22 August 1929

11th Parliament · 1st Session

The President (Senator the Hon. W. Kingsmill) took the chair at 3 p.m., and read prayers.

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Mail-Handling Appliances, General Post Office, Sydney

Senator Reid presented the report of the Parliamentary Standing Committee on Public Works, together with minutes of evidence, relating to the proposed Extension of the Installation of MailHandling Appliances at the General Post Office, Sydney.

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Temporary Employment in Commonwealth Public Service.

Senator Hoare presented the report of the Joint Committee of Public Accounts on Temporary Employment in the Commonwealth Public Service.

Ordered to be printed.

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The following papers were presented.

New Guinea - Report to the Council of the League of Nations on the Administration of the Territory of New Guinea from 1st July, 1927, to 30th June, 1928.

Nauru - Report to the Council of the League of Nations on the Administration of Nauru during the year 1928.

Canned Fruits Export Control Act - Third Annual Report of the Canned Fruits Control Board, year ended 30th June, 1929, together with a Statement by the Minister for Markets and Transport regarding the operation of the Act.

Commonwealth Bank Act - Treasurer’s Statement of the Combined Accounts of the Commonwealth Bank of Australia and the Commonwealth Savings Bank at 3 1st December, 1928, certified to by the Audi tor-General.

Dairy ProduceExport Control Act - Fourth Annual Report of the Dairy Produce Control Board, year ended 30th June, 1929, together with a Statement by the Minister for Markets and Transport regarding the operation of the Act.

Dried Fruits Export Control Act- Fifth Annual Report of the Dried Fruits Control Board, year ended 30th June, 1929, together with a Statement by the Minister for Markets and Transport regarding the operation of the Act.

Public Service Act -

Appointments - Department of -

Health- C. S. Barbour.

Home Affairs - A. R. Hogg.

Wine Overseas Marketing. Act - First Report of the Wine Overseas Marketing Board, period ended 30th June, 1929, together with a Statement by the Minister for Markets and Transport regarding the operation of the Act.

Northern Australia Act - Ordinances of 1929-

Central Australia -

No. 10 - Income Tax.

No. 11 - Education.

No. 12 - Prison.

North Australia -

No. 11- Education.

No. 12 - Darwin Chinese Public Cemetery.

No. 13 - Prison.

No. 14 - Darwin Town Council.

Lands Acquisition Act - Land acquired at Mandurama, New South Wales - for Postal purposes.

Papua Act - Infirm and Destitute Natives’ Account - Statement of Transactions of Trustees for year ended 30th June, 1929.

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The PRESIDENT (Senator the Hon W Kingsmill:

– Pursuant to Standing Order No. 28a, I hereby nominate Senator H. J. M. Payne and Senator M. R. O’Halloran to act as Temporary Chairmen of Committees when requested so to do by the Chairman of Committees or when the Chairman of Committees is absent.

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– Pursuant to Standing Order No. 38,I hereby appoint Senator J. J. Daly to be a member of the Committee of Disputed Returns and Qualifications to fill the vacancy existing on the committee.

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Senator PAYNE:
through Senator Sampson

asked the Minister representing the Prime Minister, upon notice -

  1. Has a request been received from the Mothers’ Union of Australia that uniform laws be enacted by the Commonwealth Parliament relating to Marriage and Divorce?
  2. If so, has the Government given the matter consideration, and with what result?

– The Prime Minister has supplied the following answers to the honorable senator’s questions : -

  1. Yes.
  2. It is intended to give as early consideration as possible to the representations of the union.

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asked the Vice-President of the Executive Council, upon notice -

  1. Has the Government arrived at a decision in connexion with the request from the Government of South Australia that, in view of disabilities created by federation, financial assistance be granted to that State?
  2. If so, have the amount and date of payment been decided?

Senator Sir GEORGE PEARCE.An announcement in regard to this matter will be made when the Budget is delivered.

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SenatorRAE asked the Leader of the Government in the Senate, upon notice -

Willhe inform the Senate -

What is the total Commonwealth war debt?

The Commonwealth debt, other than war debt?

The interest payable thereon -

in Australia,


The aggregate debt of the six States?

The annual interest payable thereon -

in Australia,


The amount of maturing loans due for redemption in 1929, 1930, and 1931 respectively?

1.£ 287,817,745.

Excluding loans raised for the States, £80,803,826. 3. (a) £11,553,191.


The amount at 30th June, 1928 - the latest date for which figures have been furnished to the Commonwealth - is £722,018,812.

At 30th June, 1928, the figures were:

Australia, £15,954,987,

abroad, £19,407,628.

1929, £48,192,175; 1930, £108,193,136; 1931, £44,044,907.

(These figures represent both Commonwealth and State Loans).

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Motion (by Senator McLachlan) agreed to -

That leave be given to introduce a bill for an act relating to life insurance.

Bill presented by Senator McLachlan and read a first time.

Suspension of Standing and Sessional Orders.

Vice-President of the Executive Council · Western Australia · NAT

[3.12]. - I move -

That so much of the Standing and Sessional Orders be suspended as would prevent the second reading of the bill being proceeded with without delay.

My reasons for doing so is the state of public business and the nature of thebill, which is such that I feel honorable senators ought not tobe asked to proceed with its discussion to-morrow. The Leader of the Opposition (Senator Daly) has asked for a few days in which to study the measure - a perfectly reasonable request.

It would not be fair to deal only with the formal stages to-day and tobring honorable senators back to-morrow to debate the second reading. I believe that it will suit the convenience of all honorablesenators and not encroach upon any of their privileges if the Minister in charge of the bill moves the second reading to-day. The Leader of the Opposition may then move the adjournment of the debate, and resume its discussion on Wednesday next.

The PRESIDENT (Senator the Hon.

  1. Kingsmill). - There being an absolute majority present, and no dissentientvoice, I declare the motion carried.

Second Reading

Senator McLACHLAN:
Honorary Minister · South Australia · NAT

– I move -

That the bill be now read a second time.

