12th Parliament · 1st Session
The President (Senator the Hon.
W. Kingsmill) took the chair at 3 p.m., and read prayers.
War Censorship : Appointment of Mr. A. Vaughan - Search fob Machine Guns.
– On the 17th
April Senator Hoare asked the following questions, upon notice -
I am now in a position to inform the honorable senator as follows : -
– Can the Minister say whether he has any doubt as to the satisfactory manner in which Mr. Vaughan carried out his duties?
– I have none whatever.
On the 17th April, Senator Duncan asked the following questions, upon notice -
I am now in a position to inform the honorable senator as follows: -
asked the Minister representing the Prime Minister, upon notice -
– The answers to the honorable senator’s questions are as follow : -
Debate resumed from the 17 th April (vide page 989) on motion by Senator Barnes -
That the bill be now read a second time.
Upon which Senator McLachlan had moved by way of amendment -
That the word “now” be left out with a view to add the words “ this day six months.”
Senator Sir HAL COLEBATCH (Western Australia) [3.8]. - I desire to move that the following addition be made to the amendment proposed by Senator McLachlan : - and that in the opinion of the Senate the Government should take an early opportunity after further investigation and full consideration of the evidence collected by, and the report of, the Senate Select Committee, of introducing a Central Reserve Bank Bill embodying the principle of freedom from political control, and the maintenance of a currency system that will facilitate co-operation with the central reserve banks of other countries.
There are three principles involved in this amendment which I trust the Senate will accept - the principle of establishing in Australia a central reserve bank, the freedom of that bank from political control, and the maintenance of a currency system which will enable it to co-operate with the central reserve banks in other parts of the world. I regret very much the absence of Senator Glasgow, who was the chairman of the Senate committee which inquired into this bill, but I am sure that not one member of that committee regards its report as being in any way the last word to be said on this great subject. I am not suggesting in this amendment that the Government should take that committee’s report for more than it is worth.
– I point out to the honorable senator that the question now before the Senate is that the word “ now “ be left out, with a view to insert in lieu thereof the words “ this day six months “. I understand from the tenor of the honorable senator’s speech that the amendment he proposes to move is an alternative to that moved by Senator McLachlan.
– The honorable senator proposes to add to my amendment.
– Am I not in order, sir, in discussing the words which I propose to insert?
– The procedure which the honorable senator is adopting is not strictly in order. He will be quite in order in foreshadowing an amendment which he proposes to move. I suggest that it would simplify matters considerably if a division were taken first of all on the elision of the word “now”.
– I rise to a. point of order. I have always been under the impression that a motion to leave out the word “ now “ with a view to insert in lieu thereof the words “ this day six months “ is regarded as one question, and that after the Chair has put the question that the word “ now “ be left out, the Chair then puts the question that the words “ this day six months “ be inserted. There cannot be an interpolation between the two motions that the word “ now “ be left out, and that the words “ this day six months “ be inserted. An honorable senator could not introduce another amendment between those two questions. 1 should like to know if you have ruled, sir, that this is the proper time for Senator Colebatch to give notice of an amendment for the insertion of additional words.
– Yes, otherwise, as is obvious, if the word “ now “ were left out, and the words “ this day six months “ came as a matter of form, no further amendment could be moved.
– My understanding of the position is that when an amendment is before the Chair, an honorable senator is in order in giving notice of a further amendment. Such an amendment can, however, be moved only after the amendment under discussion has been disposed of.
– That is so.
– 1 am prepared to fall in. with any suggestion that you, sir, may make. But I suggest that the Senate can hardly make up its mind to strike out the word “ now “ until it knows what words are to be inserted in its place.
– I merely point out that the honorable senator, although he cannot now move his further amendment, may give notice of his intention to do so. The honorable senator may proceed.
Senator Sir HAL COLEBATCH.The select committee does not for a moment imagine that its report is the last word on the subject, but I think the members of that committee can claim that in the short time at their disposal-
– I rise to a point of order. I understand that Senator Colebatch has already spoken to the motion. I should like your ruling,, sir, on the matter.
– The honorable senator is now speaking to the amendment moved by Senator McLachlan.
– In addition to having little time at its disposal, the select committee was, to some extent, hampered by the refusal of honorable senators opposite to co-operate. Their judgment would have been of great assistance in coming to a conclusion. On speaking on the motion for the second reading of this bill before the Christmas adjournment, I urged as a reason why the matter should not be hurriedly dealt with that the subject was being investigated by probably the most authoritative body yet set up. On that occasion I quoted to some extent from the first interim report of the Gold Delegation of the Financial Committee of the League of Nations, and mentioned that the second report of that committee would shortly be made available. That further report lias now made its appearance; but I do not intend to refer to any of its features, except those that bear directly upon the amendment 3 have suggested.
The financial committee of the League of Nations was appointed some years ago to consider international finance. That committee set up a gold delegation, consisting of leading economists “of the great nations, which has been carrying on its work of inquiry for two years, and has called to its aid eminent authorities in finance, commerce, and industry from all parts of the world. The second report of that delegation is unanimous. The features of the report that bear directly on the motion before the Senate, and the amendment which I propose to move, are these : First, as to the need for central reserve banks. I would not be prepared to strike out the word “ now “ without at the same time conveying to the Government my opinion that the establishment of a central reserve bank should be proceeded with. The gold delegation in its first report emphasized these points: First, that whatever errors or difficulties there might be in the operation of the gold standard no other monetary system was available to the world. Secondly that the trouble in the world to-day, so far as it could be attributed to monetary causes was not due to the gold standard, but to maladministration, and to mal-distribution of gold reserves, which could be cured only by co-operation between central reserve banks.
– The honorable senator means international co-operation.
– Quite so ; between central reserve banks of all nations. Further emphasis is laid on this point in the second report, the whole basis of which is that the present world conditions cannot be put right under the old haphazard system of international finance; secondly, the point is stressed’ that the basis of any reform must be confidence and co-operation. The committee stresses over and over again the extreme danger that must result from political interference dictated by the. monetary needs of any particular country. I trust that honorable senators will carefully study the committee’s report. I know that there are not many copies available ; but I have had one in my possession for some months, and have spent a good deal of time in its consideration. At page 8 the delegation deals particularly with the question of confidence. It says -
The distribution of gold to-day is indeed due more to the fact that the vast majority of countries have, in consequence of budgetary deficits, departed from the gold standard in the course of the last decade and a half than to the normal working of that standard.
There you have an attack on the principle of political control in relation to central reserve banking. The history of every inflationary movement and of every other unsound budgetary movement in Europe or elsewhere shows that it has been brought about by the pressure of a governments upon the authority controlling finance.
The financial committee, in presenting the report of the Delegation to the Le’ague of Nations, said -
The successful ^application of these principles, however, must depend to a large extent upon the existence of settled economic conditions and will necessarily be impeded if there is a lack of public confidence. The movement of gold is directly influenced by the movement of capital, and a steady flow of capital and credit cannot be maintained when the necessary conditions of security are lacking.
Dealing more fully with the question of confidence, the delegation says -
Confidence is essential to monetary stability. But both the experience of past inflation and certain political events since the re-adoption by most countries of the gold standard have tended to undermine confidence. As a result, not only has the drift of gold in this direction or in that been determined by abnormal events, but the freedom of gold movements has been impeded. Thus, central banks which had the option of meeting their obligations in foreign exchange or in gold have shown a certain unwillingness to liberate their gold; the general public in some other countries has shown a certain unwillingness to lend money abroad, even when domestic supplies were excessive and gold was available in abundance as a basis for credit at that time.
Turning more directly to the system of currency, the report says - and to my mind this is one of its most illuminating passages in relation to existing difficulties the world over -
There has been an inevitable flight of capital from countries in which currencies have been inflated, and a repatriation after stabilization was achieved
There has been a flight of capital from Australia because of inflation ; and I have not the slightest doubt that we shall witness its repatriation to Australia when stabilization has been achieved. The report continues -
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.
I invite the Senate to consider for a few moments the great truth which underlies that statement - that, because of the destruction of confidence, through inflation, through failure to balance budgets, or through other political action, capital has fled from the weak countries where it was most needed and where it could do most work. It has fled for safety and shelter to strong countries, where already there was an abundance of money and where it could be put to no profitable use. In the opinion of the Gold Delegation - and apart from the standing of the members of that Delegation our own common sense would impel us to adopt a similar view - that is one of the principal reasons for the trouble that is being experienced in all countries to-day. We know that in the United States of America, where there is a super-abundance of capital, there have been great booms on the Wall Street Stock Exchange that have certainly done no good but have greatly intensified world troubles. We know that, notwithstanding the acute scarcity of capital in all the debtor countries that need money for tho development of their resources, the people who hold it have found it almost impossible to discover what they might do with it; with the result that in England and the United States of America, where there is capital in abundance, the bank rate is lower than it has been almost at any time in our history.
– The investment by Waygoods is an instance.
Senator Sir HAL COLEBATCH.The thing is so obvious that it is not necessary to cite instances. It must be clear to everybody that wherever there is set up a political or an economic system which frightens capital and which makes people feel that the country concerned is unsafe, capital will fly from that country no matter how urgently it may be needed in it. It is equally certain that, for purposes of safety, it will go to the strongest countries, where it is least needed. What is the effect on both, countries? The effect on the weak country from which the capital has flown is obvious. The wage paying power has gone, and the power to develop and to produce wealth no longer exists. No one needs telling that the flight of capital from a weak country must bring that country down. And what happens to it in the strong, rich country to which it goes? It cannot be used successfully. Therefore, to begin with, it is of no advantage to either country. Very soon, however, those strong, rich countries find that because the capital has left the weak countries, those countries can no longer buy their goods. Surely, a sufficient explanation of that is to be found in the fact that in England and the United States of America, where there is an abundance of capital, unemployment is just as pronounced as it is in Australia, and in the debtor countries of Europe from which capital has gone. Capital is of no use to anybody unless it is working. The trouble in the world to-day is that because of one reason and another that have induced a feeling of fear, capital has been driven from the weak countries, where it was needed for development, and where it was assisting development, to the rich countries where there was no need for it.
The delegation suggests remedies, based on the two principles of confidence and co-operation. It deliberately advises - and this is very much on the lines of recent Government proposals - a reduction of the gold reserve. The bill that we are now considering will, I suggest, prove altogether inadequate to the present monetary policy of the Government; it will not fit that policy from any point of view. It provides for reserves that the Government does not contemplate keeping, as well as for a convertible currency and all sorts of proposals that the Government has long since abandoned any idea of carrying into effect. But while it suggests not merely the possibility, but also the wisdom and the necessity, of moderate gold reserves, it goes on to say -
Thus, debtor States and agricultural and other countries whose exports arc 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 moro mixed economy.
To my mind that is quite obvious. It also suggests the conclusion that not only countries, but also individualswho are engaged in any sort of activity in which the seasons or the prices are liable to wide fluctuations, cannot be considered to be on anything like a stable basis unless they make provision in times of prosperity for reserves that will tide them over periods of adversity. Of thiswe may be quite sure. unless it is possible for those industries whose returns fluctuate, because of indifferent seasons, to lay by reserves in the good years, their economy must go to pieces when unfavorable seasons overtake them. The Delegation goes on to say -
We. are of the opinion therefore that, in order at once to allow central hanks the liberty of action which is necessary for the conduct of a rational credit policy, and to permit of an economy in the use of gold, the existing legal stipulations concerning gold reserves should be modified. As we stated in our previous report, the existing minimum could be reduced without, in any way, weakening the general credit structure, granted an international understanding had previously been reached.
That is the essential feature of the whole argument. There must be an international understanding before it is possible for any country to reduce its reserves without impairing seriously its credit structure. On page 19 of its report, the Delegation stresses the necessity for cooperation between the central banks. unless the proposed Central Reserve Bank of the Commonwealth is so constituted as to enable it to maintain our currency in conformity with the currencies of other countries, thus making co-operationwithothercentralbanks possible,itwillbeworsethanuseless. O n the contrary it may do this country a great deal of harm. The Delegation states further -
This fact reinforces the point which we have already emphasised, but the more elaborate monetary system of the day demands a greater measure of co-operation between central banks than did the semi-automatic system of prewar days. The gold exchange standard especially involves a number of practical problems which demand the constant joint attention of central banks. In this particular case such collaboration would clearly be facilitated were the foreign reserve assets of central banks kept, as a general rule with other central banks.
I do not think that any one who has studied the present position is at all sanguine about the possibility of Australia meeting its present crushing liabilities under existing financial conditions. I am not atall sanguine, that if we adhere rigidly to the old methods, we shall be able to get out of our troubles either as a country or as individuals.
– Hear, hear!
– The honorable senator had better be careful. He is being applauded by Government supporters.
Senator SIR HAL COLEBATCH.I am not seeking applause from any one for theviews which I am enunciating upon this subject. I am merely stating my considered opinion. Let me repeat that Ibelieve we shall get out of our difficulties only by the most generous co-operation of the wealthier countries of the world. And this co-operation, I remind the Senate, will only be ensured by the establishment, in those countries of absolute confidence in our bona fides. Once this confidence is restored, there will be a flow back to Australia of capital which, because of lack of confidence, is to-day taking flight from this country. I believe that to establish this confidence, it is essential that we shall have in Australia a central bank, properly constituted, and in a position to co-operate to the fullest . possible extent with similar institutions in other countries.
– It must be free from political control.
– Unless it is, it will not ensure the cooperation of other central banks because it will not be able to command the necessary confidence which is the first essential to co-operation. The central bank of the Commonwealth must not be the creature of any passing government. If it is, the financial fabric of the country may be destroyed in order that the Government of the day may find easy methods of finance. The Delegation adds -
If equilibrium has been maintained with the aid of short term capital or a steady flow of long term loans, and credits are not renewed or further loans cannot be secured, the countries concerned may be forced to lose gold and conduct their trade on less favorable terms. As borrowers, their first concern must be to maintain conditions both economic and political such as to inspire confidence.
This puts in a nutshell, the present position in Australia. It is obvious that we must do all these things that are necessary to inspire confidence if we can hope to receive that help which I, for one,
believe is essential to get us out of our difficulties. I do 11Ot think it is possible for a young country like Australia, which has suffered the flight of capital to the extent reported in recent months, to recover except by inspiring the confidence and securing the co-operation of central banks in wealthier countries, thus inducing capital to return to Australia, and be put to work to reduce unemployment and increase the value of our assets. This final observation by the delegation is also, to my mind, of great significance -
In a previous section we laid emphasis uri the fact that the present distribution nf 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 bc secured. The first of these conditions is public confidence; others are related to economic policy in the widest souse of that word; others again, and those on which we have naturally laid especial stress, to monetary policy . . . But the application of these principles can only be expected if the Central Banks are allowed the necessary freedom - a freedom which will be, we consider, assured by the legislative changes wo have suggested. Further, we attach special importance to the closest possible co-operation being maintained between these institutions, for the measures we have mentioned imply a close co-operation between central banks at an early stage, with a view to preventing developments which may ultimately cause disequilibria, and, at a later stage, if, for one reason or another, disturbance has not been avoided, with a view to localizing that disturbance, and securing that the necessary correctives are put into operation.
– Why is there so much distress in the United States of America which has such immense gold reserves?
– I have already explained that there is distress in the United States of America because it is not possible for that country to put its gold reserves to any useful purpose. The flight of capital from weaker countries to the United States of America means that the purchasing power of those countries has been so * reduced as to affect the American industrial position. In support of my contention, I may cite the position in Great Britain, where the people are suffering just as much as are the people in Australia. A little while ago, we were England’s second best customer. At the present time, owing to the diminution of our purchasing power, our purchases from the Mother Country are almost negli gible. This decline in trade relationships between Australia and Great Britain has been responsible, in part, for the unemployment problem in the Mother Country. Our productive strength has gone, and, with it, our purchasing power. Wealth or capital is of no use whatever unless it is at work. If it is taken from those countries where it can be usefully employed, and sent to countries where there is nothing for it to do, inevitably, both countries must be brought to the verge of ruin.
– What is the explanation for France’s huge gold reserves ?
– 1 have not the slightest doubt that the immense gold reserves in France are doing as much harm there as in other countries where reserves are larger than is necessary to maintain the equilibrium between currency and production.
