12th Parliament · 1st Session
The President (Senator the Hon.W. Kingsmill) took the chair at 3 p.m., and read prayers.
Statement by Senatorreid.
SenatorDALY (South Australia - VicePresident of the Executive Council) [3.1]. - I ask leave of the Senate to make a statement with regard to a very serious charge made in this chamber on the Srd December by Senator Reid, reflecting on the probity and honesty of the honorable the Treasurer, Mr. Theodore.
Senator DALY. - Honorable senators will remember that, during the debate on the motion for the adoption of the Address-in-Reply to His Excellency the Governor-General’s Speech, Senator Reid said -
The present Treasurer of the Commonwealth entered into a contract with the licensed victuallers not to interfere with licences for three years in return for the payment of so many thousands of pounds.
I interjected “What was the amount?” Senator Reid went on to say -
About £10,000. Portion of that sum was used in connexion with the Labour party’s campaign, and I should like . to ask Mr, Theodore, through Senator Daly, what became of the remainder. I am not making that statement under cover of the Senate. I said it on the public platform of Queensland, and I am prepared to return to that State to repeat it to-morrow.
Senator Reid’s remarks were given very wide publicity in all the States, and particularly in Queensland. Star headlines were given to it in the Daily Mail, a Brisbane journal, and as a result I wish to report that I am in possession of a communication addressed to Mr. Theodore by a gentleman who has been the president of the Licensed Victuallers’ Association of Queensland for sixteen years. This gentleman writes-
I was surprised to read the statement made by Mr. Reid, as per enclosed cutting - “ Not Touch Licences for ThreeYears.
Contract with Liquor Trade Alleged”, and I have been president continuously for the past sixteen years. It is an absolutely false and malicious utterance. As a matter of fact, the amendment of the Liquor Act referred to by Mr. Reid was passed after you had left Queensland politics.
If what is said by the chairman of the Licensed Victuallers’ Association of Queensland, a gentleman who evidently enjoys the esteem and regard of his colleagues, since he has held his present office for the past sixteen years, is true, Senator Reid should be prepared to make amends for what was, after all, one of the most slanderous statements that could possibly be made against one of His Majesty’s Ministers of State.
Senator Dunn. - The honorable senator should apologize, as I had to.
Senator Reid. -Mr.President, am I entitled to make an explanation?
The PRESIDENT (Senator the Hon. W. Kingsmill). - I think so. When a senator makes a charge it is usual to take notice of it at the time.
Senator Daly. - I did so.
The PRESIDENT. - Yes ; but not in as complete a manner as could be desired. There does not seem to be any standing order which meets the case; but I think that if we are to be guided by rules of common sense and courtesy Senator Reid should have an opportunity to reply to the charge made against him by the Leader of the Senate (Senator Daly).
Senator REID (Queensland) [3.6].- I have nothing to withdraw from the statement I made.
Senator Dunn. - Say it on the public platform.
The PRESIDENT.- Order! The honorable senator must listen without interjections to Senator Reid’s explanation.
Senator Dunn. - I apologize to you, sir, but the other night, when, under your constitutional authority, you called on me to withdraw a statement I had made against the right honorable the Leader of the Opposition (Senator Pearce), I was man enough to withdraw it. Senator Reid made a charge against the integrity of an ex-Premier of Queensland and now a member of His Majesty’s Government, and now that the facts have been stated by the Leader of the Senate (Senator Daly) I feel sure that he will be man enough to withdraw his charge and tender an apology in regard to the matter.
Senator Thompson. - Where do you come in?
Senator Dunn. - Never mind about that.
The PRESIDENT. - Order! The honorable senator must not in his excitement disregard the rules of the Senate. Senator Reid has a right to speak in explanation or substantiation of what he said.
Senator REID.- As I have already said, I have nothing to withdraw. I made the same statement on the public platform during the election campaign in Queensland, when Mr. Theodore was campaign director in association with Mr. McCormack,Mr.Fihelly and Mr. Ryan, who had been appointed as a sub-committee of the then central executive of the Queensland Labour party, from which I had just resigned. It was well known to everyone that Mr. Theodore, on behalf of the subcommittee, received the sum of money I mentioned from Mr. Peter Murphy, who was Mr. Fihelly’s father-in-law, and acted as a go-between for the licensed victuallers and the central executive. The matter was also raised at the Labour convention inRockhampton, when Mr. McCormack demanded “ a proper balance sheet.” All that I asked in the chamber last week was that the Leader of the Senate (Senator Daly) should ask Mr. Theodore what had become of the balance of the money given by the Licensed Victuallers, which remained when the election was over. I still ask that question. I also want to know what Mr. McCormack meant when he threw the legitimate balance-sheet on the table at the Rockhampton conference and demanded the production of “a proper “ one. I have said all this on the public platform and I shall continue to say it until I get evidence to the contrary that I am in a position to use. Acting on the knowledge I have now, not one word have I to withdraw against the campaign director during that State election. I took every precaution to ascertain the truth. I did not make my assertion either on the platform or in the Senate, the other night, wildly. I have not the authority to use the names of persons to back up my statement, but I have taken every precaution to ascertain that what I have said here and on the public platform in Queensland is correct and, if necessary, I shall repeat the charge.
Senator Daly. - Let us know when you make the charge again on the public platform.
The PRESIDENT.- A statement having been made by the Leader of the Senate (Senator Daly) and a personal explanationhaving been given by Senator Reid, the subject must now drop. If any honorable senator so desires, it may be the subject of a substantive motion of which notice can be given now or at any subsequent time.
SenatorRae. - Would it be competent for any honorable senator to ask for an inquiry ?
The PRESIDENT. - Not at this stage.
Senator Dunn. - I suppose the matter will go into cold storage.
Senator Sir GEORGE PEARCE.In regard to a question I have asked on several occasions relating to the reply of the British Government to the representations of the Commonwealth Government on the question of migration, I understand, according to an answer given in another place this morning, that the reply of the British Government will be made available on Friday. May I ask the Vice-President of the Executive Council whether it will be made available at such a time on Friday as will enable honorable senators to refer to the matter if they think fit to do so when dealing with the Appropriation Bill ?
– I believe it will be made available in sufficient time on Friday to enable honorable senators to discuss it on the Appropriation Bill. The British Government is naturally anxious that the message should be released simultaneously in Great Britain and Australia, and it has been suggested that that can be done if the contents of the cablegram are kept back until Friday. The Government has nothing to conceal. In accordance with our arrangement with the States, no doubt a full statement will be made on the subject. I shall, however, communicate the wish of the Leader of the Opposition to the Prime Minister, and, if possible, see if we cannot comply with it.
– Arising out of a statement made by the Government that opportunity will be afforded to discuss the Singapore Naval Base, I should like to know if the Senate will be given that opportunity in time to benefit the Minister for Trade and Customs (Mr. Fenton), who is about to leave Australia to attend the Naval Disarmament Conference?
– The honorable senator knows that he has every opportunity to discuss the Singapore Naval Base on any motion for adjournment, or on the Appropriation Bill. But I may be permitted to suggest to him that the matter is not so urgent as to prevent honorable senators from having, their Christmas dinners in comfort.
The following papers were presented : -
Audit Act 1901-1924. - Special Report of the Auditor-General (under section 54) concerning the Internal Check of the Customs Department.
Customs Act - Regulations amended - Statu tory Rules 1929, No. 127.
SenatorE. B. JOHNSTON asked the Minister representing the Minister for Defence, upon notice -
– Inquiry will be made and a reply will be furnished to the honorable senator as early as possible.
asked the Minister representing the Minister for Home Affairs, upon notice -
What rentals are the various departments and government instrumentalities, including the Federal Capital Commission, paying for premises occupied by them, respectively, in Canberra ?
– The information is being obtained and will be conveyed to the honorable senator as soon as possible.
Leave of Absence - Views of Municipal Councils
asked the Minister representing the Minister for Defence, upon notice -
Is it the intention of the Commonwealth Government to grant leave of absence on full poy to its employees, for the periods necessary for their service under the new voluntary system of military training, including attendance at annual training camps?
– The Commonwealth Government will grant leave of absence on full pay for any time lost for military training.
asked the Minister representing the Minister for Defence, upon notice -
– The honorable the Minister for Defence has supplied the following answers to the honorable senator’s questions : - 1, 2, 3, and 4. I have no knowledge of this.
From what fund is it proposed to take the £1.000,000 which is to be advanced by the Commonwealth to the States for road purposes with a view to alleviating unemployment?
– The Federal Aid Roads Trust Account.
What is the amount of money to be expended in each State upon developmental works put forward by the Governments of the States under the Migration Agreement, which have been approved by the British and Commonwealth Governments, to the latest date for which the figures are available?
What is the amount of such moneys actually advanced to each State, to the latest date for which figures are available?
– The answers to the honorable senator’s questions are as follow : -
asked the Minister representing the Minister for External Affairs, upon notice -
– The answers to the honorable senator’s questions are as follow : -
asked the Minister representing the AttorneyGeneral, upon notice -
– The answer to the honorable senator’s questions are as follow : - 1 to 8. It is not the practice to disclose the names of persons who give information to the Government or any circumstances that would lead to their identification, nor to express in answer to questions any opinions on matters of law.
Senator DALY (South Australia - VicePresident of the Executive Council [3.22]. - I desire to inform the Senate that I have made inquiries and find that the appointment of nine members of the House of Representatives as a Library Committee to sit as a joint committee with a similar committeeoftheSenate, was notmade with any desire to cast a slight on the Senate. I understand that sometimes neither the Senate nor the House ofRepresentatives adheres strictly to the standing orders governing the appointing of such committees. On this occasion the Senate did, whereas the House of Representative did not. I have had a conversation with the Prime Minister, who has asked me to convey his assurance to you, sir, and to the Senate, that there was no intention on the part of the Government or the House of Representatives to slight the Senate in any way and that the position will he remedied.
Debate resumed from 10th December (vide page 914) on motion by Senator Daly -
That the bill be now read a second time.
– Although I have had a varied, mercantile experience, I do not profess to have an intimate knowledge of the intricacies of the laws governing high finance and gold holdings. Judging by the rumours which filled the air shortly after the motion for the Address-in-Reply was submitted in another place, I thought there would be very drastic alterations in connexion with our note reserve, but I find that the first part of the bill now before the Senate contains nothing at which I can cavil, and certainly nothing in the second part to which I can object, on principle. It is, I think, desirable that the power sought for the Commonwealth Bank should be granted; but I object strongly to the proposed intervention of the Treasurer. This has been my attitude from the beginning. After listening to the informative speeches delivered in this chamber, I am still of the opinion that it is not desirable to have any political intervention in ‘connexion with the administration of the Commonwealth Bank. I am not expressing this view because the present Treasurer happens to be a member of a Labour Ministry. My objections would apply equally to any Commonwealth Treasurer, irrespective of the party to which he belonged. Honorable senators will recall that when the. last Commonwealth Bank Bill was before this chamber, I opposed the recommendation of the then Treasurer with regard to the constitution of the board. The suggestion which I then made was subsequently given effect, and although Labour critics claimed it as their proposal I think it will be admitted that, in the first place, the suggestion came from me. I merely mention this matter to show that in objecting to the proposed intervention by the Treasurer, I am not considering the bill from the point of view of party politics. The Commonwealth Bank has considerable powers as a central reserve bank, vested in it by the bill passed two years ago. It has authority for re-discount and other matters, and actually it enjoys fairly full powers to function as a central reserve bank. It cannot, however, function that way except with the goodwill and support of the other private trading banks. I believe that a healthy move in that direction is going on gradually all the time, and that it will not be long before a better understanding will enable the Commonwealth Bank to fulfil its mission as a central reserve bank. Inasmuch as exchange and overseas credit are extremely sensitive to extraneous influences, political intervention such as is contemplated in the bill, is highly undesirable.
In introducing this measure the Government is merely following the example of the British Government. London, which is the world’s great clearing house, relies on the Bank of England to stabilize finance by raising or lowering the discount rate. When necessary also, the Bank of England goes into the open market to buy or to sell gold for the purpose of correcting exchange difficulties that arise from time to time. I do not say that it does this without consultation with the Chancellor of the Exchequer, for I believe that a continuous liaison is maintained between the Chancellor of the Exchequer and the Bank of England; but the fact remains that full and undivided responsibility with regard to international exchange and/other cognate problems rests with the Bank of England. Surely we can repose the same trustin the Commonwealth Bank, especially in view of the fact that it has fairly wide central reserve banking powers. We all recall how the bank came to the rescue of Australian wool firms a few years ago when the rate of exchange was between £4 and £5 per cent. The bank, by offering to make notes available against shipments and credits in London, to the amount of about £15,000,000, cleared up the situation in a comparatively short time, and very soon the discount rate came down to 10s. per cent.
In the course of this debate there have been several references to a speech made by Mr. Snowden, the Chancellor of the Exchequer in the British Government, at the Labour party conference at Brighton, England, on 3rd October last. His speech was published in the Australian Insurance and Banking Record of 21st November, and I note with some satisfaction that he upholds my views with regard to the function of a central bank. Speaking of the need for co-operation between the bank and the Treasury, Mr. Snowden said -
In regard to the bank rate the Treasury has no more control than any other individual whom I happen to bc addressing. …
The ability of the joint stock banks to supply credit is balanced on their reserves of cash, and their reserves of cash are related to the Bank of England reserves which, in turn, are regulated by the bank’s holding of gold.
Finally, and I ask honorable senators to pay particular attention to this statement, he said -
I doubt if anything very effective can be done except by international co-operation, and I hope that the international bank which is to be set up under the Young plan - and a committee is at the moment engaged in drafting its constitution and statutes - will be able to carry out what was- intended in the Genoa resolution to devise international co-operation for the purpose of economizing the use of gold and some machinery for preventing the unnecessary transhipment of gold.
I strongly advocate leaving this matter absolutely in the han’ds of the Commonwealth Bank functioning as a central reserve bank with, possibly, the cooperation of other banks and in consultation with the Treasurer, for naturally the Treasurer will be keenly interested in everything that concerns high finance. Accordingly I recommend consultation with, but certainly not intervention by, the Treasurer.
I do not ^entirely agree with the amendment submitted by the Leader of the Opposition (Senator Pearce) that the operation of the bill should be limited to twelve months. I think we can safely rely on the Commonwealth Bank, especially if it acts in consultation with the Treasurer and with the goodwill and co-operation of the other banks until such time as some international bank is established which will lay down rules to govern this important matter. If the amendment to limit the operation of the bill to a period of twelve months will have the effect of composing the differences between the two sides of the chamber, I shall support it ; but I reiterate that no intervention by any Treasurer iv political party should be permitted.
– In discussing this bill I wish, first of all, to register my emphatic protest against the threats of responsible members of the Government and sections of the press as to the fate of the Senate if it opposes the bill. Such threats will not affect my attitude towards the measure.
– Does the honorable senator suggest that any member of the Government has made threats ? 0
– The Prime Minister (Mr. Scullin) and the AttorneyGeneral (Mr. Brennan) and the Minister for Trade and Customs (Mr. Penton) have said that if the Senate dares to reject this legislation it will be abolished.
– The honorable senator may not call into question, except to comment on them as a matter of policy, the remarks of honorable members in another place.
– I protest against an attempt by any one to intimidate the members of the Senate. There has been an attempt at intimidation in speeches made outside Parliament. Certain sections of the press have repeated statements that if the Senate rejects this measure it will be abolished.
– Is it worth while taking any notice of such statements ?
– I have always maintained that it is my privilege to oppose any legislation with which I do not agree, irrespective of the Government which introduces it. When it was proposed by the Government of which I was a supporter to introduce the Army Act I used my utmost effort to oppose it. Similarly, when proposals to spend money on buildings at Canberra were before us, I opposed them, and with the assistance of the Labour party my objection was effective. I protest against the tactics now being adopted in relation to this hill.
I approach the consideration of thi3 measure with some misgiving. At a time like the present, when people are anxiously looking at their securities, as is the case according to a report from London, it only requires some ill-advised action on our part to bring Australian securities into strong disfavour overseas. It is proverbial that fools rush in where angels fear to tread. I fear that that is what has happened in relation to this measure. It is idle to say that the passing of this bill will not mean that our note issue will become inconvertible. If any one is obliged to take his gold to the bank, and, with the exception of £25, is unable to get it back again, the note issue is inconvertible. In that case, all the dangers of inflation arise. All the authorities that, I have read on this subject admit the possibility of a currency so managed that a paper issue may not become inflated ; but they all go on to say that there is no case known in which an inconvertible issue has not become inflated. It is barely possible that our bank board will prove super men and so manage our currency that there will be no inflation. While Senator Colebatch was speaking the other day Senator Hoare asked why there was no inflation during the war period in Australia. I thought that every one knew that there was inflation at that time. In hardly a case which has come before the .Arbitration Court has the diminished purchasing power of money not been made the ground of an application for an increase of wages. That shows clearly that inflation took place at that time. We are indeed suffering from inflation to-day, for, although we are supposed to be on the gold standard again, conditions have not been adjusted. That is one of the principal difficulties confronting us to-day. In other countries there has been a return practically to pre-war conditions; but in Australia, war standards in the matter of wages and conditions of living have , been maintained, with the result that we can sell practically nothing overseas at a profit.
– Does the honorable senator suggest lower wages and longer hours ?
– The cost of production must be lowered. That may mean lower wages and longer hours. It may mean greater production and the same wages and conditions. The remedy for present conditions is to increase our exports. Seeing that we cannot produce goods at a price which will enable them to compete in the world’s markets, we must reduce their cost. That may mean the increased use of machinery, or some other method; but in whatever way it i3 done, the cost of production must be lowered.
– It might be done by cutting out extortionate profits.
– It is not a case of extortionate profits, for such goods as we sell overseas are sometimes sold at a loss. That is so in the case of sugar.
– Does not the honorable senator think that the proper basis would be to reduce the profits made under the existing system?
– I am not dealing with internal matters, but with the difficulties encountered in connexion with our external trade. With the “exception of wool and wheat*, our goods cannot be sold overseas at a profit. Our sugar is sold abroad at a loss and Australian butter is sold in London for less than the selling price in this country. Australia must face the economic facts. The only remedy I can see is so to reduce the cost of production that we can sell our goods at a profit in other countries. The Government has been the reverse of frank in connexion with these proposals. What information we have obtained has been dragged from the Leader of the Senate (Senator Daly).
– I cannot anticipate every difficulty which will arise in every honorable senator’s mind
– The whole of the correspondence between the Bank Board and the Government should be disclosed. So far we have heard only a part of a letter; and that part relates to the first portionof this bill. We have had no documentary evidence in relation to the second part of the bill. The Senate is entitled to the fullest facts, and the motives animating the Government.
– If the honorable senator will ask for facts, I will give them. The Government has nothing to hide.