On behalf of the Government, I have now the honour to bring before Parliament a bill whose purpose is to regulate the conduct of life insurance business. It may be certainly said of this bill, as was said of the kindred National Insurance Bill, that the subject is one of farreaching importance, not merely to any particular country, hut also to the civilized world. The magnitude of the interests involved in Australia may bedemonstrated by the fact that the assets under the control of the Australian life offices at the present time must substantially exceed £120,000,000. The nature of these accumulations is even more impressive than their amount. They are virtually trust funds, set aside by the more provident members of the community as some safeguard against the incidence of the major contingencies of. life. The fact that the payment of money up to certain limits for the maintenance of an assurance policy is recognized as a valid claim for a partial remission of income tax, is ample proof that the State recognizes the beneficient nature of life assurance, admits its great and steadying influence on public finance, and considers that its recognition and encouragement is eminently desirable in the public interest.

There is every evidence that the f ramers of the Constitution recognized that legislation upon this subject would ultimately and inevitably be forced upon the Commonwealth Parliament. The fundamental and eternal principles of life assurance are not restricted by geographical boundaries, and for the sake of uniformity alone it is obviously advisable to have one law which should call for the same statistical returns and impose the same restrictions upon all life offices operating in the Commonwealth, irrespective of their State of incorporation. Section 51 (xiv) empowers the Commonwealth to legislate upon “ insurance other than State insurance; also State insurance extending beyond the limits of the State concerned “. This provides the necessary constitutional authority for the bill which is now before the Senate. That the bill is certainly called for at the present stage, and is in fact seriously overdue, will not, I think, be disputed by any of those who have followed the course of life assurance finance during the last decade.

The introduction of this bill constitutes the fulfilment of a promise given during the last elections that the subject of Federal life assurance legislation would be brought before the Senate at the earliest possible opportunity. Whilst the conduct of Australian life assurance business has a deservedly high reputation, it cannot be denied that there are certain irregularities which have crept in o it of recent years, and which call for some measure of legislative restraint. A careful study has been made of the particular problems which confront the practical reformer in Australia, and the present bill embodies the methods proposed for their solution. The divisions and clauses will be brought before the attention of the Senate seriatim at a later stage, but before this is done I propose to pass in review before honorable senators, a brief account of the history of life assurance legislation in the United Kingdom. The short amount of time involved in this will be well spent. The problems which had to be faced in Great Britain were very similar to those which now confront us in Australia, the ingenious methods adopted for their solution furnish a most fruitful subject for study, and it will be found that a large portion of the present bill derives its inspiration from principles which have been embodied in British legislation - actual and projected - and which have in the main proved their efficacy under the severest possible test, and of practical application.

It may well be conceded then that the present is a very fitting opportunity for recounting the steps which originally led to the adoption in Great Britain of legislation affecting life offices, the form that legislation first took, the problems that arose at a later stage, and the consequential modifications which were introduced subsequently. A century ago Great Britain was passing through a period of unrestrained speculation in joint stock companies. Life assurance companies in particular sprang up in large numbers; the year 1824 alone saw the foundation of 18 new life offices. The features of life assurance business which lent themselves to exploitation by the company promoter are only too obvious. They have been well stated by Mr. Besant, past President of the Institute of Actuaries, as follows: -

He (the promoter) knew that he could rely on collecting premiums for a good many years before claims would begin to emerge in any large numbers, and that during this period he could spend whatever he wished upon expenses without supervision or outside control. As soon as difficulties began to become acute, the remedy of amalgamation was open to him, and the same procedure could then be continued for a further period before the inevitable day of reckoning arrived.

In twenty years’ time the day of reckoning had arrived for a great number of these life assurance companies, and Parliamentary attention was drawn to the subject. In 1844 the Joint Stock Companies Act was made to apply to all life assurance companies not incorporated by statute or charter. This act, however, proved no protection to life offices, owing to the facility with which its provisions were evaded, and in 1853 a select committee of the House of Commons recommended that its sections should be repealed as far as they related to life assurance societies. The committte also made other recommendations which are worthy of most careful attention on account of their influence on subsequent legislation. They were substantially as follows: One general system of registration to include all existing and new companies, a deposit of £10,000 from new companies, a searching investigation into the affairs of every company at intervals of not more than five years, and annual statistical returns giving certain prescribed information in detail.

For seventeen years no action was taken. In 1868 it was stated in the House of Commons that, out of a total of 285 life offices established since 1824, no less than 174 had ceased to exist. It began to be evident that the recommendations of 1853 would not be carried into effect except under the compelling spur of a serious financial disaster. That disaster was not far distant. It came with dramatic suddenness. In 1869 occurred the failure of the Albert Life Assurance Company, and the complete collapse almost immediately afterwards of the European Life Assurance Company. Each of these companies had carried out a large number of amalgamations prior to insolvency, so that it may be said that 1869 witnessed the almost simultaneous failures of 57 life offices. This cataclysm awoke the government of the day to the imperative necessity of dealing with the matter, and, after long delay, of introducing legislation which would bring into effect the important proposals of the committee of 1853.

The result was that Mr. Cave, VicePresident of the Board of Trade, introduced a bill, which ultimately passed as “ The Life Assurance Companies Act of 1870.” This act is one of the foundations of life assurance in the British Empire. It served as the model for a great deal of subsequent legislation, and, in particular, the acts of the five Australian States which the present bill is designed to supersede, were founded almost entirely upon it. Mr. Cave was advised by two of the leading British actuaries of the day, who drafted the accompanying schedules, and the result was a piece of legislation which lasted without modification for nearly 40 years, which entirely transformed the conduct of British life assurance, and which secured the assent and approval of all the reputable life offices. The two guiding principles underlying the act have been happily described in the phrase “Freedom and

Publicity.” The main detailed provisions of the act were taken from the recommendations of the committee of 1853, and included the following: -

  1. Recognition of the deposit principle as regards new companies, and also as regards other companies commencing business in the United Kingdom after the date of the passing of the act.
  2. The separation of the life and annuity funds in the case of companies transacting other types of business also.
  3. The submission to the Board of Trade of annual returns to be made in a prescribed manner, and of periodical valuation returns.
  4. The obligation upon the Board of Trade to lay such returns annually before Parliament, together with any correspondence which may have resulted therefrom.