– I remind honorable senators that the relevancy of the present discussion is open to question.
Senator Sir HAL COLEBATCH.Quite so. Doubtless we shall have other opportunities to discuss that particular point. I content myself by suggesting that Senator O’Halloran should read, with care, both the first and second interim, reports of the Gold Delegation. I have directed attention to these matters, because they have a bearing upon the amendment which I propose to submit. I am firmly convinced that, so far as we in Australia are concerned, there is no. middle course for us to follow. We cannot go on as we are going. I believe, however, that if we take the proper action to re-establish confidence and secure co-operation by setting up a central reserve bank, free from political control and pledged to the maintenance of a proper monetary standard similar to that of the rest of the world, we shall emerge from our difficulties.
– It would appear that there is a greater need for a release of confidence than for a release of credit.
Senator Sir HAL COLEBATCH.There is no difference between confidence and credit. If a person goes to a financial institution to obtain credit, he gets it if the institution has sufficient confidence in him. The destruction of confidence is the destruction of credit.
There is another course which seems to appeal to the Government. In this morning’s newspapers there is a cabled report of an interview with the Treasurer, as published in the Herald, a London Labour daily newspaper. I do not know whether the statements contained in that report were intended for immediate Australian consumption, but they make it clear that the present monetary policy of the Government is to set up an isolated Australian economy organized and controlled by the Government. It is clear that the Government desires to have purely Australian price levels, and a purely Australian currency. Its policy could be applied only as the policy of Soviet Russia has been applied. There is no difference, either in principle or in detail, between the monetary policy of the Government and that of the Soviet Government in Russia if we are to accept the newspaper account of the principles and intentions of the Government as set out in the report of the interview referred to.
– The honorable senator should preface that statement with the words, “in mv opinion”.
Senator Sir HAL COLEBATCH.E do not presume to offer any but my own opinion.
– I thought that the honorable senator might have been expressing the views of the Opposition.
Senator Sir HAL COLEBATCH.I could take chapter and verse from the Government’s policy and the Treasurer’s statement and compare them with the publication of Mr. G. T. Grinko, the vicechairman of the State Planning Commission of the Soviet Government, and show that the principles are the same. If, as is likely, the people are called upon to decide soon between the monetary policy of the Government, and that which will be enunciated in opposition to it, the position should be made clear to them that they will be called upon to choose between the reasoned policy outlined by the League of Nations and that of Soviet Russia. We profess to have great confidence in the League of Nations. Indeed, we have given expression to that confidence by going so far as almost to abolish our defence forces because we think that the League of Nations will prevent further wars. The essential features of the Soviet plan are that the Government shall take complete control of all exchange and all currency. That means that the Government will take the products of the producer and sell them abroad in the interests of the Government, giving the producer what it thinks fit. There is no other method by which the flight of capital from this country can be prevented under such a policy. If we set up an isolated economy we cannot keep capital without prohibiting exports, except under licence. That is the Soviet plan.
Another essential, without which that plan will not work, is the abolition of private ownership and private profits from any form of enterprise. Between these two principles the people will have to decide. I have no doubt as to which course 1 shall follow; nor have I any fear as to the decision of the Australian people. We cannot continue as we are going; we must set up machinery for cooperation with other countries. We must restore their confidence as the only alternative to embarking upon the experiments of sovietism. For that reason I hope that the Senate will not carry the amendment for the shelving of this bill without giving a clear indication of its desire that at the earliest possible moment we shall set up a central reserve bank, which will restore confidence and bring about cooperation with central reserve banks in other parts of the world.
– I take this opportunity of speaking for fear that the axe may drop at any moment, as it did last Friday. I shall confine my remarks to the amendment. The obvious desire of the Opposition to postpone a definite decision on this bill is somewhat surprising. If honorable senators opposite had no intention of passing the measure in any form whatever, they could have accomplished their object by defeating the second reading. It may be that some ulterior motive underlies the delay.
The bill has had a somewhat strange history since it reached the Senate on the 18th June last year. On the 27th June the second reading of the measure was moved by the then Vice-President of the Executive Council (Senator Daly). Senator Glasgow, on the 10th J July, moved an amendment that the bill be referred vo a select committee, and that the committee should report to the Senate within four weeks. That amendment was agreed to. The select committee submitted a progress report on the 6th August, and the time for the presentation of the final report was extended until the second Thursday after the first meeting of the Senate following an adjournment. The final report was submitted on the 3rd December, 1930, and the second reading of the bill made an order of the day for the 10th of that month. When the order of the day was called on, Senator Daly moved that it be made an order of the day for a later hour in the day, whereupon Senator Pearce moved an amendment that it be made an order of the day for the first Thursday after the Senate re-assembled in 1931. The amendment was agreed to, with the result that the second-reading debate was not resumed until the 15th April, 1931. That is the way that the Opposition used its majority in this chamber to delay the passage of an important measure of Government policy. We have now before us an amendment that the word “ now “ be left out with a view to insert in lieu thereof the words “ this day six months “. If the amendment is agreed to, it will be tantamount to rejecting the bill altogether. In the light of these facte, ft is a waste of time to debate the bill further. If the amendment has been moved with the consent of the party in Opposition, why prolong the agony? In that case, I suggest that the Opposition should act quickly, as it did last Friday. I do not lite to have my head on the block waiting for the axe to fall. If the amendment is carried I shall not complain, although I should like it to be rejected; but honorable senators opposite might have acted earlier in showing their contempt for the wishes of the Government. Apparently, in no circumstances are they prepared to give proper consideration to measures sent up from another place; but they prefer not to reject a bill absolutely, so “that the Government may not be in a position to take them before their judges and allow the people to say whether they approve of their contemptuous treatment of the Government’s proposals.
– Let the Government ask the people to settle the issue.
– I am prepared to go to the country, when the time comes, as cheerfully as honorable senators opposite, and that is, I suppose, as cheerfully as a condemned man goes to the gallows. As Leader of the Senate, I am entitled to be told frankly by honorable senators opposite that they do not deem the Government’s proposals worthy of consideration. If that is so, we can get through the Senate business speedily and adjourn because, in the circumstances, it is useless for us to come here week after week. I strongly protest against the treatment meted out to the Government’s proposals by the Opposition.
Senator Sir GEORGE PEARCE (Western Australia) [3.52]. - I am surprised, that the Leader of the Government in the Senate (Senator Barnes) should, try to put upon the Opposition the whole of the blame for the time that has been taken up on this bill. It is quite true that we did demand that the measure should, before being dealt with, be subjected’ to an inquiry by a select committee. That is a course which the Government should have been the first to welcome if it was earnestly desirous of having the bill passed. It is a most important measure. The Senate merely asked that, before it should be passed into law, we should have information before us as to the attitude of authorities on banking practice. There was no undue delay in making the inquiry. Although the Government did all it could to prevent the committee from being constituted, and to hamper it when it was constituted, there was no delay on the part of the committee itself, and it would be interesting if Senator Barnes would ask the officials who compiled the information he has supplied to compile other information as to the course of this bill through Parliament. Frequent adjournments took place at the instance and request of the Government. There were adjournments for a week or a fortnight time after time.
– Even after the report of the committee was presented.
Senator Sir GEORGE PEARCE.Yes. “ After the report was presented further progress with the bill was prevented by the action of the Government in adjourning the Senate from time to time on the ground that there was no business to bring before it.
It is an extremely difficult matter to please Senator Barnes. Last week, when we dealt rather promptly with the bill to provide for a fiduciary currency, he was extremely annoyed. He seemed to desire that the debate should be adjourned. In fact the Government Whip moved the adjournment of the debate, evidently at the instigation of the Leader of the Government in the Senate.
– That is not so.
– At any rate, Senator Barnes was extremely annoyed because we did not agree to adjourn the debate, and, not desiring to exercise the right to speak, immediately afterwards allowed a division to be taken. He was then annoyed because we acted promptly, and he is equally annoyed now because we are giving the utmost consideration to another measure, the only interruptions being frequent adjournments at the instance of the Government. There is no desire on the part of the Opposition to delay the consideration of the bill, but there is every desire on its part that the measure shall b’e thoroughly examined before we come to a conclusion on it. There has been no waste of time in that regard so far as the Opposition is concerned. The report of the select committee has been a most valuable contribution to the debate. It has brought before the Senate a wide field of information of the utmost value. The only regret I have is the fear that not one honorable senator on the Government side has read the report or the evidence.
– That fear is groundless.
Senator Sir GEORGE PEARCE.If it be groundless, and honorable senators opposite have read the evidence in the report, I cannot understand why they do not unanimously support both amendments.
– Not having had the opportunity to take part in the preceding stages of this bill, I am at a disadvantage in participating in this debate; but I have read the Hansard reports and am forced to the admission that I have rarely had anything to do with a more important measure. It is unfortunate that there should have been some trouble in connexion with the appointment of a select committee, and that the committee should have consisted entirely of honorable senators on the other side of the chamber.
– That was the fault of the Government.
– I am not saying whose fault it was. It is also unfortunate that, after an undoubtedly valuable report has been presented by the select committee, an amendment should be immediately moved, aiming at the destruction of the bill. I am thoroughly of the opinion that there is need for a central reserve bank. It has been the policy of the Labour party ever since I have been connected with it to have a central reserve bank. I listened, with interest to Senator Colebatchs explanation of the attitude taken up by members of the gold delegation, and to the extracts from the report of that body given by Senator McLachlan. The report contains valuable information.
– There is more to come which will be still more valuable.
– I believe it.
– Then why not defer the consideration of the bill until we get that additional information?
– I am standing by the bill because I believe it is urgently needed. There were three points considered by the select committee. The first was whether a reserve bank is desirable, and on that point, apparently, the committee was unanimous. For years before the war and ever since we have held that any reconstruction, national or international, must obviously and fundamentally be of an international character. If one dared to mention internationalism when we were emerging from the world war, one ran the risk of being dubbed an opponent of one’s own country. As Senator Colebatch has so eloquently pointed out, no country, least of all Australia, can set itself up as a water-tight compartment doing what it likes regardless of the rest of the world. The gold delegation of the League of Nations which came to that conclusion was made up of leading financiers, who were not in the true sense of the word national or international representatives. I do not think that they were appointed by their respective nations to deal with the question of gold currency or central reserve banks from the point of view of the welfare of the nations. I think that they were dealing with the matter from the point of view of the welfare of the financial organizations which control the destinies of the nations.
– They were not bankers ; they were chiefly leading economists.
– The delegation consisted of the following: -
– What better opinion could be got than from those gentlemen ?
– I am not questioning their opinion, but there is a difference between the opinion of one who represents financial institutions and that of one who represents the interest of a people.
The select committee appointed by the Senate came to the conclusion that a central reserve bank is desirable, and T cannot understand this move to postpone for six months the bill for the establishment of such a bank. It means, of course, the rejection of the bill.
The second question considered by the select committee was, “ Is the time opportune for the establishment of such an institution?” Having regard to recent developments in Australia, I should imagine that the time was never more opportune than- the present. As Russell Lowell has said - “ The time is ripe and .rotten ripe for change. Then let it come;
I have not dread for what is called for by the instinct of mankind.”
– But provision is made in the bill for political control of such a bank.
– I shall deal with that point if I have time. One object of the bill is to mobilize and stabilize currency. ‘ Some time ago, the control of the note issue was transferred to a non-political authority which no doubt met with the approval of honorable senators opposite. The object of the bill now before the Senate is to provide for the establishment of a central reserve bank, the operations of which shall be conducted quite apart £rom those of the Commonwealth Bank. We have been informed that at present the Commonwealth Bank is performing 75 per cent, of the work which ordinarily is done by a central reserve bank.
– The last report of the Commonwealth Bank Board is to the effect that it is doing 100 per cent, of that work.
– At any rate, it is not conducting central reserve banking on an international basis, and cannot possibly do so until a separate institution is established. On reading the speech of the Leader of the Opposition (Senator Pearce) I find that in opposing this measure he strongly advised the Senate not to “ swap horses in midstream.” That advice loses much of its force when it is remembered that the party which he leads, when up to its neck in the muddy and flooded stream of discontent, left a thoroughbred National steed to climb on the back of a broken-down Labour heavy draught, which failed to pull its weight in its own team.
It has been said that the serious crisis with which we are now confronted is not due to the action of the banks, hut has been caused by the maladministration of various governments. We have also been told that the present crisis is in striking contrast to that which occurred in the “ nineties.” The banks of Australia have as free a hand as those in any other civilized country, and, notwithstanding the power which they possess, Australia has been driven into her present position. In these circumstances it is unfair to blame any government. I am prepared to admit that the short-sighted policy of all governments in the past has largely contributed to our unsatisfactory financial position, which has been accentuated by the war.
One of the objects of a central reserve banking system is to conserve our gold reserves, upon which the prosperity of a country depends, and by which our currency is regulated. It seems to me that if gold represents the wealth of a nation - if it indicates the volume of the nation’s wealth - a nation should control the wealth it produces. To-day the gold reserves are controlled by the banks, and their movement peculiarly affects the lives of the people and the progress of a nation. The Gold Delegation, which was in agreement on that point, affirmed its adherence to the gold standard, but admitted that there was insufficient gold in the world to meet the requirements of the nations. I understand that the total gold reserves of the world are valued at about $8,000,000,000 or $9,000,000,000, which is insufficient to liquidate the national debt of Great Britain. The committee also reported that under the conditions at present operating, the gold standard will, in those countries in which ithas been adopted, break down by 1934 unless means are taken to protect the use of gold. Gold is not being produced in sufficient quantities to keep pace with the increased production of the world. The committee gives percentages of gold held to currency generally, which I shall not weary the Senate by quoting, but obviously, if we are to adhere to the gold standard - and in Australia we are some distance from it - international action must be taken to stabilize gold, as is done in connexion with other things. The value of gold has to be fixed and a given quantity of gold must have the same value in all countries if an international equilibrium is to be reached. That is the objective of an international gold standard, and one which I think is being sought by the international organization at Geneva.
On the question of the responsibility for our present position, I quote the Prime Minister (Mr. Scullin), who, when speaking at Richmond, in Victoria, in September, 1929, said -
Beware of the powerful financial and commercial interests behind the Bruce-Page Government, which would dictate the policy of the nation and put the clock back 30 years and more, and repeat the evils of the ‘nineties.
Whoever is responsible we are experiencing some of the evils of the crisis of the “ ‘nineties.” During the last 24 hours certain sensational developments have occurred in connexion with our banking system. It is the obvious duty of this branch of the Legislature, which I regard as the highest authority in the Commonwealth, to take such action as will protect the interests of the people. Many people in Australia are convinced that there is some financial power in the Commonwealth to-day that is largely responsible for the present crisis. Honorable senators opposite contend that they are opposed to political control; but the great financial institutions of this and other countries have political departments which authorize and institute political action in their own interests, and in many instances their interests and those of the people are not identical.
– And sometimes by devious means.
SenatorKNEEBONE. - Yes ; I do not hold any party innocent or guilty in that connexion. The position has become even worse since Mr. Wm. Jennings Bryan, the American publicist, in 1906 said -
The money power preys upon the nation in times of peace, and conspires against it in the hour of its calamity. It is more despotic than monarchy, more insolent than aristocracy, more selfish than bureaucracy. It denounces as public enemies, all who question its methods, or throw a light upon its crime. It can only be overthrown by the awakened conscience of the nation.
The nation must deal with the position with which it is confronted. We should not look to any unauthorized official body to act; the obligation devolves upon the members of this Parliament, who are representatives of the people. ExPresident Woodrow Wilson said -
The greatest monopoly is the money monopoly. The financiers are more powerful than the nominal rulers.
If we want an illustration of the result of money power Ave have only to look around us and Ave will readily determine whether the control in financial matters is political or otherwise. The first Governor of the Commonwealth Bank, the late Sir Denison Miller, said -
Financial experts deal with hanking and currency in a language not meant to be understood by the public
On one occasion Mr. Frank Hurst, formerly editor of the Economist, said -
Banking experts not only mystify the public but obfuscate themselves with obsolete terms.
