant will not amount to a loan.
– I am afraid that I cannot follow the honorable senator’s reasoning.
– Then I shall try to explain myself later on.
– It was the intention of the Government that this £6,000,000 should really be a loan in perpetuity. Otherwise it could not form a part of the bank’s capital. I have not the honour to be in the confidence of the Treasurer in this matter, but I think his intention was that this amount should be in the nature of a definite subscription by the Government to the capital of the bank to strengthen it, and to enable it to extend its business. The amount was to be subscribed in the same way as shareholders would subscribe capital for an ordinary financial institution. The Government is the sole shareholder in the Commonwealth Bank, and it proposes to subscribe tq the capital of the institution in this way. Will Senator Pearce inform us whether his intention in seeking to change the word “ lent “ to “ granted “ is to provide later on that if the directors of the bank think it would be inadvisable at a given time to pay the full rate of interest payable on whatever portion of this £6,000,000 they obtain, because the bank is undergoing a time of strain, the Government may permit a part of the amount to be paid then, and the remainder later on ? Subclauses 4 and 5 of clause 6 of the bill read as follow. : -
Subscribers of capital to an ordinary financial institution have to take their chance of what rate of dividend they will obtain from its trading operations. While I think it may be rightly laid down in this clause that there shall be a cumulative preference right on the part of the Commonwealth to the payment of “the effective rate of interest payable by the Commonwealth on the loan raised for the purpose” of providing this £6,000,000, or any part of it, for the capital of the bank, it may also be advisable in a time of difficulty for the bank to use its available money to strengthen its reserve fund rather than to pay, on a specified date, the full amount of interest due on such sum.
– The full rate of interest is chargeable against the profits in any case.
– That is so. The bill provides that half the profits of the bank shall go to its reserve fund, and half to the national debt sinking fund. I wondered whether this amendment was proposed with a view to giving the bank management a certain amount of discretion with regard to the paying of the interest. . If that is not the case, I ask whether the Minister will accept an amendment making it a sort of cumulative right, so that it shall not be mandatory for the board to pay the full amount of interest due at a given time.
– I am afraid I cannot accept such an amendment. The bill provides that the bank must pay interest on the money advanced to it for the purposes of providing capital, and I do not think we ought to alter that provision. It is extremely unlikely” that the institution will ever find itself in the position of being unable to meet its obligations in this respect.
– I agree with that.
– I think it certainly should be obligatory on the management to pay the full amount of interest which the Government has to meet in consequence of the raising of this £6,000,000, or any part of it. Judging by the history of the bank, I do not think we need contemplate a position arising in which it will be unable to meet its indebtedness. I cannot accept such an amendment.
– The remarks just made by Senator Pearce make me all the more reluctant to agree to the amendment. It is quite clear that under the clause as it stands the bank will have to pay interest on this amount, and the bill provides that a certain amount of its profits shall be set aside as an offset against the interest payable on the borrowed capital involved in the business. If this money is to be a grant to the bank, I take it that the hank, if we can liken it to a private bank, will pay interest on it in proportion to its profits. It will not be returned to the Consolidated Revenue of the Commonwealth as interest on money advanced, but in the ordinary methods of banking, will appear in the balance-sheet of the Commonwealth Bank, because we shall have deliberately substituted the word “ granted “ for the word “lent.” T’hat is the position, unless I am unable to appreciate the meaning of words.
– The position is not governed by that word, but by the provisions of clause 6, which amends section 10 of the principal act.
– When the bill was drafted the word “lent” was used, and provision made for the payment of interest, but if we substitute “ granted “ for “lent” we shall actually alter the position of the bank in its relation to the Commonwealth. If by act of Parliament this money is “ granted “ to the Commonwealth Bank it will be absurd for the Commonwealth to claim interest, although I realize that in the end half the profits of the bank become the property of the Commonwealth. There «an be very little doubt about that. If the bank continues to be blessed with prosperity, and is not ruined by issuing notes against foreign securities, fae profits of the bank will ultimately become the property of the Commonwealth. We have now more information at our disposal than we had when the measure was under discussion in another place, or when it was introduced into this chamber. We now understand that the Commonwealth Bank, which is being conducted on safe lines, is to become a bank conducted on lines of doubtful safety. If the word “lent” is not retained, we shall weaken the claims of the people, whom I and others represent, to what are their actual rights. The Minister (Senator Pearce) has not made it clear to me - perhaps it is because it is so clearto him- that “granted” and “lent” mean the same thing.
– I did not endeavour to make that clear. I endeavoured to show that there was a difference.
– I realize that the more stupid the objection taken the more difficult it is for the Minister to answer; the position is so clear to him that he cannot possibly understand any one else failing to see it as ‘he sees it. My suspicions were aroused when the Minister rose quite innocently to move to substitute “granted” for “lent.” It is a very drastic and most important change. If the word “ lent “ is allowed to stand we. will have a claim for interest, and for the return of the capital from the bank, but if we substitute the word “ granted “ the money will be a gift to the bank.
– If a bank grants an overdraft to a person he does not consider it a gift.
– A bank grants an overdraft only where there is sufficientsecurity to guarantee its repayment, or if it is not repaid, to prevent loss; but in this instance we are giving any amount up to £6,000,000 as a free gift or a grant. If there is any doubt as to the meaning of the amendment it should be made quite clear before we accept it. It is the intention of the Minister to move a number of small amendments, but I do not wish him to think that because I take exception to this one I shall treat all the others in a similar way. This is one of those little points upon which we should be sure. If the position is clearly and definitely stated, better progress will, be made. I am quite in the dark as to the meaning of the amendment. If the two words mean the same, why should au alteration be made?
Question - That the word proposed to be left out (Senator Pearce’s amendment), be left out - put. The committee divided.
Question so resolved in the affirmative.
– I should like the Minister (Senator Pearce) to explain why it is now necessary to suggest that £6,000,000 should be borrowed for the purpose of granting that amount to the Commonwealth Bank. Notwithstanding the fact that the bank commenced operations without any capital, it now holds very large sums of money and cannot in any sense be regarded as shaky. Why is it necessary for provision to be made for £6,000,000 to be borrowed? We do not know if the money is to be obtained in Great Britain, in Australia, or elsewhere. We seem to be pursuing an entirely wrong policy in regard to borrowing money, and I do not know how long the present practice is to continue. It seems, however, that the people of the Commonwealth are. to be fleeced with the greatest possible regularity in paying interest on money borrowed in Australia and abroad. If it is intended that the Commonwealth Bank shall pay interest on the £6,000,000 proposed to be granted, this appears to involve an unnecessary amount of circumlocution, and the creation of an altogether unsatisfactory position. Our present policy of borrowing has imposed an enormous burden upon the people of the Commonwealth, and something ought to be done to relieve the position. If the Government intend to borrow £6,000,000, why not instruct the notes board to print an additional number of notes sufficient to cover the amount? This loan could be reduced by retiring annually a number of notes equal to the interest payable. By borrowing this sum from the money lenders in Great Britain, and paying, say, 6 per cent, per annum in interest, in addition to notation and other expenses, the money thus paid away is for ever lost to the country. If my proposal were adopted the debt would be quickly wiped out. It appears to me that the taxpayers of Australia are being, pledged too greatly to the money lenders in Great Britain. The Commonwealth Bank has done very well so far, despite its many and varied shortcomings, but this proposal w,ill saddle it with an additional outlay of from £300,000 to £360,000 per annum if the Government charges it 5 per cent, or 6 per cent, interest on the capital placed at its disposal. I am opposed to the idea of borrowing an extra £6,000,000, either at home or abroad, because I do not consider that the bank requires to have its capital augmented by that amount.
– The Commonwealth Bank will require additional capital because its functions are being enlarged to enable it to operate as a central bank. It is not correct to say that the bank has no capital to-day. It has accumulated profits amounting to £4,500,000. It is , proposed to capitalize £4,000,000 of that sum. It is not correct, either, to say that the bank commenced operations without capital, because the principal act made the Commonwealth responsible for the bank, and therefore it had behind it the whole of the resources of the Commonwealth. Although that backing still exists, it is necessary for the bank to have capital in liquid form available for use at any time. “Senator Grant. - Is it proposed that the Commonwealth Bank shall pay to the Commonwealth Government interest on that £6,000,0001
– On whatever amount it borrows. It is not expected that the whole of the £6,000,000 will be borrowed forthwith.
– What rate of interest will be charged?
– The rate which the Government pays for the loan.
– It is conceivable that the Commonwealth Bank may not require any portion of this £6,000,000.
– Quite so.
– I have risen chiefly because of the amusement with which Senator Grant’s proposal to issue notes was received by honorable senators opposite. There was a time in the life of this Senate when honorable senators opposite could afford to laugh at a suggestion to issue notes, but that time has now passed, because they have expressed their willingness to accede to a proposal to issue notes on security held outside Australia. The wildest “wild cat” in the Labour movement would never dream of making such an absurd proposition. I think we could well issue notes to the value of £6,000,000, or even £12,000,000/ A simple method of doing so is provided by the Commonwealth Bank Act, and that is to issue £3 in notes for every £1 held in gold. I would buy up every ounce of gold produced in Australia, and thus provide for the continual expansion of our credit. If £1,000,000 worth of gold were produced annually in Australia, by buying it up we could increase our credit to the extent of £3,000,000, at the same time retaining a solid gold backing for the notes that were issued. I realize that the Commonwealth Bank, as the Labour party established it, was provided with a better basis than that of gold. Some people who imagine they know everything about banking overlook a most important feature of the issue of notes. The credit of private banking institutions is limited, and they must, therefore, have gold as a basis for their notes. There is no limit to Australia’s credit except that of the last shilling in the hands of the last taxpayer. The credit of Australia is so great, and is developing so rapidly, that it cannot have a limit placed upon it.
