12th Parliament · 1st Session
The President (Senator theHon. W. Kingsmill) took the chair at 3 p.m., and read prayers.
page 800
– I have to inform the Senate that, pursuant to the provisions of the Constitution, I notified the Government of the State of South Australia of the vacancy caused in the representation of that State in the Senate by the death of Senator Chapman, and that I have received through His Excellency the Governor-General a certificate of the choice of Mr. Henry Kneebone as a senator to fill such vacancy.
Certificate laid on the table and read by the Clerk.
Senator Kneebone made and subscribed the oath of allegiance.
page 800
– On the 19th March, Senator Pearce made a statement regarding the appointment of Mr. T. G. Worgan as Director of Mines in North Australia. He considered that the appointment should have been given to Mr. Bell, who occupies the position of Assayer and Warden in the Mines Branch. I am advised by the Minister, for Home Affairs as follows: -
When Mr. Worgan was appointed to the position of Director of Mines, full consideration was given to the claims of Mr. Bell. As the honorable senator was informed in reply to his question on this matter, Mr. Worgan has had 46 years’ service. He is a transferred South Australian officer and is senior to Mr. Bell. ‘ He has on two separate occasions, totalling a period of twelve months, filled the position of Director of Mines during the absence of the Director. Before Mr. Worgan was appointed as Acting-Director on the second occasion, the Government Resident and a Commonwealth Public Service Inspector, who was in Darwin at the time, were asked whether they were satisfied that Mr. Worgan could perform the duties of the office. Both these officers assured the Minister that Mr. “Worgan was competent to undertake the duties. Before being definitely appointed to the position of Director, Mr. Worgan was required in accordance with section 19 of the Public Service Ordinance to prove his fitness therefor by the satisfactory performance of the duties of the office for a period of three months. On the assurance of the Deputy Government Resident that Mr. Worgan had satisfactorily performed the duties of Director of Mines during the three months’ period of trial, the Minister approved of his appointment to the position.
page 801
– On the 20th March Senator Dunn asked the following question, upon notice -
In regard to the case of Captain Conway, an ex-member of the Australian Imperial Force, is it the intention of the Government to appoint a committee of inquiry into Captain Conway’s statement that he was victimized in relation to responsible positions as they became vacant in the Australian Imperial Force?
I am now in a position to say that the Minister has given much careful and sympathetic consideration to the case. The documents he has read satisfy him that Conway was a capable officer with a good record, and that he was willing and anxious to go on active service abroad in the early stages of the war, but was not given the opportunity, and that, when the way was clear for his release on active service in 1917, he felt it incumbent on him to withdraw his application to proceed abroad out of consideration for the serious state of his wife’s health. The damaging results to Captain Conway’s military career, due to his inability to serve abroad, were his supersession in pro motion to the rank of major by officers with active service abroad, and his retirement in 1922 under the Defence Retirement Act, when drastic reductions were made in the Military Forces consequent on the Washington Conference. In regard to his supersession, the position is that the policy endorsed by Parliament, and enacted in section 20a of the Defence Act, was that an officer who was eligible for promotion to a higher rank, and who had served on active service abroad was, other things being equal, to be granted preference in promotion to an officer of the same rank who was eligible for promotion to higher rank and who had not served on active service abroad. It was in pursuance of this policy that Captain Conway was superseded in promotion, and the Minister regrets he is unable to see in what way any action could now be taken in the matter. In regard to Captain Conway’s retirement, the Minister has observed that, consequent on the Washington Conference, it was necessary to make considerable reductions in the Military Forces. A number of officers, including Captain Conway, were selected for retirement, many of whom had served abroad with the Australian Imperial Force. The Defence Retirement Act, under which Captain Conway was retired, provided for compensation being granted, on a generous scale. Captain Conway complains of victimization, but the Minister is unable to find evidence to support this contention, and is of the opinion that the appointment of a committee of inquiry would not be likely to result in any benefit to Captain Conway.
page 801
– by leave - I have to announce that it is not proposed to appoint a Government delegate to attend the forthcoming International Labour Conference at Geneva. After consultation with the industrial organizations concerned, the Commonwealth Government has appointed Mr. Marshall Eady and Mr. Robert Taylor, to act as delegates representing the employers and workers respectively.
page 802
– Regarding the Government’s sugar policy, I desire to inform the Senate that in August of last year, the Sugar Inquiry Committee was constituted for the purpose of investigating every phase of the Australian sugar industry - the growing of sugar-cane, its manufacture into raw sugar and then-
– I rise to a point of order. I raise no objection to the Leader of the Government in the Senate (Senator Barnes) having permission to make a statement, but, in order to protect the rights of the Senate, I ask is it quite in accordance with the usual procedure for the honorable senator, after completing the statement which he was given leave to make, to proceed to make another one upon a subject that has no relation to the first?
– On a strict reading of the Standing Orders, the right honorable the Leader of the Opposition (Senator Pearce) is right. The Leader of the Government should have asked permission to make a further statement. It would greatly simplify matters and would be more in accordance with the correct procedure if, in asking leave, the honorable senator specified the subject upon which he intended to speak.
– I ask leave to make a statement concerning the sugar policy of the Government.
– Is it the pleasure of honorable senators that the Leader of the Government in the Senate have leave to make such a statement?
– I wish to make a personal explanation. My object in intervening is not because I question the right of the Leader of the Government in this chamber to make a statement, but to suggest that it would assist honorable senators if, after reading the statement, the Minister moved that it be laid on the table, and printed. That would give honorable senators an opportunity to discuss it.
Leave granted.
– As the statement is a long one, I will lay it on the table of the Senate and move -
That the paper be printed.
Debate (on motion by Senator Sir George Pearce) adjourned.
page 802
The following papers were presented : -
Tariff Board - Reports and Recommendations -
Aircraft and Aircraft Parts.
Bags and Cornsacks.
Boots and Shoes.
Boots and Shoes (High Grade) - Effect of duties on High Grade Leathers on manufacture.
Castor Oil Beans and Castor Oil.
Cordage, Ropes and Twines.
Jute, Hemp and Flax Yarns.
Kapok.
Leather-covered Tobacco Pouches.
Leather Manufactures, Leather cut into shape, Harness, &c.
Olive Oil.
Paints, Colours, Enamels, Varnishes, &c., Ships’ Anti-fouling Composition.
Synthetic Resins and Moulding Powder.
Wire, Copper Pipes, Tubes, Cables, &c.
Wool Tops.
Vulcanized India-rubber Cables and Vulcanized Flexible Wire.
Commonwealth Bank Act - Regulations amended - Statutory Rules 1931, No. 32 - No. 33.
Dried Fruits Act - Regulations amended - Statutory Rules 1931, No. 28.
High Court Procedure Act and Judiciary Act - Rule of Court - Dated 24th March, 1931.
Papua Act - Ordinances of 1930 -
No. 8 - Appropriation 1930-1931; together with Estimates of Revenue and Expenditure for the Year ending 30th June, 1931.
No. 12 - Prisons.
Contract Immigrants Act - Return for 1930.
Defence Act - Regulations amended - Statu tory Rules 1931, No. 30 - No. 36.
Immigration Act - Return for 1930.
Naval Defence Act - Regulations - Statutory Rules 1931, No. 35.
Northern Australia Act -
Central Australia -
Public Service Ordinance - Regulations amended.