– I suggest that the Leader of the Senate should read the whole of the letter from the Bank Board relating to the latter part of the bill.
– Senator Lawson has already asked for that, and I shall read it at the right time. The honorable senator should not accuse me of not doing things I have had no opportunity of doing.
– It would have been better had the honorable senator read the whole letter in the first instance. We have been told how much gold is held by the privatebanks, but we do not know whether it is proposed to call it up immediately. The Government should give a definite pledge that the gold will not be used to inflate the note issue. Senator Daly said that it could not be used for that purpose, seeing that it would not get into the hands of the trustees of the note issue; but I point out that notes of an equivalent value have to be issued for the gold received. Obviously, the Note Issue Branch will not hand these notes over until it has the gold. In that case, it becomes the bank’s gold, and may be used as the, basis for an inflation of our note issue.
– Does the honorable senator trust the present directors of the Commonwealth Bank?
– That is not the point. The ultimate control of the Bank Board is in the hands of the Government. That is where the Commonwealth Bank differs from the Bank of England.
– Does the honorable senator say that the Government controls the Commonwealth Bank?
– Ultimately it does, by appointing the members of the board.
– Those appointments are spread over a number of years.
– That may be the case.
– The honorable senator must think that this Government will be in office for a long time.
– The gentlemen composing the board are not immortal.It might well happen that the Government will have a great many appointments to make during the time that it occupies the Treasury bench. I find that the amount of gold that may be commandeered is much greater than was indicated by Senator Daly. According to the last quarterly banking return the gold held by the different banks in Australia is as follows : -
– Up to what date are those figures taken?
SenatorH. E. ELLIOTT.- I am not quite sure. I take it to be up to the 30th September, the date of the publication.
– How much gold has been exported since then ?
– The Government should be in a position to indicate that.
– I have alreay done so. I have stated that £4,000,000 has been exported since last July.
– The very fact of issuing that additional £23,791,159 in notes as against the gold commandeered will tend to inflate the note issue. Gold is held by the banks as security for their deposits. There is no point in holding notes as security once the gold has been commandeered from the bank, therefore, there will be a greater tendency to use paper money.
– Is it not a fact that banks have a larger sum in notes as security against deposits?
– It is, but the notes do not afford the same security as gold.
– Exactly what is the difference?
– The value of gold holds good the world over; notes cannot be considered an equivalent security.
– While the note is convertible gold can be secured in return for notes.
– I have pointed out that it will not be possible, except in a very fictional sense, to obtain gold for notes. What is the use of getting gold from the bank and later being served with a notice to return it. Under the new conditions the temptation of the bank to put this money into circulation will be much greater than it is at present. The fact emerges that once this measure is passed it will be possible for the bank to inflate the currency to an enormous extent without any reference to Parliament.
– Was that not done during the war?
– It was and, as I have pointed out, it reduced the purchasing power of the pound to 14s. 9d.
– Will not the bank need to have regard to two important factors, one of which is the necessity of overseas credit, to keep this country sound ?
– All would be well’ if that idea was kept firmly in mind.
– Was it not kept very firmly in mind when considerable pressure was brought to bear on the bank to save the Australian wool position?
– I admit that it was, but the bank had received its lesson in connexion with the inflation that took place during the war period. It was apprehensive about a recurrence of that inflation. Members of the Labour party have strongly advocated that an increase of the note issue might well be used to carry out public works. The moment that that fancy is indulged, even to the slightest extent, there will be a tendency towards an inflated currency, and a depreciation in the purchasing power of the pound.
– Apparently an increase of the note issue is justifiable only for destructive purposes, such as a war. The honorable senator did not object to the practice then.
– That was forced upon us. Nobody wanted it. I do not think that it was realized at the time that we were “out-running the painter.” The lesson was learned very thoroughly during the course of the war, hence the reason for Senator McLachlan urging that there should be a tightening up of restrictions in order to prevent another such inflation.
On the constitutional aspect of the matter, which was mentioned by Senator McLachlan, I have no doubt that when the subject is referred to the High Court of Australia this measure will be held to be quite invalid so far as it relates to the State Savings Banks. Because it refers to the subject of currency that will not preclude the court from inquiring into its effects upon the reserves of State banking institutions with which the Constitution forbids the Commonwealth to deal. We had an excellent example recently in connexion with the Eederal Capital Commission, which passed certain “ regulations “ in an endeavour to avoid complying with the formalities laid down by Parliament in regard to “by-laws.” When the case was submitted to the High Court that court brushed the pretence aside, and held that whether they were called “ regulations “ or “ by-laws “ they had to comply with all the formalities prescribed by law. I suggest that before this bill is proceeded with the Government should obtain the opinion of some leading counsel on the subject.
– Does the honorable senator think that the Government is incapable of carrying on its own business?
– I have already pointed out a case in which a federal commission took action after an alleged consultation with the AttorneyGeneral’s Department.
– It is obvious, in this case, that the Attorney-General’s Department was consulted, because they tried to hinge the measure on the currency power provisions.
– They tried to get around the difficulty by hanging the coat on the wrong hook, but the court would not countenance that action if its effect was to interfere with the gold reserve of the State Savings Banks.
Whilst it has been truly said that the Government is responsible for this measure, the Opposition has the numbers in this chamber. We are elected on a franchise equally as democratic as that applying to another place, and are entitled to influence legislation to the full extent of our authority.
– The honorable senator and his colleagues were not elected so recently as were members in another place.
– The Consituation provided that our term of office should be longer than that of members in another place, in order to prevent a coup. If we are to put up a defence for our existence, we cannot get away from the fact that we must carefully scrutinize measures, particularly measures of such a doubtful character as this.
– It would be much healthier for the honorable senator and his friends if they were to criticize, rather than oppose the measure.
– We shall not be found wanting, if it comes to a question of opposing it. We are induced to withhold our opposition from the first part of the bill, only because of the document that has emanated from the Commonwealth Bank Board. We pay the greatest deference to the opinion of that board. But I personally shall not be prepared to vote for the second proposed new section unless, as the Leader of the Government in the Senate has promised, a further document is produced intimating that it also has the approval of the board. This Government attained power by the exercise of nothing more or less than a confidence trick.
– The honorable senator’s friends held office for a long time, so apparently they are thoroughly versed in the use of the confidence trick.
– The peculiar electioneering tactics of this Government have done more to degrade the public life of Australia than has any other action within the memory of man. Its cynical disregard of promises held out to sections of the people, now that its purpose has been served, cannot fail to have a disastrous effect upon the regard which the public should have for its public institutions. It is for us to correct that impression, so far as we can, even if it may involve our own political effacement for the time being.
SenatorRae. - I rise to a point of order. Is Senator H. E. Elliott in order in reading his speech, which he is undoubtedly doing?
– Is the honorable senator reading his speech?
– I am referring to my notes, as the Leader of the Government in this chamber did.
– I think that the honorable senator has not had much chance to read his notes.
– If we approach this bill with the greatest apprehension and suspicion, the Government has only itself to blame. We are dealing with the same people who brought off the most colossal confidence trick in history ; who have combined the skill of the gogetter with the craft of the pick-pocket. The public has been deluded once, but it will not be our fault if it is again deluded. The Labour party made a political issue of the subject of a mandate for the perpetuation of arbitration, and when it had attracted attention in that direction it filched from us our defence system,
– Is the honorable senator in order in discussing mandates? He has already debated mandates on the Address-in-Reply and the budget, and this is his third effort on his obsession.
The PBESIDENT.- I think that the honorable senator is somewhat straining the scope of the second-reading debate on this bill.
- Senator Daly and his followers claim to have a mandate in regard to the abolition of the system of compulsory defence.
– Order ! I ask the honorable senator to confine his remarks to the second-reading of this bill.
– The Labour party has, hidden away in its book of policies, a platform providing for the extinction of private banking in Australia, and for the nationalization of that industry. Nothing of that was said at the recent election. The bill now before the Senate appears to be the instrument by which the Labour party hopes to achieve its ambition in regard to the nationalization of banking. In view of the extraordinary claims that have been made concerning the purpose of the bill, we should scrutinize it most carefully. Although I am not opposed to the first portion of the bill, I do not feel inclined to support some of the other clauses unless more definite assurances than we have had up to the present are forthcoming.
– As I do not claim to be a financial expert, it was not my intention to speak on the second reading of this bill, but as there appear to be, judging from the debate, many honorable senators who do not possess an intimate knowledge of the intricate subject of finance, perhaps I may be permitted, also, to display my ignorance on this matter. I regret the apprehension evidenced by honorable senators opposite in regard to this bill and the fear they seem to entertain that some great calamity will overtake Australia should it become law. I cannot account for their attitude. I have a lively recollection of the fears for the welfare of this country which were expressed by quite a number of people, including, in all probability, many great Australians, when the Labour party brought down a bill for the establishment of the Commonwealth Bank. On that occasion we heard objections similar to those which are offered to-day to this measure. It was declared that our proposal was impossible, and that it was such as might only be expected from the inmates of a lunatic asylum. Notwithstanding what was said by some of the 6nancial experts of this country - men whose province it is to talk mysteriously of finance and inflations of credit, with the object of misleading the people in order to keep their own jobs going - we established the Commonwealth Bank.
Banking institutions had made a wonderful success of the work of fleecing the people of this country, and we came to the decision that it would be a good thing to establish a national bank, in the interests, not of the financial institutions and big business, but of the people as a whole. Will any one say that the Commonwealth Bank has not achieved the purpose for which it was established? Will any one assert that it has not justified every claim that was made for it by those responsible for its establishment?
And so of the note issue. We had the same contemptuous references to that project. I well remember the then Leader of the Opposition in another place (Sir Joseph Cook) talking of the Commonwealth notes as “ Fisher’s flimsies “, and declaring that within twelve months they would not be worth “ tuppence “. He too claimed, like a lot of honorable senators opposite, to be a financial expert. Experience has shown that the Commonwealth Bank and the note issue branch have been of great value to Australia, and that without these two great financial agencies the Commonwealth would have been at a great disadvantage in prosecuting its activities during thewar. If Senator H. E. Elliott-a gallant soldier - had approached the consideration of this measure with the courage which he displayed on Gallipoli we should not have heard such doleful utterances from him this afternoon. Who is really responsible for the introduction of this bill? My information is that it has been introduced at the request of the Board of Directors of the Commonwealth Bank, who were appointed by a Government of which honorable senators opposite were supporters. The late Government altered the management of the bank, and, in creating the board, doubtless selected what they regarded as the best brains in the country for the job.
– The letter quoted by the Minister (Senator Daly) suggests that only the first portion of this measure was recommended by the board.
– In the circumstances I have mentioned honorable senators should pay some regard to its recommendations. Is it suggested that the members of the
Board of Directors of the Commonwealth Bank, who have been in office for some years, are incapable of advising the Government as to the procedure to be adopted to stabilize our financial position? When Senator H. E. Elliott was speaking-an honorable senator interjected to the effect that there was no objection to an inflation of the note issue during the war period but ridiculed the suggestion of adopting a similar course in order to provide employment for the thousands of men who are at present out of work. The note issue was inflated during the war period in order to assist Australia financially and with the object of saving the country. If that was desirable during the war period, surely at a time like the present, when we have a huge army of unemployed, there could not be any strong objection to something similar being done again in the interests of Australia. Of course, I am not suggesting for a moment that that is intended. If the men who are now unemployed were fully engaged, we should be able to remove what we are told is the main cause of the present trouble; our production, and consequently our exports, would be increased. Every day this army of 150,000 unemployed remains idle the country becomes poorer. If honorable senators opposite give this proposal a little more attention and recognize that it did not emanate solely from some export in high finance on this side of the chamber, they will realize its value and agree to it. The measure, if passed, will be of such great service to the country that I cannot imagine honorable senators opposite who supported the appointment of a Board of Directors for the Commonwealth Bank, opposing it. No one can reasonably suggest that the members of the board, with their banking experience and general financial knowledge, would make a recommendation detrimental to the country. If the measure is wrong in principle, it will not be long before that will be discovered, and the Government will have an opportunity to make any amendments which experience has shown to be necessary. I ask honorable senators to support the bill and to dismiss from their minds any thought that it is likely to have a detrimental effect upon the Commonwealth.
– I have no objection to offer concerning the main purpose of this measure. The necessity for its introduction has arisen in consequence of the tendency of the times. It is clear that its object is to conserve our gold resources so that we may have a substantial and reasonable backing to our currency. It is apparent to every one that if the seasons and general conditions which we have experienced during the past six years do not improve during the next six years, our gold reserve will become exhausted, or nearly so, or we shall have to pay higher interest rates, which will be a serious drain on the resources of the country. The best alternative is that provided in the bill, namely, to husband our gold resources rather than to pay the exorbitant exchange rates that would otherwise be charged. Apart from the stated purposes of the bill there may be other reasons, justifiable and otherwise, in the minds of the members of the Government and concerning which I may have something to say later. There are two means of placing our exchange position on a satisfactory basis. It is quite clear, as honorable senators can ascertain from a study of our export and import figures, that this country, which should be noted for its capacity to export raw materials, has a serious adverse trade balance. For the last five years the balance of trade, on the basis of imports and exports of commodities, has been against its, but as the result of our borrowings overseas, the position has not only been intensified, but aggravated to the point in which we find it to-day. Every one pound sterling borrowed in London is equal to one pound’s worth of produce exported. As far as the exchange is concerned if we borrow £10,000,000 in London, it, is equivalent to exporting £10,000,000 worth of wool or wheat. We have been following that borrowing policy to such an extent that the balance of trade is seriously against us. This year is only a repetition of what happened last year and the year before and the year before that, in fact for the last five years, and the time has now come when something needs to be done to keep our gold together under the custody of the Government and see that it is used to the best advantage for the purpose of lowering the rate of exchange, as the Commonwealth Bank directorate says, to a point that will be of some slight advantage to our producers and consumers. The rate of exchange is high because, amongst other things, loans being included, there is more due to us from London than we owe to Great Britain. For that reason the rates of exchange have been steadily against us for the last five years, and the effect, as Sir Robert Gibson shows, is to penalize the importing interests of this country to the extent of 35s. per centum, and neutralize the advantages afforded to local industry by our protective policy. There is certainly dear money in London, and for telegraphic orders we must pay 35s. per centum, and we are threatened with an increase of that rate unless gold is despatched. It is natural for us to sell gold to check our balance rather than pay a higher percentage on exchange, but the present position is very unsatisfactory.
A young country, abounding in natural resources in every direction, ought to be able to export more than it has been doing during the last five years. The figures are not at all creditable to us. Why cannot we sell more wool, or wheat,, or dairy produce, or any other commodity extracted from the cheap land of Australia than we have been doing of late? Why are we importing goods so heavily? It is because our borrowing policy has been too extravagant. When there is plenty of borrowed money available we all know what happens. The individual that has more money than he needs is naturally extravagant. It is extravagance that leads to inflation of prices. Our prices have been mounting steadily higher. According to the Quarterly Statistical Review, the pound that we spend to-day on ordinary commodities, will only purchase what lis. would purchase in 1911. For the last 18 years the value of money has shrunk in comparison with the value of goods. That may be due to an inflation of currency - a seductive subject, which I do not propose to touch upon at this stage, principally because I am not so competent to deal with it as are experts in this chamber who have’ preceded me.
There always have been two opposing schools of thought on it, and I am content to be guided by a statement of an ex-British Prime Minister, that currency and love have sent more people into the lunatic asylums than anything else in this world. We are more concerned about righting our balance of trade, which is a more practical problem. An ideal position would be to sell as much as we buy, but we are not doing that, because we are indulging, in a lavish borrowing policy. The rate of exchange is against us because we are buying more than we are selling. People in London who want to make remittances to Australia are competing among themselves for the small quantity of bills available, and by that competition have sent up the value of their bills with the result that we are now paying on telegraphic orders nearly £2 per £100, and for ordinary short-dated bills, the price is very much higher. One means of remedying this has been advocated^ over and over again; it is that the Governments of Australia, including the Commonwealth and semi-government concerns should cut their cloak according to their cloth, and see that they borrow more frugally and depend more upon their own resources to carry on. That is one remedy. We also need to extract more wealth from mother earth than we have been doing in the past, and- we can do so only by making it worth while for people to engage in agricultural and pastoral pursuits to a much greater degree than at present. It stands to reason that if in one division of a community there is a high degree of welfare, and in another division a high degree of illfare- a new word - the time must come when, to use the old illustration of the two reservoirs, they must reach the same’ level, and an equilibrium be established. Why are men not engaged as whole-heartedly in rural pursuits, applying their physical powers to the production of the soil as they should be? Thereason plainly is that agricultural occupations are not attractive. If we produced more from the soil the balance of trade would be more in our favour, but because we are not producing more the exchange rate is against us, and there is dear money in London. The people will not go on the land because urban localities and conditions are far too attractive.
– Thousands of persons are seeking land and cannot get it.
– I do not know what happens in New. South Wales, but I know that millions of acres of land can be got in Western Australia.
SenatorRae. -Good land with a good rainfall?
– Yes. Land there can be got on the easiest conditions in the world. It is quite possible that the value of arable land where farming is established has increased to such an extent that men will compete against one another to get it. That may be the case in some favoured parts of New South Wales, but Queensland has unlimited areas which are virtually thrown at the applicant. The trouble, however, is that city conditions are more enticing than those in the countryside.
– The same thing is happening everywhere to-day.
– I know that it is happening in Canada and in the United States of America. But if we could only induce more people to go on the land and produce we should so equalize our balance of trade that there would be no necessity for this bill. This migration to the cities may be a world-wide movement, but that is no reason why we should not attempt to arrive at some means which, while not stopping it, might mitigate its effects. Take the spectacle of two brothers. One remains in the city and the other goes out into the interior to fight against all the adversities to be encountered there. If it is found that the latter, after a harsh experience ends up by being far worse off than the former who remains in the city, is the spectacle a pleasant one? Is there any justice about it, when the brother living under easier conditions can make far greater headway than the other ? According to the rule of equality of opportunity, there ought to be also equality of burden and equality in enjoyment of the fruits of corresponding effort. But when we find that one man who suffers hardships lags behind the other who suffers no hardships and succeeds, there is evidently in this country a lack of justice.
Of course, this is not the time nor the place to discuss this phase of the question, but it is the time and place to draw attention to this spectacle.
There is unlimited scope for producing wheat in Western Australia. Under the operations of the present tariff the raw material, so to speak, of the primary producer is going up in price, but that should not be sufficient to prevent any man from looking for cheap land where it can be obtained.
The DEPUTY PRESIDENT (Senator Plain). - I ask the honorable senator to confine his remarks to the bill.