Provision was also made for the disclosure of the terms of any amalgamation or transfer, and for the winding up of insolvent life assurance companies.

It is impossible to study this outstanding act without being struck by one thing which is of extreme importance in the light of recent events. That is the limitation, and the conscious limitation, of the powers of the Board of Trade. As these powers have not been materially extended by subsequent legislation, and as it is now proposed to increase them, it will be useful to set out exactly what the Board of Trade can do in the present conditions of the law. Mr. Besant, to whom reference has already been made, comments as follows upon the situation: -

First as regards the question of enforcing the deposit, the powers of the board are absolute and have never been challenged. Conversely, if a deposit is tendered, the board has no power to refuse to. accept it. As regards power to enforce adequate and complete returns, either of annual business or periodical valuations, the board is fatally handicapped. If a company does not send in any returns at all, the board can impose financial penalties; but, if returns be submitted, however incomplete or misleading, the board has no power whatever to compel the company to amend them. All that the board can do is to engage in correspondence with the company upon the points at issue - a correspondence which may extend itself over years - then to lay this correspondence before Parliament, and eventually to include both the ineffective returns and the lengthy correspondence in a belated, and, in these latter days, a highly costly blue-book.

No further reference will be made at present to the powers of the Board of Trade; but the subject is a most important one, and I shall refer to it at a later stage, when the provisions of the present bill are being expounded in detail.

One third of a century elapsed before anything further of real importance happened. Then, in 1906, public anxiety as to the position of British policy-holders in foreign companies, particularly American, led to the appointment of a select committee of the House of Lords to devise measures for their protection. Their deliberations provided the framework upon which the Assurance Companies Act 1909 was framed. This act repealed the act of 1870.

I do not propose to give any very detailed account of the act of 1909, since, while it extended the act of 1870 in details, it embodied no important differences of principle. It called for fuller details regarding the assets of life offices and the methods employed in valuing them ; also in regard to separating in the revenue account business within and without the United Kingdom. Greater promptitude in furnishing the returns was also demanded. But in regard to larger matters the act jealously safeguarded the principles of “ Freedom and Publicity,” particularly the former. Moreover, nothing was done to increase the scanty powers of the Board of Trade. This is the act which at present controls the conduct of “ ordinary “ life assurance business in Great Britain. It has not influenced Australian legislation in any way, the State Governments apparently being guided by the belief - now justified - that the subject would ultimately fall to be dealt with by the Commonwealth legislature.

The next event of importance which rails for attention is the appointment by the Board of Trade in 1919 of a departmental committee to inquire into the conduct of industrial insurance by industrial life offices and collecting societies. Although largely carried on by life offices, the nature of industrial insurance makes it rather more akin to friendly societies in that the policies are for small amounts and purchasable by small payments at short intervals. The great volume of business transacted shows certainly that industrial insurance meets a real need; but certain characteristics of the class for whom it caters must be borne in mind. In the main it is not a welltodo class or a financially well-educated class. Its members would find it difficult to combine together for mutual support, and would not be able to interpret aright the signs of coming disaster, as set out in the annual returns of companies in which they were financially interested.

All this tends to suggest that more protection is called for in the case of the industrial policy holder than in that of his more fortunate brother insured in the ordinary department. This feeling undoubtedly actuated the members of Lord Parmoor’s Committee of 1919. In the course of their investigations certain irregularities were disclosed of which they took a serious view. The result of their deliberations was embodied in the Industrial Assurance Act 1923. This act carried British legislation to lengths hitherto unimagined in the United Kingdom. It constituted industrial insurance business a separate class for the purposes of the Assurance Companies Act 1909, so that a separate deposit became necessary. It provided that the valuation should be made by an actuary on lines “ which shall be such as to place a proper value upon the liabilities.” But the most radical departure from tradition lay in the fact that companies transacting industrial insurance business came, as far as that class of business is concerned, under the control of the Chief Registrar of Friendly Societies. That official was given the title of “ Industrial Assurance Commissioner,” and acts thus in a dual capacity and with greatly extended powers.

The nature of these powers may be briefly outlined. The Commissioner has the right to refuse to accept the deposit of any company if he considers it inadvisable in the public interest that the company should continue to carry on industrial insurance. He has the right to reject any return or balance sheet which after reference to the issuing company appears to him to be misleading or incorrect. He has the right to reject a valuation or to direct such alterations as may be necessary to secure compliance with the provisions of the act. He may even, if he thinks, after due investigation that the circumstances demand it, present a petition to the court for the winding up of an industrial insurance company. These are very wide powers with which to invest an individual ; much wider than any, as yet, conferred upon the Board of Trade. They are, however, robbed of what might appear to be their arbitrary nature by the fact that in almost every case just cited the company has the right of appeal to the High Court. That they were necessary in certain cases is established by the fact that they were made operative on the passing of the act, and exercised by the Commissioner in the case of some societies whose suppression was considered necessary in the public interest.

It is only fair to add that the leading industrial insurance offices acquiesced wholeheartedly in the working of the act, restrictive though it undoubtedly is. They probably realized that abuses certainly existed, that the act as a whole was” well designed to meet them, and that the large powers conferred upon the Commissioner would almost certainly be exercised with tact and discretion, as in fact they have been. The fair-minded attitude of the larger offices will receive its reward in the fact that the standards of liberality and integrity which they have maintained in the past will now be made compulsory on all.