North Australia -
Ordinance No. 3 of 1931 - Pearling.
Health Ordinance - Regulations mended -
Garbage.
Infectious Diseases.
Mosquito Prevention.
Night-soil.
Nuisance Prevention.
Railway and Mining Camps’ Sanitary.
Rat Exclusion and Reduction.
Wells and Water.
Public Service Ordinance. - Regulations amended.
Slaughtering Ordinance - Regulations amended.
Quarantine Act - Regulations amended - Statutory Rules 1931, No. 31.
Seat of Government Acceptance Act and Seat of Government (Administration) Act - Ordinance No. 4 of 1931 - Liquor.
page 803
Representation of Australia
asked the Minister representing the Minister for Markets, upon notice -
– The Minister for Markets has had under consideration the representation of Australia at the Imperial Wool Industries Pair to be held at Bradford in July next. The cost of representation is about £250. It is considered that this expenditure should have been borne by the wool industry, but the Australian Woolgrowers Council advised that they had decided not to provide an exhibit at the fair. In the circumstances, the Commonwealth Government does not feel that the expenditure should be borne from public funds.
CASE OF Mr. MARK B. YOUNG.
asked the Minister representing the Prime Minister, upon notice -
– The replies to the honorable senator’s questions are as follow: -
page 803
asked the Minister representing the Minister for Defence, upon notice -
Is Major-General Bennett, of Sydney, New South Wales, on the retired list of the Australian Military Forces; if not, does he receive any monetary grant for being an officer of the Australian Home Defence Forces; if so, what is the yearly amount of such grant?
– Major-General H. Gordon Bennett, C.B.,C.M.G., D.S.O., V.D., is not on the retired list of the
Australian Military Forces. He is a Citizen Force officer at present in command of the 2nd Division of the Citizen Military Forces, for which he receives pay at the rate of £250 per annum in accordance with the military financial regulations for the pay of the Citizen Military Forces.
page 804
Dismantling of Obsolete Units
asked the Minister representing the Minister for Defence, upon notice -
In view of the pronounced distress operating in the iron and steel industries, will the Government give orders, through the Department of Defence, that all obsolete units of the Australian Navy be dismantled at once at Cockatoo Island?
– Within a comparatively short period the Government, on the advice of the Naval Board, has transferred the following ships to Cockatoo Island Dockyard for scrapping purposes: - H.M.A.S. Sydney, 5,400 tons; H.M.A.S. Encounter, 5,880 tons ; six river class destroyers,700 tons each. The Naval Board reports that no other ships are due for scrapping at present.
page 804
Conditions Governing Repair Work
asked the Minister representing the Minister for Industry, upon notice -
In view of the Australian Government mail subsidy granted to overseas shipping concerns and companies, will the Government insist that the concerns and companies have all repair work and painting done by shore workmen operating under industrial awards as laid down by the Federal Arbitration Court?
– The matter is under the consideration of the Assistant Minister for Industry, who has been in negotiation with the shipping companies referred to, and also with the unions concerned.
page 804
– I have to inform the Senate that the resolution of sympathy, passed by the Senate on the 11th March last, was conveyed to the Prime Minister of New Zealand, from whom the following reply has now been received: -
On behalf of the Government and people of New Zealand, I desire to express deep appreciation of the kind condolences tendered in the resolution. The message of sympathy is also being conveyed to the relatives of the victims of the disaster by publication in the press.
page 804
– I have to inform the Senate that I have received from Mrs. E. K. Bowden an expression of appreciation by herself and her family of the resolution of sympathy and condolence, passed by the Senate on the occasion of the death of her husband, the late Honorable E. K. Bowden.
page 804
– I move-
That the bill be now read a second time.
This is a small measure that is rendered necessary by faults that have been disclosed in the drafting of the principal act. Two of the three amendments proposed by it are merely formal.
Sections 10 to 12 of the Distillation Act deal with the control of stills. Small stills are used in laboratories for scientific and experimental purposes. Their use does not endanger the revenue, and in 1918 section 11a was inserted in the act to provide merely for a formal notification to the Customs Department in respect of stills of a capacity not exceeding one gallon. The amending section was not well drawn. In its present form it is interpreted to mean that notification is required in respect of such stills if used for purposes other than the production of spirits, but not if the stills are used to produce spirits.. Obviously there should be notification in the latter case also.
It is proposed to repeal section 75 of the act, which relates to licensed test stills. Section 13c, which dealt with licences for test stills, was repealed in 1918, and there are now no licensed test stills. Consequently section 75 is redundant. Apparently its repeal was overlooked in 1918.
The other amendment is proposed in consequence of representations made by the Federal Viticultural Council of Australia, and also by prominent winemakers in connexion with the fortification of wines.
Section 59 of the act prohibits the use of spirit for fortification unless the spirit is 30 degrees above proof. The reason for the prohibition is that the lower the strength of the spirit, the greater is the percentage of fusel oil, and other impurities contained in it, and 30 degrees above’ proof constitutes a reasonable standard of purity. The use of a low-strength spirit, however, is essential for the production of wines of the highest quality, as it gives to wine> the desired fragrance, bouquet and mellow character. Ten degrees above proof is in this respect a suitable strength. The objectionable features of low-strength spirit disappear if the spirit, or wine containing such spirit, is permitted to mature.
It is proposed, therefore, to permit the
Use of low-strength wine spirit - fixed at not less than 10 degrees above proof - in the fortification of wine, and to keep such wine under customs control for a period of two years, by which time the objectionable features of the spirit will have vanished.
In bringing this proposal before honorable senators, I desire to inform them that its merits were investigated on behalf of the Government by the Chief Inspector of Excise, Mr. Gollan, and by the Honorable J. Gunn, Commonwealth Director of Development, on whose recommendations the Government is now acting.
As 1 have no personal knowledge of the wine industry, I have to be guided by the recommendations of the officers of the department, who, having made the necessary investigations, have informed the Government that this measure is necessary. As the bill is non-contentious I trust that it will have a speedy passage.
– I understand that there has been a good deal of misgiving on the part of a certain section of wine-growers with respect to the effect of clause 3, to which the Minister (Senator Barnes) referred. I understand that their objections have now been removed by an assurance given by the Minister in charge of the administration of the measure.
– What is the nature of the assurance given?
– That the provision will not be used to the detriment of the small growers who have not the necessary accommodation to hold wine for a sufficiently long period to enable deleterious substances to pass off. A section of those engaged in the industry expressed the fear that if any amendment were made in that direction in paragraphs (a) and (6) of proposed new section 59, their position might be endangered. I now understand that it is the intention of the Government to retain paragraphs a and b, and on the assurance given by the Minister, there can apparently be no objection to the measure. Any attempt to provide for a lower fortification spirit content would be stoutly resisted by the growers.
Question resolved in the affirmative.
Bill read a second time.
In committee :
Clauses 1 .and 2 agreed to.
Clause 3 (Maximum strength of wine).
.- I do not know whether the effect of this provision is that wine may be released from bond under two years. Australia is at present manufacturing not only wine but also whisky, and it appears to me that a period of two years for wine or whisky to mature is altogether too short. I should prefer an extension of the present period by one year. I have not studied the provision very closely, but I do not think we should take the risk of allowing whisky out of bond under two years, although I understand that whisky may be bottled in bond before- that period has expired.