– I am trying to do that. I am drawing attention to what has been responsible for the introduction of the bill. We cannot consider this measure unless we also give consideration to things that are happening in this country and ought not to happen. I am trying to call attention to the need for a better adjustment of conditions between one section of Australians and another. That is the whole story. One man works 44 hours a week, enjoys soft conditions, and succeeds ; the other works 54 hours a week, and fails. One is bending under a heavy burden borne by the same stick, and the other is walking erect with but a light end of the stick to carry. There is no proper adjustment in that instance.
In the case of Canada the excess of exports over imports runs into hundreds of millions of dollars. Even if we cannot right the balance of trade by getting a bigger production from our vast agricultural areas, we can get our people to produce more from their secondary industries, and so take their place alongside the primary producers in trying to restore the trade balance. That would be another means of righting the balance.
– The honorable senator means that the secondary industries should export?
– Exactly. WhenI was in this Parliament in 1907 I helped to pass an effective tariff for the protection of the secondary industries of the Commonwealth. As any one can see from the Commonwealth Y ear-Book, the exported output of our secondary industries was at that time valued at about £4,500,000. Those figures have not since been increased.
Our secondary industries are nonexistent so. far as the markets of the world are concerned; they are dead. Is it not time, then, that those who have the most influence in the field of industry took notice of the situation that has arisen, and asked themselves why Canada can export over £70,000,000 worth of manufactured goods, whilst the Australian export trade in secondary commodities remains in the neighbourhood of £3,000,000? It cannot be argued that wages in Canada are not as high as they are in Australia, or that the conditions in this country are better than those obtaining in Canada. The root causes lie deeper than that. Is it not significant that the Massey-Harris harvester, which I, in ‘ common with other farmers in Western Australia, use, is of Canadian manufacture? The raw material for that machine is transported over hundreds of miles of railway in the United States of America; it pays a duty at the Canadian border before it is rolled into the component parts that go to make up the MasseyHarris harvester to be seen on so many Australian farms, and, in spite of all these handicaps, it undersells harvesters manufactured in this country under Australian labour conditions. When occasionally I tell these home truths to fellow Australians, I have the finger of reproach pointed at me, and I am described as the “ bosses’ man” or “ the employers’ advocate.” But the clamant question still is, “Why can’t we compete outside Australia in secondary production?”
The Government now seeks to prevent the export of gold. This move is an artificial device to protect us against still more adverse exchange rates. But unless the economic tendency of the times alters, the measure will be quite futile in the future. After all, the remedy is a simple one. If in our- everyday life we produced, and sold as much as we bought, we should not be in our present position. This is the kernel of the whole problem. The pla,in truth is that we are not doing the work, and those people who have the most influence in the industrial world do not exercise it. They know that, if they did, they would lose votes. I have endeavoured to understand the intricacies of the exchange position. I have come to this conclusion : With currency at par value, it follows, as inevitably as night follows day, that the country which produces and sells more than it buys reaches a favorable exchange position; whereas that country which buys more than it produces and sells, finds the discount rates against it. in the world’s money markets. We do not want to operate indefinitely upon- a depreciated currency, such as adverse exchange rates will make, us do. From 1911, as I notice from the quarterly summary of statistics to which I have referred, the value of the sovereign has depreciated to .such an extent that it is now only equal to what 10s. was 27 years ago. Has the lower value of our currency contributed to this low purchasing power? Conditions arising out of the war are not wholly responsible for this unwelcome state of affairs.. We must dig deeper if we are to get at the root causes. But this bill does not provide the opportunity for discussion. I should not have mentioned this phase of the subject but for the fact that Mr. Anstey, a member of the present Government, is known to have flamboyant notions about the manner in which a government may use credit. It has been suggested that this Government ought to use the credit of this country in the same way that an individual operates upon his credit. I would point out to the gentlemen who hold . these views that there are other competent authorities who claim that credit is as good as or better than gold. This may seem to be a contradiction in terms; but it is the truth, nevertheless. Senator Colebatch recently instanced what had happened in connexion with the Kalgoorlie water scheme. I well remember the late Lord Forrest raising a 3-J per cent, loan on the London market to carry out that big undertaking. The loan was issued at par, and so great was the faith of financial interests in London in the soundness of the people behind the scheme, that, within a week or two of the bonds being made available to the public, there were many people prepared to pay £103 for them. In other words, the bare promise of the people of Western Australia to pay £100 for their own stock at a given date, was better than gold to the extent of £3 per centum. Does not this illustration prove that credit is better than gold?
But I was about to tell honorable senators about Mr. Anstey’s views upon this important but delicate subject. That gentleman, in the course of an interview with a representative of the Melbourne Herald, employed a number of ingenious arguments to justify the Government in introducing this bill, and he spoke of the power to expand credit and practise other notions. I should say, then, that Senator R. D. Elliott had every warrant for his feeling of apprehension that this Government contemplated issuing more notes when the Commonwealth Bank had mobilized the gold in the Commonwealth. He said that Mr. Hoover, the President of the United States of America, was favorable to the policy of inflation to meet a temporary financial difficulty in that country. He spoke also of the position in Germany, which country, I remind the Senate, some years exploited the credit of the nation to some extraordinary purpose. “When I hear these advocates of note issue inflation speaking in this way, I cannot help thinking that they would be taught a salutary lesson if, by some turn in the wheel of fortune, the whole of their savings were invested in the purchase of some of the millions of paper marks that were thrown upon the market in Germany. I should like Mr. Anstey, and others who think with him, to get rid of this foolish notion that Ave can make a nation rich by turning to the printing press.
– Mr. Anstey never suggested that that should be done.-
– Mr. Anstey, nevertheless, spoke significantly of the power to issue notes. The purpose of the Government, so we are informed, is to mobilize the gold at present held by private trading banks and bring it under the control of the Commonwealth Bank. Is this a necessary condition precedent to the issue of more paper money? While I am on this subject, let me give honorable senators a humorous illustration of what may happen to the people of any coun try with a depreciated currency. Mr. Lloyd George, a former Prime Minister of Great Britain, when speaking about the evils of an inflated currency, instanced the case of two Austrians, who, it was reported, had each 10,000 florins. One of them placed the whole of his capital in the bank so that he would have a nice little nest egg for a rainy day. The other, not being of such a frugal turn of mind, invested his capital in the purchase of 10,000 bottles of wine. The story relates that he drank the whole of the wine, had a good time, and, becauseof extraordinary depreciation in the currency, the 10,000 empty bottles left in a. heap after his carouse were worth more than the 10,000 florins which his compatriot had placed in the bank.
I intend to support the bill within certain limits. It is some satisfaction to me to know that the Treasurer has so much confidence in the Commonwealth Bank that he does not propose to take any action without consulting that authority. I understand that certain amendments have been circulated in the Senate and that one proposes to place a time limit upon the operation of the act. I, see nothing wrong with the proposal to limit, the operation of the act to a period of twelve months. If, within thattime, it proves to be of substantial benefit to the Commonwealth, and if the importing interests as well as other sections of the community receive a fair deal in the .matter’ of exchange rates, surely when the Government asks theSenate to extend the time limit, there will be no objection in this chamber. Meantime, this proposal needs to be tried and tested. The root causes of our present position must be examined and the corrective applied, otherwise trade. and industry in this country will drift into a hopelessly demoralized condition. In all these financial measures, we must seek to hold the scales evenly between the different sections of the community. We. must see that opportunity is equally distributed. We must resist any attempt to establish geographical prosperity by artificial means and see that the people living in the more remote parts of the Commonwealth are not neglected while others in more “favoured localities are spoonfed.
That is the reason for this bill. I support it, subject to the qualification I have mentioned, for I believe that it is a wise, necessary and salutary measure without which we cannot safeguard ourselves.
– In listening to Senator Lynch I was reminded of a story of a countryman of his who said that he believed that every man should have a home of his own and also one to let. His argument concerning the balance of trade, if regarded from an international standpoint, means that every country should export more than it imports. I leave it to Senator Lynch to tell us where that policy would land us.
– My idea was a more equal balance.
– We heard from the honorable senator some vigorous demands for equality of opportunity for all sections of the community, whether living in rural districts or in urban areas. I welcome my old friend Senator Lynch as a convert to communism. I take it that we can increase production only by getting better rewards for the producers of our primary products. There are two sections of people engaged in primary production - the employers of labour and their employees. If we are going to make conditions so good for the investors in rural pursuits, we must also consider that unless the wage-earners in those pursuits get something like equality of treatment, they, too, will drift to the urban areas. All this talk of reducing production costs is only a roundabout way of saying that wages must be reduced. If we reduce the wages of the rural workers the trend of population towards the cities will become even more pronounced than it is to-day.
– It is not necessary to reduce wages to lower the cost of production.
– All the arguments of honorable senators opposite and of sections of the press are directed to that end.
– That is the honorable senator’s interpretation.
– It is not; it is my reading of plain print. When honorable senators opposite, and those who hold similar views, are asked how to reduce the cost of production they invariably refer to the high wages being paid.
– Or to the hours of labour being too short.
The ACTING PRESIDENT (Senator Plain). - I ask the honorable senator to confine his remarks to the bill before the Senate.
– I thought that my remarks could as easily be connected with the bill before us as were those of the last speaker. If it is in order for one honorable senator to lecture us on the law of supply and demand and the adverse balance of trade, surely it is in order for me to give reasons why that adverse trade balance exists.
The ACTING PRESIDENT.- The honorable senator will be in order in doing that, provided he connects his remarks with the bill before the Senate.
– As the balance of trade is against Australia, I take it that any export of gold which takes place is to even up that balance. In other words, if we do not send abroad sufficient goods to pay for our imports we must pay for them with gold. If that is so, then it is only right that the export of gold should be under control. I do not share Senator H. E. Elliott’s fear that there is danger in the Treasurer of the Commonwealth having a voice in deciding whether gold shall, or shall not, be exported. If we are to separate everything from politics, there will be no responsibility for politicians to undertake. No one knows better than the present Leader of the Opposition (Senator Pearce) that, when the Commonwealth Bank was formed, the most melancholy forebodings were uttered by every member on the side of the Senate which the right honorable gentleman now graces. Everyone then opposed to the Labour party denounced its proposals and fought against that measure from start to finish. It was then said that the establishment of the Commonwealth Bank would do irreparable damage to Australia.
– That does not prove that the Labour party is right, and that we are wrong, on this occasion.
– I do not say so; but when legislation which has been vehemently denounced, and uncompromisingly opposed, proves to be sound, it is fair to say that the party which introduced it is deserving of more credit for political and financial foresight than the party which opposed it. The Labour party has proved its fitness to be trusted with the finances of the country. The only weak part that I see in the present proposal is that the bill’is drafted along lines recommended by the Bank Board, which was established by our political opponents in order largely to emasculate the activities of that bank. That the bill has the Bank Board’s support may be a good argument to place before honorable senators opposite; otherwise it is the least satisfactory phase of the whole situation. I do not deride the possibility of an inflation of the note issue. I know that that can be done. I know, for instance, that, at one time, the German mark became practically worthless. I have kept as souvenirs some German postage stamps which were placed on parcels of newspapers I received from Berlin. Each of the eight stamps had a face value of 16,000,000 marks. To make sure, the value was expressed both in words and figures. A postage stamp of that value will be of interest to future generations. That instance shows what can happen to a paper currency under extreme conditions. Much the same thing happened in connexion with the French franc. I have no doubt that there was some governmental support for the deflation of the German mark and the French franc. ‘
Without dealing at length with the matter, let me say that I believe that the gold standard is largely a fallacy. The question of the credit of a country and the value of its notes is largely determined by the security behind them. It is not necessary that that security shall be gold. At one time Mr. Collins of the Commonwealth Treasury, showed me the strong-room in which the gold reserves for the” note issue was kept. In addition to strong doors, and a wonderful system of clock locks, there were sentries to safeguard the gold. Let us suppose that the millions of pounds of gold in those vaults, kept there as a reserve against the note issue, had by some means been spirited away and sunk in the Pacific Ocean; but that the public was unaware of what had taken place. Would there have been any difference? Would the note issue have been less valuable? Would a fi note have* failed to buy what otherwise it would have bought? But let us suppose that the public apprehended that the gold was not in the vaults. In that case a . panic might have occurred, with disastrous results.
– It would have been very awkward when gold was wanted recently if it had not been available.
– That may be. Nevertheless, the idea that gold itself gives stability to the note issue is, in my opinion, a superstition as useless and surprising as are many theological superstitions. While it is necessary for the Government to have a controlling influence over the gold, I see no danger in the Treasurer acting in connexion with the Bank Board. 1 regard the fears of Senator Pearce as groundless. Surely the right honorable gentleman does not believe that in order to serve his own or his party’s interests the Treasurer will advise the mishandling of the gold reserve. Does he not think that any Treasurer of the Commonwealth would take only such action as he considered advisable to safeguard the country’s credit?
– My criticism was that if the Treasurer did differentiate between firms, motives might be imputed to him.
– There may be something in that contention. Nevertheless, I am of . the opinion that, in practice, the fears expressed would prove to be grounds less. I desire to read a telegram received to-day by one of my colleagues from the President of the Sydney Chamber of Commerce -
At a special meeting of the council of this chamber to-day the following resolution was unanimously adopted, copy of which has been forwarded to the Prime Minister. Resolution reads: “In view of the gravity of the effecton Australia’s credit of any interference with the free flow of gold, either outward or inwards, the Sydney Chamber of Commerce earnestly suggests that the bill to amend the Commonwealth Bank Act, now before the Federal Parliament, should be deferred pending an exhaustive investigation of such a fundamental question by a select committee.”
I do not object to gentlemen of the Chamber of Commerce sending telegrams to my colleagues. I am rather sorry that I did not get one myself.o I realize that they have at all times been such warm supporters of the Labour movement, that we can depend upon them to endeavour to proffer advice when the occasion arises .’
– They at least know something of the subject.
– Possibly, and perhaps the board controlling the Commonwealth Bank also knows something of the subject, even as much as the members of the Sydney Chamber of Commerce.
– The Treasurer may not know much about it.
– If the honorable senator is going to debate the worth of this person and that person’s advice, I may inform him and other honorable senators that I personally know something about finance. For many years I have had to finance myself on a small income. The wives of honorable senators, particularly of those on the Government side, have had to engage extensively in high finance, and they know a good deal more about it than the average man who is able to write a substantial cheque without embarrassment. Those who have had to struggle for existence and make homes, for themselves, know more about finance than do many of those who take it upon themselves to be the high priests of this cult. I for one do not intend to sing small in the presence of those selfconstituted high priests.
It will be interesting for honorable senators to hear a statement made by the ex-Prime Minister, the right honorable S. M. Bruce, on the subject of lobbying. It reads -
I understand that nearly every honorable member has received many telegrams in regard to the proposed increase of the Entertainments Tax, and I much regret that such tactics have been adopted by those engaged in the pictureshow business. Honorable members will, I am sure, resent the insult that is thus being put upon them.
The position of these bodies, which are trading upon their alleged financial knowledge and prof erring advice, is somewhat similar to that of those who opposed the Commonwealth Bank Bill, when it was introduced by the Labour party, in 1910.
Similar arguments were advanced by these great financial experts, who are closely allied with the private banks and whose advice, because their interests lie with those banks, is tainted at the source. The Government would be extremely foolish if it took any notice of their advice. They regard the matter only from the angle which affects their own class interests, and not from the point of view of the interests of the community generally. Consequently, their advice must be taken with a very considerable quantity of salt. Chambers of Commerce and similar bodies are guarding the interests of a very limited section of the community numerically, however great their finances may be. Their opinions are based on a purely sectional and selfish view point.
– They are the star actors in this play.
– I am not so sure of that. The Government is justified in regarding their advice with grave suspicion. Probably the members of the Chamber of Commerce are doing fairly well under existing conditions. The principal thing that makes a man a conservative is the fear that any change may injure him although, generally, it may benefit the community.
– Nothing can injure commerce without injuring the whole community.
– A similar statement has been made in regard to private banking. While I do not think that this bill is likely to influence the position, I believe that if hereafter the Commonwealth Bank is used to the fullest extent, as a trading bank, and ultimately destroys private banking, it will be in the interests of the community.
– Now the cat is out of the bag.
– Not at all. That is a plank from the platform of the Labour party. If honorable senators opposite would exercise common sense and become familiar with the platform of their opponents they would achieve something creditable. I always consult the most conservative newspapers and periodicals in order to learn the views of my political opponents. Surely honorable senators opposite might, in justice to this party, learn what it proposes to accomplish. The possession of such a knowledge would obviate their making such foolish exclamations about the cat being out of the bag. As far back as 1900 the New South Wales Labour party had as one of its planks the establishment of a national bank, while the Federal Labour party has for many years supported the nationalization of banking. However, this bill has no direct connexion with that desire. I should rejoice if we did introduce a measure that would bring about the gradual destruction of private banking, and concentrate all banking in the Commonwealth Bank of Australia. I believe that that project will have the support of future legislators, just as the present Commonwealth Bank has the support of the people who were originally opposed to it. Honorable senators opposite now regard the Commonwealth Bank as a very necessary and useful institution.
– Why did not the Queensland Labour party nationalize banking when it had the opportunity?
– I do not know why Queensland had not more brains than any other State. I do not see why the question is particularly applicable to Queensland.
– Only because the Labour party failed to nationalize banking when it had the power to do so.
– It realized that the nationalization of banking should be a Commonwealth, and not a State effort. It must be generally realized that while States can conduct their own savings banks, banking generally is one of the functions specifically allocated to the Commonwealth under our constitution.
– The nationalization of banking would probably be a3 successful as was the Commonwealth Shipping Line.
– Had we had nationalization of banking in conjunction with the Commonwealth Shipping Line both industries would, probably, have been successful. However, I shall not now debate the merits of the Commonwealth Shipping Line. I do not see any danger in the proposal of the Government. I do not anticipate any vital change as a result of the operation of the measure. I realize that while we have a bank notes law that compels us to keep a sufficient gold reserve it is but a natural corollary that we should have control of the gold of the country. Otherwise it might be sent abroad to such an extent as would imperil the reserve that we are supposed to hold against the note issue.
– If you do not export gold you have ‘to pay in another way, through a higher exchange rate.
– I shall not take up the time of the Senate in debating the complex problem of exchange. There is no doubt that at present private firms may obtain gold and export it in considerable quantities for reasons which, while they may be to their advantage, may endanger the credit of the country. It is, therefore, only right that power should be given to the Commonwealth Government to control the export of gold. No other institution is better fitted to exercise thai function than the Commonwealth Bank, and the power must ultimately be vested in the Treasurer, as that bank is a Commonwealth Government institution. I believe that no serious complaints will be forthcoming when this bill becomes an act. There is no reason why its operation should be made terminable in twelve months. I should not object if such a provision were made generally applicable to measures as Parliament would be able to judge as to their utility, and re-enact them when necessary. But there is no reason why this specific measure should be singled out for the application of a time limitation. There is one definite reason why that limitation should not be imposed. It might be possible for the gold of this country to be so manipulated that the parties whom it would suit to do so, could arrange to hold over the actual export of gold during that twelve months and, at the expiration of the period, utilize the state of the market for their own profit, but probably to the detriment of the community and the danger of the credit of Australia. There is an established method of conducting a country’s business, the basis of which is the provision of a substantial gold reserve. As I have stated, there is no reason why this measure should not be passed without any limitation as to the time it is to remain in operation.