Whilst the Industrial Assurance Act was under discussion, an event occurred which drew public attention once more to the “ ordinary “ department of life insurance. This was the collapse of the City Equitable Insurance Company, followed not long after by the compulsory liquidation of the National Benefit Assurance Company, and of the City Life Assurance Company. These successive disasters threw into strong relief the impotence of the Board of Trade, as the result of the deliberate limitation of its powers. If it had possessed anything like the powers conferred upon the Industrial Commissioner, there is no doubt that these companies would have been stopped in their career long before the final catastrophe, and many people saved from financial loss. These successive disasters crystallized public opinion in much the same way that the failures of the Albert and the European had done half a century before. There were certain points on which expert opinion was practically unanimous. It was universally admitted that a crisis had arisen in which the act of 1909 had proved powerless; that the recent failure had tended to shake public confidence in the conduct of British life assurance ; that some restraint must be exercised in such matters as the manipulation of assets; and that the Board of Trade should be vested with powers which would enable it to prevent any company known to be in difficulties from continuing to transact new business. At the same time the feeling was strongly held that these objects should be attained with the smallest possible curtailment of the British principle of “ Freedom and Publicity.”

It was at this stage that the Board of Trade appointed, in 1924, a departmental committee “ to enquire and report what amendments are desirable in the Assurance Companies Act 1909 “. The committee, itself a highly expert body, made an exhaustive study of the question, and took evidence from every vested interest or professional association which was concerned in the matter. In February, 1927, it issued its report accompanied by a draft bill embodying its conclusions. This draft bill is of such importance and has so profoundly influenced the bill now before this House that some reference to its main provisions is unavoidable.

Perhaps the most important single change which is now proposed lies in the direction of separation of assets. Existing British legislation calls for separation of funds, but it is expressly stated in both the act of 1909 and the act of 1923, that there is no compulsion to keep the investments of each fund separate. The failures of 1922 and 1923, and the evidence they afforded of the manipulation of assets to the detriment of policy-holders of the life branch, compelled the departmental committee to review the situation. As the result of this, we find that clause 4 of the British draft bill provides that the investments of a statutory fund are to be kept distinct and separate from any other assets of the insurer, and that the assets of any statutory fund shall not, without the sanction of the court, be invested directly or indirectly “in any share or interest in any insurance business. It is even provided that this separation shall extend so far as to differentiate between “ ordinary “ and “ industrial “ business. In this respect the committee seems to have gone a little ahead of public opinion. It may be mentioned in this connexion that the recommendation of many of the official witnesses at the inquiry was that separation of assets as between the two departments might well be made optional.

Some alterations have been suggested to the provisions of the 1909 act relating to amalgamation and transfer. It has been found that the existing regulations have been evaded by a simple purchase of shares, or by one party going into liquidation. The new proposals aim to defeat this by providing that any amalgamation or transfer affecting a statutory fund shall require the sanction of the court. Furthermore, the sanction of the court is required in all cases of purchase of shares in an insurance undertaking by the assets of a statutory fund. Lastly, in the event of amalgamation or transfer, full documentary details must be furnished to the Board of Trade within ten days of the completion of the transaction. At the same time the clauses relating to winding up were amended. It is now sought to preserve the full interest of policy-holders in any statutory fund, irrespective of what may happen to other funds. This is a recognition of the essential difference between a fiducial and permanent policy contract on the one hand, and a renewable contract on the other. Under the new regulations it will be impossible to have further insolvencies arising under the circumstances of 1922 and 1923. Lastly, provision was made for stricter regulation so that in future the Board of Trade should have powers somewhat akin to those conferred upon the Industrial Assurance Commissioner. Power is now given for a company to be wound up, upon application of the Attorney-General, upon the grounds of insolvency or default in complying with the act. It is also proposed to give the court power to authorize an inspection of the affairs of any company by an officer of the Board of Trade; and this can be done if the board can establish not merely that an offence against the act has been committed, but that one is likely to be committed. The departmental committee evidently anticipated that this might not be entirely palatable to the life offices, for in its report it says -

While some witnesses hare expressed some apprehension at an increase of official power in the hands of the Board of Trade, the committee are satisfied that the ordinary restraints imposed by public opinion and by Parliamentary control will be amply sufficient to prevent any possibility of the Board of Trade taking unnecessary action; and it will be observed that the chief powers recommended are merely powers to set in motion machinery leading to a hearing in a court of law.

This is the stage at which legislation has arrived in England. It has influenced Australia markedly up to a certain point. Five of the States have introduced legislation on the model of the act of 1870; but New South Wales has never done so, and insurance companies with head office in that State are only registered under a far from stringent company act. It is only natural that a State with such a small measure of restriction should be the home of newly established life offices, and it will be found that most of the companies founded in the past ten years are incorporated there.

In 1908 the Government appointed a royal commission consisting of Mr. Justice Hood, and Mr. Knibbs, the Commonwealth Statistician, to investigate the whole conduct of insurance business in Australia. The commission published a most exhaustive report in 1910. The particular problems of the last ten years hardly existed then, at least not in an acute, form ; but the commission embodied its findings in a large number of recommendations covering such subjects as winding up, transfer, admission of age, protection of policyholders, appointment of a Government official to control the business, &c. It may be said in general terms that the bill now before the House rests upon the Industrial Assurance Act of 1923, the Board of Trade report of 1927, and the report of the Australian Royal Commission of 1910.

I shall now make a more detailed reference to the terms of the bill itself. The administration of the law will be entrusted to a Government ‘ officer with the title of Registrar of Life Insurance.

His duties are partly denned in clause 6, but it may be said in general terms that they are substantially akin to those of the British Industrial Commissioner. They exceed them in so far as the Australian official will exercise control over both branches of the life offices. He has very wide powers in connexion with registration, and will act as the adviser to the Government in such matters as amalgamation and winding up. With regard to the latter, he has apparently more powers than the British Industrial Commissioner, since he can initiate proceedings himself ; but in practice the two will probably be found to be equally strong, since it is provided that in practically every case, such as for example,- the cancellation of a licence, or the rejection of a valuation, where the interests of a company are seriously affected by the action of the registrar, the company has the right of appeal to the court. The Industrial Commissioner in Britain has carried out his duties without in any way antagonizing the well-managed life offices there, and there need be no doubt that the same thing will happen here. In view of the responsible and technical character of the work to be performed, it is provided that the registrar shall be an actuary, and this will be a further safeguard to ensure that nothing prejudicial to the interests of the well-established life offices will result from the vesting of such large powers in the hands of a single individual.