– Wine fortified by 30 per cent, spirit can be released immediately it is made.
– I do not know whether that is so, or whether it is desirable that it should be so.
– It is.
– Every precaution should be ‘taken to provide that wine shall not be released from bond under two years.
. -We cannot all be experts in matters of this kind. In this instance the Government has been guided by the recommendations of the officers who have closely studied the subject. I know very little concerning the manufacture of wine and therefore cannot express an expert opinion; but as the departmental officers have assured the Government that the clause in its present form is necessary, I trust that the committee will pass it.
Clause agreed to.
Clause 4 agreed to.
Title agreed to.
Bill reported without amendment; report adopted.
Standing and Sessional Orders suspended.
Bill read a third time.
page 806
Senator BARNES (Victoria - Vice-
President of the Executive Council) [3.41]. - I move -
That the bill be now read a second time.
I am well aware that, if honorable senators opposite are determined to oppose this bill, the task before me and the gallant little band behind me will be extremely difficult.I propose, therefore, to appeal to them to consider this measure from the point of view, not of party politics, but of public welfare.I need not occupy the time of the Senate by reminding honorable senators of the desperate position of Australia. Our primary producers have their backs to the wall, and in every State large numbers of our workers are out of employment. Our duty as members of this Parliament is to endeavour, as far as possible, to alleviate the situation. The Government is practically without financial resources, because two years ago the country’s credit was almost exhausted by the previous Administration.
– Not at all; we are not responsible for the state of affairs that obtains in. Australia to-day. It is estimated that over 250,000 men are out of work in the various States despite the fact that, if financial resources were available to us, many important public works of a reproductive nature could be put in hand. Unfortunately at the moment, we are unable to raise money overseas.
-Why?
-We are unable to borrow money overseas because the previous Administration destroyed the confidence of overseas investors. It is now the duty of this Government to put the Commonwealth on its feet again.
When we took office our efforts to pull the country out of its financial trouble were hampered very largely by reason of the collapse of the overseas markets for our primary products. The war ruined practically every country that took part in it. It has so impoverished many of the nations that they are unable to pay a fair price for our wool and our wheat.
– But the honorable senator told us just now that the previous Government was responsible for Australia’s present trouble.
– Nearly every country is in a positron of grave economic difficulty. Since consumers overseas cannot now afford to buy our products, Australia is passing through a period of severe commercial and industrial depression, and the Government is now appealing to the Senate to give it a fighting chance to pull the Commonwealth out of its difficulties. I am not an advocate of repudiation or inflation - neither is my party - and I am convinced that it would be safe for the Senate to pass this measure. It would enable the Federal and State Governments to so organize their financial policies as to be able at once to employ at least 60,000 men on works of a reproductive nature. Private enterprise then would be stimulated to such an extent that we could reasonably expect another 60,000 men to obtain employment.
– Upon what works could the Governments employ 60,000 men?
– I am reliably informed that the civic authorities of Sydney could spend between £2,000,000 and £3,000,000 on sewerage works in that city and suburbs. These undertakings, when completed, would immediately return from 11 per cent. to 13 per cent. on their capital cost. Similar works could be undertaken by other civic bodies throughout Australia. In Ballarat, my own home town, sewerage works were recently put in hand. The section of the city in which I live has been sewered, and as a citizen I am now paying my contribution towards interest on the capital cost. These and many other works of a similar nature which I could mention appear to me to be perfectly sound business proposals. No fear need be entertained as to the reproductive nature of the assets thus created. For this reason the Government is now asking Parliament to authorize a fiduciary note issue for the stimulation of industry. If experience shows that the existing currency is sufficient to carry on the business affairs of the Commonwealth, there will be no need for the printing of further notes. All that we are asking is that Parliament shall authorize the Commonwealth Bank Board to make the issue, for which the Government itself will take the full responsibility. The Commonwealth Bank Board is quite right in refusing to accept that responsibility. The members of the board are not elected by the people and quite rightly they say that the responsibility rests with the Commonwealth Government. I am willing to take my share of that responsibility, and I ask honorable senators to help me in doing so. I put it to the Senate thatwe are well justified in this attempt to keep the farmers on their farms, and also to provide men with employment. We know that many are being evicted, and their furniture thrown on the roadside. One has only to travel by road from Canberra to Sydney to see men, and even women and children, on “tramp “. Heaven knows how they are fed. That is the position which we must make some attempt to remedy, and surely I am entitled to claim the assistance of every honorable senator in that effort.
Under this bill £6,000,000 will be applied to the relief of wheat-growers in accordance with a plan agreed to at a conference between Commonwealth and State Ministers in Februarylast. Of this amount £3,500,000 will provide an export bounty of 6d. a bushel on wheat, and £2,500,000 will be devoted to the relief ofnecessitous wheat-growers. The
Premiers who attended that conference knew the situation in their respective States, and agreed that this was a wise provision to make. Acting upon that decision, and guided by a knowledge of the seriousness of the situation that must be common to us all, the Government has taken this action. Hundreds of thousands of men are lacking employment. The position is so acute that in almost every yard I traverse in my own State I meet an old friend who is out of work. They are honorable men, ready and anxious to work, but unable to get anything to do. Their dependants, in many cases, are hungry; but they have not the wherewithal to satisfy their needs. My experience is common to honorable senators generally. Surely then there rests upon us as legislators the responsibility to do something to remedy these distressing conditions. The people who returned us look to us to relieve them of their disabilities, as far as we are able to do so.
To my mind, it is ridiculous for commonsense men to be influenced by the views of many persons who claim to be financial experts, when their experience shows that the adoption of those views would only lead to greater trouble. When Labour advocated the establishment of the Commonwealth Bank every one knows what was said at the time by men who claimed to be financial leaders.
– Yes; that it should be free from political control.
– It was said that the Commonwealth could not run a bank for the reason that it had not the funds with which to establish it. As a matter of fact we started the Commonwealth Bank with £40,000 of till money, and to-day it stands a monument to the wisdom of its advocates, and a contradiction of everything that the financial experts predicted. These same experts tellus now that a fiduciary notes issue means inflation. The terms “ deflation “ and “ inflation “ are not particularly well understood by the general public. Even we who are supposed to be much better informed on these matters than the ordinary elector do not in every case appreciate their full significance. But certainly many thousands of electors of Australia know what “deflation” means - since their belts have had to be pulled tighter - and they will understand it very much better, and with, a little more satisfaction, when, by means of a little inflation, they have an opportunity to loosen those belts again.
The British Government authorized its banking authority to issue a fiduciary currency to the extent of £260,000,000, but all that the Commonwealth Government is asking this Parliament to pledge the country to is only £18,000,000 worth of credit. Who will complain of that, or say that Australia cannot stand up to it? Speaking from memory, I believe that the private wealth of Australia is £3,000,000,000, and that its indebtedness is £1,100,000,000. The difference between these two amounts stands to our credit, so that an addition of £18,000,000 to our indebtedness would be a mere bagatelle. By means of this fiduciary note issue the farmers will get relief which they sadly need, to the extent of £6,000,000, anil £1,000,000 per month for a period of twelve months will be provided to afford employment in the States. The notes will be legal tender. They will circulate from the man at the end of a pick handle to the storekeeper, the barber, the publican, and other tradesmen. Everyone will get a share of them.