At the same time I want it to be clearly understood that we on this side do not favour the unlimited issue of notes. At present we stand for a gold basis. We would purchase gold for the sake of security. The mining industry could thus be materially assisted, because it would pay the Commonwealth to give for the gold one shilling per ounce more than was offered by other prospective ‘ buyers. Having announced that a provision is to be inserted in the bill to enable notes to be issued against foreign securities held by private banks in London, thereby departing from the principle of maintaining absolute security and ensuring public confidence, the Government and its supporters cannot afford to laugh at any proposition made by honorable senators on this side with regard to a note issue, because they have lost every sense of responsibility that they may once’ have possessed.
– Has the Minister (Senator Pearce) any idea of the amount of gold held by the private banks, which to-day are seeking the assistance of the Commonwealth Bank? I am given to understand that the bank of New South Wales has locked up in its vaults £9,000,000 in gold, and that the other banks are similarly situated. If that is so, why should it be necessary for these institutions to be strengthened by the establishment of a central bank? The chairman of directors of the Commercial Banking Company of Sydney, which last year made a profit of £400,000, has distinctly stated that that institution has not sought the assistance of the Government, and does not require it. ‘ He has made statements,, which are not complimentary to the framers of this measure, regarding the manner in which it has been placed before Parliament.
– The private banks hold approximately £20,000,000 in gold.
– I think the figure is nearly £21,000,000.
– What is the reason for the locking up of that sum ?
– A house must hare a foundation. A bank must have a basis on which to start operations.
– The private banking institutions want the Government to provide that basis; they want the taxpayers of Australia to be responsible for an expenditure of £500,000 per annum, to pay for the foundation of a “ house that Jack built.” I am not satisfied with the proposal of the Government.
– Apparently Senator Gardiner objects to this provision, because he says that the Government is setting out to do something that has never before been contemplated - to issue notes against other than Australian securities. Why did Senator Gardiner support the government that passed the original Australian Notes Act? That act clearly contemplated, the issue of Australian notes against other than Australian securities. Section 8 of the Australian Note3 Act of 1910 provides: -
Part of the moneys standing to the credit of the Australian Notes Account shall be held by the Treasurer in gold coin for the purposes of the reserve provided for in Section 9 of this Act, and the Treasurer may invest the remainder or any part thereof -
– The honorable senator has just proved that what I said was right.
– I have not.
– Will the honorable senator be fair enough to say whether it was the notes, or whether it was the profits earned from the notes issue, that were to be so invested?
– It refers to part of the money standing to the credit of the Australian Notes Act. Inasmuch as the Australian banks hold surplus funds in English securities, such as short-dated Treasury-bills, &c, in London, the Government is providing that the Commonwealth Bank shall have power to issue notes against those securities, which will be handed over to the custody of the notes issue department of the Commonwealth Bank.
– The honorable senator is not in order in discussing those matters.
– I am simply replying to what Senator Gardiner said. This power is an elaboration of a provision already incorporated in the Australian Notes Act.
Senator GARDINER (New South Wales [6.10]. - I can promise, Mr. Chairman, that I shall not be any more out of order than was the honorable senator who has just resumed his seat. Senator Greene, having hurriedly glanced at section 8 of the Australian Notes Act, endeavoured to make the committee believe that the act authorized the issue of notes against foreign credits. The act provides for the issue of notes on a gold basis, and that the profits earned on the notes issued shall be invested in the way described by Senator Greene. There is all the difference in the world between issuing notes against foreign securties, and investing the profits earned by the notes in such securities. I do not approve of these high banking authorities trying to mislead the committee.
Amendment agreed to.
Question - That the clause, as amended, be agreed to - put. The Committee divided.
Majority … … 7
Question so resolved in the affirmative.
Clause, as amended, agreed to.
Clause 6 -
Section 10 of the principal act is repealed, and the following section inserted in its stead: - “10. -(1.) The Treasurer may, from time to time .. . borrow moneys not exceeding in the whole the amount which it is necessary to borrow in order to lend to the bank the sum of£6,000,000. “ (3.) There may be issued and applied out of the proceeds of any loan raised under the. authority of this section the sum of Six million pounds for the purpose of a loan to the bank. “ (4.) The bank shall pay to the Treasurer, half-yearly, interest on the amount due by the bank to the Commonwealth in respect of loans made in pursuance of this section. “ (5.) The rate of interest payable by the bank shall be the rate equivalent to the effective rate of interest payable by the Commonwealth on the loan raised for the purpose. “ (6. ) For the purposes of the last preceding sub-section, the effective rate of interest payable by the Commonwealth on any loan raised for the purpose of this section shall be such rate as is certified in writing by the AuditorGeneralas being the effective rate of interest payable by the Commonwealth on that loan.”
Amendment (by Senator Pearce) proposed -
That the word “ lend,” sub-section (1 ) , be left out with a view to insert in lieu thereof the word “ grant”.
– I do not intend to delay the committee, but I should like to know what is wrong with the clause as it stands, and the reason for the proposed amendment.
– Because the bank is under no obligation to repay a grant.
– That strengthens the position I take up. I do not want the people’s money to be lavished upon the Commonwealth Bank in such a way that it will be under no obligation to repay it, although I know that in the long-run what belongs to the bank belongs to the people. The will of Parliament must be supreme. This Parliament may authorize certain provisions, and another Parliament, fortunately still the supreme authority, may pass other provisions. The Ministerwould be well advised to allow the clause to stand. I do not believe this measure has been reasonably discussed by the Government. Evidently Ministers have changed their minds. I want to emphasize that fact. What harm could be done to the bank if we allowed the clause to pass? On the other hand, what harm may be done if it is amended? There will then be no claim for the return of the money granted to the bank, although a careless board of directors may be responsible for serious losses. It is because I believe that the people’s interests will be safeguarded by passing the clause as it stands that I intend to Vote against the amendment.
Question - That the word proposed to be left out, be left out - put. The committee divided.
Majority . . . 6
Question so resolved in the affirmative.
Amendment agreed to.
Amendment (by Senator Pearce) proposed -
That the word “ loans “, sub-section 4, be left out with a view to insert in lieu thereof the word “ grants “.
– According to sub-section 4 -
The bank shall pay to the Treasurer halfyearly interest on the amount due by the bank to the Commonwealth in respect of loans made in pursuance of this section.
I submit that the words “ due by” are wrongly used if the word “ grants “ is to carry the significance ordinarily associated with it. If £6,000,000 be granted to the Commonwealth Bank it surely is not due by the bank to the Commonwealth. The section was originally drafted when the idea was that this money was to be regarded as a loan to the Commonwealth Bank, but now that the Government have chosen to regard it as a grant the sub-section should read -
The bank shall pay to the Treasurer halfyearly interest on the amount granted to the bank by the Commonwealth in respect of grants made in pursuance of this section.
– The point raised by Senator Greene is a good one, and I ask leave to withdraw my amendment with a view to the submission of a prior amendment.
Amendment, by leave, withdrawn.
Amendment (by Senator Pearce) proposed -
That the words “ due by “, sub-section 4, be left out with a view to insert in lieu thereof the words “ granted to “.
– Is the Minister assured that his amendment will not provide that all the moneys granted to the Commonwealth Bank must bear interest 1 The bank may not call up the whole of the £6,000,000.
– The sub-section applies only to the amount actually granted.
– I hope that during the adjournment the Minister will make sure that his amendment will cover the position effectively. I am not sorry at what has been proposed, and I think that the amendment will protect the interests of the people of the Commonwealth; but I want to be quite sure that, in rushing in to do so, the Minister is not malting the position of the bank more difficult by calling upon it to pay interest, not upon the amount actually called up out of the grant, but upon the full amount of the grant itself.
Sitting suspended from 6.30 to 8 p.m.
– I ask leave to withdraw the amendment before the committee. I have had an opportunity to consult with the draftsmen, and the danger of moving amendments on the spur of the moment has once more been proved. If the committee consents to the withdrawal of the amendment, I shall move to make subclause 4 of the clause read as follows : -
The bank shall pay to the Treasurer halfyearly interest on the grants made in pursuance of this section.
Amendment, by leave, withdrawn.
Amendment (by Senator Pearce) agreed to -
That the words “ amount due by the bank to the Commonwealth in respect of loans “ be left out, with a view to insert in lieu thereof the’ word “ grants “.
– Some little time ago . I suggested that it might be desirable in certain circumstances for the directors of the bank to be permitted to pay to the Government a rate of interest less than equivalent to the effective rate of interest payable by the Commonwealth on the loan raised for the purpose of making the grant to the bank. In the case of an ordinary financial institution, shareholders are at times paid less than the ordinary rate of interest on their investments, and circumstances may arise - although it is not likely that they will - in which the directors of the Commonwealth Bank may consider it to be advisable, for the time being, to pay less than the full rate of interest payable to the Commonwealth Government for money which may be granted, under the provisions of this clause. I ask the Minister, therefore, whether he would be prepared to accept an amendment which would make sub-clause 5 of the clause read as follows: -
The rate of interest payable by the bank shall be a rate not in excess of the rate equivalent to the effective .rate of interest payable by the Commonwealth on the loan raised for the purpose.
Honorable senators will see that I suggest the insertion of the words “ a rate not in excess of “. To all intents and purposes the money that will be granted to the bank under this clause will be in the nature of subscribed capital, and it may be wise to provide for such circumstances as I have suggested.
– I do not think there is any need to alter the clause in the way Senator Greene has suggested. But, supposing we did so, who would be the authority to determine what rate of interest should bo paid on the money granted?
– The directors of the bank.
– It would be dangerous to leave the matter there. It must be remembered that the profits of the bank are to be divided equally between the bank and the Government. Obviously, therefore, it would be advantageous to the directors of the bank to pay a small rate of interest, or no interest at all, on the money granted to them. They may say, “ We are anxious to build up our reserves, and, therefore, we propose to pay only 1 per cent., or 3 per cent., on the money granted to us by the Government.” That will hardly commend itself as a sound proposition. But let us look at the matter from another point of view. Let us suppose for a moment that in a certain year the bank did not make sufficient profit to pay the full rate of interest due to the Government in respect to a grant made under this provision: It will hardly be suggested that the Government would foreclose on the bank.