There is a growing feeling among the people that there is some power over which the Parliament of the country seems to have no control, which is causing degradation in practically every civilized country. As Senator Lynch stated, America holds practically all the gold and Great Britain and Australia very little; but even in those countries holding large reserves of gold the position is substantially the same. Out of 20,000,000 persons at present unemployed, no fewer than 6,000,000 are in America, where a large proportion of the world’s supplies of gold are held.
– That is the puzzle.
– Yes. The work of the Gold Delegation, which Avas so ably explained by Senator Colebatch, consists of trying to overcome that difficulty. It is uneconomic to endeavour to measure all values by an ounce of gold when three-fourths of the world’s supplies are held in two or three countries. Such a system impoverishes the nations that , do not hold stocks, and does not enrich those which do. Australia’s wealth should be gauged by the wealth she produces in those commodities necessary for human existence.
– That would be a variable standard.
– Yes, but gold has a variable standard. A rough and ready method would be to determine our wealth by the value of what we produce.
If we do not produce enough we must starve, but if Ave produce more than is sufficient we should prosper, irrespective of whether we hold, as we do to-day, 4,000,000 ounces of dust-covered gold, which is lying idle in the vaults of the Commonwealth Bank. The possession of such an asset does not enrich us in any sense. If we had nothing but that gold Ave would die of starvation.
It has been pointed out by certain financial authorities that our gold reserves bear a certain relation to the real wealth which Ave produce; but that principle cannot be applied internationally. What is our position in the Commonwealth to-day. I have just said that 20,000,000 persons are out of employment. Of that number our quota would be about 300,000, and if we allow three dependants for each person that brings the number up to about 1,000,000, who to-day are unable to obtain sufficient to maintain them in reasonable comfort. When Senator Colebatch said that, unless some change is made, Ave shall as a nation be unable to honour our obligations, I said, “ Hear, hear,” because I believe Ave are faced with default, repudiation, revolution, or a rational method of dealing Avith the situation. I can imagine no more rational method than the nation taking control of affairs; but when an endeavour is made Ave find that we do not possess the power
– Does this bill mean that the nation shall take control?
– I trust that this is a step towards the nationalization of banking. In making that assertion I am expressing the views of the party of which I have so long been a member, and I cannot see anything more likely to solve the problem than a nationalized system. Such a step is essential when private banking institutions have allowed this country to get into this morass.
– Does the honorable senator suggest that private institutions have allowed us to get into a morass ?
– Apparently private banking institutions, by a( process of inflation, have established a certain situation, and, when finding their position was becoming insecure, or for some other reason, resorted to the policy of deflation, which is largely responsible for the present situation.
– Governments have bled the banking institutions white.
– I am not blaming or excusing any government. Od one occasion Mr. Phillip Snowden said that, if some government treasurers were employed by private companies, they would soon find themselves in the dock for issuing false balance-sheets. I am not prepared to say that any government is wholly responsible for the present depression ; it is, as I have said, international.
– Has not the great development which has taken place in Australia during the last 100 years been due to the assistance that the banking institutions have given?
– All praise and credit are due to them for any assistance that they have rendered; but the principal credit must be given to the pioneers who blazed the track. It was only when those pioneers demonstrated to investors overseas that they could make a profit in this country that capital was induced to come here.
– It was private enterprise throughout.
– It was not private enterprise throughout. In Australia to-day we have empty treasuries, taxation has over-reached the limit of the people’s capacity to pay, the budgets of State and Federal Governments exceed the ability of the nation to meet them, and there is a growing army of unemployed who have no prospect of securing employment.
– Not until the Government is changed.
– A heaven-sent government could not change the position without resorting to some measure which apparently this chamber is not prepared to approve.
– Restoration of confidence is the main thing.
– I shall deal with the question of confidence if there is sufficient time available to me. I say that the prolongation of the present state of affairs endangers not only the lives of the people, but also the very existence of the financial institutions, which in the past have played their part in the development of this country. It is time that some change was made. If we cannot balance one budget; how on earth can we expect to balance seven? There must be a reduction in the cost of governing Australia. That is a factor which has contributed to our present unsound financial position, and I believe that if any good arises out of it, it will be in the direction of compelling the people of Australia to adopt a unified system of government. The upkeep of seven parliamentary authorities has become hopeless, and drastic changes will have to be made.
The policy of the Labour party is the nationalization of banking, and the control of the credit of the nation.
– And the killing of private enterprise.
– “We shall see to what extent it has killed private enterprise as I proceed. The Government was returned with an unprecedented majority to give effect to that policy. That it has not done so is to its discredit. Although a majority of the members of this chamber were elected years before the present crisis manifested itself, they can, by their votes, thwart the will of the people of Australia. In the first place, they proposed to reject this measure; and now it is suggested that some other basis should be adopted than that which the bill proposes for the establishment of a central reserve bank.
Senator Glasgow has stated that if the Government will take certain action, any amount of money will be made available to it. But he did not say where that money was to come from. The very fact that a body outside of this Parliament can say to the Government and the people of Australia, “ You shall do this, or you will starve “, appears to me to demand some reform. The condition is that wages, salaries, social services, and pensions shall be re-adjusted so that reductions may be made in the cost of government. I submit that this Parliament is solely responsible for those matters, and that only the people who elected it should have the right to dictate the policy that must be adopted.
– You cannot spend money that you do not possess.
– That is admitted. On the other hand, it is not possible to make the savings that some people argue should be made. Already wages have been reduced to the extent of £40,000,000 a year; yet unemployment has increased, prices have “ gone to the pack “, and trade is depressed. Were wc to reduce the cost of social services, and re-adjust our pensions rates we would still be totally unable to balance our budget. Would we then restore confidence in Australia? I believe that the opinion of the people outside would be that a country which was not prepared to honor its obligations to its children in the matter of education, to its sick and its wounded, and to the mothers of the nation, was undeserving of confidence. I do not consider that any nation at this stage of its history should be required to submit to the dictation of those who say, “If you do this, we will help you, but if you decline we will not “.
– After all, it is their money.
– If we made reductions in these directions, and thus further impoverished the people of Australia, making two-thirds instead of onethird of them idle and hungry, does the honorable senator believe that investors would be more ready to lend us money than they are now? They would lend us nothing until we had found our people employment at reproductive work. I refuse to believe that Australia is unable to do that. It possesses wonderful natural and potential resources, yet is “ up against it “ financially because of influences over which we have no control.
Senator Colebatch referred to a cablegram published in London, and republished in Australia, in which the Treasurer (Mr. Theodore) is reported to have said -
The credit resources of the nation are too great a responsibility, and too important a factor to be controlled, manipulated and exploited by a few trading banks and financiers.
Those are rather harsh terms, I admit.
– They are rather ridiculous, are they not?
– I do not think that they are ridiculous. This is a time when drastic measures must be applied.
Therefore, those who occupy certain positions are apt to resort to the use of drastic language.
– What is meant by “ manipulation “ ? The only manipulation by the banks has been to lend to the full extent of their deposits, and a little more.
– The Gold Delegation has found that throughout the world there has been manipulation by financial organizations, which have controlled credit.
– By go- vern ments
– Governments have not controlled the gold reserves of the world. The Government of Great Britain does not control the gold reserves of the Bank of England.
– Government action has been responsible.
– We cannot do anything except with the authority or the permission of the Government. The Treasurer went on to say -
I frankly admit that I want all the banking of the community done in the Commonwealth Bank, and currency, loan, insurance and credit supplies, exchange, and interest rates to be controlled by a Commonwealth Central Heserve Bank, and all the fire, accident, life and general insurance of the community done by a Commonwealth-owned insurance office. Then we would have the credit service of the financial institutions in the hands of the people instead of private exploiters.
– It would be a case of “God help Australia.”
– It is a case of “ God help Australia “ at the present time. Senator Colebatch placed rather an exaggerated interpretation on that cablegram, when he said that the proposal was to resort to a Soviet system of government.
– It is pure socialism.
– It is. We are suffering to-day from pure capitalism; and if the honorable senator wants more of it, I do not. In the past, credit has not been controlled by the people who have created it. Credit is only faith in oneself and in one’s fellows; it is a community possession. But it has been operated not by the community, but by financial organizations. Some time ago the Commonwealth Government ap- pointed the Development and Migration Commission to inquire into the cause of unemployment, and to suggest possible remedies. This commission reported as follows : -
There is no doubt that the flow of credit has a very important reaction on business conditions. Easy credit conditions allow traders to expand their activities on the basis of overdrafts and loans, and to engage in operations that would not be possible under a more stringent credit situation.
The easing or the tightening of credit brings in its train either expansion or restriction of trade, progress or depression. I notice also that the Melbourne University Old Commerce Students Association - assisted, I believe, by Professor Copland - says -
Lower money rates and a more plentiful supply of credit facilities are essential to recovery. They will follow, to some extent, as the export season progresses. Money policy may,however, accelerate this tendency.
Who should have control of the ease or the difficulty of obtaining assistance, experienced by those who desire to develop Australia?
– Not political parties.
– Admittedly our position to-day is due to a lack of political control. We are in our present unhappy state of not being able to honor our obligations - at any rate, very readily - because of that fact.
– It is the debts of governments that have got us into the mess.
– I respectfully differ from the honorable senator. While those debts have contributed considerably, they have not been responsible for the depression, which admittedly is international.
At page 19 of Professor Copland’s book, Monetary Policy and its Application to Australia, there is a paragraph that I propose to read. I do not wish to misrepresent Professor Copland. He has said quite definitely that on this question of finance the Government must be kept at arm’s length, that it must not have control. In this paragraph he points out, however, that -
Some degree of social control is inevitable -
I believe it is suggested that on the board of the proposed central reserve bank the representation of the Government shall be only one-third. Yet if it is to be successful it must be a national institution ! You cannot link up in an international chain something that is not national.
– None of the other central reserve banks of the world are politically controlled.
– This bank will not be established unless the bill that we are considering is passed ; therefore, to that extent, it is controlled politically. The Commonwealth Bank is politically controlled.
SenatorR. D. Elliott. - How long would it take it to reach the present state of the Government Savings Bank of New South Wales?
– That is hardly a fair proposition to put to me; but I suggest that unless we take steps promptly to stop the present drift, New South Wales is not the only State in which the condition will arise.
– It should serve as a warning which should never be forgotten.
– Fear of political control is responsible for the trouble.
– It would be more correct to say that fear of nonpolitical control is responsible. Political control and administration are entirely different matters. Parliament prescribes capital punishment for murder, but the leaders of the dominant political party do not pull thelever that sends the unhappy victim to eternity, thus breaking a God-given law to carry out a man-made law. Parliament merely lays down the principle. The Commonwealth Bank, to cite one instance of what I have in mind, was established to give effect to the policy of the Labour party of the day. No one complains that it is subject to political control. Honorable senators opposite argue, apparently that in the course of time, if we admit the principle in this bill, public utilities will be subject to the swing of the political pendulum. I do not agree with them, but it is a fact, that the constitution of the Bank Board was altered materially by a bill introduced by the previous government. We may however, lay it down as a sound principle that thegovernment of the day, actingin the interest’s of the nation should always seek to give effect to its policy. ProfessorCopland goes on to say -
Speaking of the future of banking and money, Mr. E. G. Dyason put the question very clearly, “ It is not a choice between an entirely autonomous or a managed currency “.
I think it will not be denied that in the past we have had mismanagement.
– By governments, yes; but not by the banks.
– It might reasonably be argued that there has been mismanagement on the part of the banks which encouraged governments by making financial accommodation available to them.
– The honorable Senator might justly blame the banks for having made available so much money, and fornot having applied the brake two or three months ago.
– This check on governmental expenditure should have been applied years ago. The present condition of chaos has not arisen overnight; it has been developing for years. Professor Copeland states further -
The choice is really between management and mismanagement.
Although we have had mismanagement in the past, I am hoping that we shall have sound management in future. The Professor adds -
It is well to be clear on this point. Recent experiments have shown definitely that a large measure of price control is possible and inevitable.
The object is to regulate the supply of currency so as to maintain the standard of price levels, and to restore and stabilize industry. I doubt that any honorable senator opposite would hand the power over to an outside authority. Parliament, by legislative enactments, prescribes for the standard of living in the Commonwealth. This, as we know, depends upon the currency and our experience is that whenever a certain section of industry is awarded higher wages and improved working conditions, action in other directions over which the Government has no control takes it away from the employees.
Credit should, generally speaking, be 100 per cent. nationally controlled. Banking provides the Orthodox medium of ex change between producersand consumers. Sir Edward Holden, a prominent British banker, said this of banking -
Banking is little more than a matter of book-keeping . . . the transfer of’ credits from one person to another. The transfer is by means of cheques, the cheques are currency. Currency is money. Money is redeemed every time it is exchanged for commodities or services.
Since we control health, it follows that we should control wealth. We have government control of our postal services; andother public utilities and, to be consistent, we should have governmental control of banking which governs the credit resources of the nation. Professor Shann, speaking of self-reliant credit and faith, expressed this view -
Central reserve banking has managed the change-over in America from dependence on London to self-reliance, and more. It did not do so by restricting the output of American industry and agriculture. The change has come to Canada as well as to the United States. Why not to Australia?
If we continue to borrow as Senator Duncan suggested-
– I didnot suggest anything of the kind. I was referring to the policy favoured by the honorable senator and his colleagues.
– On this point, Professor Shann states -
If we continue to borrow from abroad we shall mortgage, with the interest bill, every increase in our productive power and send it all to swell the loanable funds of New York and London. Probably we can do this without growing poorer, but why not manage to set the pace of development by our own loanable capital? That would be ultimately to the advantage of both public and private finance.
– I hope the honorable senator is riot implying that Professor Shann approves of his idea.
– I am merely showing that, in his view, we should exercise some control over the national machinery which creates or destroys credit.
– If the honorable senator reads carefully what Professor Shann has said, he will find that he condemns absolutely all idea of political control.
– I am aware of that. Honorable senators opposite argue that if financial equilibrium is achieved by the adjustment of our finances, we may be in a position to approach money lenders for further finance to carry on the activities of the nation. We contend that the end may be achieved by the proper use of the credit resources of the nation.
The point whether the banks can create currency has, I think, been discussed in both the report of the Labour Committee and the Gold Delegation, and the reply is incontestably in the affirmative. It is acknowledged that banks can create credit, and there is a general belief that credit is based upon a nation’s productive capacity. On this point, Mr. McKenna, a former Chancellor of the British Exchequer, said -
I am afraid the ordinary British citizen will not like to be told that the banks can and do create credit and destroy money. The amount of money in existence varies only with the action of the banks in increasing or decreasing deposits. Every loan or every overdraft creates a deposit, and every payment of a loan or cancellation of an overdraft destroys a deposit.
We had ample evidence during the war of the power of the banks to create credits. Credit is faith. The faith of the people, used by the people’s government, should be the means of overcoming the difficulties confronting us.
– During the war the Commonwealth Bank, by the inflation of the note issue, was chiefly responsible for the creation of credit.
– Honorable senators opposite object to the bill on the ground that it will mean some measure of political control over the central bank. I regard that provision as one of the most commendable in the measure. It is in keeping with my life-long belief with regard to banking practice.
– The acceptance of that principle would mean an entire change of the banking system with every change of government.
-I disagree with the honorable senator. There has not been any change in the policy of the Commonwealth Bank following every change of government since that institution was established.
– But that is now being attempted.
– We do not follow the practice of certain other countries, where every change of government means a displacement of executives in the public service. I do not think that Australia will ever favour that policy. Under existing conditions our education system, postal services and other public utilities are undisturbed when a change takes place in the administration.
– Nevertheless, caucus denounced the Prime Minister for not changing the chairmanship of the Commonwealth Bank Board.
– We are getting pretty close to the American system when this Government appoints its own supporters to certain positions.
– That charge may be levelled at governments representing all political parties. I do not necessarily approve of it. But I believe that the desires of the people, as expressed from time to time in the election of representative’s of certain political parties, eventually leads to the framing of policies ; and governments, in giving effect to their policies, exercise some measure of political control over the nation’s utilities. This does not, however, mean that a government should actively interfere in the details of management of nationallycontrolled concerns. It has not done so up to the present, and I do not think it is likely to do so in the future. The Commonwealth Bank is a standing monument to the confidence of the people. There is no suspicion or fear with regard to any branch of its activities. But it is subject to political control in the sense that a government may entirely change the personnel of the board at any time.