– What is to be done when this amount has been used up?
– I do not know if the honorable senator remembers the old song, “Wait till the clouds roll by.” The clouds may have rolled by before the money is all spent ; we may have emerged from our present troubles by then.
Among the extraordinary statements made by some men who seek to guide the destinies of nations is the claim that longer hours must be worked, and lower rates of pay accepted. Yet the wheatgrowers of Australia are capable of producing in one year enough wheat to feed the people of the Commonwealth for six years. Why is it that Australians can do this? It is because the parents of the youth of this country have sufficient brains to give their children the best possible education they can afford; because the country itself has made education compulsory so that each child may have a fighting chance to live. The people of Australia, given the opportunity, can do anything that can be done in any other country. What is the use, therefore, of some old tory telling me that we must work longer hours and accept less pay, when we can get our boys to produce in two hours what it took their fathers, in years gone by, all day to produce? What sense is there in educating people to make themselves efficient to carry on work in a skilled way if they are to be told that they must still work longer hours than their fathers worked?
– We were told to grow more wheat.
– That is so, and, I believe, that it was the right advice to give the farmers. I may not have thought that everything connected with the proposal was such as to recommend it to me, but one has to be guided by the decisions of the councils in which one meets. An army will get nowhere unless it has a fighting policy to which full agreement has been accorded. Many talented soldiers in this chamber to-day are versed in the science of warfare. They know that they could not carry on a war for five minutes unless they controlled an. army that was ready to move off to the minute.
– The trouble with the honorable senator’s army is that they are all generals.
– I am one myself. I cannot understand the objections that have been raised to this bill. There are in circulation in Australia to-day, Commonwealth notes to the value of £45,000,000. The gold backing to those notes is £15,000,000. That gold is in the treasury vaults, earning nothing. I could never understand why Australia should keep such a huge quantity of gold lying idle unless it was for the express purpose of meeting its overseas obligations. That is the only purpose to which gold is applied to-day. The gold backing to the Australian notes is roughly about 6s. for every £1 note. Behind the remaining 14s. is the honor of the people of Australia. If we sent the £15,000,000 worth of gold from our vaults to London to meet our overseas obligations, would anything happen? Gold talks all languages. I do not know the reason for it, but prospectors in Ballarat are to-day getting £5 8s. an oz. for their gold. Gold is the thing that counts in our relations with other countries. There may be sound reasons for that. I could understand Australians being somewhat apprehensive about accepting foreign paper money for purposes of trade and commerce. However, Australians, as a people, are honorable. The guarantee of the Commonwealth Bank which appears on our banknotes is a pledge of our integrity, and should be sufficient without any backing of gold. Personally, I have not seen a sovereign for about twenty years. For a long time, our banknotes have sufficed as a medium of currency. The proposed fiduciary issue would have behind it the same pledge, the same determination to honour our obligations, as have the notes that have enabled the Commonwealth Bank to show a profit of £1,000,000 a year over its currency transactions.
I have no time for all the talk we hear about dodging our obligations. When I enter into a contract, I carry it out to the letter. It may happen to any man that he becomes embarrassed, through some unforeseen happening. In such a case, it is but necessary for him to go along to his creditor, admit frankly that he cannot, for the moment, pay, and tell him that he wants time and a fighting chance to make good. Invariably, a respite would be granted him. There was no talk about any lack of integrity on the part of Australia when the war was on. Why should there be now? Why should it be suggested that the only way in which we can balance our budget is by cutting down old age pensions-
– Who suggested that?
– The committer of financial experts recommended that oar expenditure should be curtailed. There are only three or four ways inwhich that can be done; an attack upon oldage and invalid pensions, the mater it allowance, or the pensions granted to our returned soldiers. Such methods may have the approval of honorable senators opposite, but we, on this side, reject them.
– Yet the Government would rob the workers by a process of inflation ?
– If by limited inflation we can place our unemployed in work, and do something useful for the country, I fail to see where it would be harmful.
– If, by inflation, the Government reduced the value of our £1 notes to 10s., it would be robbing the workers.
– Order! The honorable senator will have an opportunity to debate the subject later.
– If these fiduciary notes were put into circulation, one of them would buy just as much bread as would a Commonwealth banknote. But it does not follow, if the measure is carried, that one additional note would be printed. It is merely an indication to the Commonwealth Bank Board that this Parliament stands behind it. The members of that board are sane men, well trained for their task. They know the assets that Australia possesses, but they seek to be reassured by this Parliament in the present crisis. The passing of a bill such as this would be an indication that the Federal Government is prepared to accept its share of the responsibility by authorizing a fiduciary issue. No new notes would be printed until the Commonwealth Bank deemed that to be necessary.
I do not ask honorable senators to act precipitately. I ask for nothing more than the people of Australia are entitled to receive. Our men and women are wandering around the country eager to work, but unable to find anything to do. They do not want charity; they want the opportunity to make a return for what they receive. This measure opens the door to a new era. It makes possible the construction of public utilities, of railways, roads, and bridges. Those are the things in which many overseas investors have hitherto put their money. They represent a good investment.
This Government has inaugurated a tariff which, if continued, will do much to solve the problems of Australia. It has encouraged overseas investors to expand present industries, and to establish new ones in Australia. It would bring about even greater industrial activity were it not for the uncertainty that for the moment prevails. Overseas investors are apprehensive lest a reactionary party should gain possession of the Treasury bench, and undo the good work that has been done by this Government. So for the moment their purse strings are tightened. If they were given a guarantee that the present Commonwealth Government would remain for five or ten years in office, so that the existing tariff would continue’, the strings of the moneybags would quickly be loosened. I do not blame those business men for being canny. I appeal to honorable senators to assist to restore their confidence, and to give favorable consideration to this bill.
It is well-known that I would not dream of making a claim that I thought I could not substantiate. I have given this measure a great deal of thought, and personally, I believe that its passage will mean a lot to the people of Australia. It grieves me to the heart to see so many of our workers idle. I know that it does not leave honorable senators unmoved. I remember the bank smash of 1893. I was then a young man, and for two years I was compelled to tramp in search of work, which was unobtainable. Perhaps it is because of that experience that my heart is opened a little more generously towards our unfortunate unemployed during the present crisis.
I know that Australia is sound; that its people are honorable. I know that they will meet their obligations, although some of them may have been entered into foolishly. I ask for no concessions, but merely that our people be given a fighting chance to make good their pledges. How can a hard fight be won with a starving army? That is what we are attempting to do in Australia. With some 250,000 men and women out of work, we are calling on the nation to put up a strenuous fight, meet its obligations, and balance its budget. That grand old campaigner, Napoleon, said that “An army marches on its stomach.” It makes our task extremely difficult if we face it with a hungry army of unemployed. I know that Australians are a brave race, and that in such times as these they will accept conditions that they would not dream of accepting under normal circumstances. I appeal to honorable senators opposite to assist the Government to place our citizens in satisfactory circumstances, and not to leave them like Lazarus, grovelling at the foot of the rich man’s table, seeking a crumb. Give them a fighting chance to make good, and perform the work of the country. I know no better means of achieving that object than that proposed by the Government.
– All those men were not out of work until the Scullin Government came into office.
– It has had a kind of snowball effect-
– The honorable senator need not follow that line of argument, as it is quite irrelevant.