Part II. deals with matters appertaining to companies. Firstly with regard to registration, application must be made within three months, but every company operating in the Commonwealth will be entitled to automatic registration. The deposit will be £20,000 for each class of business, foreign companies to pay the same; but a special concession is made in the case of small recently established companies who may meet the deposit by annual instalments. It has been suggested that a weak point in the custom of requiring a deposit is that the formation of a new mutual society is thereby rendered impossible. This is true. When it is remembered, however, that a large number of mutual societies of the highest standing are already operating in Australia, it will hardly be argued that the public interest is detrimentally affected. Provision is made that any deposit held by a State under any of the State acts can be made available if desired, as a deposit for the Commonwealth.

An extremely important division which next claims our attention is that relating to amalgamation and transfer - operations which have a strong local interest. The clauses have in the main been taken from the draft bill accompanying the departmental report of the Board of Trade. No transfer or amalgamation will be carried through in the future without the confirmation of the court. Before an application can be made to the court, full documentary detail must be furnished to the Registrar with all reports, including actuarial, upon which the scheme is based. The Registrar may, if directed by the court, cause a report on the scheme to be made by an independent actuary. After confirmation by the court, further documentary detail, including certified copies of the scheme and reports, must be furnished to the Registrar. Each step of the transaction will be watched by experts, and full provision made for publicity. In this way it is believed that no amalgamation can be carried into effect without full protection being afforded to the policy-holder, in whose interests the whole machinery has been devised.

Part III. deals with clauses framed in the main for the protection of the policyholder. No further reference need be made here to the part relating to deposits. Division 2 relates to statutory funds, and is drawn in the main from the Board of Trade report. There is, however, one important exception. Following the English custom, provision is made for . separate funds, but it is not required that the investments of the life insurance and industrial insurance statutory funds should be separated. It will be found on reference to the schedules that provision has been made by which life offices may present a combined balance-sheet or separate balance-sheets at their option. In that connexion honorable senators are also referred to clause 44 (1). It is worthy of note that, following the recommendations of the Board of Trade report, a distinct liability is fastened upon directors or managers in respect of misfeasance in relation to statutory funds.

Division 3 relates fo accounts, returns, and valuations. Various accounts and statements are called for which must be lodged at periodical intervals with the Registrar. These are largely in accordance with the schedules, and need not detain us here. Probably the most important clause is 49, which is taken from the Industrial Assurance Act of 1923, and is here made applicable to both classes of the business. The most striking features are to be found in sub-clauses e and /. The former gives the Registrar power to reject a valuation in extreme cases, and the latter enables him to obtain the further particulars which would enable him, if he wished, to check the valuation particulars. These are extreme powers, and it is safe to say that only in rare cases would they come to be exercised. As a further protection against the improper use of this power we may note the wise proviso which permits the Registrar to hold his hand for five years, if he is satisfied that adequate steps are being taken to improve the financial status of the company whose stability is in question.

Clause 54 again gives the Registrar powers which it is safe to say will only be used on rare occasions and in the interests of the public. The power of inspection thus given, which may never be used, is very different from the annual examination of a rather inquisitorial nature, carried out by the Insurance Commissioner in Canada.

Division 4 is a miscellaneous division containing clauses dealing mainly with the relation existing between the companies and their policyholders. Some clauses dealing with industrial policies are taken from the Industrial Assurance Act of 1923, the rest are largely inspired by the report of the royal commission of 1910. As an example of the former may be mentioned clauses 69 and 70; as an example of the latter may be mentioned clauses dealing with deferred forfeiture, indefensibility, and admission of age. The principle of deferred forfeiture has been followed by most offices for many years. It has also been the custom to make payment on a policy in cases of suicide or capital punishment within thirteen months of issue of policy. These thingswhich have for long been the common practice of all the best-managed offices are now made binding on all.

A more contentious point is involved in the admission of age. The exact age of the proponent, which is one of the material facts of the contract, is frequently not proved strictly until the policy becomes a claim. It is considered that it is advisable that it should be settled, if possible, by the end of the first year. In section 7S it is provided that if any premium in respect of the second year is accepted, this shall be construed as an automatic admission of age by the company. If the company is not satisfied with the proof of age furnished by the proponent, it can decline to accept further payment, cancel the policy, and retain the first year’s premiums. It will be noted that Division 4 relates only to those policies which come into force after the passing of this act.

Division 5 contains two clauses only, relating to the protection of life policies. Divisions 8 and 9 relate to assignment and mortgage. They are mainly composed of machinery clauses, taken mostly from the New Zealand act of 1884, and need no further reference.

Division 10 relates to audit. The auditor, while not of course actually valuing the liabilities or assets, is expected to check the valuation of assets as well as to certify that the books of the company are kept with due regard to the principles of accountancy. Provision is made that he shall be elected by policyholders and shareholders.

Part IV. deals with insurances on the lives of children. It is an incorporation of the act of 1905 which, as a separate act, is hereby repealed.

Lastly comes the miscellaneous part, which contains isolated clauses that do not come under any of the preceding headings. No individual clause calls for further attention. The clauses relating to penalties and regulations come in this part.