SenatorR. D. Elliott. - How?
– By legislation.
– Without legislation.
– I would not go so far as to say that. Nevertheless, it is true that a government has power to alter the personnel of the board because its members retire at certain stated periods, and, in the course of time, if a government wished to exercise its power, the composition of the board could be entirely changed. Dr. Earle Page, in his second-reading speech on the Commonwealth Bank Bill in 1924, said-
The banks, mindful of their own interests, have no such regard for the public welfare as is undoubtedly required. Their individual outlook and interests render them unsuitable for the exercise of that provision necessary for the construction of sound policy.
The Commonwealth Bank is the creation of this Parliament. I, therefore, cannot see any danger in the establishment by this Parliament of a central reserve bank on the lines laid down in the bill, and I see no reason why the shareholders of private banks should be represented on the proposed board. At all events, they certainly have no right to two-thirds of the representation, as has been urged by honorable senators opposite. They would have representation by virtue of their position as electors and to that system I subscribe as being fair.
Just as war-time inflation benefited debtors, but crushed creditors; so post war deflation has benefited creditors but crushed debtors, governments meanwhile, being powerless. When are we going to effect a change? Only by passing legislation to deal with those persons and institutions which can now bring about inflation or deflation can we hope to solve the problems confronting -us. All authorities agree that there must be some change; they differ, however, as to the nature of the change. In no country, least of all Australia, can we set up watertight compartments. Particularly in financial matters, we must be linked with the nations of the world. As a link in an international chain we cannot set up a central reserve bank which is representative only of certain interests, and which will maintain the influences which are largely responsible for our present unhappy state. The institution we set up must be truly representative of the nation.
I shall not delay the Senate long with references to the gold, standard. The Gold Delegation of the League of Nations, which covered a wide sphere of investigation, has been forced to admit that even the gold standard is not the solution of our problems. Gold is not being produced, and probably cannot be produced, in sufficient quantities to keep pace with the currency which should have some relation to the increased production of the world. Sir Henry Strakosch, who was a member of the Gold Delegation, in a memorandum, which was published as a supplement to the Economist of the 10th November, 1928, under the heading. “Monetary Stability and the Gold Standard,” said -
They are content, metaphorically speaking, to tic their currency and price-level chips to a common buoy - gold-
– Has the statement any direct bearing on the Central Reserve Bank Bill ?
– I think so. The bill provides that the gold reserves shall be centralized. A large section of the community believes in the maintenance of a gold standard and the gold reserves of the country. It has-been said that it would not matter if all the gold in the world were swallowed by an earthquake to-morrow ; but so long as a great number of countries use gold as a measure of values, we must pay attention to the value of gold. Senator Colebatch believes that if we establish a central reserve bank we should adhere to the gold standard.
– But that is not the intention of the Treasurer.
– A central reserve bank should be part of an international organization which would ensure that an ounce of gold would be of uniform value throughout the world. The article by Sir Henry Strakosch continued -
The huge, ocean-going ship of the United States, towering over the many smaller craft of the other nations, lies there side by side with them, all made fast to their common buoy. A sea captain in real life would feel ill at ease if he found that he had moored his ship to a buoy, that was anchored to nothing and was free to drift wherever the currents and winds, or the manoeuvring of the other ships made fast to it, might take it. He is “not likely to be satisfied with the assurance of the port captain, that, in spite of its not being securely anchored, the buoy had drifted but slightly during the halfcentury before the war, and that a material change of its position had only taken place as a result of the exceptional circumstances which the war had created.
Sir Henry Strakosch was trying to show that, although we pin our faith to the gold standard, that standard is not a fixed quantity. He went on to say -
Have the captains of our metaphorical currency ship reason to feel less uneasy? ls the buoy to which their ships are moored so firmly anchored as to prevent it from drifting? Assuredly not. There is nothing in the construction of our metaphorical “ gold buoy “ to prevent it from yielding to the currents of supply and demand, and from drifting to wherever these may take it.
That is the position to-day. The gold available in the world is estimated at $9,000,000,000. To-day the bulk of it may be held ‘by one nation, and a little later by another nation. ‘ It has been predicted that a crisis will arise in 1934, when the gold standard will be abolished. It has been suggested that the world should abandon gold for use as coins. In an article in Lloyd’s Bank Monthly Review, under the heading,. “ The Functions of Central Banks,” Professor Gustav Cassel, of the University of Stockholm, who was also a member of the Gold Delegation, says -
Ever since the war a growing scarcity of gold has threatened the world with the consequences of a continuous lowering of community prices resulting in general economic depression. The amount of gold required to be provided each year, for the purchasing power of gold to be maintained at a constant level, increases in proportion to the rapid economic progress of the world, whereas an already insufficient production is expected to be reduced very considerably during the next two decades. The only conceivable means of preventing this calamity is a systematic reduction in the monetary demand for gold.
Gold has practically gone out of use as a monetary medium, and paper has taken its place. William Cobbett said that paper money was born in hell. Probably that gave rise to the expression we so frequently hear of a person having “ money to burn.” To-day most of the world commerce is conducted by means of paper money. Professor Gustav Cassel went on to say -
The use of gold coins in circulation must l)e abandoned. The introduction of the new British currency not redeemable in gold coins and India’s abandonment of the idea of putting gold coins into circulation, are the chief features that mark the. success of this policy.
It will be seen that even the big international financiers are concerned with the stabilization of the price of gold, in order to protect their own interests. There are, however, other interests to be served. Only by international institutions can the interests of the people generally be protected. [Extension of time granted.] In the article to which I have referred, Professor Cassel also says -
Many people do not like a managed currency. They fancy it should, be possible for the world to return to a “ natural state of things “ where the value of gold was determined by general market conditions and not subjected to the influence of any deliberate policy. People also oppose the idea of cooperation with other central banks, believing that national independence in monetary policy could be ‘secured by isolated action.
That quotation supports the views expressed by some honorable senators who have spoken. In my opinion, a central reserve bank must be a national institution carrying out a national policy, in which case it must be controlled by those who represent the nation. The article from which 1 have quoted continues -
These ideas, however, are hopelessly irreconcilable with present realities. The gold policy of the leading countries has a very material influence on the value of gold, and once this fact is recognized this value will always in some way be managed.
It will be necessary to establish an authority to deal with the value of the gold reserves of the world. That can best be done by a chain of banks established on an international basis.
I favour the establishment of a central reserve bank controlled by the nation. There is a tendency to attribute too much value to gold as a metal. Carlyle once said that “ the deepest depths of vulgarism is that of setting up money as the ark of the covenant “. That is not intended in this bill. Some people believe in the gold standard; others do not. But some standard is necessary. Whatever that standard, we can protect Australia’s interests only by our central reserve bank being a part of an international organization. _ If we are going to split on the question of the control of the bank, I warn honorable senators that the electors will speak with no uncertain voice on that matter. I cannot imagine the electors supporting the establishment of an institution to be controlled as our financial institutions have been controlled in the past. Whether the standard decided upon be gold or goods, I believe, with Ruskin, that -
The wealth that is, represents but the pitifullest fragments of the wealth that might bo. It is a handful of rags, gathered by camp followers on a lost battlefield where gallant soldiers lie dying.
I remind honorable senators that here in Australia honest workers, who formerly were gallant soldiers, lie dying, and that it is our duty to do something practical for them now. I, therefore, urge them to pass this measure.
– I rise to oppose the motion that the bill be now read a second time, and to support the amendment before the Senate, and also the further amendment of which Senator Colebatch has given notice. I am glad that the honorable senator has given notice of such an amendment, otherwise every honorable senator who voted against the bill would be placed in a .false position. His action in voting against it would, in that case, be interpreted as opposition to the principle of central reserve banking. So far as I am aware, no honorable senator is opposed to that principle. The opposition to the bill is not to the principle it contains, but to the method by which the Government proposes to inaugurate central reserve banking in Australia. Senator Kneebone let the cat out of the bag.
– The cat was never in the bag, so far as I am concerned.
– When the bill was introduced it was suspected that the real purpose behind it was not so much to inaugurate a system of central reserve banking as to nationalize the banking system of Australia. Some time ago I asked the Minister representing the Treasurer a question based on a speech- made by the Treasurer in Brisbane. I listened to the wireless broadcast of that speech, and I distinctly understood the Treasurer to say that the real purpose of the Government in introducing the Central Reserve Bank Bill was to nationalize banking in Australia. When I asked the question the Treasurer gave a very non-committal reply, and certainly did not admit that such was the purpose of the Government in introducing this measure, but Senator Kneebone has made it clear that the purpose his party has in view is to nationalize banking.
– That is the ultimate objective.
– That is so.
– I am glad to hear the honorable senators’ admission.. Senator Kneebone has also said that the monetary problem is now an international one and that our present position is due to the fact that there is a system of monetary control by individuals or groups of individuals in other countries. This, he said, can be counteracted in Australia by the Government owning the banking institutions, and, as it were, nationalizing the whole of our banking operations. The honorable senator might have been able to express that opinion with a great deal more effect yesterday than to-day. We have not had many examples in the world of the failure of government banks. We have had, of course, many instances of the failure of privately controlled banks for one reason or another, but we have not had experience of that kind in Australia for. many years. In spite of the prevailing depression and the many great calls made upon them, the banking institutions of Australia are quite sound, and have not had to suspend payment. We learn to-day, however, that a government institution, a nationalized institution, has closed its doors.
– No nationalized institution has closed its doors. In fact, so far, no bank in Australia has closed its doors.
– I hope that what the honorable senator has said is correct, but I have heard otherwise, and we all know that certain negotiations have been commenced because a governmentcontrolled banking institution, by reason of circumstances over which. perhaps, its board has had no control, finds it extremely difficult to meet its obligations. That disposes of the argument of Senator Kneebone and others of his party that banking only needs to be nationalized to be made quite safe and sound; that industry only needs to be nationalized or socialized to be made quite sound and of immense service and nothing else but service to the people. We differ, of course, on that point, but I have always been a strong advocate of the principle of a central reserve bank. I have not only been convinced: that (fis inauguration of such a system in Australia was necessary,but I have also’ advocated it on m-a’ny occasions on public platforms in New’ South Wales. I have said that it would have been infinitely better for Australia, and the country would have been’ much better equipped to meet a crisis such as the present, if we had had a central reserve bank.
– With the Government having some voice in its control.
– The Government would have had some voice in its inauguration, but that would hot imply government control, to which I am totally opposed.
If immediately after the war we had realized the true position, and the Government of the day had brought down a bill for the establishment of a central reserve bank, that institution would have been a veritable Rock of Gibraltar to-day so far as Australia’s finances are concerned. What is the position how? To upset the whole of the banking equilibrium of Australia by creating a central reserve bank which would take months, perhaps as long ‘as two years, to get into effective operation would not be likely to solve our immediate difficulties, but would rather tend to increase them.
– - What functions would such a bank perform?
– I will explain my meaning by a homely illustration. When a whole town is burning, it is too late to consider the ordering of equipment for a fire brigade. In order to cope with the conflagration, you must use the means at your immediate command: That is the position in regard to the establishment of a central reserve bank in Australia. It is unfortunate that it was not inaugurated years ago, so that it would have been in operation now.
– What functions would a central reserve bank perform that are not now performed by the Commonwealth Bank?
– A central reserve bank would undertake several functions that cannot be effectively and properly undertaken, at any rate for a considerable time, by the Commonwealth Bank. I shall deal with the honorable senator’s question more fully later on.
I wats rather surprised to’ hear attacks -some of them- most- vicious in their nature - that have been made on the banking institutions of Australia. I refer’ to the private banks. It is admitted, of course, that those institutions, and the banking system generally, have their limitations, but we must not forget the great service these banks have rendered to Australia in the years they have been in existence. They have done good work for this country, although, perhaps, at the same time they may have done very well for themselves. We have reached a stage, however, in our national development, when something more is required. Other countries, faced with almost similar crises to ours, have solved their problems by the adoption of a system of central reserve banks, and in nearly all of these countries the governments of the day, with commendable wisdom, have followed scientific lines in framing their legislation. Where they have not done so; where they have hurriedly pushed legislation through Parliament to get these banks going’, they have had to retrace their steps and follow proper lines.
-South Africa, for instance.
– Yes, South Africa hastened its bill through Parliament just as the Commonwealth Government wants Parliament to hasten with this legislation, but it subsequently had to retrace its steps and appoint a committee of experts to overhaul its central bank system. Honorable senators want to save the Commonwealth from being in the same position. They want to have the inquiry first. Unless Australia follows scientific lines, we cannot expect a central reserve bank to function in the best interests of the people. Banking is a science. Its various functions are based on certain well-established economic laws, and if there is any departure from those laws we must suffer for it. Economic laws must be observed. Honorable senators supporting the Government evidently think that Australia can be a law unto itself.
– Who think that?
– It is, unfortunately, only too true that a great majority of the Labour party think it.
– Those who think it have left the party, including the honorable senator.
– I do not know that they have left the party. What I do know is that the party has not altered its objective, and that it regards Australia as a law unto itself. Economic laws mean nothing to supporters of Labour. Their faith is pinned to the wildest and most extreme theories of economy, such as the socialization of industry, and I am afraid that this bill is designed more to achieve that objective than to help Australia. The control of banking, currency and credit would provide a very effective means of attaining it. What would the position in this country be if the present Government, through the establishment of a central reserve bank, secured control of the whole of the currency and credit of Australia, and if banking were nationalized? At present there is only the Senate standing between this Government and its objective with respect to banking, and I know that on this occasion this chamber will exercise its authority and carry the amendment moved by Senator Colebatch.
I fully appreciate the work of the select committee which inquired into the Central Reserve Bank Bill. The members of that committee, at great personal inconvenience, heard a great deal of valuable evidence, and presented a report which should be carefully studied by honorable senators. That committee is not opposed to the principle of central reserve banking, or to the ultimate establishment of such an institution in Australia. It has approved the principle, but expresses the opinion that the present time is inopportune to establish such a bank. If a central reserve bank were already in operation it would be of great advantage, particularly to the Government, as mentioned by Senator Daly, who said that the Commonwealth Bank is now carrying out the functions of a central reserve bank.
– I said that it was doing ‘75 per cent, of the work of a central reserve bank.
– It is generally regarded as axiomatic that a central reserve bank, holding, as it would, a large proportion of the reserves of the trading banks, should not also operate as a trading bank. There are even differences of opinion among economists and writers on that point, and I draw a clear distinction between economists and writers on economics. Since this measure was ‘ introduced, honorable senators have been inundated with correspondence, pamphlets, documents, and all kinds of literature prepared by economists and writers. The opinions of the former are always worthy of our close consideration, but some of the opinions expressed by so-called writers of economics are not worthy of the same consideration. In this connexion, I do not refer only to those in favour of the bill in its present form, but to writers who have expressed opinions against the measure. A good deal of this matter, some of which has been written anonymously, grossly misrepresents the purpose for which the measure has been introduced if that purpose was really to establish a central reserve bank, and has been prepared by those who have not given sufficient consideration to the general principles of central reserve banking. I have read most of that which has come to me, because I considered it my duty to do so, and I have been amazed at some of the statements made for and against the establishment of a central reserve bank. As I have said, it is almost, axiomatic that a central reserve bank, holding as it would, a considerable portion of the reserves of the trading banks should not operate as a trading institution in the ordinary sense of the term.
– The honorable senator should know that that is not intended.
– I cannot see that, and some of the provisions in the measureneed to be further explained. A central reserve bank should operate in the best interests of the country, and should not have to contend with a possible collapse in the value of the securities it is holding. The securities of the trading banks consist largely of real estate against which advances should not be made by a central reserve bank. The Government has the good sense to limit the sphere in which a central reserve bank should operate in the matter of advances. The Government doubtless realized that the assets of a central reserve bank must be readily realizable in order to meet urgent calls upon it by other banks, and, perhaps by governments. But a central reserve bank, when competing with trading banks, cannot observe this principle. The Commonwealth Bank at present carries out all the functions of an ordinary trading bank, but when functioning as a bank of central reserve would incur considerable risks in making, as it has in many instances, advances against real. estate and other securities not readily realizable. In times of financial stress -the Commonwealth Bank, operating as it is to-day, might find that some of its securities had depreciated to such an extent that it would not be in a much better position than many of the trading banks which had made advances against similar securities. That is one direction in which the Commonwealth Bank is at present going beyond the functions of a central reserve bank, and consequently, under the present system there is not the same degree of security that there would be under a complete central reserve banking system.