– Is this measure calculated to restore confidence overseas ?
– If I were an investor in Great Britain, and Australia appealed for £10,000,000, or whatever sum it wanted, I would ask myself what use would it be to lend money to a country that had such a great proportion of its population out of work. How could such a country repay my principle and interest? That would be a natural line of reasoning for any investor to take. If, on the other hand, the country was a hive of industry, with practically all its citizens in work, I would not hesitate to make available what money I had to invest. I know the production capacity of my countrymen. I am proud to regard them as the best educated and most efficient race in the world. They take a place second to none. Do honorable senators opposite imagine that English investors have not followed the history of Australia, and studied its economic circumstances? An investor pays great regard to the productive capacity of the workers of the country in which he proposes to place his money. If its statistics disclose that the production capacity of its people is low, he will refrain from investing his money there. If they disclose the contrary he will say, “ These people are able and willing to work, and honorably carry out their obligations. On the principle of ‘ safety first ‘, that is the country in which I must invest my money”. The credit of Australia was depreciated more than two years ago, and we are now endeavouring to restore it to the position that it formerly occupied. If my small voice will help, I say to our kinsmen overseas that they need not fear default by Australia; we shall keep our flag flying; all that we ask is that they give us a fighting chance.
The responsibility rests upon honorable senators opposite to say whether £6,000,000 shall be made available to the farmers and £12,000,000 to the workers of this country. I do not say that defiantly. Rather do I say that if they agree to the proposals of the Government they will be doing their country a favour. In all probability, they are as anxious as I am to improve the conditions in Australia. I hope that they will give this matter their earnest consideration. Our people ask for nothing except an opportunity to work so that they may feed their wives and children. I say very gravely to honorable senators opposite that a tremendous responsibility is cast upon them. I hope that they will treat this measure as generously as I expect that they should. If they do so, they will earn the gratitude of the people of Australia, because the result will be that industry will move, little children will be better fed and clothed, and everywhere there will be smiling faces.
There I leave the matter, in the expectation that the Senate will do its job quickly, faithfully and well.
Debate (on motion by Senator Sir’ George Pearce) adjourned.
page 811
Debate resumed from the 11th December 1930 (vide page 1288), on motion by Senator Daly -
That the bill be now read a second time.
– Since this measure made its appearance in the Senate many events have transpired, many schemes have been enunciated and many financial ideas have been “ put on the air “, the majority of which have remained in the air.
The principle underlying the institution of a central reserve bank has come under most critical examination during the last few months. Although, perhaps, it is now being examined for the first time in the light of history, certain facts have emerged from not only the State and the national, but also the international point of view.
I believe it can fairly be said that up to a certain point all parties are in agreement with respect to the principles that underlie the establishment of a bank of central reserve. But an examination of the matter in the light of recent happen ings must, I believe, inevitably lead to the conclusion that in the last analysis all that a central reserve banking system can do is to mitigate the rigors of a crisis rather than to prevent a crisis from arising. In that connexion, if conducted on sound lines, it may be of some benefit to the community. The experience of the United States of America, where the system has received perhaps more attention than anywhere else in the world, serves to prove that it does not operate to prevent a financial crisis. Even in the Mother Country it has not had that effect.
It appears to me that the psychology of the people has to be studied in connexion with the monetary question as well as with all other questions. It has been shown that even though there be ample gold and other reserves, if there is the will to boom, if there is an extension of credits between one individual and another, no central reserve bank can prevent a crisis from arising. In the financial world there are cycles of exceeding elation, the desire to be lavish in expenditure, the wish to do things on a grand scale; and very shortly afterwards we find the pendulum swinging in the other direction, with the whole community suffering as a consequence.
The second interim report of the financial committee of the Gold Delegation of the League of Nations discusses this question from the angle that on one occasion, I believe, was put by Professor Gregory, and is referred to in the report of the select committee of this Senate which inquired into the matter. Giving evidence before that committee, Mr. Lemon said that Professor Gregory had pointed out that a common policy of international monetary authorities is facilitated by central reserve banks. It was from that angle that the Gold Delegation of the League of Nations examined the question. I have been very anxious to see to what conclusion they came, because I admit frankly that had I been asked six or twelve months ago whether I subscribed fully to the principles of central reserve banking, I should have answered affirmatively. The state of my mind at that time was such that I do not think anybody could have shaken my belief that central reserve banking would prevent as well as alleviate a crisis. But within the last few months I have had reason to modify that belief. I view the matter entirely outside of party considerations, because I consider that such considerations are not involved. The party aspect is entirely divorced from the system so far as it has the approval of those who have the welfare of the country at heart.
I shall refer a little later to the considerations that are regarded as essential to the establishment of any system of central reserve banking. From the point of view of its ability to prevent a crisis such as that through which we are passing at the present time, I do not think that it fulfils the expectations of even those who, con amore, are supporters of the principle.
That Professor Gregory is a great authority on this subject is best evidenced by the fact that he has been consulted very widely by the nations of the world who are in distress to-day, and that his assistance was sought, among that of many other eminent financiers from Germany and Prance, by the financial committee of the Gold Delegation of the League of Nations.
As I have already said, I approach this subject as one who, prima facie, at the outset was strongly in favour of the institution’1’ of a central reserve bank as distinct from a trading bank. I shall suggest certain amendments that I consider should be made to this measure if it is to become law, with the object of making it safer for the people of this country and of stripping it of all political control, so that it may not be subject to influences that cannot but desire to serve their own particular ends rather than those of the country.
Before embarking on these details, may I give a few excerpts from the report of the financial committee of the Gold Delegation. They are statements which those who wish to consider the financial and economic position of Australia may well pin in their hats, if they cannot get them into their heads in any other way. They represent the concentrated thought of the masters of economics and of finance in the world. They are not the views of those who, for political or other ends, desire to engage in economic rehabilitation. These men have examined the various subjects connected with central reserve banking and kindred matters, with the sole desire of saving civilization, if possible, and of rehabilitating those countries which are now in the throes of a great depression. At page 15, the Gold Delegation, in its second interim report, says -
The sensitiveness of liquid capital, however, has been due not so much to its magnitude as to the unstable economic and political conditions to which wo made allusion in our introductory remarks. There has been an inevitable flight of capital from countries in which currencies have been inflated and a repatriation after stabilization was achieved. Capital has moved on account of political uneasiness from those parts of the world where the need for it was greatest to countries where there was already an excess of funds. It has been attracted not simply by the real needs of business but by the chance of quick profits from Stock Exchange speculation. Simultaneously, the normal flow of goods has been impeded by sudden changes in customs tariffs, by the imposition of prohibitions, and by the innumerable measures which governments (or industrial combines) have taken to shelter domestic markets against external competition.
On page 16 the committee states -
The commercial policy of recent years has itself been largely determined by the unstable and abnormal fundamental conditions which have resulted from the war, and it may be hoped that the farce of these exceptional circumstances will decline. To the extent that this happens and public confidence improves will it become more possible to assure an optimum distribution of the gold available for monetary use and therefore to reduce to a minimum the risk of a shortage of gold in any centre being caused by the trapping of gold in others. The manner in which this result may, we hope, ultimately be achieved, in spite of the greater complications of the present gold standard system is considered in the following section.