The bill may be said to have two objects: one to deal with life assurance companies as companies; the other to deal with the particular problems which arise from the nature of the business. The first object is sought to be obtained by such clauses as clause 15, which aim to restrict the activity of the companypromoter; and the provision which prohibits the expenditure from statutory funds to acquire a controlling interest in other companies. With regard to the other part, it is evident how much the bill before the Senate owes to the invaluable work of the highest experts in Great Britain ; and we trust that this part of the bill at least will be found to be free from serious defect. We have drawn upon the experience of 60 years, and the bill is, in consequence, of wide scope. It is impossible, under the circumstances, that every section of the work should escape criticism. But if there is any tendency on the part of those who will come under the operation of this bill to think that it leans too much to the side of undue control, it may be said in justification that its ideal is to bring the few weak societies to the high level of the many strong ones. The influence of the failure of a weak company is out of all proportion to the insignificance of the company itself. It may tend to strike a blow at the whole thrift movement which is so important in the public interest.

Debate (on motion by Senator Daly) adjourned.

page 197


Vice-President of the Executive Council · Western Australia · NAT

[3.55] -by leave - For the information of new senators, I wish to explain that in order to give the Senate an opportunity to debate the financial statement as presented by the Treasurer in another place, it is the practice to lay on the table of this chamber the Estimates and Budget Papers for the year and for a motion to be moved, “ That the papers be printed.” It would, however, be out of place for this to be done before the budget had actually been delivered in another place. The Treasurer is at this moment engaged in that task, and in order that he may complete it before I proceed to lay the Estimates and Budget Papers on the table of the Senate, I suggest that the sitting should be suspended from now until 5 p.m.

Senator Sir GEORGE PEARCE (Western Australia - Vice-President of the Executive Council) [5 p.m.]. - I lay upon the table of the Senate, by command -

Estimates of Receipts and Expenditure, Estimates of Expenditure for Additions, New Works, Buildings, &c, and Estimates of Expenditure from Loan Fund, for the year ending 30th June, 1930.

The Budget, 1929-30 - Papers presented by the Right Honorable Earle Page, P.C., M.P., on the occasion of opening the Budget of 1929-30.

I move -

That the papersbe printed.

The motion will give honorable senators an opportunty to debate the general principles of the financial statement submitted by the Government before the Appropriation Bill comes to the Senate for discussion. In accordance with the usual practice of Parliament the Appropriation Bill will probably not be before the Senate until late in the session, which would not give honorable senators much chance to debate the general principles of the financial statement. I, therefore, invite honorable senators who wish to do that to avail themselves of this motion which will remain on our business paper for some considerable time.

In accordance with the usual custom,I propose to give the Senate a summary of the financial position disclosed, and the proposals for the coming year.

Transactions of the Year, 1928-29.

Consolidated Revenue Fund

The following table summarizes the transactions for the year, and furnishes a comparison with the estimate made at the beginning of 1928-29 : -

Revenue, 1928-29

The reason for the actual receipts falling below the estimate was the decrease in the returns from customs and excise duties, which were £2,241,429 less than the estimate. The estimate was justified by the experience on previous occasions when similar circumstances prevailed. The temporary depressions of 1917-18 and 1921-22 were each succeeded by a recovery in the revenue, and such a revival was actually experienced in the latter part of 1928, the receipts of the December quarter being a record in the history of the Commonwealth. Industrial disturbances in the coal and timber industries, the prospect of a poor season and falling prices of our commodities, however, produced the deficiency which actually resulted.

Expenditure, 1928-29

The actual expenditure approximated closely to the estimate, a result made possible by the successful application by the Government of the principles of economy and by a close scrutiny of all expenditure.

Part I. - Departments and Services other than business undertakings and Territories.

A summary of the increase and decreases is set out hereunder : -

To these increases war pensions contributed £145,774, and invalid and oldage pensions £124,239.

War services payments to states and those statutory payments which have received parliamentary sanction account for an expenditure of £54,676,961 or 85 per cent, of the total expenditure. The remaining 15 per cent, on which all savings must be effected does not present a great scope for savings; but economical administration has produced good results.

Despite the increased population with its attendant extension of services departmental expenditure decreased from £3,081,253 in 1927-28 to £2,987,306 in 1928- 29. The cost per head of departmental expenditure has decreased from 10s. 7d. in 1921-22 to 9s. 5¼d. in 1928-29 as a result of experienced and careful control and the elimination of waste.

Part II. - Business Undertakings.

The Post Office produced a surplus of £158,328 but a deficit of £338,216 was experienced under the heading “ Business Undertakings “ by reason of the working losses on some of the Commonwealth railways.

Part III. - Territories.

Although the Mandated Territory of New Guinea is self-supporting and Papua is largely so, little revenue is received by the Treasury from the Territories with a result that the deficit to the Commonwealth for the year in respect of all the Territories was £504,814.

Finance for the Year 1929-30.

In framing the budget for the year 1929- 30, the Government was faced with almost unprecedented difficulties. The temporary financial depression pointed to reduced revenue from direct and indirect taxation. Growing commitments for interest and sinking fund, pensions and repatriation of soldiers had to be met. The royal commission which inquired into the financial position of South Australia had recommended financial assistance to that State, and Mr. Justice Pike, after an exhaustive inquiry, had recommended that the Commonwealth should shoulder a still further burden in respect of soldier land settlement. Provision for capital expenditure was rendered most difficult by the disturbed conditions in London and New York and the depression in Australia. In addition it was necessary to formulate a scheme for liquidating the deficits of the two preceding years.

The total revenue for the year is estimated at £64,198,000, and the expenditure at £63,837,102, with a resulting surplus of £360,898. This surplus will be set against the accumulated deficit at the 30th June, 1929, of £4,987,718. In addition, an amount of £1,200,000 will be used to assist in the wiping off of the deficit. The amount referred to is the profits or income of the Public Trustee and Custodian of Expropriated Property. These moneys are available for payment to Commonwealth revenue.

Part I. - Department and Services other than Business Undertakings and Territories.

The estimated expenditure under Part I is £51,986,161, which shows increases and decreases as compared with 1928-29 as follows: -

I point out that these decreases are matters over which the Government has control, as they are not governed by the States.