Honorable senators on this side of the chamber are not opposed to the principles of central reserve banking; but. they are opposed to the establishment of a central reserve bank under political control. At present the Commonwealth Bank makes advances on long terms against securities which should not be held by a central reserve bank. There is a general idea in the minds of many people and of some honorable senators opposite, that the funds of the Commonwealth Bank should always be available to any one who has a reasonable security to offer, and that there is not the same necessity for that institution to exercise the extreme precautions taken by the trading banks. At present there is what may be termed a first-class dispute in progress between the Treasurer (Mr. Theodore) and the Chairman of the Commonwealth Bank Board, merely because the board is not prepared to comply with certain requests of the Treasurer. Honorable senators opposite and their supporters are howling aloud for the dismissal of the chairman.
– Objection has been taken not to the chairman but to the board.
– The name of Sir Robert Gibson has been mentioned by many supporters of the Government, and it has had particular prominence in Labour journals which contend that he has to go, and that it is the responsibility of the Government to shift him.
– Sir Robert Gibson does what the board directs.
– As chairman of the board he is guided by the decision of the majority. If a central reserve bank such as that proposed by the Government were to be established, we know what would happen. Under political control, a desperate Treasurer, with the assistance of desperate supporters, would have a free hand. A central reserve bank should be in an impregnable position, and should not be liable to have its reserves interfered with by a government in order to meet governmental obligations.
– It would not be. The honorable senator does not understand the work of a central reserve bank.
– It is because I do understand the functions of such a bank that I do not intend to support the bill in its present form. There is much in the measure to commend it, but certain important amendments will have to be made before it will meet with my approval.
– What is the difference between the central bank such as is proposed in this measure and those operating in 27 other countries?
– There is this vital difference, that in those 27 countries to which my honorable friend has referred there is a proper recognition by the Government of the fact that political interference with its central reserve bank would spell ruin to the country. The Commonwealth Bank is supposed to be entirely free from political control or influence; yet, as I have endeavoured -to show, this Government has not hesitated to exert political pressure and influence upon the board of that institution. That being so, Ji would not hesitate to exert similar pressure and influence upon the board of this proposed central reserve bank. It did not appoint all of the present member? of the board of the Commonwealth Bank, but if this bill should become law it would have the appointment of the board of the central reserve bank, and in its present temper knowing that it might want to call upon the board to do what was not strictly in accordance with central reserve banking principles; the. probabilities are that it would appoint persons who it knew would be amenable to its influence. That is too great a danger for us to take.
– Particularly having regard to the history of the French bank.
– That is so. We have been told that a central reserve bank would have behind it all the resources of the Government and the people; but what would happen should a government have no resources ? What are the resources of this Government to-day. It would be not a strength but a weakness, perhaps even a positive menace, to a bank established under this- bill. There must not be even the suspicion that the funds of the central reserve bank can be applied to the purposes of a desperate Treasurer. There would not be, in the minds of the people of Australia, that absence of suspicion which there should be, if this legislation was to be successful.
A very great deal could be said upon this subject even at this late stage, although almost the whole of the field has been covered again and again, both in this chamber and in another place. I feel, however, that we ought to resolve the question as quickly as possible, more particularly in view of the protests against delay that have been made by the Minister and by government supporters, and so let the Government and the people of Australia know where the Senate stands in relation to it. As I said earlier, I shall support the amendment that has been moved by Senator McLachlan, and that which has been foreshadowed by Senator Colebatch. I cannot at this stage support the second reading of the bill. The adoption of those amendments would not signify the defeat of the measure, despite what has been said by Senator Kneebone; the matter would merely be deferred for further consideration and inquiry. We should then have the benefit of another report by the Gold Delegation of the League of Nations; and the development of the situation that confronts Australia to-day might throw new light upon the matter, and certainly should make possible the enactment of central reserve banking legislation that would be in the best interests of Australia and entirely devoid of those dangerous principles which are embodied in this measure.
– I have listened attentively to the arguments that have been used in support of the proposal to defer the passage of this measure.
As has been stated previously, this bill is an important link in the chain of bills that the Government intends to bring down to give effect to its financial policy. The principal objection to it appears to be that it makes provision for political control. The opponents of the Labour party have always argued that industry is hampered by the fact that political control plays a very prominent part in its operations. I presume that that belief actuated our predecessors when they handed over the principal functions of government to boards and commissions, with the result that the present Government finds it almost impossible to administer the affairs of the country in accordance with the wishes of .the people.
The acceptance of the amendment that has been moved by Senator McLachlan, and that which has been f foreshadowed by Senator Colebatch, would be tantamount to the defeat of the bill. Honorable senators opposite would act more honestly if they definitely rejected, instead of shelving the bill. The only reason for its being shelved from time to time is that they have nothing better to suggest in its place. They agree that there is need for legislation of this character. Not one word has been spoken in favour of the existing financial system, and none can be said.
– It stands selfcondemned.
– As the honorable senator says, it stands self-condemned. If it is to continue, and if the people of Australia are to depend upon those who brought them to their present position, the outlook is dark, indeed. This is not the first time that Australia has faced a crisis, although perhaps no previous crisis has been of such magnitude as that through which we are now passing. In the early ‘nineties there was a financial crash, which was preceded by extraordinary prosperity. That prosperity was the creation of the banks, and after the crash had subsided they again made money available freely. It is safe to say that the pioneers to whom reference has been made, were robbed of thefruits of their struggles by the attitude then adopted by the banks in relation to advances.
– How would this bill benefit the country if it became law?
– The benefit that the people would derive from it would depend on the passage of other measures that the Government proposes to bring down. The Government stands definitely for the nationalization of banking. It believes that there must be some change in the existing monetary system, and that the people must have some say as to how their wealth shall be distributed.
– But what benefit would follow the enactment of this legislation ?
– The stabilization and the control of credit, and the regulation of its flow, so that there would not be periods of fictitious prosperity followed by acute depression.
– Have other countries that have central reserve banks been able to achieve that?
– No, because in many cases the Government or the people of those countries have had no say in the management of the institution.
– In every instance in which the Government has had a say, it has ‘destroyed the currency and the credit of the country.
– I dispute that. The Commonwealth Bank was established on a principle similar to that which underlies this measure. Provision has been made in this bill for the representation of financial, agricultural, and all other interests that count.
– Everybody except usurers.
– That is so. The objection raised by honorable senators opposite is that it is proposed to take control out of the hands of those who exercise it to-day. That, to me, is not a crime. The greatest crime is that which is being committed on society to-day by private banking and other financial institutions generally. Whether it be intentional or accidental, the fact remains that thousands of people are starving, and are debarred from producing the necessaries of life, although they are willing to do so. Numbers of those who have made arrangements through banking institutions to purchase homes, have lost all that they possessed, because of the depression of values.
No honorable senator has put forward any proposal that would be of greater benefit than that embodied in this measure. This is part and parcel of the Government’s financial policy. It was sent to the Senate nearly twelve months ago. Had the Senate then done the right thing, it would have amended it in the direction desired. I challenge honorable senators of the Opposition now to pass the second reading, and to show the people by the amendments that they propose in committee the nature of their policy in regard to this matter. The Government is determined to turn the tide if it is humanly possible to do so, and to prevent a recurrence in the future of the conditions that now obtain. The present action of the Opposition constitutes a deliberate attempt to prevent the Government from putting its policy into effect. If the bill were rejected, the Government would know exactly where it stood. To defer it for six months would be tantamount to defeating it. Why not go straight ahead with it now? Why not pass it through its second-reading stage and amend it in committee? , If honorable senators opposite are prepared to face the issue, that is the course which they should adopt, instead of shelving the measure for a further period of time. The people will not tolerate this contemptuous treatment of the Government’s proposals. It has been tried in the past with consequences that are well known to honorable senators.
The Government, by the introduction of this bill, is seeking a way out of this country’s difficulty. While the Commonwealth Bank was under the management of a governor, no one suggested that there was anything wrong with the administration, and certainly there was no justification for the appointment of a board to control its policy. Honorable senators opposite, who supported the Government which was responsible for that change, claim that the purpose was to prevent the possibility of political control. Nevertheless they toot good care to see that the appointees to the board were “ dyedinthewool “ nationalists, with the result that since then the bank’s policy has been directed along lines approved by them. No one can suggest that the action then taken was dictated by the desire to get away from political control.
There is nothing. in the bill to which exception can be taken. I have read the report of the Senate Select Committee. It is a valuable document. I have also read much other literature dealing with central banking, and I find that all authorities favour the system. They differ only as regards the method by which the objective shall be attained. I direct attention to the last paragraph in the committee’s report, which reads -
Consistent with the opinions outlined in this report your committee is arranging for the preparation of detailed amendments to the bill, and these will be presented to the Senate as soon as they are available.
I now invite those honorable senators who were members of the Select Committee to present the amendments referred to. We shall then know where we stand, and we shall see whose interests they are representing in this chamber. Are we to understand, from the amendment, that they require a further six months for the preparation of these amendments, or may we take it that Senator Colebatch expressed the mind of the committee when he suggested that the Government should prepare amendments on the lines indicated by that body? The Government has given this matter very mature consideration. I refrained from accepting appointment to the Select Committee because I was satisfied that the bill presented by the Government was satisfactory in every respect and that there was no justification for delaying its passage by referring it to a select committee. The action of the Senate on that occasion was an attempt to interfere with the passage of government legislation in this chamber, and the amendment seeking to postpone the second reading of the bill for six months will only add fuel to the flame of discontent. I recognize, of course, that this is in keeping with the policy of the Opposition to hamstring the Government with regard to its legislation. I should prefer to see the bill defeated outright. We should then know where we stand. The Fiduciary Notes Bill was rejected on Friday last. Why do not honorable senators opposite treat this bill in the same way since they are opposed to it?
– Does not the Minister concede to the Senate the right to have an opinion on this important matter ?
– I do. I am merely expressing my own view. Without discussing the merits of the bill I think it can be said that there is general agreement that a central reserve bank is necessary. The only difference of opinion is with regard to its control. I am convinced that the measure of control provided for in the bill is necessary to give effect to the Government’s policy which has had the endorsement of the people.
– I intend to support the second reading of the bill, because I am in favour of the underlying principle. The merits or demerits of the proposal are an entirely different matter. If the provisions in the bill are not in conformity with the main principle underlying it, the measure must be condemned outright. Although I intend to vote for the second reading, I am strongly inclined to support the amendment submitted by Senator Colebatch, which will give time for mature thought to be given to the amendments indicated by Senator McLachlan.
I regret that the Government is not more appreciative of the attitude of the Opposition in this chamber. I say this because not long ago, when Senator Daly was the Leader of the Senate, he expressed himself in laudatory terms of the behaviour of honorable senators on this side with regard to government measures sent from another place. But Senator Daly has been dethroned. I have nothing at all to say against Senator Dooley, who has lately been raised to cabinet rank. I am merely directing attention to the altered opinion of the Government concerning the attitude of honorable senators on this side. But a little while ago we were praised ; to-day we are roundly condemned, not only by Senator Dooley, but also by the Prime Minister (Mr. Scullin).
I venture to suggest, however, that if the records of this chamber are examined it will be found that the Senate has always been willing to give full consideration to every proposal submitted by this Government. It has given honest and sincere thought to every legislative proposal and has discussed every bill upon its merits. Since we have done all this for the Government, I am disappointed that the Assistant Minister should express views so contrary to those uttered by Senator Daly when he was Leader of the Senate. The complimentary remarks of that honorable gentleman reminded me of the dilemma in which Daniel O’Connell once found himself, and I was almost persuaded that I should examine my own conscience to see if I had done something wrong, because I, and other honorable senators on this side, had helped the Government so much and were praised for it.
Turning now to the bill itself, I remind honorable senators that there are in the Commonwealth eleven associated banks, and the Commonwealth Bank. The proposed, central reserve bank would be the thirteenth. I believe that, in certain respects, the establishment of a central bank would be justified, but I am not so certain that action in this direction is warranted, in view of the fact that this country is suffering a period of commercial and industrial depression unexampled in its history. At a time like this every citizen should see that, for the expenditure of every shilling, he gets a shilling’s worth of value. Oan it be said that an expenditure of approximately £20,000 to establish a central bank is justified? I have no estimate of its probable cost, but we may safely assume that something more than air and water will be required to sustain it and enable it to function successfully. Money will be needed. Although in a minor sense, perhaps, it might be possible to justify an expenditure of £20,000 on this project, I consider the time inopportune. I doubt also that the proposal commends itself to the people. The United States of America, the country which, of all others, is keenly alive to the necessity to utilize and exploit currency and exchange in the interests of the nation, had no central reserve bank until 1914. If that great country slumbered on the question, so to speak, for over 100 years, where is the urgency for the establishment of a central bank in Australia ?
The purpose of a central reserve bank, amongst other things, is to check excessive speculation on the one hand, and to act as a stimulus to slack trade on the other, but the tenth annual report of the Federal Reserve Bank shows that even in the United States of America the central banking system has failed in a measure in those very directions. The United States of America took 100 years to come to a decision on the matter with which we are now dealing. A better comparison can be obtained by comparing Australia with Canada, for, in many respects, Canada is similar to Australia. Like Australia, she has huge unexploited territory; to a great extent her problems are our problems. Her population is larger than ours ; the volume of her trade, both internal and external, is greater. The value of her exports of manufactured products is estimated at £90,000,000 per annum as against £2,000,000 or £3,000,000 for Australia. Although Canada’s banking system is probably superior to ours, the people of that dominion have not found it necessary to establish a central reserve bank. No secondary industry in Australia can compete with its products in the world’s markets. If a wheelbarrow were manufactured in Sydney and taken to any country, it would have to be brought back again because a market could not be found for it. That is a sad commentary upon our country. The unfortunate primary producers of Australia are doing their job differently and well. They are standing up against the competition of the world. Their products can hold their own in the world’s markets against the products of black, brown, brindle, or other coloured labour. Despite excessive tariffs, dry climates, and, in some cases, poor soil, they are still able to hold their own. But not one of our secondary industries can compete in the world’s market. “Why don’t the secondary industries do the same as the primary industries? If they did this country would have no depression to-day.
South Africa has been quoted as an instance of a dominion which has established a central reserve bank. It is not often that we take South Africa as an example. I prefer to take a lead from Canada; and I repeat that the dominion has not even thought of establishing a central reserve bank. In that case, why should Australia do so? The cat, or rather the tiger, has been let out of the bag. The honorable Minister (Senator Dooley) has told us of his desire to establish governmental control of banking, to wipe out all private banks, and to substitute brandnew State institutions. I have referred to a number of countries which have not thought it necessary to establish a central banking system. Ireland is another country which decided against the system.
– That is the country whose people are said to be “ agin the Government”.
– I am not “ agin any government” which acts in a commonsense way. I knew Senator Kneebone in Western Australia some years ago. He was then so mild and innocent that an overdose of mother’s milk would have gone to his head ; but since he moved eastward, it would appear that he had been suckled by a tiger. On the other side of the chamber sit a number of gentlemen with Irish names - Senator- O’Halloran, Senator Daly, and Senator Dooley - but they have not said one word about what is happening in Ireland. It remains for me, whose name is Lynch - a name of only one syllable, and if that syllable were taken away I would have no name at all - to stand up for Ireland.
– The honorable senator i3 hardly fair in saying that.
– I ask honorable senators to avoid personalities as much as possible.
– I rise to a point of order. Is the honorable senator in order in making such a statement concerning honorable senators who have no opportunity to reply?
– The honorable senator will have his opportunity to reply.
– I have already spoken on this measure.
– I was pointing out that many of the leading countries of the world have not thought it necessary to establish a central reserve banking system. In this connexion, I referred to Ireland.
– The honorable senator need not make personal allusions in pointing out these matters.