Dealing with that aspect of the subject, they say -
Countries adopting the gold standard become thereby automatically members of an international system under which they assume a responsibility for conducting a reasonable economic and financial policy which, with the maintenance of confidence, will facilitate the general working of that standard.
In connexion with the temporary dis.equilibria resulting from the present disposition of the world’s gold supplies they proceed, on page 16, to state -
Temporary disequilibria may arise through causes over which the country mainly affected has itself no direct control, such, for instance, as a failure of crops or financial difficulties in one of its main export markets. They can be met by temporary gold movements or by the provision of short-term credits. In such cases, if equilibrium existed before these temporary causes made themselves felt and the movement of gold is allowed to affect the general level of values in either the losing or the recipient country it may be found, after these special causes have ceased to operate, that owing to that change in values a more permanent and serious form of disequilibrium has been caused and that a complete reversal of policy is required. If, on the other hand, the movement of gold is not allowed to exercise its natura influence promptly when more permanent causes of disequilibrium arc operating, then serious instability may result and gold may continue to flow from one centre to another until its shortage or excess forces upon Central Banks a drastic change of credit policy. Apparently identical phenomena may thus require exactly opposite measures to be adopted by monetary authorities, and great discretion has to be exercised in the planning and execution of monetary policy.
The following paragraph has also a very important hearing on the present position in Australia : -
Thus, debtor States and agricultural and other countries whose exports are composed of a relatively restricted number of commodities are likely to require a larger reserve proportionately to their total external trade or average balance of international payments than are countries with a more mixed economy. Countries again in which foreign Central Banks keep their reserves in the form of large sight claims may well consider it advisable to maintain an additional stock of gold against these special international liabilities.
I do not wish to weary honorable senators, but the excerpts which I have quoted comprise valuable information, which should be at our disposal in considering this measure. On page 18, the committee states that normally the purchase of gold should be unrestricted, and on page 19 I find the following: -
To countries which have to meet the service of debts which were not incurred, or have not been employed, for internal economic development, the need of caution in further borrowing is obviously still more imperative. Temporary borrowing intended to postpone such fundamental adjustment of values and of the reorganization of production as is required in order to render a debtor State able to meet its liabilities, is likely later only to intensify the difficulties by which it is faced. Nor are those difficulties likely to be alleviated in the long run by the artificial stimulation of exports by bounties or subsidies, or by the artificial restriction of imports by tariffs or prohibitions.
In dealing generally with the central reserve banking system, the committee states on page 21 that -
The central authorities have, as we have seen, two functions of special importance to perform - the prevention of such disequilibria as may be averted by monetary policy and the restoration of equilibrium when balance has been lost. We have already pointed out that to obviate unnecessary adjustments. Central Banks are compelled to keep a reserve in gold, in excess of their legal minimum and suggested that the reserve stipulations should be modified. But the unnecessary export or import of gold may itself be avoided by means of the provision of short-term credits between Central Banks. Inter-Central Bank credits postulate a co-operation and mutual understanding the steady development of which should, in our opinion, be the constant object of these institutions.
In their final observations, on page 21, the committee deals with gold position of the world in these words -
In a previous section wo laid emphasis on the fact that the present distribution of gold was due to causes in part political, in part economic or fiscal. In later sections we have endeavoured to outline the conditions upon which a beneficial distribution of gold may be secured. The first of these conditions is public confidence; others are related to economic policy in the widest sense of that word, others again, and those on which we have naturally laid especial stress, to monetary policy. We desire before concluding to make it clear, however, that the banking principles the application of which is likely to prevent a maldistribution of gold stocks and to secure economy in their distribution, will not by themselves ameliorate the existing distribution in so far as that is at present defective.
A constant flow of monetary gold from or to any country is a sure sign of maladjustment in international values or interest rates, or of a lack of public confidence. Such maladjustment, if confidence is restored, the application of these principles should overcome.
There are other excerpts which I could quote which clearly show that in the opinion of the committee the central reserve banking system must be extended to every civilized country before it is likely to become really effective. Therefore, whatever we may do in Australia would be of little practical benefit unless central reserve banks were in operation in all other civilized countries. In effect, the Commonwealth Bank, which is now operating in close co-operation with the private trading banks, is performing the functions of a central reserve bank. The establishment of a central reserve bank on the lines proposed in this measure would not increase the credit of this country in the slightest degree. The Treasurer (Mr. Theodore) said that all the credits were available, but that it was essential to mobilize them in one institution. It is not the banking system of Australia that has failed, as was the case in the “ nineties “, but the governments of the country, due largely to extravagant policies adopted both. by the Commonwealth and the States in recent years.
At present the banking institutions of Australia are. in a sound position, and are doing all in their power to safeguard the interests of depositors. As the Commonwealth Bank is now operating in close co-operation with the trading banks, I cannot conceive how a central reserve bank would be of any benefit. Up to a certain point the principle embodied in this measure appears to be sound ; but beyond that point it fails. It is useless to assume that simply by mobilizing the reserves of the private banks in a central reserve bank we shall in any way alleviate the present financial position. The banking institutions, which are operating on a sound basis, do not need assistance. The report of the Board of Directors of the Commonwealth Bank, in clearly setting out the functions of the Commonwealth Bank, states -
The general position has all tended to the development of closer relations between the Commonwealth Bank and the trading banks of Australia. To-day the Commonwealth Bank is in reality functioning as a central bank, and the reserves of the trading banks deposited with the Commonwealth Bank are fully in accord with the requirements of central banking. This co-operation between the trading banks and the Commonwealth Bank has been of great assistance in arranging the many difficult financial problems which arose during the half-year.
I agree with the view expressed that the functions of a central reserve bank are incompatible with ordinary banking business. With certain reservations, with which I shall deal later, I could have supported the bill; but in its present form I cannot see that it will be of any benefit to the financial institutions or to the community generally. Mr. Robertson, of Trinity College, Cambridge, in Money, points out, that-
A monetary system is like some internal organ; it should not be allowed to take up very much of our thoughts when it goes right, but it needs a deal of attention when it goes wrong.
Surely that suggests that when the banking system is functioning effectively there is no need to make any radical change. The fundamental reason for the establishment of a central reserve bank is to mobilize and protect the reserves of other banks and to place them where they can be readily available in the event of a crisis. Mr. Spalding, an eminent authority on banking and currency, said a little while ago -
The future currency of the world would, therefore, seem likely to take the form of well secured note issues in the hands of the central banks of issue. The issues are in every case to be kept within well defined limits, and, with the increase in co-operation among the central banks, the dangers inherent in note issue, such as over issue and inconvertibility, should be reduced to a minimum.
The note issue should be stringently regulated. Those who have the responsibility of determining the amount to be allowed in circulation from time to time should be quite free of political, trade or other influences.
We heard something this afternoon about the Government’s intention, under cover of another bill, to secure control of the note issue in Australia. That policy, I suggest, is contrary to sound banking principles; contrary to the views expressed by all the recognized world authorities on banking, and contrary to the best interests of Australia. Professor Shann, who always illumines every subject with which he deals, in his preface to the treatise which Mr. Davidson issued on central banking, made a valuable contribution to the discussion on this subject. He stated -
Our banks rubbed along without a central reserve as long as gold flowed in profusion from the mines. Australia herself found them in bullion on most handsome terms. But the days of financial innocence are over. Some are foolish enough to think that a printing press in a government bank of issue can do, at less cost, the work that the mines used to do. Their faith in fiat money is still unshaken after the miseries of war and post-war finance in Europe. They are but few - the “ lunatic fringe.” Many, however, favour a single all-swallowing bank, either under direct political control or on a short leash. With all the eggs in one basket, for which impatient parties make a triennial grab, it is a certainty that one day all would be smashed. Then we should have paper money, willy-nilly, and South American finance for all.