– After having read what Mr. Snowden has said on this subject I hesitate to express an opinion upon it. However, I welcome its introduction by a Labour Government, because it shows me that at least it is beginning to realize the difficulties of our economic position, which has arisen in consequence of the artificial conditions under which we are living. The Government must also recognize the fact that if Australia is going to improve its position, we must develop those of its industries that man provide a surplus for export. If we continue as at present, we shall prevent the development of those industries, including the production of gold, which, owing to the artificial conditions under which we are living, has almost ceased. The cost of production, which has been referred to by some honorable senators, has had the effect of making it impossible for us to develop the great metal and other resources of Australia. From that view-point, I welcome the introduction of this bill, and trust that it will prompt the members of the Government and their supporters to delve more deeply into the economic situation. I think it was Senator Thompson who compared the financial position of Great Britain with that of Australia, but I cannot see that any reliable comparison can be instituted when Great Britain is a creditor nation and Australia a debtor nation. In Britain, the gold supply is controlled by increasing the interest or discount rates, which has the effect of bringing back into the coffers of the banks, the supply of gold necessary to meet requirements.
– Did not the war change Great Britain from a creditor to a debtor nation?
– No. Last year the balance of trade in favour of Great Britain was £148,000,000. In that connexion, I am not referring only to trade and commerce, but to the revenue which Great Britain receives from freights,- insurances, and other sources. Great Britain is still a creditor nation and is able to regulate its gold reserves by raising or lowering the interest rate. That is beyond the control of governments.
– London is still the financial centre of the world.
SenatorR. D. ELLIOTT.- Yes, because the British financial institutions are able to regulate the position. We cannot reasonably compare the position of Great Britain with that of Australia, and it is in connexion with that point that I wish to challenge the remarks of Senator Thompson.
It is not my intention to go into details concerning the position in Australia, but I think that we all realize what it really is. Australia is a young country in the process of development, and most of its requirements are coming from outside. If we were proceeding along sound lines we should be developing our own capital by encouraging those industries which could produce a surplus for export. But instead of creating our own capital, we are borrowing. During the five-year period 1923-28, we imported £762,000,000 worth of goods, while our exports for the same period were valued at 718.5 million pounds. The Commonwealth debts overseas in 1923 amounted to 126.1 million pounds, and in 1928 were £206,000,000. The increase in overseas debts for the five-year period mentioned, was 79.9 million pounds, and the total interest paid during that period was 42.4 million pounds. The States’ overseas debts during the same term increased by 77.8 million pounds, and the estimated interest paid by the States on that account was 89.9 million pounds. The summary of these figures disclose that for the five years Australian imports were valued at £762,000,000, for which, of course, payment had to be made abroad. For the same period, the Commonwealth also had to pay interest abroad to the extent of 42.4 million pounds, and State interest was paid overseas to the amount of 89.9 million pounds.. The total payments overseas in this respect, therefore, were £762,000,000 plus 42.4 million pounds plus 89.9 million pounds, or a total of 894.3 million pounds. As against this, our exports were valued at 718.5 million pounds, thus showing a deficiency of approximately 175.8 million pounds. This was met by an increase in Commonwealth borrowing overseas to the extent of 79.9 million pounds, and an increase in State borrowing abroad to the amount of 77.8 million pounds, making a total of 157.7 million pounds. It will, therefore, be seen that we have actually had to borrow capital abroad to pay our interest bill to the extent of 157.7 million pounds sterling.
– We are developing into a nation of interest slaves.
– I am afraid that that is the position which we are approaching. I am glad that honorable senators opposite realize the situation. I feel certain that as a result of this debate they will go even further - if they do they will have the assistance of honorable senators on this side of the chamber - and endeavour to remove the false economic conditions under which we are now operating.
– Does not the honorable senator think that this proposal was initiated not by the Government, but by the Commonwealth Bank Board? Action was recommended by the Commonwealth Bank Board.
– I am not surprised at that, in view of the figures I have quoted. The Board of Directors of the Commonwealth Bank is in a position to thoroughly understand the situation on the other side of the world. This it has impressed upon the Government of the day, and I trust the result will be of great advantage to the Commonwealth. I am afraid, however, that this measure will tend to make the Commonwealth Bank enter into such active competition with the banks of issue that our whole economic structure may be materially affected. Those in control of the banks of issue are authorities on not only Australian but also international finance. They have been born and bred to the business. The banks of issue are operating not only upon their own resources, but also on the resources placed at their disposal by depositors throughout Australia. These banking institutions regulate the exchange position, and any honorable senators who may be importers, and have had transactions with these institutions during the last six months, will doubtless say that they have been requested to review their requirements from abroad, and to make a considerable deduction in importations during the next twelve months. These institutions know the elements operating throughout Australia and on the other side of the world, and are adopting measures to adjust the situation to the advantage of the country.
The bill makes provision for the Commonwealth Bank to control the resources of gold held by the banks of issue. These have been accumulated by the banks merely to protect the interests of Australian industry and trade, to make their position elastic, and to enable them to maintain Australia’s credit overseas. The measure authorizes the handing over of the gold reserves of the banks of issue to the Commonwealth Bank, which is more or less a government institution, with the result that those importing houses which are experiencing difficulty in meeting commitments abroad are now inundating the Commonwealth Bank with offers of their business. If this bill is passed, and the Commonwealth Bank possesses greater external credit facilities than the banks of issue are able to offer, there is a great danger of an unsatisfactory situation arising. I do not think that the Commonwealth Bank will call upon the banks of issue for their total gold reserves. I do not think that the gold will be exported, because Ibelieve that the Commonwealth Bank will be able to make credit arrangements overseas whereby the gold will still be held in Australia, and credit abroad established on that basis. If the banks of issue hand over their gold reserves to the Commonwealth Bank, I do not think their overseas credits will be affected.
– What does the honorable senator mean by the banks of issue?
– I thought that the honorable senator was aware that, in Australia, all the banks, other than the Commonwealth Bank, are known as banks of issue. If the Leader of the Government in this chamber can assure the Senate that arrangemnts will be made to preserve the external credit of the banks of issue, the Government will have no difficulty in securing the unanimous support of the Senate to this bill. Reference has been made to the Commonwealth Bank as a central reserve bank; it is not now functioning officially as such. If it is the intention of the Government to make the Commonwealth Bank a central reserve bank, or divide its activities by having one section conducting business as it now island another acting as a central reserve bank, that would have the effect of steadying the position and would satisfy traders, bankers and the financial authorities in Australia and on the other side of the world.
– It has the necessary powers at present; but nothing in that direction has yet been evolved.
– There is a great fear on the part of some that the Government may interfere with the note issue. I do not fear that at all, because I think the world has had such an experience of the inflation of currency during the last ten or fifteen years that if would be only a very courageous government that would attempt to dabble or in any way interfere with this very delicate system.
– There is a margin now on which operations in that direction could be conducted, if desired.
– There is; but I do not think the Government will abuse its privileges. Finance and industry are inter-dependent. The two sections resemble, scissors blades - unless they work together neither has any effect. I have no great fears concerning this bill. I welcome it, particularly as it has been introduced by a Labour government, and I hope that the necessity for its introduction will lead members of the Government and its supporters to look below the surface. If they do that they will realize the false economic position into which Australia has drifted.
Senator Sir JOHN NEWLANDS (South Australia) [5.30].- This bill, which, subject to certain amendments, I intend to support, is rather disconcerting, because we have had varying opinion concerning it expressed in very excellent speeches by honorable senators who know something about finance, and know from their own experience what are the safest steps to take for the maintenance of our gold reserve. I do not intend to say very much on that subject. My principal purpose in speaking is to put forward a plea in support of an application that has reached us from South Australia on behalf of the State Savings Bank there. The trustees of that bank ask why the Commonwealth Government should seek to take from the institution the gold that has been deposited in it. The trustees of this bank have been in charge of it for many years; they are all well known in South Australia, and their capacity to control their gold reserve is respected on all sides. They are of opinion generally that if the Commonwealth deprives the banks of their gold reserves, the Commonwealth Bank should establish such effective’ credits in London that the abstraction of the gold from the vaults of the banks will impose no hardship on their operations. Savings bank business is very peculiar. As explained last night by Senator McLachlan, very little serves to upset savings bank depositors and cause them to start a run on the banks in which their savings are deposited. For tha.t reason the trustees of the State Savings Bank in South Australia are anxious that nothing may happen to affect the confidence of their depositors and cause a serious run on their bank. They urge that the gold reserves of State savings banks should be exempt from the provisions of this bill. It seems to be unnecessary for the Commonwealth to take into its possession the gold on deposit in institutions over which State governments have full control-. A great deal of money is on deposit in these banks, and one can imagine the effect Commonwealth interference is likely to have on the arrangements that have been in operation for many years past. Any alteration likely to affect those arrangements is looked upon with a great deal of suspicion by depositors.
It is scarcely wise for one who does not claim to be familiar with banking law to speak at length on this measure, but to me the first part of it seems to be good ; at any rate, it appears to have the approval of most honorable senators. Suggestions have been made by the right honorable the Leader of the Opposition (Senator Sir George Pearce) and Senator Sir Hal Colebatch to amend the second part of the bill, and I shall support the amendment when it is moved, because, in my opinion, banking arrangements which have been carried on successfully for many years in Australia ought not suddenly to be ruthlessly thrown to the winds. The Government should be satisfied that the drastic change it has proposed is looked upon so favorably by honorable senators, and should not demur about accepting an amendment to limit the period of the operation of the bill to twelve months. At the end of that time, if honorable senators find that it has worked satisfactorily, and that the people who are concerned with our finances and our exchange operations are of opinion that it has proved a success, I am sure they will be willing to re-enact it.
.– Every honorable senator will agree with me that the debate on this bill has been of a very high order. I think the representatives of the Government in this chamber should be grateful to the Senate for having discussed it, not from a party political angle,- but from the point of view that appeals to each honorable senator as being in the best interests of the Commonwealth. No more important bill has come before the Senate. It deals with a matter which is vital to the best interests of Australia. The maintenance of our credit abroad on the most favorable terms is the life blood of a young nation like ours. Anything that can be done to make that credit sounder than it has been in the past should meet with general approval. The bill is of such importance that the Government would have been well advised if, having introduced it, it had notified its intention to defer its further consideration until Parliament reassembles next year. That would have afforded honorable senators an opportunity to get into touch with the best minds of Australia on this subject, so that they could have the best information available when it came up again for discussion. However, the bill is with us, and we must deal with it now. I can understand the objections that have been raised by Chambers of Commerce .and other bodies as well as individuals, against the rapid passage of this measure. Senator Bae has stated that, in his opinion, the Chamber of Commerce and other similar bodies take too narrow a view of these questions ; and that their personal interests ave always to the forefront. But the honorable senator must know from his long experience that on the prosperity of our commerce, especially in respect to our commercial relations with the outside world, depends entirely the prosperity of Australia. I can well understand the attitude of the Chamber of Commerce in Sydney, a body held in highest repute by those who think in that part of Australia, a body by whose efforts Sydney, as a commercial centre, has been brought to the position it now occupies. Senator Rae will not deny that upon the prosperity of the commercial life of Sydney depends the prosperity of New South Wales.
– It “depends on the hard work of the toilers.
– We cannot separate the interests of the workers from those of others whom the honorable senator does not include in the category of workers, but yet are the greatest workers Australia has ever had. Our interests are all bound together. No section can suffer without the whole community being affected. It is in the interests of Australia that relations between our commercial people and overseas commercial people should be of the best possible order. It is, therefore, essential for us to maintain our credit abroad on the most favorable conditions possible to the Commonwealth.
Senator Rae also had the audacity to suggest that the primary reason for the establishment of the Commonwealth Bank was to bring about the eventual destruction of the private banks.
– I meant absorption.
– The honorable senator, in his speech, did not suggest the word “ absorption.” He practically said that it was intended that the private banks should meet with destruction. He has forgotten, in his ingratitude, the debt he and we all owe them for their operations before the advent of the Commonwealth Bank. What would be the position of Australia to-day if we had not had the benefit of the guidance and advice of the private banking institutions of Australia? Honorable senators appear to forget that if the private banks are destroyed as a result of the operation of this measure, hundreds of thousands of small shareholders of those banks will suffer very grave financial losses. Furthermore, if, by any legislative action, we impair the efficiency of ‘ the private trading institutions, to that extent must we impair the credit of the Commonwealth, and I am afraid it will take Australia a very long time to recover from the effects of that policy.
– Depositors in private banks will simply transfer their deposits to the Commonwealth Bank.
– There is no suggestion in the bill that the Commonwealth Bank will acquire, at their market value, the assets of private banks that may be taken over; but if I understand aright the underlying purpose of those extremists who favour this course, no compensation will be paid for destroyed credit. They believe in confiscation of assets.
– Or starving the banks to death !
– Unfortunately, there is good reason for the fear that a certain section of Government supporters is not averse from confiscation. One honorable senator, at all events, is not afraid to state openly what a certain section of the community is out to accomplish.
Although an issue which was raised by Senator Lynch may not be quite relevant to the subject matter of the bill, it certainly deserves more attention than it has received hitherto. The most urgent need in Australia at the moment, is greater production in both our primary and secondary industries so that eventually we may strike a favorable trade balance.
– When the bounty on the export of evaporated apples, about which the honorable senator has been speaking so much of late, is granted, we may do something to correct our adverse trade balance.
– It is a matter, of indifference to me in what light the honorable senator views that proposal. My chief concern is to ensure greater production in all branches of industry, and I feel justified in putting forward any proposal to that end. Undoubtedly, Senator Lynch put his finger on the weak spot in our trade position when he spoke of the absolute inability of Australia to produce to a greater extent owing to the great handicap under which we are labouring - our excessive costs of production. The right honorable the Leader of the Opposition (Senator Sir George Pearce) has circulated a number of amendments which he proposes to move when the bill is in committee.
– It is not competent for the honorable senator to discuss at this stage the merits of amendments that have been circulated.
– I do not proposeto discuss the merits of the amendments, but I do intend to speak of the demerits of certain provisions in the bill. Subsection 3 of proposed new section 7c states that, after the issue of a proclamation that a state of emergency has arisen, the board shall refer to the Treasurer with a report thereon any application received for permission to export gold ; and the following sub-section enacts that the Treasurer” may, within his absolute discretion, approve or refuse approval to any such application. I strongly disapprove of the latter provision, not because the Treasurer is a Labour Minister, or because I wish to cast any reflection upon his administration of the finances. I object to it because the financial barometer in other countries is so sensitive that if there is the slightest suspicion that political influence will be brought to bear upon the Commonwealth Bank, our credit abroad will be seriously impaired. I firmly believe that the best interests of Australia will be served if, in this measure, we prevent absolutely any political interference with the administration of the Commonwealth Bank. We cannot afford to introduce any provisions that may create a feeling of uneasiness in the minds of those who would be our creditors as regards our trade relations with the Mother Country. For this reason any amendment in the direction which I have indicated will have my support. It has been suggested also that it would be advisable to restrict the operation of the bill for a specified term. I have no fault to find with that proposal. This legislation is the first of its kind introduced in the Commonwealth Parliament, and, therefore, must be looked upon as an experiment.
– All legislation is experimental.
– I do not agree with the honorable senator. I could mention many measures which are dealt with from time to time and which certainly are not experimental, since they are based upon experience. If we limit the operation of this bill to a definite period, we shall have an opportunity,, should the occasion arise, to deal promptly with it. If amendments such as have been indicated are inserted in the bill, good results should accrue to the trading community, and its effect on the community generally should be beneficial. -
– The Ministry has every reason to be pleased with the reception of the bill. It has not been discussed from the point of view of party politics, because honorable senators on both sides realize that it affects the trading position of the Commonwealth, and all are anxious that nothing shall be done by legislation to impair the national credit. I am glad that those who have taken part in the discussion recognize the importance of encouraging primary production, because the necessity for this bill is entirely due to the fact that, unfortunately, the value of our wool has declined - it is estimated that the revenue from this source will be £20,000,000 less than has been received in former years - and also because, unfortunately, wheat production has declined very substantially. In the circumstances, I should have expected the Government to accompany legislation of this nature with a statement of general policy for the encouragement of primary production, to stimulate the export of our wool, wheat, timber, gold and other metals upon which the prosperity of the Commonwealth depends. I regret that, almost concurrently with this bill, the Minister for Trade and Customs (Mr. Fenton) has introduced a new tariff schedule which will press very heavily and unfairly upon the whole of our export industries.
The bill is divided into two parts. The first deals with the mobilization by the Commonwealth Bank of the gold resources of the Commonwealth. Very little objection has been taken to this proposal. I have heard no complaints from the private, banking institutions which are most vitally interested in it, since they all hold considerable gold reserves, so it is probable that the Government’s policy will meet with their approval. But there is an entirely different feeling with regard to the second part of the bill, under which the export of gold can be prohibited by the Treasurer. It would appear that the Government has not been guided by the letter from the Chairman of Directors of the Commonwealth Bank, which was read by the Treasurer when moving the second reading of the bill in another place. I have compared the provisions of the bill carefully with the terms of the letter referred to, and I find it provides that, after the issue of a proclamation declaring that a state of emergency has arisen, there should be no export of gold from the Commonwealth without the permission of the Treasurer in writing.’ This provision is entirely opposed to the representations made by the board under that heading. Not only is it at variance with the advice given by the board, but it is also opposed to the views expressed by Mr. Philip Snowden, the Chancellor of the Exchequer in the British Labour Government, in an address delivered at a conference of the Labour party at Brighton, England. Mr. Snowden declared that the Treasury had no control over the bank rate. This responsibility, he added, rested entirely with the Bank of England. It will be seen, therefore, that this Governments proposal to give the Treasurer power to place an embargo upon the export of gold is entirely opposed not only to the views of the Commonwealth Bank authorities, so far as we can find them expressed, but also is at variance with the practice in Great Britain. It is doubtful if this power to prevent the export of gold should be exercised at all under conditions that are likely to obtain in the near future, but, if the occasion should arise, authority to use the power should be vested in the Commonwealth Bank, not in the Treasurer.
– Or by the Minister for Trade and Customs.