– It would defer payment of the interest.
– That is so. We have already done something of a similar nature in regard to the Federal Capital Commission. We have assumed that at some time the Federal Capital Territory will return a profit to the commission, but in the meantime it is impossible for the commission to carry on unless it is provided with money. The Government, therefore, has advanced money to it, and the commission is, in effect, piling up a liability which it is hoped will later on be liquidated.
– Perhaps it would be possible to insert in the bill a provision that this grant shall be in the nature of cumulative preference shares.
– That is the position now.
– It is equivalent to that. If the directors of the bank find that they are unable to pay the full rate of interest in any given year, the Government will defer payment of the interest, and no doubt later on the bank will be able to meet the usual interest payment, and also any existing deficiency.
– I do not press my proposal.
– For the sake of clarity, and also with a view to meeting Senator Gardiner’s objection to the substitution of the word “ granted “ for “ lent “ in the preceding clause, I wondered whether the Minister in charge of the bill would agree to the insertion of the words “ and granted,” after the word “raised “ in sub-clause 6. The sub-clause would then read: -
For the purposes of the last preceding subsection, the effective rate of interest payable by the Commonwealth on any loan raised and granted for the ‘purpose of this section shall be such rate as is certified in writing by the Auditor-General as being the effective rate. of interest payable by the Commonwealth on that loan.
Such an amendment might prevent confusion later on, and it would reconcile the latter part of the clause with the former part.
– I think the position has been made perfectly clear by the amendment we have just made to subclause 4.
– But that deals with the matter from a different point of view.
– It dealswith the payment of interest on ‘ the money granted.
– My only object in suggesting this amendment is to prevent any possible confusion. I think there is virtue in my proposal. I must say that the proposition of the Government to change the word “ lent “ to “ granted “ did not appear to me to rest upon any very solid ground. However, I do not press the matter.
.- The position is now perfectly clear. The bank will only pay interest on the amount actually granted to it. The early part of the clause provides that the Treasurer may issue inscribed stock or debentures to the bank for the purpose of providing it with capital, and the latter part of the clause makes it clear that interest will be payable only on such money as may be so granted.
.- The Minister (Senator Pearce) seems to think that my silence indicates that I am sleeping, and am satisfied that the money to bo advanced to the Commonwealth Bank is a loan and not a grant. I do not think that the amendment suggested by Senator Lynch is at all unnecessary. I do not know whether I would be quite in order in suggesting that the Minister’s “ offsiders “ do not appear to be too sure as to whether he is right or not. If, however, we devote too much time to the consideration of details little progress will be made. I am anxious to get on with the bill, but I am afraid the Minister doubts my sincerity.
Clause also consequentially amended, and, as amended, agreed to.
.- I move-
That the following new clause be inserted : - “6a. From and after the expiration of three years from the date of the passing of this Act the bank shall hold cash or securities of the Commonwealth or a state equal to 331/3 per centum of the amount of the bank’s liabilities :
Provided that the amount of cash so held shall notbe less than 20 per centum of the liabilities.”
This appears to be the only appropriate point at which to provide the manner in which the business of the “bank shall be conducted. It is quite clear that, apart from the appointment of the directors and the settlement of other subordinate matters, there is no expression in this bill as to how the business of the bank shall be conducted. The amendment I have submitted is an attempt to repair that omission. Our experience of banking has been of a varied nature, but happily examples of rash or careless banking in Australia have not been frequent. The public interest is so involved and so inextricably bound up with the question now under consideration that we should not lose an opportunity to Bee that what has happened in the past shall not occur again. I refer particularly to the happenings in this country in the early nineties, which are well within the memory of honorable senators. We can well remember that at that time about ten banks were carrying on’ business in Australia, and to all intents and purposes up to a particular year, and aye, up to a particular month, they were thought to be in a sound position. But experience taught us that all was not as we imagined. They had been carried on in a fashion that did not commend itself to any person experiencedin banking, or to any person capable and willing to express an independent opinion as to how a bank could be soundly and safely conducted. The result was that most of the banks failed. We know the main cause, and the purpose of the proposed new clause is to prevent a similar happening.
– It was overspeculation.
– That is another phrase to define the same thing. The main cause of the failure of the banks, which involved a loss of about £100,000,000, was as then stated in the Banking and Insurance Record. The catastrophe was of such dimensions that one would have to go back fairly far in English history to find its equal. The main cause of the collapse was the way in which the banks conducted their business of extending credit. Story upon story was erected upon slender foundations, until the natural thing happened and eight or nine banks failed. Tens of thousands of shareholders lost their money. I do not wish anything of that land to happen in connexion with the Commonwealth Bank, and for the information of honorable senators, I shall quote some of the evidence given before a commission appointed in 1893, when the debris was scattered all over the landscape, and when men who went to bed in the firm belief and conviction that they were men of substance and means awoke in the morning- to the dreadful experience of finding that they were ruined. It .is well within the- memory of honorable senators-
– No one lost anything. It had only gone before.
– There are men in this country who lost a mighty lot, which they will never recover. I have been with some who were on the verge of lunacy as a result of the treatment the banks extended to them on that occasion. When that catastrophe happened a commission was appointed by the New South Wales Government, before which many witnesses were called to give evidence. Amongst them was Mr. Coghlan, the statistician at the time, and this is what he said -
I certainly think it is the essence of good banking that the liabilities should bear some fixed and definite proportion to the original capital and reserves of the bank, and what is more, the reserves should be kept as reserves and not put into the general pool of the business.
A Mr. Backhouse, a banker of experience at the time, was also called, and he stated -
If on English bank had a liability to the public of £6,000,000 it would not consider itself justified in advancing more than £4,000,000. That is, it would keep 33 J per cent, of - its liabilities in cash or liquid securities. I cannot help feeling that too much importance is attached to the proportion of gold to the total liabilities, insufficient importance being given to the proportion of the reserve to liabilities from which circumstances I consider come the whole of the recent failure. We have about two million in coin and securities, but make ten million a year less out of them than we ought to make owing to careful banking.
If we are to be guided it should be by the lamp of experience, which, as Patrick Henry said, is the only one which lights the feet of men to progress through life. We should be guided by experience and avoid such a catastrophe as that which happened in the early nineties. I am quite aware” that in opposition to this proposal it will be said that it will mean locking up the reserves of the
Commonwealth Bank to an unnecessary degree, but if the locking up of these reserves means a positive insurance against what happened in the period I have stated, our action will be fully warranted. I therefore ask the committee to agree to the proposed new clause, so that it can be said that this is a bank conducted on such sound principles that it keeps in reserve, in cash or in a liquid form, one third of its liabilities to the public. It will be said, of course, that the Commonwealth Bank is a national bank, owned and controlled in the interests of the people, and cannot be pressed into liquidation. In reply to the argument which may be raised against the locking up of reserves, I would point out that even in regard to public credits, to which I attach the greatest importance - because public credit stands superior to the credit of an individual or any section of individuals - it is universally admitted that one cannot go beyond a certain point. I point out to Senator Gardiner and Senator Greene, who referred to the note issue, that public credit cannot sustain the action of any Government in issuing notes upon its own responsibility and upon the good faith of the nation unless the note issue has, as a compulsory limit, a gold backing to the extent of 25 per cent. Public credit can only be trusted up to a certain point, and if that limit is exceeded universal consent will not sustain the action taken. If any one proposed to provide less than a 25 per cent, gold backing for our notes, universal opinion would be up in arms, and rightly so, too. When it is necessary to employ the public credit and provide a rigid safeguard in relation to our note issue, it is equally important to make similar provision, in regard to the bank, the operations of which we are now discussing. It is only fair to the bank, to the public, and to the good name of the Commonwealth that we should provide such safeguards as will remove the bank from beyond the point of suspicion in order that it may be established upon a foundation, so to speak, of imperishable granite. There should be’ no chance of its tottering. We ought to do this for the further reason .that there has been no change in our banking law since the early nineties. The Com- monwealth Parliament must soon pass a bill to regulate banking that extends beyond the limits of one state. I am sure that this Parliament will require the private banking institutions ‘ to observe some such provision as this. If it does not, the lesson of the early nineties will have been wasted. If the private banks are compelled to provide this safeguard, similar provision must be made in the case of the Commonwealth Bank. I remind the committee that this proposal is not a new one. Until recent years, the Canadian banking law provided that not more than 8 per cent, could be- declared as a dividend by any bank if the reserves fell below one-third of its liabilities. Anything in excess of 8 per cent, had to be placed to reserve, to bring it up to at least one-third of the liabilities of the bank. I want the Commonwealth Bank to be built on the soundest possible foundation. The only way in which that can be done 13 to ensure that, as against its liabilities, it shall have either cash or liquid assets in the proportion proposed by me. I hope that my amendment will commend itself to the committee.
– I think I have every justification for taking exception to the submission of this important clause without notice to me that it was to be moved or a copy being supplied.
– I returned from Adelaide only this morning; otherwise I should have supplied the Minister with a copy.
– This is not a minor matter. The honorable senator proposes one of the most revolutionary changes that could possibly be made in the banking law of any country. No country in the world has in its banking law a provision similar to this. Before agreeing to make such a startling change a great deal more consideration would be necessary than I am able to give it on the spur of the moment. I fear that, whatever merits may be possessed by the honorable senator’s case, he has prejudiced them, because of the fact that one is not able in the time available to look into the full meaning of the proposed new clause. It is. fairly obvious that, if there is one bank in the Commonwealth that does not require this safeguard, it is the Commonwealth Bank. If this provision is a neces sity of banking, it should be applied to every bank other than the Commonwealth Bank. The proposed new clause would place upon the Commonwealth Bank a restriction which would not apply to any other bank in Australia.