Without making an invidious comparison between that and other reports, I should like to pay a tribute to tha delect committee of the Senate for its excellent report upon this subject. From beginning to end, it contains material which is “well worthy of the earnest consideration of honorable senators. Sir Otto Niemeyer, in a precise memorandum which he furnished to the committee, dealt very pertinently with the point which I have been endeavoring, somewhat laboriously, I fear, to elaborate. On page 18 of the committee’s report, he stated -
This aspect of reserve bank theory has acquired added importance in recent years from the emergence of a number of monetary problems which involve international relationships and can only be dealt with by international co-operation between the various reserve banks of the world. Many of these problems, particularly those relating to world prices, are of especial importance to Australia.
That crystallizes the observation which I made at the commencement of my speech, that thiB business of central reserve bank ing is an international problem. It follows, therefore, that any measure which we may pass should be in perfect harmony and sympathy with similar legislation in other countries. The dominating principle of central banking everywhere is that it shall be entirely free of political control.
– Has the honorable senator read the second interim report of the Gold Delegation of the League of Nations ?
– I have. During the Minister’s temporary absence from the chamber, I quoted somewhat extensively from that document, which, I hope, other honorable senators will have an opportunity to study.
Senator Dooley, speaking in the Senate on the 11th December last, said -
I have studied the- report, and I can see nothing in it which, in my opinion, may not be acceptable to the Government.
Since the honorable senator is now a member of the Government, I think we are entitled to assume that the amendments suggested by the select committee may not be unacceptable to the Ministry. If the bill is passed in its present form, it will inevitably weaken the Commonwealth Bank. That institution, deprived of a certain amount of easy money which comes to it under existing conditions, will have to meet the ordinary trading banks in open competition for its future business. The proposed central reserve bank could only come to its aid in the event of a crisis.
There is a good deal of learning to be had in the numberless standard works on this subject of central reserve banking. In the main, all the authorities are agreed upon the point which I have made, namely, that a central reserve bank must be free of political control. It is essential, in the interests of the people, that there should be international co-operation between central banks in all countries. To this end, legislation to establish a central reserve bank for the Commonwealth should be so framed as to enable the bank to co-operate with central banks in other countries, in the manner in which I have indicated. In their recent work on this subject, Kirsh and Elkin, referring to the Central Reserve Bank in the United States of America, state -
In the United States of America a somewhat similar position existed at the time of the establishment of the Federal Reserve Bank system. With the enormous number of small and large single-office banks (i.e., having no branches) obtaining in the United States of America at that time, there were practically none, or extremely few men, whose banking knowledge and experience had given them the training necessary for directing affairs of an important Central Reserve Bank. To overcome this the system of the United States of America relies for its sound working on a blending of the nominated and elected element.
They go on to say -
On the general question whether it is preferable that the commercial banks, as such, should become stockholders in the Reserve Bank instead of the whole of the stock being offered to the general public, it may be said that anything which tends .to impair the breadth and unity of the interests participating in the Reserve Bank is to be deprecated. If blocks of shares are held by the commercial banks the probability is that this will carry the right to nominate or elect one or more directors. There is some risk that directors representing special bodies may incline to regard themselves as peculiarly charged with watching over and safeguarding the interests of those bodies and that the board may, as a result, tend to divide into groups. Such a tendency is undesirable, as the maintenance of a sound credit policy demands a united impulse from a central board.
Because of the large number of private trading banks operating in the United States of America this weakness in the’ constitution of the Federal Reserve Bank, which was commented on by the Finance Committee of the League of Nations, has been, to some extent, responsible for the unsatisfactory condition of American finance in recent years.
– What objection has the honorable senator to the existing Commonwealth Bank?
– I have commended the Commonwealth Bank for what it has done in the realm of central banking, and I am now endeavouring to show that this bill will weaken that institution. In normal times the Government’s proposal might be a step in the right direction but, as the directors of the bank have emphasized in their last report, the Commonwealth Bank is now doing all that is necessary to meet the position. In co-operation with the private trading banks, it is releasing all the credit that is available, and, at the same time, it is buttressing the position of the private banks. I think I have made it plain that, if the monetary policy of the Commonwealth is to be framed on sound lines, the central bank must not be the minion of the Government.
I wish now to make passing reference to some of the evidence given before the Senate select committee. Professor Copland, whose views on the subject are well worthy of consideration, said -
A central bank cannot be established by legal enactment. It must possess substantial funds.
In other words a fiduciary issue will not suffice -
It must be accepted as a leader by the private banks, and it must bo independent of the Government whilst working in co-operation with the Treasury. It takes many years for a central bank to build up its authority in this way, and whatever the law may bo, the success of the bank depends entirely upon its administration, and its relations with the private banks.
The point has been emphasized over and over again, but has been put in no more concise form than in the evidence given by Professor Copland. On page 34 of the evidence will be found a statement by Mr. Duffy, which we should look at. Mr. Duffy, who was at the time secretary of the Melbourne Trades Hall Council, said -
The Commonwealth Bank at present performs a number of the functions of a central reserve bank, so far as the note issue is concerned; but it does not control foreign exchange. The banks arc now controlling foreign exchange, but there was no obligation on the part of the private banks to agree to this arrangement. … I do not think that the proposed central reserve bank should be under political control. … A banking policy may bc conservative or liberal; but credit cannot be extended beyond the country’s resources. . . . We know what has happened in Russia, Germany, and France as the result of the over-issue of notes.
Mr. Colman, chairman of the Melbourne Woolbrokers Association, in reply to questions asked him by various members of the committee, put this point, -
I fear that this bill will have the effect of restricting credit. Criticisms uttered in London and Australia, mostly in banking circles, suggest that that might be the result. Wool houses have to rely on accommodation from their banks, and if they were restricted in credit they would have to restrict credit to their clients. We are basing our view largely on the statements of the private banks themselves. They fear such a restriction, and that fear is conveyed to us as part of the community that relies on credit.
Another objection he voiced was -
One of my objections to the bill is that there is no limit proposed to the advances that a reserve bank might make to governments, and that might make credit more rigid, although the trading banks’ reserves would be compulsorily lodged with the reserve bank.
Mr. Colman seems to have been a bit of a prophet, because at that time I do not think the same amount of borrowing from the Commonwealth Bank had taken place as has since, taken place. He went on to say -
We are afraid that the reserve bank might lend money to the Commonwealth Bank, which might, for political needs, lend that money out. If this bill became law, the Commonwealth Bank would simply be a trading bankbacked by the Government, and in order to keep up its profits it would have to go into competition. There might be so much drawn from the reserve bank as to prevent it from exercising its proper functions when there was urgent need for it to take a steadying action.