The increases in expenditure are confined to services of an obligatory nature, such as pensions and interest and sinking fund. These increases are almost wholly offset by definite economies of some £500,000 in other services.

The reduction in the defence expenditure has been made mainly in the naval services: The total amount available for civil aviation remains at £250,000. Of the latter amount £144,000 is available in trust fund.

The decrease in miscellaneous services and additions, new works and buildings are due to the absence of Commonwealth elections this year and to economy. Of the total expenditure under Part I, war pensions and special appropriations account for £48,580,000, while only £2,980,711 is allocated to the administration of departments. This represents a still further reduction from the costs in previous years. Towards this achievement responsible officers in the service have co-operated with ministers in charge of departments and assistance has been given by the Departmental Economy Committees.

War and repatriation services will cost £30,324,521, an increase of £226,770 over last year. Of this £21,180,000 is for interest and sinking fund. The lattermentioned charges in respect of War debt have remained practically stationary during the last five years in spite of increased rates of interest payable on certain loan conversions. This is due to the redemption of £7,500,000 of war debt from accumulated surplus and of £3,400,000 from reparations. The saving of interest on these amounts is £550,000 per annum.

War pensions will account for £7,850,000 while there are increases under invalid and old-age and war pensions. There is a reduction of £61,000 in the estimated payments for maternity allowances. This will be brought about by restricting the allowance to persons with a family income not exceeding £8 per week.

The National Insurance Bill, which was introduced last session, was designed to secure a rectification of the incidence and a reduction in the costs of expenditure of social benefits, and to place oldage pensions on a sounder basis. A questionnaire has been sent to the States to ascertain their present costs and methods of relief, and the most economical means of consolidating them. Until a reply has been received, and the whole question thoroughly examined, the Government intends to postpone further dealing with the National Insurance Bill. Amending legislation is to be introduced in respect of Public Service arbitration. Life insurance business is also to be dealt with by Commonwealth legislation.

The reduction in the total of all forms of defence expenditure, including works, is £237,536; but basic organizations will not be permanently effected, nor their efficiency impaired to any great extent.

The policy of the Commonwealth has brought about a satisfactory development of civil aviation, and arrangements have been made for its continuance in the coming year.

The amount available for scientific and industrial research is £256,811, as against £99,520 in 1928-29. Capital expenditure on laboratories will absorb £109,000. Of this £34,000 will be recouped by the Empire Marketing Board. The provision of these funds has been made possible by the appropriation of moneys from surpluses of previous years. Hereafter, these researches must be charged direct to revenue, unless the industries that are benefited are prepared to find funds to continue the work.

The council is devoting most of its attention to primary industries, and the beneficial effect of its work has already been abundantly apparent in various directions. It is now assisting in research, notably in the wool industry, which is menaced by the competition of substitutes. The eradication of prickly pear, weed pests, bitter pit in apples, blue mould in tobacco, the destruction of the sheep blow-fly and the elimination of animal diseases are being actively investigated. Valuable assistance is being received from the Empire Marketing Board.

The Government hopes that the Imperial Government will defer any action abolishing preference to Australian goods until the British and dominion authorities have conferred on the matter. The Government is opposed to any alteration of the basis of distribution set out in the Dawes’ plan, and strongly supports Great Britain’s opposition to the adoption of the Young plan in its present form.

PART II. - Business Undertakings.

The estimated surplus under this division of the estimates is £266,601. The Postmaster-General’s Department is estimated to produce a surplus of £829,161, compared with £158,328 last year. The rapid extension el the telephone service continues. There is now a total of 505,554 telephones in Australia, of which 221,725 are in the country. Last year 35,000,000 trunk calls were handled. The proposal to instal a wireless telephone service between Tasmania and the mainland is under consideration. Automatic exchanges are being planned to give the maximum service. Telegraphic communication between Perth and the eastern cities is being extended and improved, and plans are being made for a complete network of broadcasting stations to provide an efficient service to the greater part of the population of Australia. Telegraph and telephone charges are to be adjusted.

The deficit on the railways is estimated at £562,560. The traffic of the transAustralian railway continues to develop satisfactorily, and the estimated earnings show a surplus over expenses of £74,000. Passenger traffic has increased from 24,351 to 31,109 in the last three years.

Part III. - Territories of the Commonwealth.

The deficit arising from the administration of the Territories is estimated to be £627,630. This is an increase of £122,816 on the previous year, due largely to increased expenditure of £87,972 on the Sydney-Canberra-road, and £33,229 interest on loans.

Part IV. - Payments to or for the States.

The following table shows the payment to or for the States. The expenditure under this head is as follows: -

The provision of £30,000,000 is in pursuance of the terms of the Financial Agreement. The amount will be recouped by the States. A special grant of £300,000 is to be made to South Australia, while £60,000 is provided in accordance with the Commonwealth’s proposal to take over the Red Hill-Salisbury railway. The payment to Tasmania has. been increased by £30,000, and provision will be made for a grant of £250,000 to that State for five years.

The policy already in operation with regard to main trunk and arterial roads is still being pursued. An amount of £7,244,808 has been expended in carrying out the approved programme which contemplated an expenditure of £35,000,000 over a period of ten years.

Although deficits have been experienced (luring the last two years, the following table shows the wise use to which surpluses in previous years were put: -

The use of revenue moneys for the redemption of debt has effected a saving of nearly £400,000 per annum in interest.

Estimated Revenue, 1929-30

The estimated revenue for this year is £64,19S,000. From this must be met expenditure to the extent of £63,837,102. The resultant surplus of £360,898 will be taken in reduction of the accumulated deficit. The deficit, as I have already said, will be further reduced by an amount of approximately £1,200,000, being interest on revenue earned by the Public Trustee and Custodian of Expropriated Property, so that the total amount expected to be wiped off the accumulated deficit in 1929-30 is £1,560,898.