– I think Senator Lynch ought to wait for the introduction of a general banking bill.
– Then such a proposal might quite properly be made. It would be most unfair to saddle the Commonwealth Bank with this restriction. The people cannot allow that bank to escape its liabilities as some private banks, according to Senator Lynch, did in the nineties. As long as there is a shilling in the Treasury locker, it must be placed at the disposal of this bank. There is another reason why, on the spur of the moment,’ without having had time to properly think the matter out, I do not favour the proposed new clause. It is intended to make the Commonwealth Bank a central bank. We hope that, if a time of crisis does arrive, the Commonwealth Bank will come to the rescue of the private banks. This restriction would operate at such a time, and the Commonwealth Bank, even though it had the resources of the whole of the people of Australia at its back, would be hamstring. In the nineties, when those terrible events referred to by Senator Lynch occurred, it was obviously in the interests of the people that the private banks should be kept going, and the governments of the states took extraordinary action to that end. Had the Commonwealth Bank been in existence at that time it would have been its duty to go to the assistance of the private banks, but such a provision as this would have prevented it from doing so. Everybody must recognize that this is the one bank that can safely do without such a provision. Senator Lynch must see, on reflection, that it would be most unfair to place this restriction on the Commonwealth Bank and allow the other banks to operate without it. I appeal to him to withdraw the amendment at this stage. It can properly be considered when the general banking law is being amended.
.- I think that the amendment is worthy of more consideration than has been given to it by the Minister. Instead of being withdrawn at this stage, it ought to be deferred until the Minister has had an opportunity to consider it more at his leisure. He has said that the Commonwealth Bank could dispense with a provision of this nature. I differ from that point of view. Those banks which were affected by the last crisis observe this practice strictly without any legislative provision. It is in the interests of the directors and the shareholders that they should do so, because they are liable to suffer heavy loss. The Commonwealth Bank, on the other hand, will be controlled by directors who are under no danger of losing their personal capital, and such a provision as this may be uecessary in its case. If at any time, owing to some great national crisis, it was imperative for the Commonwealth Bank to disregard this safeguard, it could approach the Commonwealth Parliament and have passed a measure conferring upon it extraordinary powers. It is all very well to say that the taxpayer is behind the bank. The taxpayer does not want to be made liable for anything over which he has no control. The shareholders of a private bank can bring their directors to book, but the taxpayers of the Commonwealth cannot influence the directors of the Commonwealth Bank. I hope that the Minister will not press for the withdrawal of the amendment, but that he will defer it until we can obtain a mature opinion upon it.
– I listened very attentively to Senator Lynch, and I am sure that he is not sufficiently aged to remember the banking crisis of the early nineties. Already this bill contains the provisions that saved the private banks at that time, even after the panic had started. In New South Wales, when private banks had closed their doors and posted the notice, “ Payment suspended pending reconstruction,” the State Government hurriedly passed a measure pledging the credit of the state to the .private bank notes, and making them legal tender. Senator Lynch said that he wanted to build the Commonwealth Bank upon a firm foundation. Let us look at the manner in which firm foundations are made, in a material sense. If an architect were to provide for a foundation of reinforced concrete in the proportion of one part of cement to three of river sand, Senator Lynch would not improve the mixture by throwing in a further quantity of mullock. The Commonwealth Bank has an excellent foundation in a gold basis and the credit of the Commonwealth. On such a foundation one can safely build, because the credit of the institution is limited only by the resources of the Commonwealth. Senator Lynch’s statement drew from the Minis-‘ ter the remark that as a central bank this institution may come to the relief of the private banks. I have no hesitation in saying that that is the chief purpose underlying the proposal to transform the bank from a trading bank to a central bank. In countries in which banking has grown to any extent the thing that most forcibly strikes students of banking is the periodical panic that has to be faced. After a period of prosperous trading something suddenly causes a run on the banks. The chief cause to my mind is that in the days of prosperity, when profits are great, the shareholders get the whole of the benefit. Since the lesson of 1893, in Australia, I believe that banking has been carried on with safety as the guiding principle. I think that we are now going through a most critical banking period, and that is why I favour moving very slowly, lest, in our eagerness to help the private banks, we do more harm than good. Senator Lynch’s proposal is tantamount to throwing too much mullock into a good foundation. What better foundation could one have than a gold basis and a taxable people ? The Australians submit more readily to taxation than the people of any other country. There appears to be no limit to their patience. They appear to be able to adapt themselves to any condition and submit to any hardship in the way of taxation. The people of Australia are behind this bank, and will submit to a good deal to maintain their own reputation. I see no necessity to tie the hands of the management by any imaginary strengthening of the bank’s position. As the Minister has pointed out, if the provision were applied to all the banks there might be something in it, but as it will only apply to the Commonwealth Bank, why this extraordinary precaution? Apart from the service the bank has rendered the community, and the savings it has effected in connexion with the floating of our loans, the actual profits earned on its ordinary banking business totals £4,500,000. If it had been a private bank how much of that £4,500,000 would have remained the property of the people? It would, of course, have been disbursed in dividends. If the bank” is managed as successfully in future as other banks are, and I venture to say it will be, the credit and the accruing profits of the bank year after year will build up a reserve greater even than Senator Lynch now proposes to establish, because with the ordinary turnover of a 5 per cent. profit, the bank will double its capital in fourteen years. In a growing country like Australia, investments in land constitute one of the greatest dangers to banking. One has only to bear in mind the immense fortunes that are made. A friend of mine hot long ago invested £1,000 in a Sydney suburban subdivision, and turned the property over at a profit of about £5,000 in a short space of time. Panic, financial stringency, and difficulties soon come when a sufficient number of people have to pay away their weekly earnings as interest on land transactions. The Commonwealth Bank will not go headlong into that kind of investment. The government of the day, rather than the directors of the bank, must be responsible for the successful operation of the bank. That responsibility cannot be removed from them, but we must have the strong guiding hand of the man upon whom would fall the censure of the people in the event of disaster. The position of the Commonwealth Bank is sounder than the position of the private banks.We have an institution that is already successfully operating. Its earnings to date total £4,500,000. Now it is to be granted another £6,000,000 of capital, and Senator Lynchwants to make its foundations better by adding something. It might be wise if Senator Lynch withdrew his amendment, and submitted it at a later stage when honorable senators had further information as to its details, and knew exactly what it meant. At the moment I do not consider it necessary, and I am not going to impose on the Commonwealth Bank, the property of the people, conditions which are not required of the privatelyowned banks.
– Perhaps the Minister can see his way clear to postpone consideration of this proposed new clause. I do not think that it would help us very much, for the reason, amongst others, that the Commonwealth Bank can issue notes to itself. If it found that it was running short of the percentage allowed in Senator Lynch’s amendment, it could issue a few more notes and the position would be all right again. That is one of the dangers I see. However, I do not press it, but I suggest that the Minister postpone consideration of the clause until we have considered the position a little more.
– If Senator Lynch withdraws his amendment he may move for the recommital of the bill at a later stage for the purpose of again presenting his amendment.
– In deference to the wishes expressed by honorable senators, I ask leave to withdraw my amendment conditionally upon an opportunity being given later to recommit the bill for the purpose of considering the proposed amendment.
Leave granted; proposed new clause withdrawn.
Clause 7 -
Sections eleven to fifteen, both inclusive, of the principal act are repealed’, and the following sections inserted in their stead: - “11. - (1.) The bank shall be managed by a board of directors composed of the Governor and seven other directors. “ (2.) Subject to this act, the seven other directors shall consist of -
two persons who are or have been as sociated with manufacturing industries or commerce;
two persons who are or have been associated with agricultural, pastoral, or other primary industries; and
two persons who have a knowledge of currency and are declared by the Governor-General to have been chosen because of that knowledge. “ 12.- (1.) The Governor and a Deputy Governor shall be appointed by the GovernorGeneral, andshall hold office for a period not exceeding seven years, and shall be eligible for re-appointment. “ (2.) In the making of the appointments of the directors specified in paragraphs (b) and (c) of sub-section (2.) of the last preceding section, due consideration shall, as far as possible, be given to the fair representation of the geographical divisions of the Commonwealth. “ (3.) The directors specified in paragraphs (b), (c) and.(d)of sub-section (2.) of the last preceding section shall be appointed by the Governor-General. “ (4.) Of the six directors first appointed in pursuance of paragraphs (b), (c) and (d) of that sub-section, one shall be appointed for a term of seven years, one for a term of six years, one for a term of five years, one .for a term of four years, one for a term of three years, and one for a term of two years. ‘ (5.) Thereafter each director shall be appointed for a term of seven years. “ (0.) Each person who is appointed a director shall, upon the expiration of the term for which he was appointed, be eligible for reappointment. “ (7.) In the event of the office of one of the directors specified in paragraphs (6), (o) and
of sub-section (2.) of the last preceding section becoming vacant otherwise than by effluxion of time, the Governor-General may appoint a director to that office for the remainder of the term for which his predecessor in that office was appointed. “ 12a.- (1.) The Governor shall be the chief executive officer of the bank. “ (2.) The Deputy Governor shall perform such duties as- are directed by the board. “ (3.) The Governor and the Deputy Governor shall severally devote the whole or their time to the duties of their office.
– I move-
That the words “ the governor and seven other directors lines 5 and 6, be left out with a view to insert in lieu thereof the words “ seven directors and a general manager “.
The sub-clause will then read -
The bank shall be managed by a board of directors composed of seven directors and a general manager.