– What has that glorious green isle done to honorable senators opposite that they never mention it? This bill is. important for,. I understand, that the Government’s financial policy hinges on it. What is wrong about referring to Ireland? I shall do so even if honorable senators opposite forget that beloved country. I shall tell the Senate what has happened in Ireland. Senator Barnes is looking at me. I imagine that the honorable senator has some Irish blood in his veins; but he made no reference to Ireland. It is important that we should know what is taking place in other parts of the world. In Ireland a commission comprising the highest financial authorities obtainable in Europe and America was appointed by the Government to investigate the system of central banking. One of the members of the commission was an American; another was Mr. Campion, the manager of the Commonwealth Bank in London ; while the remaining members were also men of high intellectual calibre.
Sitting suspended from 6.15 to 8 p.m.
– When a proposal was made from this side of the chamber that a committee should examine this bill in a hurried way, the present Government, unlike the Irish Government, not only refused point blank to participate in the work of that committee, but also placed obstacles in its way to hinder it in coming to a decision. I propose to read the relevant portions of the report of the commission appointed by the Irish Government.
– The portion which suits the honorable senator.
– That is so, a portion that will not suit the Government. The summary of the commission’s findings contains the following : -
Almost at the outset of its deliberations the commission was brought’ face to face with the question whether to recommend the establishment of a so-called “ central bank “ for the purpose primarily of directing the note issue. This view appealed strongly to some members of the commission, but a practical consideration of it led to the feeling that at the present time it was not to be recommended as an immediate expedient. It is clearly true that the tendency in many countries has been of recent years toward the creation of central banks, and toward the retirement of private banknote issues, their place being taken by central banknote issues. It would be easy to cite illustrations of this movement both from the British dominions and from Europe, and from the experience of countries in the Western Hemisphere. The Genoa conference recommended the creation of central banking institutions by countries desiring particularly to take steps towards a uniform and sound note issue, and at the same time to maintain control of their own financial affairs. As to this general question we call attention, however, to the following points: -
The Saorstáthas to-day an unquestionably sound and satisfactory banking system. No one questions the solidity of its banks or their ability to meet the demands of their customers.
Government business is being on the whole satisfactorily dealt with from the banking stand-point.
Banks are able to obtain either through their own offices in London or through correspondent banks there such access to a great money market as they may need from time to time.
There is no independent discount market in Ireland, and, in fact, apparently little market for bills of exchange outside the banks.
Exactly our position here -
It would appear, therefore, that many of the conditions which often call very urgently for the establishment of a central bank are absent, while at the same time the conditions which render easy its establishment are likewise absent. While some members of the commission arc of the opinion that the conditions which render such an installation feasible or easy are not likely to make their appearance in the near future, other members differ, but we are all of the opinion that they are not present at this time.
I am surprised that certain honorable senators for whom I have the highest respect have thought it necessary to ignore Ireland in this important particular. It passes my comprehension that in this 20th century the experience of that glorious green isle - which in the past sent out teachers and preachers to civilize western Europe and shone like a star in a dead world - has been passed over by its sons who find a place in this chamber. I do not propose to follow their example.
I draw particular attention to the reference to the control of currency by this central bank which is proposed to be established, and the remainder of my. remarks will be directed largely tq that phase of the subject which I regard as the kernel of the whole proposition. Banking technique I shall leave on one side. We have no need to pay heed to what has been said from the Government benches, so long as we know what is the ukase of the masters of those who represent Labour in this chamber. When, on the 27th July of last year, the Federal Conference of the Australian Labour Party, that supreme head of the party, met in conference here in Canberra, among other things, it adopted the following: -
The provision of work depends almost entirely on freeing the credit resources of the Commonwealth. As a first contribution-
Mark the word “ first “ - in that direction our committee considers that the Federal Parliament should find £20,000,000, which should bc allocated amongst the States.
Those are the orders which this Government must obey or get out. If the first instalment of £20,000,000 is exhausted, is there not to be a second, third and fourth? Ministers must obey their masters’ voice. That is the voice to which we must pay heed, and not what has been said in regard to this bill by honorable senators who support the Government and try to tone things down.
I shall refer later to the only objective which this Government has in mind - that its central reserve bank shall be the only banking institution in Australia, and shall control all credit. Generally speaking, I regard a central reserve bank as a necessity in Australia, because it will be a sort of financial pillar, deeply set, to which all subordinate financial institutions will cling when the storm rages. A wise general does not at the outset put all his reserves in the front line. He wins his battle because towards the finish he can bring up his reserves. The foolish general puts all his reserves into the front line and loses. A central reserve bank, which will carefully husband the financial reserves of the Commonwealth, exercise control over the financial operations of the country, check the eagerness of men to embark upon unsound propositions in boom periods and inject into the financial system some necessary encouragement in order to keep the wheels of industry going in times of stagnation, will be fulfilling functions of the greatest importance to the community. It will keep Australia’s head to the wind, enable it to weather any gale, and prevent untold hardships being imposed upon the people.
Our friends opposite may not be able to recall the hardships of the ‘nineties, but their fathers must have told them that in 1893, as a result of rash banking with slender reserves, and an expansion of credit beyond the point of safety, many of the financial institutions of Australia could not stand the strain, and had to close their doors. Tens of thousands of people were deprived of their earnings, and did not recover them, in some instances, for twenty years. In many instances they never recovered them. That ordeal, however, provided a valuable lesson for Australia. But, alas, how soon it is forgotten. To-day the banks have behind them reserves which guarantee that the people of Australia will not again be robbed of their earnings. The Government, however, seems to have forgotten the lessons of the past. We on this side of the chamber have not. We are in favour of a reasonable expansion of credit in keeping with the reserves that are held, and consistent with the maintenance of our banking system on a sound basis, so that Australia’s head may be kept to the wind during any financial storm.
Incidentally, I may refer to the political control of the central reserve bank. Fortunately, we have it from the Minister in charge of the bill that such is the aim of the party. Of course it is. Some government supporters may seek to dodge the issue when the question is put to them, but they must stand by their declaration that banking must be nationalized, and that private banks must be sent out of business, bag and baggage.
– I rise to a point of order. The honorable senator has accused me of stating that I was advocating the political control of the central reserve bank, whereas what I said was that I advocated the Commonwealth Bank doing all the banking business of Australia.
– I referred to Senator Dooley, who said that the avowed aim of the Government was the nationalization of banking. I remind honorable senators who contend that the Commonwealth Bank has been a complete success, which I admit, that it has reached its present position, not because of what the present Government would have it do, but because it has always been absolutely free from political control. The success of the Commonwealth Bank lies solely in the fact that it is free from political control. When the late Mr. Andrew Fisher, who at the time of the establishment of the Commonwealth Bank was the Prime Minister, was seeking a governor for that institution, he searched throughout Australia for the most suitable person to control its operations, and eventually selected the late Sir Denison Miller. One of the conditions imposed by that gentleman before he would undertake control was that the bank was to be absolutely free from political control. Shortly after its establishment the bank came to the assistance of the Broken Hill mining companies, and for a time assisted in. keeping the mines in operation, and rightly so. Honorable senators opposite should recall that the Commonwealth Bank also came to the assistance of the Trades Hall authorities in Perth when a new building was required; but in order to obtain financial assistance from the bank one of the leading planks of the Labour party’s platform had to be ruthlessly cast overboard. At that time the Governor of the Commonwealth Bank firmly stipulated that if money was to be advanced by the bank for the construction of the Trades Hall in Perth the work would have to be undertaken by contract, and not under the day-labour system, which was the policy of the Labour party. That direction was immediately obeyed, and the bank advanced the money. Although I am f re:quently referred to as a deserter from the Labour party, called all sorts of names in consequence, and falsely charged with having broken a plank of the party which was never in its platform, no mention is ever made of the action of the Trades Hall authorities in Western Australia who smashed one of their party’s planks to smithereens in order to satisfy the sane and business-like demand of the Commonwealth Bank. I have frequently been charged, quite wrongly, with having violated the planks of the Labour party platform, but no mention is made of the fact that the officials of that party violated a very important plank of its platform when it suited them.
I repeat that the Commonwealth Bank has been a success because it has been absolutely free from political control and the old Labour party of the time deliberately willed it so. It has carried out its job with that policy as an unshakeable fundamental.
We have also been told that the establishment of a central reserve bank is necessary because the trading banks have not extended credit or that credits have not been released as they should have been. We have also heard a good deal about credit being locked up in this country, but I remind honorable senators opposite that credits will not be released by the banks unless there is some assurance that they will be utilized in a sane and businesslike way. If an honorable senator opposite, after lending a friend a £10 note, discovered that it had been frittered away ingambling or some other idle purpose, was asked to loan him another “ tenner “, the request would immediately be declined. Money is not loaned to spendthrifts, and when they ask for it they are always told to go about their business even by members of this Government. That is the attitude which the banks have adopted towards the governments of this country which by adopting a spendthrift policy have caused extreme financial stringency, increased unemployment, and brought hardship and privation into the homes of thousands of deserving people. We have been having a mighty good time, and have been spending lavishly regardless of the consequences. My advice to honorable senators is to adopt the old and honest practice. When we get into difficulties we should put our house in order. It is the responsibility of every one to-day to put his neck into the collar and work harder, save more, spend less, and by those means adjust his finances, and indirectly those of the nation. If we do our part others will be willing to do theirs. A client of one of our trading banks might approach the manager and say that he was £1,000 in arrears. On being asked the reason he might say that he had purchased a Rolls-Royce motor car, spent a holiday on the coast, visited the races, lived riotously, and generally had a good time. In such circumstances a request for further accommodation would immediately be refused.But another client in a similar position who in formed the bank manager that he intended to live more frugally, dispense with his motor car, use a spring cart if necessary, and generally to reduce expenditure of every description to the absolute minimum, would receive favorable consideration, because he was prepared to help himself and to make a sacrifice. The Government is in exactly the position of an ordinary client of a bank; but instead of reducing its expenses to a minimum it continues to carry on in the old, bad, extravagant way. It must be recognized that deposits and the ordinary capital of the banks are the only two sources from which credits can be made available. A reference to current newspapers any day in the week will show that banking institutions have actually lent in excess of their deposits, and that as a result of the Government’s present insistence for financial accommodation, private enterprise has been paralyzed and unemployment increased. Where is this money to be obtained? If the banks operate upon their reserves we can expect another financial crisis such as occurred in 1893, when thousands of deserving citizens were ruined, and a state of general financial chaos prevailed. Does the Government want that repeated? Is that what the Government desires? Governments cannot obtain credit to the extent they desire because they are not showing the slightest inclination to place their houses in order. If they did, I believe assistance would be forthcoming at once. At a meeting recently held in Western Australia, I heard a gentleman famous for his oratory say that what is wanted is a “ liquefaction of the congealed communal credit of Australia.” He heaved that slab of meaningless jargon at an unoffending harmless but very deserving section of the farmers in this country.
– The honorable senator was present at that meeting?
– Indeed I was, and I put the position before the farmers in a way which I am sure they all understood and appreciated.
In dealing with this subject, honorable senators of the Opposition have unfortunately to adopt an unpopular course while honorable senators opposite persist in telling the people that the policy they advocate is right, and that the ‘banking and ‘Other financial institutions are operating with a dark and evil design upon the common people and the prosperity of this country. We never hear the members of the party opposite telling the people that they have some responsibility. They persist in reminding them of their “rights” but they studiously refrain from mentioning their responsibilities, because they know that by so doing they would lose votes. I say, advisedly, that the party of which I am a member is, in a sense, foolish beyond compare. We are telling the people to do what honorable senators opposite are continually telling them they need not do. If they were to tell the electors that they must play their part they would not like it, but that is the very thing that Ave are doing. It is our responsibility to perform this very unpleasant task, but my advice is that, if we are to be honest Avith ourselves and our country we must many times do what is most unpleasant. Honorable senators opposite are flagrantly shirking their duty. We are advocating a course which in the long run will be the salvation of the people, and which will result in Australia retaining its good name, so that like the old village blacksmith it will fear not any man, because it “ owed not any man “. In effect, the supporters of the Government are telling the people that they have no responsibilities. They believe in setting the printing machine in motion, and by so doing will reduce the present value of our currency. That is a roguish way of doing things. I would rather sacrifice my liberty than my good name. Liberty if temporarily lost, can be regained, but it is mighty hard for one to regain his good name once it has been lost. If an Australian in future travels amongst strangers and on being asked where he came from, replies “ Australia “, he Will immediately be told that that is the country that does not pay its debts. And if a game of cards was proposed he might be required to put down legal tender at the start as an indemnity against his gambling debts. That is what dishonesty might bring Australia to.
Concerning the bogus allegation that the banks here imprisoned credit in this country, I would -say this: If critics of the banks will consult the daily press of any city, they will find the return for the capital invested in banks. It is far lower than the return from this Government’s own stocks, and is much lower than is the case with industrial concerns. Then why should these arch-conspirators against our country’s welfare be content with the lowest return? Why do not they withdraw their investments from the banks altogether, and by investing elsewhere not only have a happier and an easier time, but be free from the castigations and abuse they are now called upon to suffer ?
Let me deal now Avith the charge that the banks have restricted credit. Credit is only another name for money. It is well known that if a banking -institution were established with 1,000 depositors, each of whom deposited £1,000, it would gamble on the chance that the whole of those depositors would not turn up the next day and withdraw their £1,000. Experience would teach them that a certain number would turn up from day to day; but with the balance of the money they would be able to trade on a much wider basis than the amount at their command would appear to allow. That is what is known as credit. If the charge is correct that the banks allow to remain idle a potential agent of profit, the only conclusion to be arrived at is that they do not know their own business ; because, by releasing credit they would make more profit, whereas, by restricting credit, their profits would be far less. According to latter-day Labour critics, on their own showing, the banks are standing in their own light and losing money every day they will not “ release credit “. That would be an extraordinary attitude for banks to adopt, especially when we are told they -are hungry and greedy for profit out of all reason. The banks trade to the extent that safety permits. If they go beyond that mark, they run the risk of bringing about conditions similar to those which were experienced in this country in the early ‘nineties.
The reserve which the bill proposes that the bank shall hold in respect to Australian notes and its liabilities to depositors is 25 per cent, of the amount of Australian notes issued, together with 25 per cent, of- the amount of liability to de- positors that does not exceed £20,000,000, and 50 per cent. of such liability as exceeds £20,000,000. Therefore, a certain proportion of the currency, as “well as of the deposits, will not be represented by any foundation whatsoever.We have been told that some time ago the British Government indulged in the practice of issuing fiduciary notes; but as usual the complete story has not been related. It is true that currency to the extent of £410,000,000 was issued in the Old Country; but sustaining that currency was gold to the value of £150,000,000, while the balance of £260,000,000 was represented to the last pound by government securities. The Commonwealth Government does not propose to back its issue with government securities in the same way; it wishes to live by faith alone.When a shepherd in the State of “Western Australia was asked, “ How dp you make the sheep look so well?”, he replied, “ With plenty of sunlight and water.” A country cannot run a currency on that basis. The Old Country does not dare to make the attempt. But this Government will attempt anything.