On page 31 of the evidence Professor Shann, of the Perth University, summarized the position most concisely and logically. He said -
How could it help us in this rugged crisis to place a central reserve bank in charge of our finances? We have certainly erred and strayed from the fold of international parity. Our price-level has stiffly diverged from the rapidly-falling levels of other countries. Moreover, the fever of speculation is still in our bones. Men, it may be, have ceased landbooming and commodity-cornering on private account, but they are still urging on parliament, on farmers, and pastoralists, and on the country generally, pools and schemes for enhancing values by withholding goods from market. Being individually impoverished, they want the Government to speculate for them.
Those are points worth keeping in mind. In paragraph 16 he went on to say -
The duty of a central reserve bank in breaking such bad habits and liquidating the remainders would make it very unpopular in Australia, to-day. Yet, to enable the pound Scullin to look sterling in the face again, we must sell goods overseas as actively as possible. Only thus can we build up London funds, repay the banks their swollen advances, and thus enable them to finance the expansion of production which will keep us solvent, and selfrespecting.
Professor Shann then proceeded to touch on the bill question, but I pass it by, although it serves to emphasize the difficulty of putting into operation a measure of this sort at the present time. He next dealt with the measure itself, saying-
Does the bill under consideration secure the establishment of such a public trustee? Part III. of the bill, setting for the management of the reserve bank, promises a board of directors, one of whom would hold office ex officio, viz., the Secretary to the Treasury; all the others would be appointed by the GovernorGeneral, doubtless with the advice of Cabinet. They would be appointed for varying terms up to seven years, and their remuneration would be “ as fixed by the Governor-General “. So, too, might be their policy, seeing that they would be eligible for reappointment.
I stress the words “ so, too, might be their policy “ -
Do the terms of the bill regarding the bank’s powers plainly envisage a policy of liquidation, and a steadfast return and adherence to the gold standard, as the best available basis of international trade and credit? If a central reserve bank is to be worthy of its name its assets must be of the most liquid character possible. Hence Strakosch’s rule that “ A central bank should not purchase shares or securities other than securities of its own government or local authorities that have a currency not exceeding six months “.
Professor Shann then quoted from the words of Francis Walker, who at the close of the Civil War in the United States of America, said -
The issue of inconvertible paper money is never a sound measure of finance, no matter what the stress of the national exigency may be. I believe it to be as surely a mistaken policy as the resort of an athlete to the brandy bottle. It means mischief always. If there is ever a time when a nation needs its full collected vigour, with a steady pulse, a calm outlook, a firm hand, a brain undisturbed by the fumes of this alcohol of commerce - paper money - it is when called to do battle for its life with superior force. It is, to my mind, the highest proof of the supreme intellectual greatness of Napoleon, that, during twenty years of continuous war, he never was driven to this desperate and delusive resort. I hold any man to bc something less than a statesman, in tha full sense of that word, who, under any stress of fiscal exigency, supports or submits to a measure for the issue of paper money not convertible at the instant, on demand, without condition, into coined money. The political arguments by which such measures are always supported, on the outbreak of war, seem to me the veriest trash, due half to ignorance, and half to cowardice.
Professor Shann’s evidence contains economic gems which every honorable senator would do well to study. Mr. Tranter and Mr. Wreford, experienced bankers,, gave evidence on many details, which is worthy of the closest consideration, as also was that of Mr. Lemmon. Mr. Watts, who represents the Sydney Chamber of Commerce, said -
Without a bill market the central bank would have no means of operating as a true central reserve bank, and it is inconceivable that a bill market could bc established in less than from seven to ten years.
We know likewise from Sir Ernest Harvey that it takes time to establish a bill market. We have also Mr. Kiddle’s views on what happened in France, a lack of candour on the part of the Bank of France, a non-disclosure to the French’ people of the crisis to which they were heading, and by which they were well nigh overwhelmed.
Having regard to the last report cif the Commonwealth Bank Board, and to the present financial position, the crisis through which the country is slowly, and, I hope, safely passing, I do not think that the present is a time to embark upon the policy outlined in this bill. It means duplicating the overhead of the Commonwealth Bank. On the board of a central reserve bank there must be representatives of the commercial community, and the credit resources of the country. The finances of Australia would have to bear that additional burden. Sir Otto Niemeyer has already pointed out that the Commonwealth Bank is doing all that it is possible for a central reserve bank to do, and his statement ia backed up by the report of the bank board itself that it is functioning to the full as a bank of reserve. The crisis of 1893 was confined to the private financial institutions of Australia. To-day, those institutions are sound; it is the governments who are holding out. signals of distress. The details of the measure, before us do not concern us now. If the bill is to become law, it will have to be drastically amended. It is my view that the present is no time to embark on this business. We have coming forward to us from Geneva further reports. We have not heard the last word concerning this matter. It is of the utmost importance to Australia that when we do constitute a central reserve bank it shall be upon lines that will enable reciprocal relations to be entered into with similar institutions in other parts of the world. I have failed to learn from any of the utterances that have fallen from the supporters of the measure, either here or in another place, the need at this juncture for a central reserve bank in Australia. Had one been constituted a few years ago, it might have been advisable to consider an amendment of the act later, but the inauguration of such an institution at the present moment would be futile. As an honorable senator stated this afternoon, our bank credits are exhausted, and the Commonwealth Bank is doing everything that could be done by a central reserve bank. I move pursuant to Standing Order 194 -
That the word “ now “ be left out with a view to add the words “ this day six months “.
While I approve of the principles of a central reserve bank I do not support this measure blindly, even with the amendments that have been suggested by the excellent report of the committee, to the members of which I pay the highest tribute. I feel that while we are in such troublous financial waters, fighting for our very existence economically, we should take no steps to disturb existing arrangements. This bill was introduced at a time when sundry other proposals which have since been advanced were not even dreamt of in some quarters. We are asked to pass it to mobilize the reserves of the Commonwealth Bank. When there are no reserves to mobilize, and the Commonwealth Bank Board is functioning to the full and doing everything that a central reserve bank could do, why should there be any desire to institute a new body and superimpose it upon that bank ?
Such a step would mean the establishment of another bank, and would entail considerable additional expenditure at a time when we should be economizing rigidly.
I am prepared to accept to the full my obligations with regard to central banking. The subject is not a new study to me. I merely believe that the time for such an innovation is inopportune. We must stop tinkering, and get down to realities. I do not deny that the principle of a central reserve bank is sound, and that in other circumstances it would do much to mitigate the effects of a crisis such as that through which we are passing, but I do deny that the establishment of a central reserve bank would serve any good purpose at the moment.
– Are we in order, Mr. President, in debating the subject generally, or must we confine ourselves to the amendment providing for the second reading of the bill this day six months ?
– The subject may be debated generally, as the amendment involves so much of the original principle. I point out to honorable senators that really the only known method to shelve a bill is to move in the direction taken by Senator McLachlan. There are various other ways of circumventing the acceptance of a bill, but this is the recognized Parliamentary procedure, which is fatal to a measure if the motion is carried.
– I do not propose to speak at any great length at this juncture. I hope that every honorable senator has taken the trouble to read the very informative report that has been issued by the select committee. If that has been done, honorable senators must now possess a very much better idea of the subject than they did previously. I believe that a central reserve bank is eminently desirable, and that one might well have been brought into existence very much earlier than was originally intended by the bill. I ask leave to continue my remarks at a later date.
Leave granted; debate adjourned.
Senate adjourned at S.28 p.m.
Cite as: Australia, Senate, Debates, 15 April 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19310415_senate_12_128/>.