– No. The Minister for Trade and Customs has certain powers under another act, but they were not intended to be used for a purpose of this kind without the consent of Parliament. I congratulate the Government in that it has sought Parliamentary approval to the proposed power for the prohibition of the export of gold.
-Isit not a fact that the prohibition of the export of gold is definitely vested in the Commonwealth Bank in the first instance by this bill?
– No. Under the bill the power to acquire gold is vested in the bank; but the power to export it, or to prohibit its exportation, is placed in the hands of the Treasurer. No gold may be exported without the approval in writing of the Treasurer. I hope that that power will not be vested in the Treasurer, but in the Commonwealth Bank Board. To prevent the export of gold would be to break down the gold standard in Australia; for practical purposes it would make the Australian note inconvertible. That would mean a departure from the gold standard, which is recognized throughout the world as the best method of exchange. Any departure from the gold standard would result in a revival of the exchange difficulties of wartime, when it was frequently impossible to’ get money from England to Australia. At that time sovereigns in Australia were worth from 20s. to 30s. in Australian notes. We do not wish for a recurrence of that unsatisfactory state of affairs. I hope that whoever is vested with the power to prohibit the export of gold, will exercise that power with discretion. That is particularly necessary when we reflect that a shortage of real money, which would arise from a departure from the gold standard, would result in the interest rate increasing. That would, in turn, mean increased prices for the goods we purchase, increased cost of living, and further unemployment. When conditions similar to those which now confront us faced New Zealand, the banks there, in which the Government had a controlling interest, decided to increase the bank rate as a remedy. After eighteen months it was found that the position adjusted itself. Conditions in Australia are similar to those in New Zealand, so that the experience of that dominion is valuable. The same thing happened in England. It is referred to by Mr. Snowden in the speech from which I quoted just now - “ Nobody likes a high bank rate,” Mr. Snowden said, “but in this rather imperfect world we are sometimes compelled to submit to things we do not like, afraid that, if we do not, the consequences may be still more disagreeable.”
The Commonwealth Bank might well consider whether that is not the real solution of our present financial difficulty.
During recent years trade has moved so rapidly that the banks have actually imported into Australia £10,000,000 in gold since the war. With the ebb and flow of trade that amount, and other sums in addition, have since flowed out again. There is nothing before us to show whether the Government consulted the associated banks of Australia before introducing this bill. One would think that, in a matter of this nature, so vitally affecting trade and commerce and the life of the people within our borders who depend on credit, the Government would have consulted the associated banks and placed their views regarding the bill before the Senate. Both in peace and in war these institutions have done their utmost to assist the Government in the development of the country. I suggest that the Government should consider seriously the establishment of a central reserve bank in Australia. I feel sure that such an institution would receive the practical support of the trading banks. If a central reserve bank were established all the gold in the Commonwealth would naturally gravitate to it. While I hope that the Commonwealth Bank will become a central reserve bank, I point out that it is difficult for an institution to be both a central reserve bank and a trading bank. A central reserve bank should not trade, for, if it does, then it is in no better position than are the other banks, in times of depression.
SenatorRae. - Does the honorable senator suggest that the Commonwealth Bank should be turned into a central reserve bank?
– I think that would be best; but, alternatively, a separate branch of the Commonwealth Bank could be established in the same way as we now have a savings bank branch. It would be better to convert the Commonwealth Bank into a central reserve bank than to vest in the Treasurer the power to interfere with the export of gold from Australia.
I have here an extract from a very informative article by J. B. Brigden, Professor of Economics in the University of Tasmania. Referring to the bill now before the Senate, Professor Brigden says -
It is unfortunate that the Government has found it necessary to control the export of gold, it should have been sufficient to have given the Commonwealth Bank power to requisition the gold held by private banks. The controlof gold export implies a possible refusal ofgold to pay debts abroad, which possibility is itself a shock to our credit. The debts are incurred in gold, and if there is any doubt us to payment they immediately become insecure.
There is also a real danger of inflation once the Australian pound becomes practically inconvertible. The Government might need all its moral strength to resist the demand for currency inflation in the near future. And with unemployment rife and depression upon us it will not be easy to convince ardentadvocates that a small degree of inflation is bad. Every degree can be a small one. It could take place in Australia without reducing the proportion of gold reserve to the note issue, and without requisitioning any of the gold held by the private banks. It could take place merely by preventing the export of gold and by absorbing the current production. It was the control of export that made possible the inflation of currency during the war. If the normal production of gold were added to the note issue reserve, that reserve would he increased by about 10 per cent. in one year. The increase could even be anticipated, and in view of the Government’s pledge to assist in the development of existing gold mines that increase might be stimulated by subsidies.
A permanentchange of the character suggested should not be rushed through Parliament merely because of a temporary emergency.It should be considered very fully as part of the Government’s general banking policy, and with a more complete realization than at present seems to exist of the effects both here and abroad. In the circumstances an assurance that there will he no increase in the note issue would be of very considerable value.
I commend those remarks to the consideration of honorable senators. I should be pleased if, in his reply, the Minister would give us an assurance that the inflation of the note issue is not proposed as a consequence of the Commonwealth Bank getting hold of the gold reserves of Australia, and the Treasurer having the power to prohibit the export of gold. It is idle to deny that, throughout Australia, there is considerable anxiety because of the rumours that the Government’s intention is to inflate the note issue.
Senator Colebatch suggested that the bill should be amended so that it would not apply to gold which, will be. produced in Australia after this measure becomes law. That is very important. If the export of gold is prohibited, then gold will again be at a premium. If we compel the mines to sell their new production to the Commonwealth Bank at par, they will be heavy losers. That is made evident in the report of the royal commission on the disabilities of Western Australia. When the mining industry applied for a bonus of £1 per oz. on the production of further gold in Australia, the chairman of the Disabilities Commission reported as follows : -
I am not prepared to recommend the full amount of the bonus asked for - 20s. per oz. - for the reason that, in February of this year, a deputation representing the Chamber of Mines of Western Australia waited upon the Commonwealth Treasurer (the Hon. Earle Page) at Kalgoorlie, and placed before him the following proposals for the assistance of the gold-mining industry: -
Five per cent. subsidy on value of gold production for a period offive years.
Miningcompanies to be exempt from income tax until subscribed capital returned.
Commonwealth Government cooperation with State Government in providing £1 for £1 expenditure on mine development and rewards for new discoveries.
Revision of customs duty on machinery, &c., required in mining where such requisites are not obtainable on a commercial basis in Australia.
That all necessary ingredients for the local manufacture of mining explosives be admitted into the Commonwealth free of customs duty, irrespective of the country of origin.
Reductionby the Commonwealth Line of Steamers of freight on cyanide shipped to Australia.
Every assistance to be given by the Commonwealth Government to the goldmining industry to preserve the right to sell its products in the best market.
Mr. Hamilton, manager of the Great Boulder mine and chairman of the Chamber of Mines in Western Australia, when asked why representatives of the gold-mining industry were asking for 20s. per oz: instead of 5 per cent. said, in effect, that having gone deeper into the matter they concluded that the. former proposals were altogether insufficient to revive the industry. He added, “ I may say that when those proposals, Nos. 1 to 7, were put forward, the gold premium was 15s. per oz. ; but at the present time we receive no premium.
Sitting suspended from 6.15. to 8 p.m.
– The seventh of the proposals that I have read is a most important one. It will be realized how important it was to that great industry that an open market for the sale of gold won from the bowels of the earth should be retained. I shall now read the recommendation of the chairman of the royal commission, the Honorable W. G. Higgs, who was at one time Federal Treasurer. He advocated -
I suggest that we cannot better balance our national ledger than by increasing the production of gold. At a time when there is talk about giving the Commonwealth Treasurer power to restrict the export of gold, how could we better meet the position than by carrying into effect the recommendation of the Honorable W. G. Higgs, and granting a bonus for gold production ?Far better than to prohibit the export of gold wouldbe the adoption of the recommendation of that independent tribunal. That would bring about an increased production of the precious metal. The more gold that is won, the more fresh wealth we acquire, the better. We are talking about the restriction of gold export, but the better plan would be to encourage the production of gold in Australia. Let us have the two things concurrently. I am confident that if that recommendation were put into effect, mines that have a bountiful supply of low grade ore would be reopened.
If this bill is not altered to grant exemption to prospectors and gold-miners to enable them to sell their gold” in the open markets of the world, a fresh and heavy disability will be imposed upon the gold-mining industry of Australia.
– Has the honorable senator any idea as to the comparative prices they would obtain in the open market as against those they would get if the measure was in operation ?
– The prices would depend entirely upon the extent to which our bank notes depreciated locally. I cannot forecast what that will be, but during the period of the last embargo, which occurred during the war, it was possible to obtain from 25s. to 28s. for a sovereign almost anywhere in Western Australia. We in Western Australia have a very unhappy recollection of what was known there as the “ gold steal “ that took place during the war, as a result of the embargo on the export of gold. The gold producers of Western Australia were robbed during the period that the export of gold was prohibited to the extent of £2,000,000 by the Federal Government. The effect was that the production of the Kalgoorlie and other mines, especially those working on lower grade ores, was greatly reduced. I hope that the Government will accept an amendment to this bill that will prevent any recurrence of that “ gold steal.”
– Did that occur because of the prohibition of the export of gold ?
– Yes, because the Commonwealth Government of the day took all our gold production and paid for it at a price below world’s parity.
– Then the Australian pastoralists had better lock up their stud rams, because the export of those animals is prohibited.
– I do not see any connexion between the two subjects.
– They are connected, as a prohibition operates in each case.
– That “ gold steal “ occurred because of the prohibition and the depreciation of currency. The Commonwealth Government thus mulcted the gold producers of Western Australia to the extent of £2,000,000.
– The Mount Morgan Gold Mining Company Limited lost a good deal over that prohibition, but we in Queensland did not term it a “gold steal.”
– The gold producers of Western Australia are very bitter on the subject.
– What price per oz. did the Commonwealth pay?
– I think ti that it paid the ruling price, £3 17s. per oz., plus a small but varying premium. The acceptance of that price and premium combined resulted in a loss to the gold producers of Western Australia of £2,000,000. That was the difference between the mint and the market prices. It is because I remember that “gold steal “ so vividly that I issue this protest against legislation which will permit its recurrence. That prohibition was enforced under the provisions of the War Precautions Act, and the Senate had no opportunity to debate the matter. We now have proposed legislation on the subject before us. I hope that the Senate will not permit the introduction of a provision that will impose another injustice on the gold producers of Australia.
– I do not intend to deal at any length with the bill that is before the Senate, as I consider that the subject of finance is a special study. I shall consider the measure from the point of view of the primary producers of Australia, and particularly from that of our wool and wheat growers. Those two types of primary producers have, to a large extent, to depend upon preliminary finance to enable them to market their crops and clips. They have to depend upon the world’s market, an outside one, for the sale of their products.
I doubt very much whether it is advisable to vest the complete control of our gold resources in the hands of one concern. We have to remember that it is chiefly through the private enterprise of private banks and private concerns that Australia has attained its present standard of progress. It is by the assistance of the private banks that the development of our large grazing and wheat growing areas - in fact, the development of Australia generally - has been effected. Although I am probably not in a position to judge, it appears to me that the withdrawal from those banks of their main asset, the gold reserve, might have a detrimental effect upon their business activities. I have in mind what occurred in February, 1924, when the Yokohama Specie Bank applied to the Note Issue Board for the loan of £400,000 against £400,000 in gold. The Note Issue Board refused to grant the advance, and, as a result, wool declined to the extent of from 3d. to 4£d. per lb., due to the lack of competition from Japanese buyers. Not only was that an enormous loss to the wool-growers of Australia; it was a severe blow to our national credit generally. About the same time the Bank of New Zealand applied to the board for an advance of £200,000 in notes against £200,000 in gold. That request was also declined. Probably that action was sound. from the point of view of the Note Issue Board, but it must be remembered that our primary products are of a seasonal character, and that a great deal of elasticity is needed in regard to their financing. I maintain that through those two actions of the Note Issue Board those concerned temporarily lost touch with the position in the Commonwealth, and a considerable amount of wealth was lost to Australia. That kind of thing might recur.
I have no intention directly to oppose the bill, but I consider that it should be placed on trial for a period in order that we may judge its consequences. If its operation is as successful as we all hope that it will be, there should be no difficulty in effecting its renewal. Everything possible should be done by all sides of political thought, and also by all interested in the financial concerns of Australia, to make the project a success, and to place the finances of Australia on a sound working basis.
– I desire to thank honorable senators for the careful consideration which they have given to this bill. After the debate had proceeded for some time, I was inclined to the opinion that the Senate was getting as near as possible to the position which Senator R. D. Elliott desired ; but as the discussion went on it became apparent that some honorable senators were dealing with the bill on strict party lines. I think I can say, however, that we are all in agreement upon one of the main principles embodied in the bill - the mobilization of the gold reserve of Australia - but there is considerable difference of opinion between the Government and the Opposition concerning the restriction proposed to be placed on the export of gold. Certain fears were expressed by the Leader of the Opposition (Senator Sir George Pearce), and in the important position which he occupies,, the right honorable gentleman was justified in sounding a note of warning. Although doubt was expressed by some concerning the necessity of placing an embargo upon the export of gold, I think it is generally admitted that occasions might arise when the export of gold should be prohibited, and that legislation should he passed in that regard. Honorable senators having agreed with the Government on the two main principles of the bill, I ask them to consider, from a non-party and purely Australian standpoint, the means by which the Government is attempting to render effective the principles embodied in it. Considerable exception seems to have been taken to the fact that the Government proposes that the Treasurer shall be the person who shall have the final word in determining whether gold shall or shall not be exported. I remind honorable senators that, before the Treasurer c»,n. act in that respect, the Board of Directors of the Commonwealth Bank must initiate the proceedings. Upon the issue of a proclamation”, and not till then is the Treasurer empowered to act. The Senate has therefore to decide the extent to which we are to depart from the British system of parliamentary government. Are we to transfer what is properly an executive power to some other authority? There is no necessity for me to remind honorable senators that, in the main, the Australian parliamentary system is based on the British parliamentary system, and that right down through the ages the office of Treasurer has been regarded as the most important portfolio in a British Cabinet. In effect, the members of the Opposition are asking the Government to depart from a recognized system and introduce a novel method.
– The Chancellor of the Exchequer does not possess the same powers as the Government proposes to give to the Treasurer under this bill.
– I shall deal with that particular point in a moment. It is the duty of the Opposition to assist us as far as possible in following the British parliamentary system, consistent, of course, with our general parliamentary procedure.
– So long as that system is adapted to Australian conditions.
– Yes. I propose to quote from Dicey, a leading constitutional writer of the day, who, after referring to other constitutions, deals with the Australian system of government in thi? way-
The true reason, it . may be conjectured, why Australia has decisively adhered to the system of cabinet government is that a parliamentary cabinet is the only form of executive to which the statesmen, either of Australia or of England, are accustomed -
The pioneers who blazed the track in Australia were accustomed to the British system of government, upon which our parliamentary institutions have been founded. I ask honorable senators opposite if they think they will be justified _ in attempting to amend the measure in committee, by giving the control, which should rest with the executive, to some outside body? The quotation continues -
In one point, indeed, the executive of Australia may appear to bear an even more parliamentary character than does an English cabinet, for whilst, in theory at least, a statesman might be the member of an English Ministry, though .he were .not a member” of either House of Parliament, no Australian Minister can hold office, i.e., in effect, be a member of the Cabinet for more than three months, unless he becomes a senator or a member of the House of Representatives. But here Australian statesmanship has followed the connexions rather than the law of the English Constitution, for in practice an English cabinet always consists of mcn who are members, or who will become members, either of the House of Lords or of the House of Commons. Indeed, it is worth remark that in several instances where the Australian Constitution deviates from that of England, the deviation is caused by the desire to follow the spirit of modern English constitutionalism.
We should advance a step further, and consider the position of the Treasurer and also the Commonwealth Bank in relation to this Parliament. .The Treasure^ as a member of the Cabinet, will, under this measure, be authorized to exercise discretionary powers. Is that discretion to be fettered by the addition of another body to the particular person who has to come to a decision? The Treasurer, as a member of the Cabinet, is subject to the criticism of Parliament. In that regard I quote the powers which Parliament has over the Treasurer and which it does not possess over the Commonwealth Bank -
The essence of responsible government is, that mutual bond of responsibility one for another, wherein a government, acting by party, go together, frame their measures in concert, and where if one member falls to the ground, the others, almost as a matter of course, fall with him.
After a proclamation has been issued the Treasurer exercises a discretion in accordance with that principle. Parliament has the right, not only to displace the Treasurer, but also the Government of which he is a member. Can it do that with the Commonwealth Bank? The Commonwealth Bank Board is not under our control; Parliament has no right to interfere with the discretionary powers of the board. It has been suggested by some members of the Opposition that we should dispense with one of the main principles of our Parliamentary system because the Labour, party is in power.
– No. We made it quite clear that our opposition was not due to any such reason.
– I am pleased to have the assurance that such is not the case. Then upon what grounds do honorable senators opposite justify a departure from the present system? The Leader of the Opposition (Senator Sir George Pearce) attempted to justify his criticism in this respect by referring to the provisions of the Dried Fruits Export Act. He said that dried fruits cannot be exported from Australia without the consent of the Dried Fruits Export Control Board, and that in that respect Parliament had transferred its discretionary powers to that body. Parliament has not done anything of the kind, as the Customs Act enables the Minister for Trade and Customs to prohibit the export of dried fruits. It is not the board which has the right to prohibit exports, but the Minister for Trade and Customs. It has been said that the Government could have rested on its oars when once the Parliament had agreed to the mobilization of gold, and left it to the Minister for Trade and Customs to prevent its export. The Government was actuated in adopting the method provided in the bill by the fact, that the Treasurer is the most suitable member of the Cabinet to deal with such a subject. An honorable senator said last night that there was no reason to provide for further than a mobilization of gold in Australia, and to provide for an embargo against its export, in view of the provisions of the Customs Act, but this measure is to make the control more effective. What would happen if we deleted the provisions in the bill relating to the export of gold? The Minister for Trade and Customs would then have to decide the momentous question of whether gold should or should not be exported from Australia ; that Minister has no control over the Commonwealth Bank.
– Has the Treasurer any control over that institution ?
– Yes. The Treasurer has control when it is a matter of dealing with national questions such as that now before the Senate. The Treasurer is not concerned with the internal management of the bank; he is content to leave its management in the hands of those specially trained in the work; but when it is a matter involving the national credit of the country, the Treasurer stands between the Commonwealth Bank and Parliament. The Australian notes bear the signature of the Treasurer or such officer of the Commonwealth Treasury as the Treasurer directs. That is provided for in the Commonwealth Bank Act. Commonwealth notes, even though signed by representatives of the Commonwealth Bank, are signed by the Treasurer or by a representative of the Treasurer.