Let us now consider the effect which this ruinous policy will have upon the bulk of our people - the workers.I tell the Government and every one else who chooses to listen to me that those who stand to lose longest and most grievously of all from this policy are the workers, and the hardship that they will be called upon to bear will have been brought about by those gentlemen who profess to be their friends. The Government is in an awkward situation and this is an easy, even though it be a roguish, way of escaping from it. In proof of my contention, I shall quote the record of four countries - France, Germany, Austria and Poland, aggregating a population of some 180,000,000 people. What happened to them should be a warning to Australia with its 6,000,000 people. I shall also prove that even in Australia, as a result of the operation of a policy of inflation, the workers have been robbed. The evidence is to be found at page 360 of the Commonwealth Year Book for 1930, which gives the price levels about which Mr. Theodore talks so much. I shall prove up to the hilt that the whole thesis of his argument is rotten, and that it will not hold water. If he were to argue the matter before a public assembly, against a man who knew a little more than he did, he would be soundly defeated. Index price numbers are given from the year 1861 to the year 1929. The datum year is 1911. That year is well selected, because our Australian £1 stood at par, as the exchange records show. Taking 1,000 as theindex number for that year, the records show very little variation in the purchasing price of £1 in the years that preceded it ; but looking forward, there is a gentle rise until the year 1918 is reached. That was the last year of the war. The purchasing power of the pound then began to diminish rapidly as the currency issue ascended. The index number in that year was 1934. In 1919, it was 2055; in 1920, it was 2480; in 1921, it was 1903.Not only was the high water mark of the decreased purchasing power of the pound reached in those years, but that was also the period during which the greatest inflation occurred in this country. The two events synchronised. The purchasing power of the workers’ £1 dwindled to 10s., or evenless ; therefore, a worker who in 1911 received a wage of £4 a week received the equivalent of only £2 a week in 1920. The following figures will show the excessive issue of notes in those four years: -
From that year the issue was gradually decreased. Those figures support my contention that the excessive issue of notes in 1918 and 1921 was responsible for the reduction that took place in the buying power of the Australian £1 note. Yet we are told that a fiduciary issue is a cure for all the ills from which we suffer to-day! It is nothing of the kind. It would place our workers in a worse position than they now occupy by reducing their real wages; in fact, inflation is only another name for wage reduction and unemployment.
I shall now refer to the experience of Europe, because of the existence there of a number of central reserve banks which were not able to prevent a catastrophe in Central Europe.
A publication issued by the International Labour Office, the authenticity of which will not be disputed, states in its preface -
The fourth session of the International Labour Office held in November, 1922, adopted a resolution proposed by the Workers’ Group, instructing the International Labour Office to undertake a documentary investigation into the standard of working class life, as compared with the pre-war standard, in countries with very depreciated exchanges, more particularly Germany, and also into the measures adopted or contemplated to secure an adequate living wage for the workers
The researches of the International Labour Office showed that, so far as Germany was concerned, the real wages of skilled workers in State undertakings in 1920 were as 66 is to 100 compared with 1914. In 1921 they were 75, in 1922 they were 62, in 1923 they were 52; and in 1924, when the mark was stabilized on the basis of 20 to the £1, they rose to 86. In the case of unskilled workers in State undertakings they were88 in 1920, 100 in1921,85 in 1922, and 69 in 1923; and when the mark was stabilized in 1924 they rose to 86. A further investigation made by the Labour Committee showed that the unskilled workers in Germany suffered grievously as a result of the inflation of the currency. In 1922 the weighted average for wages in the principal industries was 66; in 1923 it was 62 ; in 1924 it was 83 - all below the prewar level. Thus, it will be seen that disaster overtook the unskilled workers in Germany at the time when inflation was proceeding merrily. The following table clearly sets out the position : -
Another phase of the investigation by the Labour Committee dealt with the reduction in income through unemployment of the industrial population of Germany. It shows that, not only did the unskilled workers suffer a serious reduc- tion in real wages, but also that there was unparalleled unemployment throughout the country. Again, the figures indicate that, when the mark was stabilised, the figures as regards unemployment declined appreciably. The table is as follows: -
The third set of figures to which I direct attention deals with the aggregate income of the industrial population from 1920 to 1924. Taking 100 as the weighted average in 1914, the aggregate income dwindled until it reached 60 per cent. in 1920, but, following the stabilization of the mark, improvement began. The following figures are illuminating: -
On page 132 of this report by the Labour Committee, there appear, also, the following comments : -
On the whole the decrease in the total income of the working classes in the three countries considered - Germany, Austria and Poland - may be attributed to three factors -
Economic disorganization and the extensive changes of frontiers, due to the war, brought about a decrease in the national income for some years at least, quite apart from the distribution of this income.
The monetary inflation caused a steady rise in prices to which wages could not be adjusted precisely or rapidly. It thus led to a continual fall in the real income of the workers.
Monetary stabilization increased the unemployment which had already appeared, and deprived a large proportion of the working population of employment, and, therefore, of income.
The decrease in wages bore most heavily on workers with families, and attempts were made to meet this difficulty by paying allowances, graded according to the number of workers’ dependants. These allowances were never of any great amount in any of the three countries, and seem, in no case, to Have compensated fully for the greater expenses of workers with families.
When, as the result of representations for relief from Germany and its war-time allies, General Dawes, whose name is associated with what is known as the Dawes’ plan, visited Germany for the purpose of making the necessary investigations, he was met by an influential deputation of representatives of the German workers, who implored the special committee over which he presided to give Germany, above everything else, a stabilized currency. They had had an unforgettable experience of the appalling misery, idleness, loss and confusion resulting from an unrestrained policy of inflation, which had been indulged in, and looked to stabilization to save them from total economic destruction. When, at last, the mark was stabilized in November, 1923, at 20 to the £1 sterling the German people came into their own again.
Turning now to the other side of the picture^ and considering for a moment the charge that deflation has wrought havoc in this country, I find from figures that appear in the Commonwealth YearBoole, that the clearing house returns show that the volume of commercial transactions in 1929 was £300,000,000 in excess of the returns in the following year 1930, when the amount of currency in circulation was nearly £1,500,000 greater than in 1929. Therefore, the charge of deflation does not hold good.
I have already shown that disaster overtook those European countries which departed from the international gold standard, and I again warn the Government of the dangers that lie ahead. .Are we to abandon the standard by which our currency is measured in international transactions? If, unhappily, we embark into the uncertain sea of inflation no section of the community will suffer more than the workers, concerning whose welfare this Government professes to be so solicitous. The position of the French workers through inflation is exactly the same as disclosed by the same Labour Department of the League of Nations.
The final point to which I desire to direct attention is the danger, if we set out upon this policy, of the control of the entire machinery of currency and exchange passing inf.. the hands of the Government and being used to give expression to its policy. The experience of the world has shown that if we allow this instrument to bc placed at the disposal of the Government we shall be committing ourselves inevitably to a course of destruction. When the greenbacks and other earlier issues of debased currency in the United States of America were as cheap as wallpaper Daniel Webster said that there was nothing in the wide world more calculated to fertilize the rich man’s field than the blood and tears of the poor and needy the world over brought about by this system of inflation of currency. Let us heed that warning.
We are told that if we take this step adequate safeguards will be inserted in the bill to control inflation. In what way is it proposed to exercise the control? Do honorable senators realize that the issue of £18,000,000 of fiduciary notes would increase our paper currency by 40 per cent.? If we inject this amount of additional notes issue into our currency system, it will inevitably depreciate the value of the £1 and prices of commodities will rise accordingly. Therefore, I have no option than to urge the Government, even, at the eleventh hour, to forbear and not to commit this country to such a mad and ruinous policy. If it succeeds in passing its financial measures, the people of this country may have a merry time for a while, but history shows, beyond any possibility of doubt, that nothing will save the Commonwealth from eventual ruin. Real wages will be reduced by at least 50 per cent.; possibly more than that. Will the Government embark upon this policy deliberately? Why should the people be robbed? Is this the reward which is to be given to the thrifty, frugal, and industrious section of our citizens?
The Treasurer has argued that it is, necessary to have a fiduciary issue to stimulate industry and to raise the price levels to the 1929 level. What does that mean ? It means, of course, that if we sanctioned the fiduciary issue, we should be pumping so much extra currency into the present system in order to maintain prices at the 1929 level. Unfortunately, we should not be able to control the prices of our export commodities, and as a result the producers of this country would be penalized because they would be obliged to pay high prices for all the things that they used and would be forced to accept world prices for their exportable products. The buyer on. the other side of the world would pay little heed to the conditions under which our primary produce is placed in the overseas market. He would not be influenced by any notions which we might entertain about an inflated currency. His one concern would be to obtain his requirements at the cheapest point and in the cheapest market and, in the case of wheat, he would look to the Argentine, to Canada, or- even Soviet Russia, where wheat is produced under conditions that are equal’ to slavery. His troubles about Australia or her social standards founded upon the quicksands of political opportunism!Mark this word, and it is the last one on the subject: If inflation would raise world prices I would’ be wholeheartedly with the Government, because this would be a fair deal all round. But, as inflation will screw up the nether millstone and world competition screw down the top millstone, our producers will be ground to dust between them. When that happens where, then, will our unfortunate country be?
Of course, the people who live in our cities and stand behind this Government, naturally want this central reserve bank, because they can see, in the consummation of this Government’s financial policy, the possibility of easier times. At the outset of an inflationary policy they might reap some temporary advantage. But they, too, in the long run, would pay the price, and a higher price it would be.
Having said this much, I repeat that I shall vote for the second reading of the bill for the purpose, mainly, of endorsing the principle. But, as I said, I want a better bill later on. At the same time, I warn this Government that if another Fiduciary Notes Bill comes up from another place, it will meet the same fate as the last. There is the waste-paper basket, and I feel sure that so long as there is a member on this side of the chamber, that will be the destination of any proposal to dilute our currency. If we are to maintain our reputation for honesty, we must, at all hazards, be prepared to pay our creditors 20s. for every £1 received. Would any honorable senator accept less than that in respect of his own transactions? Then why should we treat this country’s creditors differently ? It has been the practice lately to point to the success of this or that loan as evidence of the confidence which the money lenders and subscribers to loan issues have in a Labour administration. But no one ever dreamed, until recently, that there would arise in this country a government prepared to degrade the reputation of the Commonwealth by proposals such as those which have come before this chamber in recent months. We should be willing to pay back in full the money that we were glad to receive. I hope that wise counsel will prevail, and that in view of the critical position of the country the Government will alter its outlook. We stand here to-day; but before many years have passed others will take our places. What does it matter to the present generation that twenty years ago certain things kept the people apart? We will be looked upon twenty years hence in the same way. To-day we are in different camps, notwithstanding that the country is faced with a terrible crisis. That should not be. At such a time the Government should be willing to accept counsel from every party in this Parliament; it should be prepared to tell the people the honest truth ; it should pay in full measure what it owes.
– Hear, hear. We want to make it possible to pay 20s. in the pound.
– I am glad that Senator O’Halloran is willing that the country should pay what it owes; but unfortunately some of his confreres in the Labour movement think otherwise. To be honest we must pay 20 honest shillings in the pound.
– The measure before us is one of five bills by means of which the Government hopes to give effect to its policy. My first objection to this bill is that, having regard to its great importance, it has not been sufficiently considered. It is true that a select committee was appointed to consider it, and that the personnel of that committee was well chosen. A great amount of evidence was taken by the committee, most of it being in opposition to the bill. I have studied the evidence, and with one exception every witness tendered evidence in opposition to it. When the bill was introduced some months ago, the then VicePresident of the Executive Council (Senator Daly) told honorable senators that an officer of the Commonwealth Bank was available for consultation. That official when giving evidence before the select committee said that there was nothing in the then existing conditions to warrant undue haste in establishing a central reserve bank. I should like to know whether the Government obtained technical information from experts to enable it to draft a bill of such importance. Unless the Government itself devised the scheme underlying the bill it must have had advice from some one. What was that advice, and who gave it? If I were responsible for a bill of such importance I should not consider the time or money spent in obtaining the best information on banking from other parts of the world to be wasted. The reorganization of our banking system is a task which, if done properly, would take two or three years to complete. Money spent in a full investigation would be well spent.
The views of honorable senators regarding the measure are interesting, but the views of people outside are perhaps even more so. Professor D. B. Copland, referring to the banking policy of the Government, said -
The first comment that occurs to one in reviewing the Government’s banking policy is that tlie whole of the legislation should be suspended until a proper and adequate investigation has been made into the working of our banking structure by a body, both competent and free from any suspicion of political bias. Though intimately affecting the welfare of the people as n whole, banking is a highly technical function. To make it a vital issue in a general election is to ask the mass of people to vote upon measures that they do not, and cannot in the nature of things, adequately comprehend. A government that enters wilfully upon such a course is betraying its trust as a guardian of democracy, and making the task of democratic government needlessly complex if not impossible.
That is the considered opinion of a high economist. Members of Parliament have their functions, which they perform as well as they can, but in a highly technical matter such as the establishment of a new banking system, we should not be afraid to go outside Parliament to get the best expert advice obtainable. As I have said, this bill is one of five by which the Government hopes to give effect to its financial policy. One of those measures provides for an amendment of the Commonwealth Bank Act with a view to a complete re-organization of our banking system. That has not yet come before us; another is to amend the Commonwealth Bank Act with respect to the note issue, in order to enable gold to be shipped from Australia; another deals with rates of interest. Still another, which the Senate rejected last week, dealt with the creation of a fiduciary note issue. Is the object of these bills to put the banking business of Australia on a better footing, or is it merely to get the Government out of a temporary financial difficulty which it has not the courage to face in a proper manner?
– The object of these measures is to effect the economic and financial re-construction of the country.
– Professor Copland also said -
These measures as a whole involve drastic changes in the banking structure of Australia, and their merits and de-merits should be considered quite apart from political controversy. Their association with politics, however, is such that it would be remarkable if the proposals as a whole were beneficial. It is undoubted that grave evils are involved when banking policy is made the plaything of politics. Almost without exception fundamental changes have been made only after’ extensive investigation by experts. This was true of the banking reform in the United States that culminated in the Federal Reserve Act of IS 1.3, and it has been the universal practice in all countries which have reorganized their banking systems since the war.
The Government is endeavouring to reorganize the banking system; but so far as I know it has not gone outside its own ranks to get information on the subject. If it sought advice no mention has been made of the fact.
An amendment has been moved that the bill be read a second time six months hence. That amendment has been moved in order that the Government, after a study of the report of the select committee and any other information which’ may be available, may bring in a bill more suitable to the establishment of a central reserve bank. There seems to be a general consensus of opinion that at some time or other a central reserve bank should be established in Australia to meet the growing demands of its people. . I shall vote for the amendment to postpone the second reading for six months in order that we may, in the meantime, have a thorough non-political examination made of the whole matter.
– I explain to the honorable senator, as I have explained before to others, that under Standing Order 194 the carrying of a motion, that the second reading of a bill shall take place six months hence, means that the bill is finally disposed of. It is well that honorable senators should know that.
– I understand that Senator Colebatch has given notice of a further amendment. It was along the lines of that further amendment that I was speaking. The object of the further amendment is that the bill shall not be definitely disposed of now, but merely suspended in order that the Government may make a further examination of the position. By postponing consideration for six months the Government will be in a better position to get the best technical advice available.
In my opinion, the present is not an opportune time to tinker with our banking practice. The minds of the people are not in a state to deal with such things. Every day we hear of trouble arising between bankers and governments because the latter cannot obtain overdrafts to meet their requirements. If Australia is to have a central reserve bank which will last as long as the country will last, this is not the time to rush the legislation through Parliament. The establishment of a central reserve bank is a matter for calm and quiet consideration, so that it may be established on a sound foundation. The country was never in so serious a position as it is in to-day. There are thousands of men who would work if they could obtain employment; but they have nothing to do. Twenty-five per cent, of our workers are unemployed.
There is no sadder sight than to see men unsuccessfully searching for work. Unemployment is an economic los3 to the nation because it loses the product of men’s labour. It is the greatest menace in Australia to-day. Although unemployment imposes an immense drain on the resources of the taxpayers who have to provide the workless with sustenance, we cannot allow those who are out of work to starve. It would be much better if, instead of providing the unemployed with sustenance, we could give them work; but so long as work is not available for them we must provide them and their families with sustenance. It costs South Australia between £15,000 and £16,000 a week to provide rations for the unemployed in that State.
– That provides only one meal a day in many cases.
– I understand that in South Australia there are about 60,000 receiving sustenance through unemployment. In that case the weekly contribution by the Government would not provide a full living for them. The position in our cities is indeed serious, and in the country districts it is not much better. Many farmers are in sore straits. We have heard a good deal of the position of the wheat-growers of this country. A bill to provide for a fiduciary note issue in order to help them was before us recently. It is unfortunately true that many wheatgrowers need assistance, but they are not the only ones who are suffering. The position of many dairymen, fruit-growers and mixed farmers is as bad as that of the wheat-growers. These men are as much entitled to assistance as are the farmers who grow only wheat. I know of many practical, hard-working, industrious farmers who have no chance of making ends meet this year.
– That, unfortunately, is the general condition of the farmers of this country.