I must plead guilty to not having cir culated the amendment, but I can assure honorable’ senators that I had no intention of discourtesy, because in my secondreading speech I indicated my views on this subject, and intimated that I would seek to have them given effect to when the bill was in committee. Though the amendment is only a short verbal one, it will, if agreed to, have very important consequences I take exception to the title of the executive officer of the bank, and to his holding a position on the board. It would be far better, and in 6he interests of the future welfare of the bank, if the executive officer were made the general manager. The whole future of the bank depends upon having an efficient board of directors. If the chairman and other members of the board do not work well with the executive officer, the progress of the bank will not be what we all hope for. It is the custom, in connexion with all banks and great institutions, to have boards of directors and a general manager, and I do not see why an exception should be made in the case of the Commonwealth Bank. It is true that in the past, with one-man control, the executive officer of the bank has been termed the governor. It is quite right that, where there is autocratic control, the executive officer should he called the governor, because he exercises full power. In the case of the Bank of England the directors are termed “ governors,” and I think the chairman is styled the Chairman of the Governors of the Bank of England. But when we create a board of directors in the ordinary sense of the word, the term “governor/ I think, should be dropped. The general manager, as the officer responsible for the policy of a hank- or any institution, brings matters ‘ of great moment before the hoard of directors, who, no doubt, are largely guided by his advice.
– “What is the governor of the bank doing now?
– He has full control. He is the board of directors and executive officer all in one. He has no master. I contend that the general manager of the bank should submit <his- recommendations to the board of directors, the members of which may approve of them or vary them” as they deem advisable. We want a good chairman of directors, because his is t<he most important, position on the board. If we are going to have the executive officer putting up proposals and voting on them, there will he friction with the chairman of directors from the outset. If, however, the board is to be ‘composed of automatons, the will of the executive officer will prevail, and things will perhaps go on in a haphazard way for a time. We want men of the highest calibre for the board of directors of the Commonwealth Bank, and it is not fair to the other directors that the executive officer should have a vote on the board. If it is desired that he should’ be on the board, then I say that he ought to be given his proper title. He should be called the managing director; not the governor of the bank.
– Why does not the honorable senator move an amendment in that direction?
– If my present amendment, which I prefer, is not agreed to, I shall do so.
– Is there any difference between “managing director” and “ governor “ ?
– There is a vast difference. If I cannot achieve my purpose by having the term “governor” altered to “general manager,” I shall endeavour to have the words “managing director “ used ; but even that would be fraught with great difficulty, because, sooner or later, the managing director would be sure to fall foul of a very active chairman of directors.
– What would be done with the governor of the bank?
– He would become the general manager, with no vote on the board of directors.
– Surely that would he a mistake?
– I do not think so. Sir John Russell French, the doyen of bankers in Australia, was the general manager of the Bank of New South Wales, but was not on the board of directors of that bank.
– The general manager is the brains of an institution.
– Quite so. He makes -all the recommendations.
– And he should have power to carry them out.
– The honorable senator knows that the general manager evolves the policy of any big’ institution. The Commonwealth Government will be riding for a fall if it gives the governor of the Commonwealth Bank a vote on the board of directors. As general manager, he will have all the authority he requires, and the board will be placed in a better position for future harmonious work.
– There are very good reasons why this amendment should not be adopted. I shall deal first with the honorable senator’s proposal to change the title “ governor” of the bank to that of v< general manager.” The Commonwealth Bank, which has been in existence for a number of years, has always been managed by a governor. In fact, the term “governor” has grown up with the institution. It is really one of the things that differentiate the Commonwealth Bank from other financial institutions. There are many reasons why this differentiation should exist, and why terms commonly in use in private banks should not be employed in respect of the Commonwealth . Bank. The latter is the nation’s bank, it has no private interest, and is not run for private profit, whereas the other banks in Australia belong to private people, and are run for private profit. There are traditions in the Commonwealth Bank associated with the term “ governor,” and it is the same term as is used in the Bank of England.
– The directors of the Bank of England are all governors.
– Why do we- talk of the governors of the Bank of England and of general managers and boards of directors of other banks? It is for the same reason that applies in the case of the Commonwealth Bank, namely, that the Bank of England fulfils a function not fulfilled by other banks.
– Do the Govern ment contemplate making the governor of the bank the chairman of directors?
– No, but I prefer to deal with one point at a time. There is great value in retaining the term “governor.” The very fact that it differentiates between the Commonwealth Bank and the other banks is a recommendation for its retention. I quite believe that the other banks are not pleased that there should be any differentiation in this respect between them and the Commonwealth Bank, and that they would like to see the term altered, but I do not think that we should fellow their lead. I therefore strongly urge the committee to retain a title that has been from the first associated with the Commonwealth Bank. I also ask the committee not to support the proposal to take the governor off the board of directors, which, will not be the same as boards of directors of other banks. The Commonwealth Bank is the property of the people of Australia, but as it would be impracticable to get the. people of Australia to a share holders’ meeting to elect their directors, their representatives in Parliament act as their proxies and place the people’s representatives on t’he board. As the bank will be a central bank, it will be necessary to have on the board at least one man with a special knowledge of banking transactions and the relations of a central bank with other banks. That knowledge is not required in the case of other banks which are not central banks. To have on the board of directors of the central bank a man with the requisite knowledge of banking transactions, it is essential that the governor shall be a member of it. Furthermore, as the Commonwealth Bank is a Government bank, with intimate relations with Government finance, the Secretary to the Treasury must also be on the board of directors. It is true that all the other banks have relations with the Treasury, but not to the extent that the Common - with Bank has, and will have in its capacity as a national bank. The other banks are private trading concerns, and it cannot be argued that because certain things are done in regard to the directorates of those banks they must also, be done in regard to the directorate of the Commonwealth Bank. There is no analogy between the two classes of banks. When the board of directors of the Commonwealth Bank deals “with the relationship of a central bank to the private banks, it will be essential to have among them one who has a special knowledge of banking, and one who can influence them, not only by his voice, but also by his vote. This is one of the principal features of the bill. It has been carefully considered, and, as I said on the second reading, the Government attach so much importance to the necessity for having the governor of the bank on the board of directors that they are also providing that the deputy governor shall attend all meetings of the board in order that he may keep in close touch with it. Thus, if at any time the governor is unable to he in attendance through illness, or from any other cause, the deputy governor will step into his place with a full knowledge of what has been the’ policy of the board.
– I quite agree that the governor ‘and the deputy governor should attend the meetings of the board to ensure continuity of policy.
– That is correct. Other directors may come and go, but the governor will remain. His presence on the board will ensure continuity of policy. Private affairs may lead to the resignation of directors at any time, but, subject to good behaviour, the governor will be re-appointed from time to time under the provisions of the act. Recognizing the added importance we are giving to the bank by making it a central bank, we must view the matter, not from what private banks do, but from a wider stand-point. I trust that the committee will stand by the proposal in the bill and retain the title of “governor.”
– I am wondering whether Senator Pearce proposes to stand hard and fast by the clause, and whether the directorate will remain, with the qualifications provided for in the bill. I should like some honorable senator opposite who has been fortunate enough to be a director of a bank to five us his experience of the way in which a board of directors of a private bank functions. I should imagine that when a board of directors of a great institution like the Bank of New South Wales, the Bank of Australasia, or the Union Bank, meets, it is largely guided by the management.
– Yes, by the general manager.
– Not altogether.
– He would be a very strong man indeed who came upon a board of directors of a bank and chose to. differ from the general manager. It is generally accepted that a man who has succeeded in malting money as a pastoralist is a financier. At any rate, he gets the reputation of being one. We ought to consider this bank as altogether different from private banks. Although I hope that the Government of the day will never interfere with the management of the institution, I think it ought to constitute the real directorate, for when all is said and done it has to exercise a good deal of authority. If a government interfered with the purely business concerns of the bank, absolute failure would result. It would also be a disastrous proceeding, in my opinion, for the Government to use its influence with the bank to secure an extensive note issue, or even to cause Parliament to pass measures to instruct the bank to issue notes.
– I am glad to hear the honorable senator say that. That is a sensible view.
– We can make or mar the development of this country for the next twenty years by successful or unsuccessful banking. A satisfactory board of directors for the bank would be the Secretary to the Treasury, and the Manager and Deputy Manager of the bank. If they required advice such as could be tendered by the representative men that the Government proposes to appoint to the board, they could apply to the Government. In my wide parliamentary experience - and whatever other experiences I lack - I have had a wide parliamentary experience. I have never known a Commonwealth or state government not to live up to its responsibilities in connexion with an institution like the Commonwealth Bank. If Senator Thompson presses his amendment to a division I shall feel disposed to vote with him, not for tho mere purpose of altering the name of the chief officer of the bank, but to create a vacancy on the board with a view to providing an opportunity to do something that will be more advantageous to the bank than the Government’s proposal.
– This clause is a very long one, and deals with a large number of matters. We have already postponed the definition of “ local board.” Possibly the Minister can now say whether the Government proposes to press its provision for the appointment of local boards of advice.
– We will take the will of the Senate on that.
– I call the attention of the honorable senator to the fact that there is an amendment before the committee, and it is necessary for him to limit his remarks to the matter with which it deals.
– Then I shall defer my other remarks until after the amendment is disposed of.
– Apparently the committee is not disposed to accept my amendment, though I believe that what I have said to-night will be found to work out in actual practice. One of the most frequent interjectors while I was addressing the committee was Senator Guthrie. I remind him that the gentleman at the head of his firm who, by the way, is, in my opinion, one of the ablest financiers in the British Empire, is a general manager who reports to a board of directors.
– He runs the whole show.
– And so, under my proposal, would a general manager practically run the Commonwealth Bank.
The gentleman to whom I have just referred was the moving spirit in the very fine reconstruction scheme which placed the Queensland National Bank on its feet after the financial crisis of 1893. If we secure a virile chairman and board of directors for the Commonwealth Bank, as I believe we shall, it will be a marvel to me if the scheme as it stands works out satisfactorily. I ask leave to withdraw my amendment.
Amendment, by leave, withdrawn.