– The bank notes bear a printed signature. The Secretary to the Treasury does not sign a single note personally.
– That is a mere quibble. I am sure it will not be necessary for me to explain what constitutes a signature. In any case the principle involved is the same. Before a note goes into circulation it is the Treasurer who must sign it.
– The signing of a bank note involves no responsibility.
– That is a queer statement from one who is supposed to represent the nation. If the destinies of the currency of Australia rested on a man whose mentality is capable of that interjection there might be ground for fear.
– The note is also signed by the Governor of the Commonwealth Bank.
– The note bears the signature of the Treasurer or his nominee, and that of the Governor of the bank or his nominee. Another section of the Commonwealth Bank Act designed to protect the currency itself is as follows -
Every person who, without the authority of the Treasurer (proof whereof shall lie upon him) makes, or has in his possession -
any copy of an Australian note, or
any writing, engraving, photograph or print resembling an Australian note or apparently intended to be or pass for a copy of an Australian note, shall be guilty of an offence.
Eight through the Commonwealth Bank Act, wherever the interests of the nation are involved as opposed to the administration of the finances of the bank itself, the Treasurer bears the responsibility. This has been deliberately done with the desire to act consistently with the principles upon which any British Parliament would legislate for this purpose..
Last night Senator Colebatch referred to what he described as the very wide difference between this bill and the English legislation. Let me demonstrate, by quoting the sections of the English act, how, in the final analysis, the British Treasury is the controlling authority. Section 2 of the Currency and Bank Notes Act, 1928, provides -
The Treasurer may at any time on being requested by the bank, direct that the amount of the fiduciary note issue shall for such period as may be determined by the Treasury, after consultation with the bank, be reduced by such amount as may be so determined.
Section 3 of the same act provides-
The bank shall, from time to time, give to the Treasury such information as the Treasury may require with respect to the securities held in the issue department, but shall not be required to include any of the said securities in the account to be taken pursuant to section 5 of the Bank of England Act, 1819.
This report has to be made to the Treasury which stands between the banking interests and the nation. Section 8 provides -
If the bank at any time represent to the Treasury that it is expedient that the amount of the fiduciary note issue shall be increased to some specified amount above two hundred and sixty million pounds, the Treasury may authorize the bank to issue bank notes to such an increased amount, not exceeding the amount specified as aforesaid, and for such period, not exceeding six months, as the Treasury think proper.
The other English act bearing on this subject shows that the British Parliament has passed legislation exactly similar to ours, retaining a Parliamentary right which has come down to us through the ages that responsibility should rest on an executive officer, whose actions may bring about the fall of a Government. Section 11 of the English act provides -
Any person in the United Kingdom owning any gold coin or bullion to an amount exceeding ten thousand pounds in value shall, on being required so to do by notice in writing from the bank, forthwith furnish to the bank, in writing, particulars of the gold coin and bullion owned by that person, and shall, if so required by the bank, sell to the bank the whole or any part of the said coin or bullion, other than any part thereof which is bona fide held for immediate export, or which is bona fide required for industrial purposes, on payment therefor by the bank, in the case of coin, of the nominal value thereof, and in the case of bullion, at the rate fixed in section 4 of the Bank Charter Act, 1844.
Where a private bank can show to the satisfaction of the British Treasurer that the whole or any portion of the gold mobilized has been contracted for immediate export, it can hold back such portion, provided the Treasurer is satisfied of the bona fides of the transaction.
– And that is as far as it goes.
– But that is the whole point. It is not until that point is reached that the Treasurer’s discretion comes into play. Whether the amount is the £25 provided in our bill or the £1,700 provided in the English Act the principle is the same. A point is reached at which somebody in the interests of the nation must exercise a discretion with regard to the export of gold, and in both cases the person who exercises that discretion is the one who is responsible for the administration of the finances of the country. It is not vested in the Bank of England, nor, so far as we are concerned, in the Commonwealth Bank. Under the English Act the Treasurer has the right to decide certain questions.
– Not if the gold is bona fide held for export. He cannot stop its export.
– He decides the bona fides of the matter. If I picked up a book and the Senate had to decide whether or not I acted bona fide, would it not be exercising a discretion? With all due respect to the laymen of this chamber I do not think any lawyer in the Senate would contend that in that case the Senate would not be exercising a discretion. The English act does not allow free export of gold. We are all agreed that a point may be reached at which the export of gold without permission from someone must cease, but some honorable senators would depart from the British practice, and say that the discretion must be exercised by the Treasurer fettered by the Commonwealth Bank. That, however, would be a distinct departure from our cabinet system of Government.
Senator McLachlan raised a point relating to the power of the Commonwealth Government to deal with gold reserves held by the State savings banks, and read an opinion from most eminent counsel for whom I have the very highest regard, and to whose opinion I attach a good deal of weight. But I respectfully submit that counsel’s opinion was not directed to the currency provisions of our Constitution.
– He specifically dealt with that question.
– He specifically dealt with the question of whether the Commonwealth had the necessary power to do what is proposed to be done. Just as Senator McLachlan was not prepared to give his opinion uncorroborated by counsel’s opinion, so I have sought the opinion of Sir Robert Garran on the point and it is as follows : -
The power of the Commonwealth Parliament to legislate authorizing returns to be called for as to holdings of gold, and to authorize the acquisition of gold, does not depend upon the Constitutional powers to legislate with respect to banking.
The various legislative powers of the Commonwealth are separate and distinct, and that involved in this instance is the power to legislate with regard to currency and coinage and to borrowing on the public credit of the Commonwealth.
Accordingly, any State bank cannot claim exemption from the operation of this provision, and the measure applies equally to State banks as to private banks.
Parliament, therefore, need not concern itself about a matter quite outside the provisions of the act. Even if .the point be subsequently tested it does not affect the legislation now introduced. And even if this bill becomes law it does not follow as a matter of course that the £211,000 in gold, to which reference has been made, will be taken from the vaults of the savings bank and put into the reserves of the Commonwealth Bank. It will still be left to the authorities appointed under this measure to exercise a discretion. The proper procedure is not to exempt the savings banks. Once we start exempting people from the provisions of an act we open up the possibility of abuse. When the bill becomes law the savings banks can make representations to the responsible authorities and every consideration will be given to them.
Senator McLachlan was of opinion that we should exempt not only the savings banks, but also private banks, and he spoke of the patriotism of the latter. As a matter of fact he convinced Senator Payne that they are institutions we ought not to touch. Figures prove that the private banks have reaped a fairly decent profit from their “ patriotism.” Senator Cooper spoke about “taking from them their principal asset, gold.” Would it surprise the honorable senator to know that against the £26,000,000 of gold reserves held by the banks advances have been made on cheques, overdrafts and credits to the extent of £328,000,000? Is that the patriotism of the banks?
– Order! The honorable senator has exhausted the time allowed for a reply to a debate, and there is no opportunity to extend it. For the information of honorable senators, I will read the portion of the Standing Orders governing this matter. At the end of Standing Order 407a, which imposes a time limit to speeches, the following words occur -
Provided that where a right of reply is allowed, in any debate, a senator speaking in reply shall speak for not more than thirty minutes.
– Then, Mr. President, I shall simply state that I have a complete answer to the questions raised by Senator Lawson in his second-reading speech. I may have an opportunity to deal with the matter when the bill is in committee.
Question resolved in the affirmative.
Bill read a second time.
Clause 1 agreed to.
Clause 2 -
After section seven a of the Principal Act the following sections are inserted: - 7b. - (1.) Where the Treasurer is satisfied that it is expedient for the protection of the currency, or of the public credit of the Commonwealth, to obtain particulars of gold coin and bullion held by persons in Australia, or to require the exchange of any gold so held for Australian notes, he may, by notice in writing, authorize the board -
to require persons to furnish particulars of the gold coin and bullion held by them; and
) to require persons to exchange for Australian notes any gold coin or bullion held by them. (2.) The board may, in pursuance of any authority given under the last preceding sub-section, by notice in writing -
require any person to furnish to the bank particulars in writof the gold coin and bullion held by that person ; and
require any person to exchange with the bank for its equivalent in Australian notes, any gold coin or bullion held by that person. 7c. - (1.) Where after the receipt of a recommendation from the board, the Governor-General is of opinion that it is expedient so to do, he may by Proclamation prohibit the export of gold from the Commonwealth except in accordance with the provisions of the succeeding subsections of this section, and thereupon gold shall not, while the Proclamation remains in force, be exported from the Commonwealth except in accordance with those provisions. (2.) Any person who desires to export gold from the Commonwealth may apply in writing to the board for the approval of the Treasurer of the export of the gold.
– I move -
That after sub-section (4.), proposed new sub-section 7b, the following be added: - “ (5.) The provisions of sub-sections (1.) and (2.) of this section shall not apply in respect of gold held by any State Savings Bank.”
I need not elaborate the argument which I employed in my second-reading speech. I consider this is a proper amendment for the Government to accept. The people who, in the main, will be affected by the provisions of this proposed new section are deserving of every consideration at the hands of the Senate, and I venture to think that its acceptance will be in the interest, not only of good government, but of sound credit. The Leader of the Senate has assured us that every consideration will be shown to these deserving State institutions; but the matter should not be left there. After the Commonwealth Bank has mobilized all the gold in the Commonwealth, the State Savings Banks of South Australia and Victoria will be left absolutely without any means of checking any foolish acts of administration, and therefore may be unable to allay a feeling of uneasiness on the part of their depositors in a time of crisis. The chairman of the Commonwealth Bank has been interviewed by the representatives of the State Savings Bank of South Australia, and I gather from the latter that, in a telegram to the Prime Minister, the Chairman of the bank stated that he would not recommend the inclusion of an amendment to exempt the gold reserves of the savings banks from the operation of the act. I understand that the directors will neither oppose nor support such an amendment. In view of the attitude of the Commonwealth Bank, I suggest to the Leader of the Senate (Senator Daly) that the Government should not oppose this amendment. The amount of gold holding under the control of the State Savings Banks referred to, is approximately £500,000. The trustees of the State Savings Bank of South Australia take the view that there is an obligation upon them to safeguard the interests of their depositors. They have no self interest to serve, and since the Commonwealth Bank will not object to or recommend their exemption, the Government might very well accept the amendment. There is no suggestion that these institutions should be exempt from the provisions contained in the latter portion of the bill. As I pointed out last night, the gold will remain in Australia, but it will be held by these banks for the specific purpose of buttressing their financial position. I can carry the matter no further. I hope that the Government will accept the amendment. It will in no way affect the operation of the act, but if it is not included, the act may seriously affect the credit of the State savings banks and some day may be responsible for a crisis.
– I remind honorable senators that in voting for the second reading of the bill they adopted the principle of the mobilization of the gold reserves of the Commonwealth. Senator McLachlan now asks the committee to agree to an amendment on purely sentimental grounds, and he suggests that it may avert a calamity at some future date. The State Savings Bank of South Australia has branches throughout the State and the head office is in Adelaide. If, unhappily, there was a run on the bank at Orroroo, could any one imagine a crush taking place there? The only people who could be killed in the rush for gold would be those living in the immediate vicinity of the bank in Adelaide. All trading banks are in much the same position as the State Savings Bank of South Australia. They have branches all over the country. Why, then, should we prescribe one law for the State institutions and another for the private trading banks? The principle upon which Senator McLachlan asks us to accept his amendment, is unsound. I, therefore, ask the committee not to agree to it.
– From the Minister’s statement it would appear that there is to be no exception to the operation of this measure. We have been told that the main reason for this bill is that, in the public interest, it is necessary to gather all the gold in the Commonwealth from the hands in which it is at present held and place it undpr the control of the Commonwealth Bank, as otherwise it may be sent out of Australiato the detriment of this country.
That might be a sound argument in the case of private banks, but it does not apply to the savings banks of the States. The State savings banks should be excepted from the operations of this measure. They do not hold gold for the purpose of exporting it, but to give stability to institutions which have rendered such valuable service to the public.
– What extra stability will they get if the amendment is accepted ?
– The trustees of these institutions should be better judges than the Government of what is best in their own interests.
– If that argument applied all round we should have no laws at all.
– Gold held by the State savings banks is held for a different purpose from that held by the private banks. If we deprive them of their gold, we destroy their usefulness in the community. It is well to remind ourselves that when this gold is mobilized and taken from the savings banks it will be placed in the vaults of the Commonwealth Bank at Sydney. Already this country is suffering from too much centralization. The Government’s proposal would make the Commonwealth Bank in Sydney a huge vacuum pump, drawing all gold into its insatiable vortex. Once the vacuum pump is set in operation gold will be drawn to Sydney from every corner of the Commonwealth. The Leader of the Senate (Senator Daly) spoke lightly of sentiment. I remind him that if we take sentiment from the world there is very little of value left. There should be a wise discrimination in these matters; we should not measure everything by the same rule. These State institutions which were in operation before the Commonwealth was thought of, should be allowed to carry on their business as they have done in the past. I have no fault to find with the Commonwealth Bank. I voted for its creation ; but I shall not vote to aggrandise it at the expense of the State savings banks. In our desire to do what is best for Australia we should not do anything which might impair the usefulness of the State institutions. I shall support Senator McLachlan’s amendment.
– Senator Lynch is an adept at putting up men of straw in order to knock them down again. The defeat of the proposed amendment would strengthen the savings banks in the several States. Senator Lynch’s statement that the gold will be taken from the State savings banks and shovelled into the Commonwealth Bank in Sydney is a figment of his own imagination. It is true that the bill provides that the gold may be placed under the control of the Commonwealth Bank; but that does not mean that immediately it is passed someone will go round to collect that gold. The granting of certain power does not necessarily mean that it will be exercised. Indeed, the very existence of that power is one of the soundest reasons for suggesting that it will seldom be exercised. That has occurred over and over again in connexion with legislation.
– But suppose the power is used ?
– That would only be done when necessary in the public interest. The Commonwealth Bank could do nothing with the gold other than preserve it for the purposes set out in this measure. It could not gamble with the gold, or use it in “ wild-cat “ speculations. What is proposed in this bill is merely a reserve power to be used, if necessary, in the interests of Australia. It is all bunkum to say that immediately the bill became law the vaults of the State savings banks would be raided and their contents transferred to the Commonwealth Bank in Sydney.
– Senator Daly asked what principle is involved in this measure. I refer him to section 51 (xiii) of the Constitution, which provides that the Commonwealth shall have powers in respect of banking, other than State banking. The Constitution requires us to keep our hands off the State banks.
– Even if it destroys our currency? The honorable senator should look at the previous paragraph.
– The two paragraphs must be read together. It is all very well for Senator Rae to say that there will be no raiding of the vaults of the State institutions. In his speech this afternoon he clearly suggested that the gold should be taken to Sydney and used as the basis of a further note issue.
– I did not say one word to indicate that.
– On the ground that the Constitution preserves to the States the funds of State savings banks, I shall support the amendment.
– I challenge the statement of Senator H. E. Elliott that the various paragraphs of section 51 of the Constitution must be read together. Every constitutional authority will admit that each is separate, and that the meaning of one cannot be read into another. I invite the opinion of Senator McLachlan as to the rule in that matter. It is true that the Constitution precludes the Commonwealth from engaging in State banking, but that provision is not to be read into other sections.
– The Constitution prevents the Commonwealth from interfering with State banking.
– The Constitution gives the Commonwealth power to make laws relating to banking, other than State banking. Senator McLachlan and I might disagree about the power of the Commonwealth Bank in relation to banking, but there is one point upon which we shall not differ, namely, that we cannot call to our aid a section relating to banking in order to limit the operation of another section relating to currency. In view of Sir Robert Garran’s opinion that the Constitution permits the exercise by the Commonwealth of the power to legislate in respect of currency, then I submit that Senator H. E. Elliott’s opinion is an incorrect interpretation of the law.
Senator Sir HAL COLEBATCH (Western Australia) [9.14]. - In all our legislation we should endeavour to avoid uncertainty and the possibility of litigation. I shall not express an opinion as to whether this bill deals with banking or currency, but it appears to me that in the provision relating to banking there is a reference to the issue of notes. A strong argument might be made out in favour of the State savings banks being exempted even if a specific provision to that effect were not included in the bill.
But if we do include such a provision we avoid all possibility of argument. We refrain from interfering with the State Savings Banks, and leave them this amount of money, which cannot, in any conceivable set of circumstances, be of the least use to the Commonwealth. As an indication of the unwisdom of passing legislation that may possibly be challenged later, may I refer honorable senators to the position in which we find ourselves as a result of the operation of the Bankruptcy Act, a position that will involve many citizens of Australia in heavy loss, and probably very great embarrassment. If it were a matter of great importance that the Commonwealth should have this amount of gold, one might say, “ Oh, well, we will take the risk.” But it is of no great importance; why, then, take the risk ? Why not make our intentions clear, assume that this is a banking matter, as it is, and avoid the possibility of any conflict in the future. By doing that, we should do the decent thing by the States.
– The Leader of the Government in the Senate (Senator Daly) has said that the Senate has approved the principle of the mobilization of gold. But there is more in this bill than that. It also covers the export of gold.
– That is not dealt with in this proposed new section.
– The control of the export of gold is at the bottom of the whole thing. Although some justification may be advanced for the control of private banks in this matter, the position of the State savings banks is quite different. There is no likelihood of their exporting any of their gold reserve, as they do not hold it for trading purposes. Therefore the Government should consider carefully whether they should not be exempted from the provisions of the bill. This is new legislation, of a somewhat drag-net nature. From time to time, we find it necessary to embody exemptions in our legislation. We should always endeavour to make it specific. The Government should have some regard for the opinions and the interests of those concerned, in this case the State Savings Banks, in which the people of the different States have a very great interest. The State Savings Bank of South Aus tralia alone has half a million depositors. It is claimed that it is not likely that this power of mobilization will be used. Why, then, give it to the Commonwealth Treasurer? I believe that the acceptance of the provision would be harmful to the business of our State Savings Banks. Their trustees are hard-headed business men, with a very long banking experience. Those in South Australia pointed out that the gold reserve of 200,000 odd pounds creates a great deal of confidence in its depositors, who see that reserve shown in the balance-sheet.
– State savings banks do not issue notes.
– But they hold that gold as a reserve. The trustees of the South Australian State Savings Bank have pointed out that if that reserve is withdrawn, their position will be weakened very considerably. Instead of giving this power, which may not be used, it would be better to make the provision a specific one, and exempt State Savings Banks.
– While I have the greatest regard for the feelings of the Board of Trustees of the South Australian Sayings Bank, who for a long period of years have furnished ample evidence of their capacity, and have managed the institution wisely and well, I cannot follow Senator McLachlan in his desire to have State savings banks specifically excluded from the operation of this measure. This committee should decide the matter on the principle of the proposed new section.