A certain amount of additional taxation will be necessary to realize the revenue figure mentioned, but such taxation will be so imposed as to inflict the least hardship. Additional amounts collected under the income tax will be obtained by a super tax, involving a 10 per cent, increase in the rate of tax on taxable individual incomes exceeding £2,000.

An additional amount of £600,000 will be obtained by an amusement tax of five per cent, on the total receipts from charges for admission to entertainments.

The estimate for Customs revenue is £2,691,429 in excess of the actual collections of 1928-29.

Loan Expenditure

The estimated loan expenditure in 1928-29 was £9,024,375; the actual expenditure was £7,635,347, so that there was a saving of £1,389,028. Loans amounting to £1,352,573 were raised for the States for development and migration purposes, and £555,000 was raised for the Federal Capital Commission. The estimated loan expenditure for 1929-30 totals £5,085,645, being a decrease of £2,549,702 on the actual expenditure for last year.

The items of expenditure compared with those of last year are as follows : -

In addition to this it will be necessary to raise £2,000,000 for loans to the States under the development and migration scheme, and £384,700 for the Federal Capital Commission. The expenditure under the vote for post office services and war service homes will secure assets which will immediately produce a revenue covering the interest and sinking fund charges. Both services contribute to the convenience and thrift of the community. The Grafton-South Brisbane railway, for which £631,000 is provided, is approaching completion, and it is not expected that further capital expenditure will be necessary in this direction. Expenditure under the other items is provided for the acquisition of valuable assets.

The Commonwealth will also, during the year, relieve the States of a further sum of approximately £2,600,000 in respect of the losses on soldier land settlement. The previous assistance given to the States in this respect was : -

  1. Direct sustenance payments to settlers to an extent of approximately £500,000.
  2. A rebate of 2½ per cent, per annum for the first five years of interest on advances by the Commonwealth to the States, the total rebate amounting to approximately £4,735,000.
  3. In 1925 the Commonwealth relieved the States of £5,000,000 of the principal amounts of soldier settlement loans owing to it by the States, and agreed to a reduction of interest rates on the remaining soldier settlement loans to 5 per cent, after 31st December, 1930.

In 1927 the Commonwealth decided with the concurrence of the States to institute an independent investigation of the whole position with a view to a comprehensive and final solution of the question. Mr. Justice Pike, of the New South Wales Land and Valuation Court, was appointed to make the investigation, and after a full inquiry has furnished his report. He is of the opinion that although the Commonwealth has no legal responsibility in the matter, the Commonwealth and States should share equally in the loss, after taking into account all previous Commonwealth assistance with the exception of the sustenance grant of £500,000.

As this inquiry was instituted with the approval of all parties, with the object of a final settlement, the Commonwealth Government accepts the recommendation of the Commissioner, and will take over a further amount of £2,447,000 of soldier settlement loans owing to it by the States. The allocation will be as follows: -

The Commonwealth has already taken over more than half the loss incurred by Western Australia in allocating previous relief. An amount of £150,000, to cover losses in the provision of home maintenance areas, will also be allocated to certain States.

After 1930 the Commonwealth will share equally any interest liability in excess of 5 per cent, per annum payable on Commonwealth loans due by the States to the Commonwealth in respect of soldier land settlement.

The Commonwealth makes the concession on the condition suggested by the Commissioner that the settlement of returned soldiers be completed satisfactorily, and that the States agree that the settlement be full and final.

Public Debt

Under the financial agreement all Commonwealth and States’ debts and future loans are subject to sinking fund provisions. During the past year the amount of Commonwealth loans redeemed under the provisions of the sinking fund was £6,230,708, which is equivalent to £1 13s. 5d. per cent, of Commonwealth debt. It should also be remembered that the Commonwealth during the last six years has redeemed £7,415,755 of debt from surplus revenue.

The amount of States’ debt redeemed under the operation of the National Debt Sinking Fund was £4,661,161. This figure represents contributions for the years 1927-28 and 1928-29, owing to the delay in the ratification of the agreement by one of the States. Not only have moneys of the sinking funds been used to purchase securities on the open market, but substantial reductions have been made in the amounts of loans which have fallen due for conversion. The gross public debt of the Commonwealth is now £377,621,573, and the net debt £349,356,349. The combined debt of the States is £722,018,812. During the last seven years the war debt has been decreased by £45,276,088, while the works debt has been increased by £58,058,071, the net increase being £12,781,983. In other words, tangible assets to the extent of £58,058,071 have been acquired at a cost of increase in debt of £12,781,983.

The Commonwealth debt per head has decreased by £6 12s. 5d. in the same period.

Commonwealth Bank

The profits of the Commonwealth Bank, excluding the note issue, have increased from £250,953 in 1924 to £740,832 in 1928. The profits of the note issue in 1928-29 were £1,042,899, of which £782,174 was paid to the Consolidated Revenue Fund. The percentage of gold to note circulation was 52.42 per cent., against the statutory requirements of 25 per cent.

The Government has reduced expenditure in every direction possible, and, without encroaching upon payments of an obligatory nature, believes that the measures which it proposes for raising the necessary revenue will create the least possible disturbance of economic conditions. Our present difficulties are a passing phase of our economic life, and can be overcome provided the nation sets itself out to secure and maintain industrial peace and increased production.

Debate (on motion by Senator Daly) adjourned.

page 203


Motion (by Senator Sir George Pearce) agreed to -

That the Senate, at its rising, adjourn till Wednesday next.

page 203


Businessof the Senate.

Vice-President of the Executive Council · Wes tern Australia · NAT

[5.34] - In moving -

That the Senate do now adjourn,

I desire to intimate that the Government proposes to take as the first business of the Senate when it resumes the adjourned debate on the Life Insurance Bill. I hope that honorable senators willcome prepared to discuss that measure. Should there be any break in the debate, an opportunity will be given to discuss the general financial statement which has been submitted to-day.

Question resolved in the affirmative.

Senate adjourned at 5.35 p.m.

Cite as: Australia, Senate, Debates, 22 August 1929, viewed 22 October 2017, <>.