– It would be a distinct advantage for the Commonwealth. Bank to have a London board of advice. Most of the big trading banks of Australia have Loudon boards.
– I do not think any of them have.
– I think the honorable senator is wrong. I know that the Bank of New South Wales has a London board.
– But the Australian banks arc really controlled in Australia.
– That is so; nevertheless it would be -wise to provide for the appointment of a London board of advice for the Commonwealth Bank.
– What would the honorable senator suggest as to the composition of such a board?
– I think there should be three members.
– Including an officer of the bank?
– Possibly the London manager.
– What power would the board have?
– Power to advise. It should be in close touch with financial affairs in London. If the Commonwealth Bank becomes the big institution that we hope it will be, it will be called upon to discharge very important duties, and it will be highly desirable to appoint two or three men in close touch with business affairs in London as a board of advice.
– I think that is quite right.
– I hope the Minister will accept an amendment along the lines I have suggested. Careful consideration would have to be given to the duties of such a board. I do not know whether honorable senators opposite agree with the proposal for the general management of the bank, but I feel certain that they will not object to anything that will result in the bank being furnished with all possible information to enable it to function successfully. Personally, I believe that too large a directorate is provided for. Five directors, in addition to the governor, would be plenty. I do not agree with the proposal to appoint to the directorate representatives of different interests of the community. The clause provides that the governor shall be a director, and that is quite proper. I do not think that any objection will he made to the Secretary to the Treasury being on the directorate. There are special reasons why he should be, ex officio, associated with it. But I do not agree that gentlemen should be appointed because they are particularly associated with manufacturing industries or commerce, or with agricultural, pastoral, or other primary industries.
– We should get the best five men available.
– That is my opinion. It is also proposed in the bill that in appointing the directors “ due consideration shall, as far as possible, be given to the fair representation of the geographical divisions of the Commonwealth.” I disagree with that.
– That provision is quite wrong. It is putting a restriction on talent.
– Why does not the honorable senator move an amendment? If he does we will support him.
– I intend to do so.
– What is the use? He will run away as soon as the Minister makes faces at him.
– I propose to move an amendment along the line3 I have suggested. The clause also provides for the appointment to the directorate of “ two persons who have a knowledge of currency, and are declared by the Governor-General to have been chosen because of that knowledge.” Who are these persons with a knowledge of currency? I suppose people who claim to have a knowledge of currency can be found in every class in the community. I ask the Minister (Senator Pearce) “ if the Government are going to the University to select men who have a more or less academic knowledge of currency matters. They could get them there, but I venture to say that they are not the type of men required upon the board of the Commonwealth Bank. I do not agree with the provision to create a board within a board, which is the intention in regard to the currency directors. Later on in the bill there is provision for certain matters to be determined by these currency directors in a certain way. I do not agree with that provision of the bill. What the Government ought to do is to endeavour to get the five best men available, be prepared to pay them well for their services, and ask them to meet once a week.Such a board would exercise a very much better control over the affairs of the bank than would the board proposed in the bill, the members of which are to be drawn from men following various avocations in different parts of Australia.. The whole control of the bank will eventually fall into the hands of an executive of three.
– Because the members of the board, as proposed, will not concentrate.
– They cannot. - To test the feeling of the committee, I intend to move an amendment.
– Will the honorable senator allow me to make a suggestion without in any way endeavouring to interfere with his right to move in the direction he desires?
– I can easily see that we shall get into a. state of confusion if we proceed to deal with the whole of the clause at once, as it is almost a bill in itself. I would suggest, for the convenience of the committee, that the proposed new sections be taken separately. If that is done, we shall then have a connected discussion on the different principles involved.
– There being no objection to the Minister’s proposal, I shall deal with the clause in the manner suggested. - Amendment (by Senator Greene) proposed -
That the word “ seven “ in proposed new section (11) bo left out with a view to insert in lieu thereof the word “ five “.
– I trust the committee will not agree to the amendment proposed by Senator Greene. I do not think the proposed board, which is to consist of seven members, will bo unwieldy. We wish to have a board truly Australian in character. We do not want it to be a Victorian board, or, if the head office of the bank is in Sydney, to be regarded as a New South Wales board. I again remind the committee that the bank is to be a central bank and in constituting the board, consideration must be given to geographical divisions of the Commonwealth.
– How often will it meet ?
– At least once a month, but perhaps every fortnight. Provision is made for an executive to transact the business between meetings. Each state of the Commonwealth has certain financial problems peculiar to it. In Queensland, for instance, consideration has to be given to the financing of the sugar crop and the wool clip.
– The Commonwealth Parliament does that.
– Matters relating to the problems of financing the wool clip have been brought before Parliament, where certain action has been authorized to enable the clip to be financed. On the other hand, there are other states which are not so vitally interested in the wool clip, but which are involved in other production. Western Australia has an important timber trade, which is more extensive, perhaps, than that of any other state. All these questions are closely related to banking, and a central bank needs to have upon its board persons who have a knowledge of them. There is one reason why the Go-( verment wish the board to be constituted as is proposed. If we reduce the number we incur the risk of sufficient attention not being given to the varied interests in the Commonwealth, and, instead of giving the different portions of Australia some voice occasionally in fixing the policy of the bank, we shall, if we reduce the number, involve the risk of having what is really not an Australian board. It has been said that it would be difficult for some members to come from Western Australia to Melbourne, but it must be remembered that there are some men who spend a good deal of the year in this city, but whose interests are solely in Western Australia. I trust the committee will not only retain the number proposed, but will also refrain from interfering with the diversified character of the board. Senator Greene was -somewhat facetious in regard to the appointment of gentlemen with a knowledge of currency. There are in the Commonwealth people who have made a study of the question, who have had a lifelong experience, and who have a greater knowledge of the matter than their fellow citizens.
– And they all differ from one another.
– They may, but that cannot be regarded as a disqualification. If two express opposite views, another member can act as an umpire.
– Has provision been made for the proposed new states to be represented 1
– Due regard has been paid to the geographical divisions of the Commonwealth which would include new states. I appeal to honorable senators, particularly those who represent distant states, to realize that this is an attempt to provide those states with some voice in the control of the bank, which is to be a central bank, and one which will also control the note issue.
– I am prepared to go a little further than Senator Greene. It seems that the Government, in changing from the present system of control, which every senator agrees has been admirable, are, to paraphrase a familiar expression, going from the sublime to the ridiculous.
– We are extending the bank. . Senator KINGSMILL- Exactly, and I am prepared to make what I consider a sufficient concession, having due regard to the extension of the hank. If the word ‘ ‘ seven “ were left out, and the word “ three “ inserted, it would, at all events, meet my views. I fancy by these geographical divisions there is a professional differentiation,’ and, instead of having facility and despatch in the execution of business, we shall get nothing but argumentation and trouble. Personally, I would sooner have a board consisting of three good men, in addition to the governor, who should be paid correspondingly, and who should meet at prescribed short intervals, rather than the proposal put forward in this clause. I have listened to the debate, and I have wondered why there has been this rushing -from one extreme to the other. So far I have not heard any satisfactory reason advanced. I do not think the states are likely to insist upon their special rights in this direction when they are so often disregarded in others. I do not think Western Australia is yearning to have a representative on the board. Even if it were, I do not think in the interests of business - and, after all, this is a business, and not a political, bank - that such representation would be necessary. In regard to the representation of various interests upon boards, we have seen many experiments. I am thinking now more particularly of harbour boards, on which geographical situation and trade interests were considered. Such attempts have ended disastrously. Some years ago, I was authorized to investigate the constitution and operation of harbour trusts throughout Australia with a view to the establishment of a harbour trust in Western Australia. I inquired into the conditions under which the harbour trust for ‘.the port of Melbourne, and also a similar ‘body in Sydney, and in various other -places operated, and found that the most satisfactory harbour trust, in those days at all events, was the Sydney Harbour ‘Trust, which consisted practically of one ‘man. I found the most unsatisfactory trust was that in operation in Melbourne which consisted of about twenty men, who represented various sections and interests. I had the pleasure of being present by invitation at one meeting of the Melbourne Harbour Trust and it resembled, if I may be permitted to say, a turbulent meeting of the Senate, or what is worse still a meeting in another place.
– Western Australia followed the example of Melbourne.
– Western Australia had a harbour trust consisting of five men instead of twenty.
– But different interests were represented.
– That was the policy at the outset, but it was disregarded after a time, and I am justified in saying that the Fremantle Harbour Trust to-day is the most successful body of its kind in Australia.
– Interests are represented on it.
– Not now. I may, perhaps, be falling into the position of having my own opinion quoted against me if I fight this question much more, but in a business such as this, which must “be conducted on business lines, I think that the fewer the number consistent with safety the better it will be. Personally I am not much enamoured of the conduct of public business by hoards. Considering the actions of a certain hoard which is at present in my mind, I am more likely to favour direct management.
– That is a small board.
– I am afraid to think of what would happen if it were a large one.
– The honorable senator might then have got better treatment from it.
– I certainly could not have got worse. I shall support Senator Greene’s proposal to leave out the word “ seven,” and shall test the feeling of the committee in regard to the insertion of the word “ three.”