I point out, as Senator Daly pointed out in reply to the argument adduced in support of the amendment, that the security furnished by this gold reserve in the event of a calamity for which that reserve is intended to cope, would be afforded only to a limited number of the bank’s depositors. The South Australian Savings Bank has some hundreds of agencies throughout the State, but the demand for gold on the part of depositors in time of panic would necessarily be limited to those fortunate few who got to the head office of the bank in the quickest time.
– Did the honorable senator ever see a run on a bank other than at its head office?
– Fortunately, I have not seen a run of any magnitude on a bank. I was only about two months old when the last serious run occurred. If we admit the right of savings banks to hold their, gold reserve, there is little or no difference between the principle as applied to them and the principle as applied to private trading banks. Private trading banks have established a gold reserve for the same reasons as have State savings banks, to create confidence in their customers.
– Has the honorable senator ever heard of a State savings bank exporting gold ?
– The proposed new section does not concern the export of gold. It deals only with the mobilization of the gold reserve, for the benefit of the Australian nation. If the Government accepted this amendment it would, to a very dangerous degree, destroy the efficacy of the measure. The State Savings Bank depositors in South Australia - and the same applies in Victoria - are amply guaranteed, because in addition to the undoubted soundness of the institution in which their money is lodged they have the backing of the State Government, which guarantees that their deposits will be repaid to them in full. What further guarantee do they need ? If the time ever comes when the Government of South Australia fails to meet its obligations, then the deposits in the savings bank of that State will not be worth very rauch to the individual depositor. I can see no reason for the insertion of this amendment, and I hope that the committee will reject it.
.- I feel sorry that the Government will not accept this amendment. Considering the comparatively small amount of gold involved, it would be wise to accept it. The Government claims that the power, when granted, may not be used. It must be remembered that small depositors in savings banks are particularly suspicious. Their savings represent their hard earnings, collected as the result of self-denial, and set by for a rainy day. Supposing that the Government did exercise this power and mobilized the gold of the savings banks, and the matter was given publicity in the press! These small depositors do not take much interest in high finance, and would not know the details; they might become panicky; and a great deal of distrust would be engendered amongst them that might be disastrous to the nation. Personally, I do not think that it is worth while creating that suspicion or fear in view of the comparatively small amount concerned. The savings banks do not export gold, they merely hold it as a guarantee for their depositors.
– How many depositors know of its existence?
– It is not a matter of depositors knowing of its existence. They are always informed that they can get gold for their notes. If that guarantee were removed their suspicions would be aroused and a deplorable condition of affairs would be the result. Senator Sir Hal Colebatch pointed out that it would be wise to keep our hands off the State savings banks.
– They use our notes.
– But they know that those notes are issued on a gold basis.
– Will the honorable senator tell me upon what principle I can accept the amendment?
– The principle that has been defined by Senator H. E. Elliott, admitted by the ‘Leader of the Senate (Senator Daly) himself, and stressed by Senator Sir Hal Colebatch. The State Savings Banks are different from ordinary private trading banks, and should he excluded from the operation of this provision.
.- The Minister (Senator Daly) asked Senator Reid to state a principle upon which the Government could accept the amendment moved by Senator McLachlan. I remind him that the bill provides that the Commonwealth Bank shall have power to mobilize the gold in Australia and to control its export in circumstances recommended by the Commonwealth Bank Board. The savings banks are not trading institutions, therefore cannot export gold. The intention of the bill is to ensure that supervision which the Government considers necessary.
– The honorable senator said this afternoon that that was the intention of the Commonwealth Bank, but that the Government had gone further.
– No reasonable objection can be offered to the amendment in view of the fact that the State Savings Banks have never exported, and cannot export gold under the acts under which they have been established.
– Then why do they require gold?
– In order to have a substantial reserve should the occasion arise.
– They have the resources of the States behind them.
– I am- not aware of any State Savings Bank, apart from the one mentioned by Senator McLachlan, holding any gold reserves although, possibly, other similar institutions also have reserves. If the State savings banks do not hold gold for export, why should they be included in the bill? I remind the Minister that there are in Australia other savings banks apart from State savings banks. In Tasmania there are two trustees savings banks, one of which commenced operations in 1845 before the State Savings Bank was established. A trustees savings bank is established at Launceston with branches operating all over Tasmania. I would suggest . that Senator McLachlan amend his amendment by leaving out the word “ State “ to make it apply to all savings banks.
– No one wishes to injure, in any way, those who have placed their money in State Savings Banks, and I do not know why Senator Reid should be under the impression that the depositors will ever be afraid of losing their savings, if this measure becomes operative. The deposits in State Savings Banks are guaranteed by the State Governments, and that should be sufficient to satisfy any depositor. Even if the Government accepted the amendment, the value of the gold held in savings banks would not be of any consequence.
– It is valued at only £200,000 in this particular case.
– Of what value would such an amount be in converting notes into gold if a heavy demand were made?
– All depositors could not be paid in gold.
– No. It is generally recognized that a sovereign is of no greater value than a Commonwealth £1 bank note. Senator Lynch appears concerned because it is proposed to mobilize the gold reserves, including those held by the State Savings Banks, and to place them under the control of the Commonwealth Bank. “What would be the use of placing such reserves in the Commonwealth Bank when the depositors in that bank will not have the right to demand gold for notes in excess of £25? They can be compelled to accept bank notes. There are very few in the community who would prefer 100 sovereigns to a similar amount in Commonwealth Bank notes, particularly as there is no difference in their purchasing power. I do not wish to do anything detrimental to the interests of the savings banks ; but I cannot see how their stability will in any way be affected, if the gold which they are holding in reserve is placed under the control of the Commonwealth Bank. If we were endangering the credit of the State savings banks there would be some justification for the amendment. The only argument that can be adduced in favour of the State savings banks retaining their gold reserves is that they are government institutions. There is no better means of instilling confidence in the minds pf savings bank depositors than by telling them that their deposits are guaranteed by the State Government, as is indicated outside the doors of all such institutions.
Senator Sir GEORGE PEARCE (Western Australia) [9.20]. - I am glad that Senator McLachlan has raised this point ; but I think too much can be made of it. Personally, I have not the slightest doubt that the gold now in possession of the State savings banks will never be removed. There are two provisions in this clause dealing with the mobilization of gold. One of these is to the effect that a return must be furnished by every person having gold in his possession, and the other is that gold may be called up. I imagine that the Commonwealth Bank will never call up the gold in the possession of the State savings banks, which is valued at less than £1,000,000 sterling. It is not held for the purposes of export, and is not in conflict with the principle underlying this legislation. I can understand the trustees of the State savings banks feeling that this very effective safeguard is to be taken from them. I suggest that the Minister, on behalf of the Government, should publicly intimate that the gold now in possession of the State savings banks will not be taken from them under this measure. If that were done nothing further would appear to be necessary. Unless some such undertaking is given, I feel I must support the amendment, although I candidly confess that I do not believe that the Commonwealth Bank will remove the gold which the savings banks are holding.
– Why not make certain of it.
– I suggest that the Minister consults his colleagues to see whether they will give that undertaking which would be honored by the Commonwealth Bank.
– The Opposition is endeavouring to put the Government in a most ignominious position by asking the Treasurer to give a definite undertaking to the Senate that, notwithstanding the provisions of the bill, the gold reserves held by the State savings banks will not be interfered with. No such suggestion has ever been made to any government, and such an undertaking would not be binding upon succeeding Treasurers. If the principle is right the committee should accept it; if not, they should reject it. Surely the committee has sufficient confidence in the present Government to realize that the Treasurer will give effect to the will of the legislature as expressed in these words -
Where the Treasurer is satisfied that it is expedient for the protection of the currency or of the public credit of the Commonwealth to obtain particulars of gold coin and bullion held by persons in Australia or to require the exchange of any gold so held for Australian notes, he may, by notice in writing, authorize the board -
to require persons to furnish particulars of the gold coin and bullion held by them; and
to require persons to exchange for Australian notes any gold coin or bullion held by them.
Would any honorable senator suggest that, if it was absolutely necessary for the protection of the currency or the public credit of the Commonwealth, the Treasurer should call up £211,000 from the State Savings Bank of South Australia, it would not be his duty to do so?
– We know that he never would.
– Then why ask for an undertaking from the Treasurer that he will not do so? It is humiliating to the Government to ask it to do what no government has ever been asked to do previously - to barter with the Opposition.
– I am not suggesting that the Government should bargain with us. I am suggesting that an assurance should be given to the trustees of the savings banks.
– If I enter into an undertaking with a State savings bank that the Government will not touch its £211,000, some honorable senators will vote for the bill. Senator Payne will vote for it if the Government will give an undertaking that it will not deprive the private banks of their reserves, and Senator Lynch may say that he will vote for the bill if some friendly society is exempted. In the end I would not be able to recognize my own measure.
– The honorable senator is dealing with absurdities now.
– I am not. Under this bill, if passed, the Treasurer will have a sacred duty to perform. If, in the interests of Australia, it is necessary to call up all the gold, whether it is held by savings banks or other institutions, he should have power to do so. But Parliament can rest assured that this discretion will not be exercised arbitrarily. A note of warning has been sounded by the Commonwealth Bank Board, and if the necessity arises the gold will be called up from the savings banks. What would be the use of having gold in the vaults of the savings banks if the Commonwealth were to become insolvent? It is not gold we want. As Senator Lynch says, we want more wheat and more wool. The £211,000 held by the trustees of the Savings Bank in South Australia cannot be exempted upon any principlewhatsoever, and I am not prepared to accept an amendment unless it is based upon some principle.
– I cannot understand the fears alleged to be entertained by the trustees of the State Savings Bank of South Australia. They want their gold to meet a possible run on the bank; but, if that should occur, they would not issue gold. They would issue notes, which bear the pledge of the nation that, if they are taken to the Commonwealth Treasury, they will be exchanged for gold. What does mobilization mean? When troops are mobilized they are not all dragged into one centre. They are mobilized in the different mobilization areas. Similarly, when gold is mobilized by the Commonwealth it will still remain in the vaults of the various banks. If I were a depositor in a bank I would prefer Australian notes to gold. They are easy to carry. In any case the trustees of the savings bank need not worry, nor need we honorable senators worry, because when the day of panic comes it will be just about time for Australia to put up its shutters. The amendment is quite unnecessary.
– If I read the provision in the bill correctly, no member of the Commonwealth Government has any voice in regard to what happens under paragraph 2 of proposed new section 7b. The Treasurer only has to be satisfied -
That it is expedient for the protection of the currency or of the public credit of the Commonwealth to obtain particulars of gold coin and bullion held by persons in Australia or to require the exchange of any gold so held for Australian notes.
He has to decide the larger issue whether it is expedient to take this action for the protection of the currency or public credit of the Commonwealth. He then falls out of the picture, and there is vested in the Bank Board the following discretion : - “ (2) The board may, in pursuance of any authority given under the last preceding subsection, by notice in writing -
The function of the Treasurer in this respect is merely to decide whether any emergency has arisen. In passing I may say that the Leader of the Senate made out a case yesterday that would call upon the Treasurer to authorize the Commonwealth Bank to ask for these returns, and to require gold to be exchanged for notes. In the ultimate issue, therefore, the matter rests with the Commonwealth Bank alone, and although I much appreciate what the Leader of the Opposition has said I cannot agree to accept any undertaking on behalf of somebody who has absolutely nothing to do with the taking of the gold.
On half a dozen occasions during this debate we have been asked to discuss the question of principle. The principle underlying this bill is to prevent the export of gold, so that our credit overseas may be regulated from this end, and our gold reserve held against the note issue. What violation is there of that principle so long as the gold is kept here, and is available for the credit of Australia? It seems to me that an unseemly struggle is taking place in this chamber with a view to rendering it possible to acquire a half million pounds held in specie for the purpose of protecting the poorer people of Australia. Some of my friends have not passed through the number of crises that I have witnessed, and a great deal of rhodomontade is talked about country districts. Is it the purpose of some people to allow any section of the community to take the risk that will arise if this bill is passed? Senator Daly claims that the power to take gold should be general. Where do the runs on savings banks occur ?
– In the cities. For instance, there was one in Sydney.
– There would be less danger to a savings bank in Sydney than there would be to a savings bank in Perth or Adelaide, because the note which Senator Sampson was good enough to flourish in the chamber a few moments ago is convertible in Sydney only. We had experience of runs on banks during the war, and in 1893. I have seen them allayed by the prompt and bold, but absolutely effective, means of distributing gold lavishly to those who came in to claim it.
– The honorable senator should have seen the run on the savings bank in Sydney in the early nineties.
– I did not know that there was a panic in Sydney. Some honorable senators have tried to draw a red herring across the trail by differentiating between a small centre in South Australia called Orroroo, and Adelaide. Has anyone ever heard of a run on a bank in an outlying district? In 1893 there was no panic in country districts. The chairman of the trustees of the Bank of South Australia has occupied the position for 22 years. He has had experience of crises and has preserved this gold in the interests of the 400,000 depositors in the bank. Panics do not occur in country districts; they always occur among the least level-headed people in the community, those who reside in urban areas and are in close touch with the morning press. They get unduly excited and foresee the possibility of some great calamity overtaking them. Like Senator Sampson I should not have the slightest hesitation in taking a Commonwealth note. But savings bank depositors are not conversant with the note issue and its gold backing, and history has an unfortunate habit of repeating itself. We should take warning from our experience and not place the savings banks at a disadvantage.
– Has the State Savings Bank of South Australia ever had occasion to pay out its gold ?
– Yes, in the early stages of the war a run on the savings bank in Adelaide occurred for no earthly reason. The depositors were paid in gold and did not know what to do with it. It all came back to the bank a few clays afterwards. But the point I make is that if the gold had not been available the panic would not have been allayed. I am personally satisfied with the Australian note, but we must remember that in dealing with savings bank depositors, we are dealing with the mass.
– And with human nature.
– That is so. The depositors are looking after their own interests. It may be that they have in the savings banks all that stands between them and absolute poverty. The credit of the Commonwealth would not be affected if the savings banks were allowed to retain their gold reserves. It has been urged that if the State savings banks are exempted from the operation of the measure, the private trading banks should be treated similarly; but I remind the committee that the latter maintain their gold reserves for the very reason that prompted the introduction of this bill, namely, the establishing of overseas credit for their customers, and, by the way, they make money out of the business. The State Savings Bank of South Australia holds its gold for the protection of the rank and file of its depositors, and in order to allay any feeling of uneasiness as to its ability to pay in gold. If it did not keep this money in its vaults, it could earn at least 5¼ per cent. for it, so actually it is losing £10,000 a year by maintaining its gold reserve in liquid form.
– The honorable senator must know that all the money in aState savings bank is not actually repayable at call. In some instances depositors are required to give notice of withdrawal.
– And that, I suggest, would be a most dangerous practice to adopt in a time of crisis. In the early years of the war, as I have previously shown, the existence of this gold reserve in the State Savings Bank of South Australia averted a threatened financial panic. Certain honorable senators appear to have a good deal of sympathy for these State institutions, but are not prepared to vote for the amendment, which is simply an act of justice to them.
SenatorO’Halloran. - How many of the State savings banks have asked for this amendment?
– The trustees of the State Savings Bank of South Australia have asked for it, and I understand that the Victorian State Savings Bank authorities also desire it.
– The Victorian State Savings Bank has not asked for it.
– I was given to understand that the Victorian State Savings Bank desired the inclusion of this amendment. The trustees of this bank consider that the existence of this gold reserve is necessary to ensure the stability of the institution. Once every year the depositors of the bank are advised that it is available over the counter if they ask for it. This is an important factor in stabilizing the finances of that institution. Something has been said about the bank’s fears that the position in future may not be so well safeguarded. I am assured that these fears are not imaginary; that there is good reason for them. Having regard to the small amount involved, I cannot understand the reluctance of the Government to accept the amendment.
– The Government is opposed to the amendment because an important principle is involved.
– It was never intended that the Parliament should interfere with the State savings banks.
– I am somewhat disappointed at the attitude of a number of honorable senators who have spoken in favour of the amendment. It seems to me that the issue is so simple that it is not worth all the oratory that has been heard in this chamber this evening. Perhaps, like a well-known countryman of mine, I am out of step with the rest of the army, but I feel that I must stand to my own views on this subject. We are-all agreed that it is desirable that the Commonwealth Bank should be authorized to mobilize our gold resources. Why, then, should there be any exemption ? The State savings banks have no more right to exemption than have the trading banks, or other financial institutions. If I thought the bill contained a menace to any of our financial concerns, I should vote for the amendment. If the gold is mobilized, the institutions which hand it over will receive the equivalent value in Commonwealth notes, and the whole of the resources of the Commonwealth will be behind the notes.
– But the gold will not be under the control of the institutions concerned.
– It would be in the hands of the Commonwealth Bank, and if, unhappily, a rush did take place at any time, the Commonwealth notes would be legal tender, so there should be no danger of a crisis. Since the gold reserve of the State Savings Bank of South Australia is only a little over £200,000, it would soon be mopped up in a financial panic of any magnitude. I suppose that it is the reserve for at least £30,000,000 or £40,000,000 of liabilities. That being so it could not stave off much of a rush. I consider that it would be unsound business practice for the Government to accept the amendment.
– I could have understood the great concern of Senator McLachlan with regard to this matter, if we had been legislating along these lines, say, 25 years ago, when the political troglodytes in this community thought that the Labour party could do nothing in the way of finance administration. The people of Australia have beeneducated since then, and I am sure that the majority do not bother much about whether they have gold or notes paid out to them. I have not had a sovereign in my pocket for the last ten years, and I am not conscious of being any the worse off because of that fact. Senator McLachlan has told us that the depositors in the State Savings Bank of South Australia have an opportunity every Christmas time to see this gold reserve of £200,000. Not one person in 50,000 sees it.
– They are advised of its existence.
– Well, if the bill passes in its present form that gold will be mobilized by the Commonwealth Bank, and the depositors of the State Savings Bank of South Australia will know that it is in good hands, and is being used in the service of their country. We are all accustomed to notes, silver and copper as currency within the Commonwealth, and no one has the slightest fear that his financial status is endangered simply because he is not handling gold. I am certain that if the trustees of the State Savings Bank of South Australia were in the gallery tonight, they would be highly amused at all the dust which Senator McLachlan is kicking up about this little matter.
– I do not feel any enthusiasm for the provisions of the bill, but I am strongly opposed to the amendment, the effect of which will be to differentiate in favour of a particular class of bank. It seems to me that those honorable senators who have spoken in support of the amendment have not grasped its full significance. It is not proposed that the Commonwealth Bank shall commandeer the gold. On the contrary, it will issue notes in exchange for it, and since we have had so many years’ experience of notes in circulation, I cannot believe that even the people of Adelaide have any doubt as to their face value. I am sure, therefore, that SenatorMcLachlan has given expression to a fear which does not and never did exist in the minds of the depositors, in either the State Savings Bank of South Australia or the private trading banks in that State.