– Senator Kingsmill has, in a measure, anticipated an amendment which I intended to move later. Clause 7 contains one of the most important provisions in the bill. Whether it is carried in its present form or in an amended form is, for the moment, immaterial. No matter what the number of directors may be, the fact that the bank is to be managed by a board constitutes a complete, if not a drastic, change in its management. What reasons have, so far, been advanced in favour of any change? The Government that brought the bank into existence placed in control of it a gentleman who did an immense amount of service to the Commonwealth and its people. He was - appointed for a period of seven years. He had to organize his staff, establish branches throughout the Commonwealth, and do a hundred and one other things that the governor of the bank is not called upon to do at the present time. After it has been demonstrated that the bank can be efficiently managed by one man, the Government desires to take the management from the governor of the bank and hand it over to eight gentlemen about whom we, at present, know nothing. Then the Leader of the Senate (Senator Pearce) says that we ought to consider the rights of the various states in making appointments to the directorate. Does any other honorable senator share that opinion ? 1 thought that this Parliament and this bank were essentially Australian institutions. If we are to have a board of directors it should have on it the best men available, irrespective of the states from which they come. Why should geographical limitations be imposed when it is necessary to obtain men who will render the best service ? If it were necessary to advertise for a governor for the bank, would Senator Pearce contend that state interests should be considered, and that we should be very guarded in our movements for fear that we should interfere with state rights? Such a proposition, if made seriously, would not be listened to for a moment. If, in the states containing the smaller population there is a man with qualifications superior to those possessed by any one in the states that have the larger population, he should be chosen. Respecting currency, Senator Greene said that varied opinions had been expressed by different people in Australia. That fact is evident from a perusal of the newspapers. In the Melbourne Argus and the Melbourne Age to-day - the latter particularly - honorable senators will find varying opinions regarding the present financial stringency; so-called experts expressing widely divergent views. Even members of the Cabinet differ from each other. The Minister for Trade and Customs (Mr. Pratten) has a panacea for the financial stringency. He says that we should cease from borrowing abroad, stop importing, and float our loans in Australia, to bring ourselves within the safety zone. The Treasurer (Dr. Earle Page) in effect tells the Minister for Trade and Customs that that would be a suicidal policy, and - that we have reached the peak in the flotation of loans in Australia. What is meant by “ currency “1 I have consulted a dictionary on banking, and I find that the word “ currency “ was originally applied to the currency, or passing .from hand to hand, of money, but it has now come to bo applied to the money itself - gold, silver, and copper. Bills of exchange, bank notes, cheques, and any other document which acts as a substitute for coin, are also included under the term. So it can safely be said that if we are to appoint two persons possessing a knowledge of currency they must be chosen from the banking sphere. I take no exception to the term “governor.” The Minister stated that it would not be wise to change the name to that of managing director. He also said that if the Governor were taken ill, the Deputy Governor would be expected to take his place on the board. According to the bill the Governor will be an executive officer, with a seat on the board ; but nd provision is made for such a contingency - which I hope will not arise - as the Governor being laid aside by illness. The proposed new section 12 a provides; -
– The honorable senator is wrong in saying that no provision ‘has been made to meet the case of the illness of the Governor. Section 15 makes such provision.
– I hope the committee will not agree to the appointment of a board of eight directors. What real purpose will the directors serve by meeting only once a month? Other honorable senators have pointed out that the policy of the Commonwealth Bank is laid down by the Governor of that bank, and the policy of the associated banks by their general managers. The Government urges that,, for the efficient management of the Commonwealth Bank, it is necessary to have seven other directors, who shall meet monthly, and be paid approximately £50 a sitting. If there is a real necessity to appoint directors, they should be in closer touch with the Governor of the bank than a meeting once a month will enable them to be. The appointment of part-time directors, who will probably be more concerned about their own business activities than about the success of the Commonwealth Bank, will not result in the efficient management of that institution. I favour the present system of management, but, as the committee is not agreeable to that, I shall vote for any amendment that will make a blank in the clause, and enable ns to provide for the appointment of a fewer number than is proposed. I hope that the committee will agree to reduce the number of directors.
– The clause contemplates the appointment of a board of directors consisting, in all, .of eight persons, one of whom is to be the Governor of the bank, and another the Secretary to the Treasury. The. motive actuating the Government when it decided to appoint six additional directors is quite evident from the construction of the clause. It is proposed that sub-section 2 of section 12 shall provide -
In the making of the appointments of the directors specified in paragraphs (b) and (c) of sub-section 2 of tho last preceding section, due consideration shall, as far as possible, be given to the fair representation of the geographical divisions of the Commonwealth.
That is the reason why six directors have been suggested in addition to the governor and the Secretary to the Treasury. There is to be one from each state. The Minister pointed out how vital it was, in his opinion, that each state should have representation upon the board. The clause is about the most unworkable in the whole bill. I asked the Minister how often he expected the board would meet, and he said, perhaps once a month, and in times of great financial importance the board would probably meet once a fortnight. It is absurd to expect gentlemen coming from each state to meet once a fortnight or once a month for tho munificent salary of £-600 a year. The object of securing representation for each state may be quite right, because members of the board would be «m fail with the conditions in their particular states; but it is utterly impossible to expect them to maintain .themselves away from their home states and devote their time to the affairs of the bank for the salary mentioned. Some other suggestion will have to be made. Coming now to the personnel of the board, a further absurdity is revealed, tt is provided that the board shall include two persons who are, or have been, associated with manufacturing industries or commerce. I am wondering from which state those members will be drawn. If they are appointed from, say, New South Wales and Victoria, is it to be expected of them that they will give special consideration to the manufacturing interests of Western Australia or Queensland ? We hear most bitter complaints from Western Australia that the manufacturing industries of the eastern states have gone to almost any length to crush out factories in Western Australia.
– So they have.
– I agree with the honorable senator. Is it to be expected that the representatives on the board of the manufacturing interests, unless they come from the distant states, will give special consideration to the manufacturing interests of those states? I do not think they will.
– But that would not be the objective of the directors.
– They will be appointed because they will bring to the board a personal knowledge of the industries referred to.
– The object of the Government is to appoint one representative from each state. I want to know from which state the representative of the manufacturing interests will be drawn, from which state will come the representatives of those who are or have been associated with agricultural, pastoral, or other primary industries, and from which state will come the two directors who have a knowledge of currency. The proposal which has, to some extent, been forced upon the Government in another place is farcical. I agree with the principle that has been enunciated here, that the proper course is to settle upon the number of directors, and, irrespective of state interests, appoint the best men available. It should not be necessary to give special consideration to this or that interest as against the interests of the Commonwealth. I do not like the Government proposal, and I shall vote for the amendment to reduce the board of directors to five, because I believe that in doing so we shall be countering the pernicious principle which the Government has endeavoured to set up. The operations of the bank will not be hampered or interfered with, and the Government will be able to get away from its idea of state representation and appoint the five best men available.
– The Government proposal has been subjected to varying criticism. One honorable senator holds that a board of directors composed of eight persons is too- many, an-d should he reduced to five; another believes that five is too many, and favours three. Still another honorable senator is in favour of one man only. Taking the last objection first, I think we are justified in saying that one-man control of large institutions has proved a failure. Taking the Public Service as an illustration of my argument, we have seen men broken on the wheel of duty because of overwork. Now we have three men doing work which formerly was done by. one man, for the simple reason that
Ave have come to the conclusion that one man was unable to do it. At the entrance to these legislative halls there is the inscription, that “ In the multitude of counsellors there is safety.” “We walk over it every day. In that I believe. If Ave go back to the system of one-man control in connexion with this fine institution we shall be courting ruin. The arguments that have been advanced against the’ Government’s proposals are inconsistent. Senator Duncan objects to the appointment of eight directors. Let us see what would happen if we adopted his suggestion and deprived the board of the services of the governor, who has a right to be there, and the Secretary to the Treasury, who should also be a member. There remain six directors. Senator Duncan’s criticism would almost suggest that the board should be further reduced to three. Senator Greene is in favour of five. The position created by him would be on all fours with Senator Duncan’s views. Suppose only three are to be appointed. From whom. will the selection be made? It is fair to assume that they will be selected from the populous parts of the country and from particular states. “We have, for better or worse, cer- ‘ tain states which are given over principally to manufacturing industries, while other states are in the pioneering stage of development. If among the directors there is a majority of men representing . the manufacturing or commercial interests, what chance will the interests of a state whose people are engaged chiefly in ‘ pastoral pursuits have 1 Human nature being what it is, the Government’s proposal is admirable, as it combines all interests. So far as the number on the bank directorate) is concerned, Senator Greene will tell us that even the smallest bank operating in the Commonwealth has a directorate of at least four or five.
– I shall give the exact figures presently.
– In the case of the Commonwealth Bank, which has to deal with so many interests, the proposal of the Government is eminently sane and sound. I, therefore, have pleasure in supporting it, as I believe that it is necessary to hold the balance fairly between different interests, and between different state’s. Particularly do I see the importance of having all interests represented on this board. I am in favour of having one director to represent the wage-earners specially. We need a man to deal with the control of the currency in the interests of the wage-earner. Later, I shall move in that direction, as by that means we shall have a board worthy of the work it will have to do - one which will make for the best management of the bank itself, and act in the interests of the -whole, and not merely a section, of the Commonwealth.
Senator DRAKE-BROCKMAN (Western Australia) [10.131. - One honorable -senator, in criticizing the proposed -board, desired to know what was the use of a board which would meet but once a month. He evidently assumes that, when a bill specifically sets out that a board shall meet not less than once a month, the minimum is to be the maximum. The same provision is to found in the act which constituted the Notes Issue Board. It is true that on occasions that board meets only once a month, but it is true also that it frequently meets at intervals of three or four days. A board constituted to control the Commonwealth Bank would meet much more frequently than once a month. I am not sure that Senator Duncan was not on safe ground when he suggested that £600 was a rather small remuneration for the members of the board. If the honorable senator proposes that the amount should be increased, we can consider his suggestion later, but at present we are not dealing with that question. Most of the criticism of this bill is directed towards the size of the board, and the consensus of opinion seems to be that it is too large. Personally, I think that it is too small, and that if an alteration in the number suggested by the Government is to be made, it should be in the direction of increasing the number of ‘ directors. Although Senator Gardiner stated that the path to the Opposition benches was paved with good intentions, he indicated .also that if the Labour party were in power it would endeavour to see that th<» people of its own particular shade of thought were placed in control of the bank, so that it could be used as an instrument for nationalizing banking.
– The honorable senator is wide of the mark.