– I should not have risen again but for the references that have been made to the bank failures in Sydney in 1893. I happened to be in Sydney at the time, and I have a clear recollection of what happened then. At that time, there were about 22 banks doing business in Sydney, and all but four of them closed their doors. It was not the ability to pay the gold that saved them. They weathered the storm because the Government, led by Sir George Dibbs, convened a special meeting of Parliament, in order to make the notes issued by the private trading banks legal tender. There were also two savings banks in operation at that time - the Barrack-street Savings Bank, under the control of trustees, and the New South Wales Post Office Savings Bank. A wild Irishman, named Arthur Desmond, went to the Barrack-street Savings Bank and chalked on the wall in big letters, “Gone bung.” The panic which ensued was only allayed when the then Premier of New South Wales mounted the steps of the bank and notified the depositors that the Government of the State would stand behind the bank and see that every one was paid. That stopped the panic. The only way in which gold figured on that occasion was when the Premier said that he would introduce legislation to make notes legal tender only on the condition that one bank, whose financial positon was very insecure - I think it was the City Bank - should not close its doors. The other three banks took their spare gold to the
City Bank, and thus the fears of its depositors were allayed. So far as the banks generally were concerned, notwithstanding all the gold at their command, the panic would have been complete had not notes been made a legal tender. We have heard a good deal about the Savings Bank of South Australia, and also certain rumours regarding the Victorian State Savings Bank, but we have been given no indication that the other State Savings Banks are in a great state of apprehension regarding this measure. The New South Wales Government Savings Bank has more at stake than has the Savings Bank of South Australia, but the trustees of that institution are not perturbed about the Government’s proposal.
– They can get their gold across the street.
– There is no great demand for gold. The great majority of the people will not be bothered with it so long as they are convinced of the stability of the note issue. I decline to think that the majority of the people of South Australia are more superstitious than are the people of the other States, or that they will become hysterical because this bill has been introduced. Indeed, the majority of depositors in our savings banks are probably unaware of the existence of any gold reserve. I am convinced that there is no general feeling of uneasiness regarding the security of Commonwealth notes. Actually the security of depositors in State Savings Banks is greater with Commonwealth notes in reserve, because the Commonwealth is greater than any one State.
, - I listened with interest to Senator Rae’s account of the panic which occurred in Sydney in 1893, when several banks closed their doors. I do not think that the panic at the Barrack-street Savings Bank occurred at the same time. I remember that occasion well. It was indeed, serious, although Senator Rae spoke lightly of it, saying that it was only a flutter.
– That is all it was.
– It was a serious happening. People fought their way into the bank to withdraw their money, and when they came out the “ hawks “ robbed them of it. The “ run “ lasted all one afternoon and the next day. People fought like wolves to get into the bank; those who were unsuccessful the first day were there first thing the next morning to get their money. I do not want to see another such panic. It was not the insignificant episode that Senator Rae would have us believe. The excitement and the rush bathed the depositors in perspiration. They felt that their savings were in jeopardy.
– It was the action of the then Premier of the State which saved the situation.
– It was in 1893 that Sir George Gibbs sought to make notes legal tender, because a number of banks were affected. I do not think the savings bank panic occurred at the same time.
– Yes it did; it all happened in the same week.
– I know that within a very short period four or five banks closed their doors. I was only a lad at the time, but the sights I saw on that occasion made such an impression on me that I hope they will never be repeated in Australia.
Question - That the proposed new subsection be inserted (Senator McLachlan’s amendment) - put. The committee divided.
Majority . . 4
Question so resolved in the affirmative.
Amendment agreed to.
Senator Sir GEORGE PEARCE (Western Australia) [10.29] . - I move -
That after the word “ Treasurer “, proposed new section 7c sub-section 2, the words “ and of the board “ be inserted.
The proposed sub-section would then read -
Any person who desires to export gold from the Commonwealth may apply in writing to the board for the approval of the Treasurer, and of the board of the export of the gold.
If that amendment is carried, it is my intention to move a later amendment, but we can test the feeling of the committee on this. Its object is to associate the board with the Treasurer in approving or refusing consent to the export of gold. I do not regard that in any way as an interference with what the Vice-President of the Executive Council (Senator Daly) has referred to as the British traditions of executive government. Both in Great Britain and Australia Parliament has often conferred executive powers such as this on governmental authorities. This Parliament has conferred on the Commonwealth Bank itself the power of management and the control of the note issue. Associated with that note issue is the gold reserve. This Parliament has vested in the Commonwealth Bank Board the control of the note issue and the gold reserve.
The regulation of exchange is not a governmental function, and the political executive should not be brought into it. Hitherto it has always been the function of the trading banks. The Commonwealth Bank in so far as it is a trading bank, has rightly been concerned with it. But it has never been the function of governments to regulate exchange. It is not a function of the British Government, and it has’ never been that of the Commonwealth Government. Therefore it is not rightly the function of the Treasurer. This is an innovation empowering the Treasurer to exercise a function, which has never been regarded as a function of government, so that the argument of the Leader of the Government in this chamber about the invasion of the British traditions of executive government has no point. In this bill we are breaking with tradition in that, for the first time, we are giving to the Government the regulation of foreign exchange. That may be justified by the circumstances. The Government thinks that it is. If it is, then, associated with the Treasurer, should be the Board of the Commonwealth Bank, because that bank has hitherto had the control of the gold reserve and of our note issue.
There are other reasons why the Treasurer should not be the sole authority to decide this matter. When speaking of the Treasurer I am not referring to the present occupant of the office or to any other Treasurer. I should take the same view if Dr. Earle Page or Mr. S. M. Bruce were Treasurer.
The purport of my amendment, which I wish to be taken as a test, is that the discretion shall not rest solely with the Treasurer, but that the board of the Commonwealth Bank shall be associated with the decision. In the event of the Treasurer differing from the board and prohibiting export, he will be faced with the responsibility of explaining to Parliament why he differed from the board. That would relieve the Treasurer from an invidious position. I assure the Government that my amendment is not put forward in any party spirit. It is not advanced in any spirit of hostility to the proposed legislation. It is put forward in the genuine belief that it is an undesirable precedent to establish the political control of foreign exchange. The bill as it stands makes the regulation of foreign exchange a function of government, which has never hitherto obtained in a British community. If it is to be done it should be associated with every possible safeguard. The board of the Commonwealth Bank is a non-political body. If my amendment is carried the country will have the guarantee that the political executive will be associated with a nonpolitical body, the board of the Commonwealth Bank, which controls the note issue and our gold reserve. I urge the Government to accept the amendment. I believe that, if carried, it would have the effect of giving confidence to the public, to the trading banks and to those trading firms who deal in foreign exchange, since it would assure them that there will be no political bias in so far as the administration of these provisions is concerned.
– The Government cannot accept the amendment moved by the Leader of the Opposition (Senator Sir George Pearce). The amendments proposed by the honorable senator have been circulated among honorable senators, and I have intimated to him that I am prepared to accept that one which provides that the board shall report to the Treasurer upon the application and shall state in such report whether it approves or disapproves of the application. That is the next amendment to be moved by Senator Sir George Pearce. Its object is to allay any fear that the Treasurer is about to do something without consultation with the board. It is all very well for Senator Pearce simply to attempt to brush aside the whole principle by- conjuring up the suggestive phrase of “ foreign exchange”. I again urge upon honorable senators that the amendment involves a departure from the British executive system of government, cloak it as the right honorable senator will. I ask Senator Pearce is it because there is a Commonwealth Bank in existence that the Treasurer is not to regulate foreign exchange, or is it the general principle to which exception is taken ?
– I do not understand the question.
– Did I not understand the right honorable senator to say that he would not like to see the matter of foreign exchange ever become a governmental function?
– I said that the regulation of foreign exchange is not a function of government in any British community.
– This is not a regulation of foreign exchange.
– That is the objective of the bill.
– It is not. I have already stated its objective, and Senator McLachlan has given his views on the subject.
– How could the Government control foreign exchange without the aid of this bill? Is this not the first step?
– This is one pf the means proposed to be taken for the purpose of trying to right the position in which we find ourselves. The matter as to how far the nation, qua nation, can go in the righting of that position is a function of the executive government.
– Does not the chairman of the Commonwealth Bank Board, in his letter to the Government, point out that the mobilization of gold is necessary for the purpose of protecting foreign exchange?
– No. He said that it was to try to put the ship of state on an even keel. Our financial position is so bad that it is necessary to mobilize the gold, to prevent matters from becoming more acute. I do not care if the mobilization of gold is for the distinct purpose of attempting to stabilize the foreign exchange. What has to be done under this provision is unquestionably an executive act. Senator Pearce said that the matter of discrimination should not be left to the Treasurer; that it would have a semblance of politics about it, .and that we should give the people an assurance that the matter will’ be controlled by an outside body. I ask the right honorable senator who would exercise discretion as to the export of gold, if this portion of the measure never became law - the Commonwealth Bank or the Minister for Trade and Customs? Of course, it would be the Minister for Trade and Customs.
– And his power would be limited.
– To what?
– Read the section that gives him the power.
– Broadly speaking, that section gives “him the right to prohibit the export of gold if in his opinion it is in the interests of the nation to do so. Sub-section 1 of section 112 of the Customs Act 1901-1923 provides that the Governor-General may by proclamation prohibit exportation of any goods.
– But read the further paragraph as to the issue of a proclamation.
– The act also provides that-
Any proclamation made under paragraph (6) and sub-section (1a) shall be notified to each House within seven days of the issue of such proclamation if the Parliament is in session, but if not in session within seven days after the meeting of Parliament.
That does not affect the principle. The amendment of the Leader of the Opposition is not to the effect that the issue of a proclamation shall be notified to each House of Parliament.
– I was only pointing out that a limitation is placed upon the powers of the Minister for Trade and Customs.
– Yes. My point is that the control, with certain limitations, rests in the executive, but the limitations are those of Parliament. Parliament is the only authority which can veto the act of the Minister, but the Leader of the Opposition wishes to give the Commonwealth Bank Board that right of veto. It is a dangerous procedure to provide that the Treasurer of this country, who has the right to do certain things, for which he is subject to the criticism of this Parliament, or upon whose acts the fate of the Government may depend shall, in the exercise of this discretion, be subject to the consent of some other authority which is not under the control of this Parliament. Honorable senators opposite, of course, believe that our national credit should not be tampered with, but under the amendment complete control can be taken from the Treasurer. In the interests of the nation the Treasurer might decide that the export of gold should be prohibited; but the board, which is not controlled by Parliament, might hold a different view.
– Power has already been given to the board to recommend the issue of a proclamation.
– I anticipated that interjection. The Executive believes that a proclamation should not be issued until the Commonwealth Bank has first sounded a note of warning ; but it is the Executive Council which is to decide whether a proclamation shall be issued.
– It cannot be issued in the absence of a recommendation from the board.
– There is no obligation upon the Government to issue a proclamation even after the warning. With whom rests the discretion of issuing a proclamation ? The Government does not object to the Treasurer being advised by the Commonwealth Bank Board, as proposed in a further amendment circulated by the Leader of the Opposition, as the procedure would be the same as operates when the Executive Council, after receiving advice, issues a proclamation. The Commonwealth Bank Board reports to the Government that a proclamation should be issued and discretion has to be exercised by some one. Why should the Governor-General have the final right?
– He acts on the advice of his Ministers.
– Of course; but of the contention of the Leader of the Opposition is correct, why should not the board have the right to issue a proclamation? Would it not be possible for the members of the Executive Council to be so tainted with party politics as to act in a party spirit? Why did not the Leader of the Opposition make his second amendment read in such a way that the discretion of the Governor-General would be fettered by the board? He was prepared to fetter the power in the one case, but not in the other, because to do so would be to affront the Governor-General. But the insertion of those words in this instance is an affront to the Treasurer of the Commonwealth. Politically biased as all are, we are given discretion in one instance, but in another a totally different system’ is suggested. Honorable senators opposite have accepted as a recognized principle of British legislation that the Executive should be the authority responsible to Parliament, and that we should not delegate to boards and commissions beyond the control of Parliament that work which the people sent us here to perform.
– Why is the Government prepared to take the responsibility in one case and not in the other?
– We are prepared to accept it in both instances.
– Why not accept the amendment of the Leader of the Opposition ?
– We have agreed to accept his further amendment in regard to the -board reporting to the Treasurer upon an application and stating in its report whether it approves or disapproves of the application. The board’s opinion is obtained under sub-clause 3. But what happens. Sub-section 1 provides that where after the receipt of a recommendation from the board, the GovernorGeneral is of the opinion that it is expedient so to do, a proclamation may issue prohibiting the export of gold. What greater power should the bank in one case have over the executive . than in the other? If the Government had inserted the words, “ Governor-General “ where the word “ Treasurer “ appears in the proposed new sub-section now under consideration no objection would have been raised by honorable senators opposite.
The CHAIRMAN (Senator Plain).The honorable senator’s time has expired.
– I do not know why the Leader of the Government (Senator Daly) has become so excited.
– I am disappointed, not excited.
– The Minister seems to think that the amendment has a personal bearing on the Government and the Treasurer.
– It is difficult to understand it on other grounds.
– I think I can show that it is drafted upon a very definite principle which is already incorporated in this legislation. The Minister contends that the amendment is an infraction of the principle of executive government, and destroys an essential quality in the British system of parliamentary government. I am as anxious as is the Minister to preserve that principle which makes the executive responsible to Parliament for the exercise of a discretion which may he vested in a government by an act of Parliament. In this proposed new section two principles are involved. One is of major importance, and provides that a proclamation may be issued prohibiting the export of gold. But before the discretion reposed in the Government can be exercised, a recommendation must be made by an expert authority, which, in this instance, is the board of directors of the Commonwealth Bank. If that board recommends a general prohibition of the export of gold the executive council makes its recommendation, and a proclamation is, or is not, issued by the Governor-
General. The Government has the discretion to accept or reject the recommendation of the board. That preserves the principle of executive authority.
– It must have a recommendation.
– Yes, the executive council then exercises that power with a full sense of its responsibility to Parliament, and through the Parliament, to the people. There is also a minor principle involved. In some instances there may be cause for permitting the export of gold. The procedure could be made exactly the same, and presumably the opinion of the Commonwealth Bank Board would be sought. Surely it is not derogatory to the dignity of the Government or the personal honour or prestige of the Treasurer, if in a matter which is highly technical and might require expert consideration, it is provided that an application for consent to export gold shall first of all run the gauntlet of the Commonwealth Bank Board, and that that board shall have the right to offer any objection, when the Treasurer will then exercise his discretion in fulfilment of the principle of executive authority.
– Will the Opposition accept that principle?
– We reach the same result. In the first instance, a proclamation may be issued on the recommendation of the board. I do not know what is in the mind of the Leader of the Opposition.
– The honorable senator is expressing what is in my mind.
– May we take it then that if the board recommend a particular proposal the Leader of the Opposition would allow the Treasurer to exercise his discretion?
– The phraseology of the amendment is different from that in which the principle is expressed in the major provision.
– That is one of the difficulties of drafting.
– But it is surely not beyond our capacity to devise something which will meet the sensitiveness of the Minister and yet provide that applications for consent to export gold shall first come to the Commonwealth Bank, that the bank shall make its recommendation, and that the Treasurer shall then exercise his discretion.
– That is executive control.
– The result is the same. I suggest to my honorable and learned friend that the principle of executive control is assured even in the way this amendment is drafted, because it gives to the Treasurer the final responsibility.
– According to Senator Pearce either the board or the Treasurer may hold up the export of gold.
– That is possible under the proclamation.
– It is not possible. The procedure is altogether different.
– It seems to me that it ought to be possible for us to reconcile our differences. If the Leader of the Senate is prepared to make it a condition precedent to the approval of the Treasurer for the export of gold, that there must first be the recommendation and the consent of the board, I think honorable senators would be prepared to agree to that.
– What happens after the board makes its recommendation?
– The Treasurer exercises his discretion.
– The same absolute discretion that he has already?
– It is not incumbent upon the Treasurer to permit of the export of gold even if it is recommended by the board.
– The noxious part of Senator Pearce’s amendment is that the Treasurer and the Commonwealth Bank become co-partners in the matter, and if there is disagreement between them then) can be no export.
– If the Treasurer disagrees with the board there can be no export. By his disagreement the Treasurer gives the final decision.
– If the amendment suggested by Senator Pearce would be more acceptable to the Government in the form I have suggested, I conceive that the Leader of the Opposition would have no objection to the alteration so so long as provision is made for a recommendation from the bank board before the Treasurer gives his approval.
– I have already intimated that I am prepared to accept an amendment which provides that the board shall report to the Treasurer upon any application for permission to export gold and state whether it approves or disapproves of the application.
– The position would then be that if the bank disapproved the Treasurer could give consent, or if the bank approved the Treasurer might withhold his consent. What strikes me most is that if the Government requires expert advice in respect of the major principle involved it is wise, and for the protection of the Treasurer, to provide that he shall obtain that advice also on the minor subject. I cannot understand the Treasurer being anxious to accept the onerous responsibility of being called upon to make invidious distinctions. I am, however, prepared to support an amendment along the lines I have suggested and I ask the Leader of the Opposition (Senator Pearce) whether it would meet with his concurrence.
– If progress is reported it will give us an opportunity to give further consideration to the matter.
Motion (by Senator Daly) agreed to -
That the Senate, at its rising, adjourn till to-morrow at 11 a.m.
Motion (by Senator Daly) proposed.
That the Senate do now adjourn.
– This morning I asked the Minister representing the Minister for Defence, a series of questions including the following: -
The Minister’s answer, as given by the Assistant Minister, was - 1, 2, 3, and 4. I have no knowledge of this.
The questions I asked were based on matter published in the press, and there should have been no difficulty in getting information on the point. It is of great public interest that this matter should be cleared up, if only for the sake of recruiting, which is likely to be affected in the municipalities of Richmond and Fitzroy. I ask now if it is not possible for further particulars to be obtained.
– The questions asked by the honorable senator this morning were founded on press reports. We know that there is no truth in many press reports. The honorable senator’s request for information was sent to the proper quarter, and when the Minister replied that he had no knowledge of the matter, I naturally assumed that his department knew nothing about it, and that there was no correspondence in existence on the subject.
Question resolved in the affirmative.
Senate adjourned at 11.8 p.m.
Cite as: Australia, Senate, Debates, 11 December 1929, viewed 22 October 2017, <http://historichansard.net/senate/1929/19291211_senate_12_122/>.