– BROCKMAN.That is the impression I gathered from the remarks of the honorable senator. But whether or not he intended that, it expresses my view of what would happen if the Labour party were in control of I he bank. I see considerable danger in these political appointments, especially if the power to make them is in the hands of a party whose policy it is to nationalize banking. It would be very easy to make the appointment of directors the spoils of party, for the purpose of forwarding the party’s policy. For that reason, I would be very loath to see the number of directors reduced to three, as suggested by Senator Kingsmill, or even to five, as Senator Greene proposes.
– What difference would it make?
– BROCKMAN. - Without any necessity to alter the bill - ti matter of some difficulty, possibly - any party in power would be able to control the board within the life of one Parliament. If the board consisted of three directors, one of whom was to retire each year, a party could in two years, by making political appointments, obtain, control of it. Even with a board of five, that control could be obtained during the life of one Parliament.
– It could be done even more quickly than that.
– To do so would require an amendment of the act,
– Could that not be overcome by an alteration of the term of office ?
– Possibly it could be accomplished in that way. I should prefer to see sixteen members on the board, one to retire each year. That would give continuity of policy without risk of undue political interference. The directors should have a reasonably lone term of office, so that there could not be undue political influence from anywhere. The temptation to use that influence will always be present to any party, no matter to what political creed it belongs, if there is a short-term board, and if within the life of one Parliament half of that board retires by effluxion of time. It is even possible within the fife of two Parliaments, because most political parties hold office for at least two Parliaments. As men automatically retire from the board of directors of the Commonwealth Bank, others will be appointed to succeed them who will serve the political ends of the party in power. How this difficulty can be overcome, I do not know; but it is a danger which causes me to wish that the members of the board of directors of the Commonwealth Bank could be surrounded with such protection as would make the risk of it as remote as possible. The number proposed to be appointed to the board is small as compared with the directorates of most central banks. The Bank of England has a governor, a deputy governor, and 24 other directors. Of course, the Bank of England is a very much bigger concern than the Commonwealth Bank, but as time goes on I hope that our institution will occupy in Australia, and ultimately in the whole world, a position corresponding with that of the Bank of England in the British Empire to-day. The board of directors of the Bank of France consists of a governor, a subgovernor, and fifteen others. There are eleven directors of the Reserve Bank of South Africa. Each of the twelve reserve banks in the United States of America is controlled by nine directors. Even in the case of trading banks the directorates are large. The Western Australian Bank, which operates in Western Australia only, has six directors. The Bank of Australasia has twelve directors.
– How many of those are in Australia?
– In addition to the twelve directors on the central board, there is a board in each state. The Union Bank also has twelve directors, and a local board in each state. The Bank of New. South Wales has a board of seven, the English, Scottish, and Australian Bank a board of eight, the Commercial Banking Company of Sydney a board of five, the National Bank a board of six, the Commercial Bank of Australia a board of five, the Bank of Victoria a Board of five, the Australian Bank of
Commerce a board of six, the Bank of Adelaide a board of five, the Queensland National Bank a board of five, and the Bank of New Zealand a board of five.
– The popular number seems to be five.
– The majority of those with five directors are small institutions, and limit their operations to one state. In- any case, not one of those institutions is a central bank.
– A central bank should require fewer directors than a general bank.
– On the contrary, the central banks have directorates ranging from 24 to nine.
– The Commonwealth Bank also acts as a savings bank.
– I was about to mention that fact. In addition to functioning as directors of a central bank, the board of directors of the Commonwealth Bank will act as general bankers. A proposal to load a comparatively small board with the tremendous functions of a general bank and a central bank is the quintessence of absurdity. I hope the committee will not agree to the suggestion of Senator Greene to reduce the board to five. That would be calamitous, but to go further, and accept the suggestion of Senator Kingsmill, that this great institution which we hope to build up in Australia should be controlled by a board of three, would be even more so.
– The Commonwealth Bank has been built up by one man. ..> - !
– I aave the strongest views in regard to the control of a great public utility by a single individual, but I do not wish to be drawn into a discussion of that aspect of the question. I content myself by saying that it would be most dangerous to the Commonwealth Bank and the Commonwealth itself to reduce the number of directors.
.- On the second reading I indicated that I had a number of objections to the bill, including the proposed board of management and its constitution. I. am glad to find that there is at least some divergence of opinion even on the ministerial side, and that there is a remote possibility, unless the big stick is used upon honorable senators opposite, of securing a reduction in the membership of the board. I do not want to make any adverse comments on the management of the bank up to date, especially by the late governor, but at the same time I hold the opinion that as the bank has developed the time is opportune to place its management in the hands of more than one man. I do not, however, think that the extraordinary increase suggested by the Government is justified. The proposal to make the selection on geographical grounds should not bo tolerated.
– The honorable senator would like all the directors to be chosen from New South “Wales.
– It is a matter of no importance to me where they come from. If Western Australia can produce the best men I do not mind if they fill the whole of the positions oil the board of directors of the Commonwealth Bank. I am also opposed to the idea of selecting directors from any industry. They should be chosen from those who have had wide banking experience. As a matter of fact, the banking fraternity of the Commonwealth has recently shown ignorance of banking when dealing with the exchange difficulty. It is a standing disgrace to the private banking institutions, and also to the Commonwealth Bank, that they have been absolutely impotent to deal with this difficulty. Those great stalwarts of private enterprise, who are represented in this chamber by henchmen like Senator Thompson, are to-day in the same humiliating and disgraceful position that they occupied in 1890, when they appealed to the colonial governments to come to their assistance. The exchange position to-day should be successfully grappled with by the allegedly great banking institutions of the country.
– -The Government prevented the free export of gold.
– There is £21,000,000 of gold locked up in the vaults of the private banks, and a similar amount in the coffers of the Commonwealth Bank. Yet those institutions are either unable or .unwilling to deal with a trivial problem such as has arisen recently. The time is opportune to follow the example set by the managements of some of the big industrial concerns. The evidence clearly shows that our banking authorities are not the big men they are supposed to be ; they are, in fact, very small men, and the time has come for effecting a radical alteration. The employees of the bank should be given some representation on the board of management, and I ask the Government to agree that at least one of the directors shall be elected by the employees. In other services that is a common practice.
– There is an amendment before the committee to reduce the number of directors, and I ask the honorable senator to confine his remarks to that proposal.
– I desire the word “seven” struck out, and provision made for the appointment of a smaller number of directors, and I am suggesting that the proposed board of directors should include a representative of the employees, as do the managerial boards of some large industrial concerns. It is recognized that the men who do the work of a concern should have some say in its management. I do not suggest that the employees should be allowed to elect a majority of the directors, hut, even if that were conceded, the board would not be more incapable of dealing with the financial position than the directorates of private banks have shown themselves to be. Individually and collectively, the bank directors are absolute failures, and they are obliged to ask this Parliament to permit the issue of notes against securities which they say they have in London. I hope the Government will abandon the idea of appointing the directors on a geographical basis. I remind Senator Drake-Brockman that his desire to remove the management of the Commonwealth Bank beyond the reach of future Labour governments will not he realized. I believe that, at the next election, the Labour party will be returned with a substantial majority in this chamber and in another place ; and, if we then discover that the present Government has taken advantage of its position to appoint to the Federal Capital Com mission and the directorate of the Commonwealth Bank men of their own political kidney, it will be our imperativeduty to take whatever steps are necessary to revoke such appointments. Even were it necessary to appoint sixteen more directors to the board of the Commonwealth Bank, I should be prepared to dothat. The Commonwealth Bank must not be crucified by a board of directors as it has been under the past management.
– Did not the Labour party appoint the first governor of the bank?
– And the honorable senator says that the bank has been crucified ?
– I think so. It has never had a fair chance, but I do not admit that the Labour party has been responsible for its mismanagement. The management of the bank in the past did not do its duty. There are only 68 branches of the bank throughout the Commonwealth.
– The honorable senator must confine his remarks to the amendment, which relates to the number of directors to be appointed.
– The proposal to appoint eight directors would have some justification if the number of branches of . the bank had been greatly increased. The Bank of New South Wales, in addition to its head office and its Melbourne office, has 399 branches throughout the Commonwealth, and has only seven directors. The Commercial Banking Company of Sydney, in addition to its head office, has 232 branches, and only five directors. Yet we are asked to appoint a directorate of eight to control a bank having a head office and only 68 branches. I shall support the proposal to reduce the number of directors, in order to give the Commonwealth Bank the chance it has never had up to the present moment. I should prefer the board to consist of only three members, but, failing that, I shall support a hoard of five members which shall include a representative of the employees.
Assent to the following bills reported : -
Seat of Government (Administration) Bill. Hop Pool Agreement Bill.
– In moving -
That the Senate do now adjourn,
– I am quite in agreement with SenatorPearce’s desire to make better progress with the business; but I take it that he was responsible for the “stone-walling “ of the bill to-day by his own supporters.
– I did not hold anybody responsible for the little progress made.
– I hold the Minister responsible for. it. Valuable time is being frittered away now, and I suppose that later on we shall be asked to agree to some all-night sittings in order that the Government’s programme of business may be completed. I do not feel in a fit state of health for that kind of thing. I ask the Minister representing the Minister for Defence whether, to oblige me, he will find out before we meet to-morrow if it is the intention of the Government to introduce to Parliament this session a measure to provide adequate pensions for certain officers, non-commissioned officers, warrant officers, and others who have been retired on allowances which are altogether too small to support them. I am asking the Minister to obtain this information to enable me to ask a question, without notice, to-morrow.
– I shall do everything possible to meet the honorable senator’s wishes.
Question resolved in the affirmative.
Senate adjourned at 10.45 p.m.
Cite as: Australia, Senate, Debates, 30 July 1924, viewed 22 October 2017, <http://historichansard.net/senate/1924/19240730_senate_9_107/>.