– Owing to low prices there is scarcely a commodity which they can sell at a profit. Tinkering with our banking legislation is not the remedy for these things. The remedy will be found by making it possible to produce our goods at a cost which will enable them to be sold at a profit. There is plenty of work to be done, but it is not undertaken because it does not pay to have it done. The remedy for our present ills will be found, not in intiation or in doles, but in enabling producers so to reduce the costs of production that their products will compete with those of other countries in the world’s markets. Unfortunately, production costs have been steadily on the increase for some time. Our policy should be to reduce the cost of farming implements and not to tax them. Take fencing wire, to mention one small item out of dozens, which the farmer has to use every year of his life for the renewal of fences. If he goes to a merchant for a ton of wire, he has to pay £3 or £4 more than he formerly paid, because a duty has been imposed for the purpose of stimulating industries in which people will not work with any degree of energy. Food, tea, tobacco, clothes - everything the farmer wants is taxed. The farmers will not be helped by this sort of legislation. I advise honorable senators opposite to reverse their policy, and bring down the cost of production so that the farmers may live.
– And reduce their interest bill.
– I admit that the rate of interest is far too high, and that the farmers cannot pay it, but what is the rate of interest on the other side of the world? In Canada, it is 4 per cent, and not 8 per cent.; and plenty of money can be borrowed in England at from 2 per cent, to 3 per cent., because people who have it to lend there feel confident that they will get it back again. The only means by which we can bring about a permanent reduction in the rate of interest iu Australia is to restore credit, a.nd make the people who have money to lend believe in us. We shall not do it by tearing a £10 note into halves and calling it £20. The better the security the lower the rate of interest. T-hat rule applies all over the world. As the security wanes, the interest rates rise, and it is only because in Australia, through mismanagement, through trying to take the easy course, our security has waned, that out interest rates have risen. If those rates are arbitrarily reduced, it may give a little temporary relief, but that course will react upon the community by driving capital out of the country.
The fact of the matter is that the present Government has tried to find an easy way out of a very hard situation, whereas there is no easy way out. We cannot legislate ourselves out of the trouble; we must work our way out of it. If it were possible to find a way out by legislative action it would not have been left to the Australian Parliament to discover it. Other countries, governed by some of the best brains in the world, have been in similar trouble, and not one of them has got out of it easily. The main cause of our trouble is that the prices of all our primary products are only half what they were two or three years ago. Our wool and our wheat are not worth half what they were. Our butter is about half what it was. Everything else has suffered in price. But the Government and many of its supporters are trying to go on in the same old style. A man who loses half his income, and tries to keep on spending at the same rate as before will soon become bankrupt ; but that is exactly what this Government is trying to persuade the people can be clone. It says, “ Half our national income has been lost, but we must maintain the standard of living, and if you have not enough money to enable you to do so, we shall give you some fiduciary notes “. I should like every one to enjoy the highest possible standard of living, but it is sheer humbug to talk of maintaining an artificial standard of living when there are 300,000 men out of work, although there is any quantity of work in this country to be done. It is work that would be done if we removed the causes that prevent it from being done, by letting wages, like the rate of exchange, and everything else, reach their natural level. A reduction of 25 per cent, in salaries and wages, including the allowance to members of Parliament - for we should set an example - would cause the cost of living to come down to such an extent that very few people would know what had happened. The products we have to sell have lost half their value, and . we must take less in salaries and wages. There are many things we may have to do which I hope will not be necessary, but I recollect the timewhenmeninthiscountrywere getting8s.adayasanaveragewage,and I can say without any chance of successful contradiction that they were better off then than they are to-day. They had any amount of work, and could buy food and clothes and pay their rent very much better than they can do now. The Arbitration Court, by following the high cost of living, and the tariff have brought wages to an unnatural level, and all they have succeeded in doing has been to put 300,000 men out of work. Not one man is better off through the operation of the Arbitration. Court. Instead of tinkering with banking legislation, if we were to try to undo some of the harm Parliament has done, letting things run their natural course, and allowing people to carry on unhindered by legislation we should get out of trouble in no time. I shall vote for the amendment to be moved by Senator Colebatch, because if it is carried it will give the Government an opportunity to secure the highest technical advice on central reserve banking, and enable us to establish a bank that will be of benefit to Australia.
Debate (on motion fey Senator O’Halloran) adjourned.
The following papers were presented : -
Petrol - Report by an officer of the Auditor-
General’s Office and an officer of the Department of Trade and Customs on their investigations into the price of petrol.
Ordered to be printed.
International Labour Organisation of the League of Nations - Fourteenth Conference held at Geneva, June, 1930 - Reports of the Australian Delegates - -Draft Conventions and Recommendations adopted at Conference.
League of Nations - Eleventh Assembly, 10th September to 4th October, 1930 - Report ofthe Australian Delegation.
Arbitration (Public Service) Act - Determinations by the Arbitrator -
No. 1 of 1931 - Commonwealth Public Service Artisans Association.
No. 2 of 1931 - Commonwealth Public Service Clerical Association.
Commonwealth Bank Act - Treasurer’s Statement of the Combined Accounts of the Commonwealth Bank of Australia, and the Commonwealth Savings Bank at 31st December, 1930, certified to by the Auditor-General.
Public Service Act - Appointments - Department of Health - F. W. Clements and T. J. Cotter.
Motion (by Senator Barnes) proposed -
That the Senate do now adjourn.
Senator Sir GEORGE PEARCE (Western Australia) [9.28]. - I make no apology for bringing before the Senate a statement made by the Prime Minister in another place in regard to the Government Savings Bank of New South Wales. It is a matter ofsuch grave importance that it warrants the immediate and earnest consideration of the Government, because it is a symptom of a deadly malady in this country which, if not soon grappled with, will have extensive and serious results upon the whole community. It cannot lightly be ignored or glossed over. I speak to-night as a representative of a State that has made considerable sacrifices to keep solvent, but is being dragged down by two other governments which are making no attempt tostem the tide of disaster. Some striking figures have recently been issued as to the overdrafts of the various governments of Australia. The amount at the end of the financial year at the present rate will be £24,000,000 - I am giving round figures only - and of that amount two governments are responsible for £20,000,000. the other £4,000,000 being distributed over the other five governments.
Senator Sir GEORGE PEARCE.The Commonwealth Government to the extent of £12,000,000. and the Government of New South Wales to the extent of £8,000,000.
Senator Sir GEORGE PEARCE.That does not affect the position one iota. When we come to think of the population, resources and wealth of the other five States, and realize that their accounts are bad to the extent of £4,000,000, we must regard it as a serious matter, but as one that is by no means incapable of rectification.
It is a comparatively minor problem for those five States not only to remain solvent, but soon to meet their liabilities. The last two months of the financial year are the best from the point of view of the amount of direct taxation collected, although the depleted incomes of every one will, of course, affect the returns. If Australia consisted of only those five States, and their financial position was that they had an overdraft of only £4,000,000 - as these five States have - to overtake the position could be easily rectified. But when we come to the other two governments, what is the position? We find that the Government of New South Wales is not only making no attempt to rectify the position, but that, actually, everything it is doing is making the position worse. It is shortening the hours of labour, increasing the wages of government employees, and returning amounts deducted by a previous government. All this kind of thing is making the position worse. In the case of the Government of the Commonwealth, absolutely nothing is being done to meet the situation. Despite this tremendous, staggering overdraft of £24,000,000, all that the Government can do is to speak of a double dissolution. Do’es it think that this country can wait for a double dissolution ? Long before the conditions laid down can bo complied with this country, if the situation is not grappled with, will be ruined. The writing is on the wall! Yet this Government can think of nothing but politics and the seeking of political advantage. It has not one single proposition to rectify our present terrible position. In such circumstances are we to remain silent? We have been told that if we speak of this thing the result may be disastrous.
Senator Sir GEORGE PEARCE.Nothing that the Government has proposed would result in the employment of a single additional man. The immediate problem we have to face is the overdraft of £24,000,000 which is paralyzing the credit of the community. That amount has been taken from the banks for the purposes of government when it should have been employed in industry. That is what is causing unemployment. The Government is taking the vitals out of industry by piling up the present tremendous overdraft. No less than £20,000,000 by way of overdrafts has been obtained by two governments, which, if used in other ways, would be very valuable to the industries of this country. That is what is wrong. The Government must grapple with the position. The country will demand that it shall be so. The happenings in New South Wales to-day will send a thrill of apprehension throughout the Commonwealth. Speaking as a representative of one State which is trying to put its house in order and which has recently reduced its railway expenditure by over £500,000, cut its public service down to the lowest minimum possible and is making sacrifices in every direction, I object to it being dragged down by this profligate State of New South Wales, which, despite an overdraft of £8,000,000 is distributing largesse in every direction, and by the Commonwealth Government with an overdraft of £12,000,000- neither of them making any attempt whatever to reduce expenditure.
I feel that in making this protest I shall have the support of the representatives of the other four
States, ‘ widen are making similar sacrifices. We have no control over New South Wales, but we demand that the Commonwealth Government shall put its house in order. The Senate, which is the guardian of the States’ interests, should demand in the interest of the five States which are’ trying to maintain their solvency, that action be taken by the Commonwealth Government to try to turn us in the direction of solvency.
– Many of the sentiments expressed by the right honorable the Leader of the Opposition will, I am sure, receive the support of the Government. Everybody deplores the unfortunate financial position in which the Commonwealth and the States find themselves to-day, but ‘it is idle for the Leader of the Opposition to attempt to throw the responsibility upon the present Government. I am absolutely mystified by the inconsistency of the arguments advanced against this Government. The Leader of the Opposition has just informed us that the real reason for our present unemployment problem is that Commonwealth and State Governments have, in effect, sapped the life’s blood from the banks, and that no further credit is available. The logical deduction to be made from that statement is that if credits were available, industry could be carried on, and that we have not reached the stage which another of our attacking forces suggests - that we cannot produce anything that we can sell. 1 seriously put it to the Leader of the Opposition that we shall not balance our budget until we put our men back to work, and that that cannot be done until the Senate assists the Government to place on the statute-book those financial proposals which, up to now, the Opposition has so contemptuously treated.
.- The financial proposals of the Government, to which Senator Daly has ju3t referred, evidently include the Fiduciary Notes Bill, which was defeated by the Seriate last week. If that measure, which provided for the issue of fiduciary notes to the extent of £18,000,000- of which £12,000,000 was to be used in giving employment at the rate of £1,000,000 a month - had been passed, only £3 6s. 8d. per month per man would have been made available for the 300,000 unemployed.
May I point out that in Queensland the Moore Government, since it came into power, has been reducing public expenditure with a view to balancing its budget. That Government has demonstrated that it is possible to reduce public expenditure, and at the same time to reduce unemployment. That is the point I wish to em’phasize. But for the exchange position and the fact that it has been dragged down by another State, Queensland would have been able almost to balance its budget this year. In proportion to its population, Queensland has probably the smallest deficit of any State, and its unemployment figures are also lower. This shows that when once a government sets to work to place its house in order unemployment is reduced. One of the arguments of honorable senators opposite has been that when governmental expenditure is reduced employment is also reduced, but the fallacy of that contention is demonstrated by Queensland’s experience under the present Nationalist Government. New South Wales has a larger deficit than any of the other States; it also has the highest unemployment figures. As a result of sane administration Queensland is in a better position than any of the other States.
– That is owing to the surplus inherited from the previous Labour Government.
– Queensland had a bitter experience under the previous administration.’ Prior to the coming into office of the Moore Government its unemployment figures were higher than these of any other. ,
– That is not so.
– According to the figures supplied by the Commonwealth Statistician the position was as I have stated, and it was only when the Moore Government came into power and made an honest attempt to balance the budget by reducing expenditure, that unemployment was reduced. As a result of the efforts of the Moore Government, the unemployment figures in Queensland are, in proportion to population, only one-half of those of New South Wales. The man Lang, the present Premier of New South Wales, has, by his cowardly action of repudiation, thrown upon the other States, including Queensland, the responsibility of his Government. lt is one of the most cowardly actions ever taken by any State Premier. I endorse the remarks of the Leader of the Opposition concerning the position of the other States. It is unfair and dastardly ‘ that the other States, which are endeavouring to conduct their affairs on sane and businesslike lines, should be dragged down by the negligence and ineptitude of a government such as that now in office in Now South Wales, and by the Government of the Commonwealth, which is making no attempt to balance its budget. If it did so, it would reduce the unemployment figures for the Commonwealth.
.- I support the statements that have been made by my colleague from Queensland (Senator foll), and by the Leader of the Opposition (Senator Pearce) in regard to the danger that other States, are likely to suffer because of the neglect pf the Federal Government, and as a result of what has occurred to New South Wales. Some time ago, Queensland came to the rescue of South Australia. At the present time, it is the most solvent of all the States, and is endeavouring to handle its problems in a way that will be of assistance to the whole of Australia. As Senator Foll has said, Queensland has fewer unemployed than any other State. The principal reason for that is that its Government has made every effort to find employment for its people. To-day its ratio of unemployment is only 12 per cent., and it is decreasing every month. The tax that it imposes for the relief of unemployment is 3d. per week per head. New South Wales imposes a tax of ls. in the £1, yet its unemployment figures are greater to-day than they have ever been iu the history of the State. The money that is thus contributed has been diverted to other purposes. The Queensland Government has guaranteed its wheat-growers 4s. a bushel at the siding.
Senator Daly referred to the wonderful things that the Commonwealth Government would do if its measures were passed. He ought to know what is well known to any sane person, that the issuing of notes that have no substantial backing would not help in any direction. Nine months ago, the Leader of the Opposition in another place offered to assist the Government in every possible way to balance its budget. He was supported in that attitude by those who sit behind him in that chamber, as well as by honorable senators who sit on this side. We were willing to share in whatever opprobrium might be incurred because of the imposition of additional taxation, or the adoption of other measures to rectify the existing position; simply for the sake of Australia; but his advances were rejected, and since that time the Government has merely made promises and brought down bills designed to gain support at the next election. It has taken no other step to deal with unemployment, which, to-day, is one of the most serious problems that confront, not only Australia, but every other country in the world. The Prime Minister admitted, in the speech that he broadcast the other night, that 300,000 of our people are out of work, despite the fact that we have had one of the best seasons on record, and there is produce in abundance throughout the Commonwealth. No nation in history has succeeded in developing its resources by the adoption of a system of currency inflation. Inflation is partly the cause of our present troubles. Senator Daly has said that if the Central Reserve Bank Bill had been passed the conditions would now be different. Surely he does not so far insult our intelligence as -to suggest that had it been passed six months ago it would have solved our problems? It would not solve anything. The only course open to us is to cut down expenses, and to reduce the prices of those commodities which the people can buy; but that is exactly what the Government will not do. The Queensland Government reduced the salaries of its public servants by 10 per cent. Why should those public servants be taxed, and the federal public servants be allowed to go free? The Government will not fac-!’ the position, because of the pressure that is exerted upon it from outside. Mr. Lyons has expressed his willingness to do all that he can to help the Government. Every member of the Opposition would assist in restoring prosperity to Aus*tralia. The Government, however, is viewing the matter purely from a sectional point of view, and can see no merit in any proposal other than to decrease hours and increase wages. The consequence is that unemployment has been increasing ever since it has come into office. If it does not soon adopt stem measures it will be faced witu more serious trouble than that through which New South Wales is passing at the present time. The banking institutions have shown that they have stretched their resources to the utmost. They have been compelled to withhold assistance from industry in order that governments may be saved from defaulting. They have clone the best they could, yet they have had nothing but abuse from the Treasurer, who ought to know better. If the Government wants a double dissolution, the Senate will help it to the fullest extent of its power, so that the people may decide what is in the best interests of Australia. The sooner an election takes place, the better it will be for everybody.
Senator Sir HAL COLEBATCH (Western Australia) [9.54]. - I rise only to direct the attention of Senator Daly to what I regard as the considered opinion of the Prime Minister in regard to the proposal that he said would have lifted us out of our trouble. Mr. Scullin said in London -
Banks are expected to carry any shortage in midgets, also to underwrite loan conversion. That, together with the responsibility to finance the harvest, will be a heavy strain on the banks. To create credit for £20,000,000 for loan works is unsound, and I expect the banks to refuse to do so.
– I agree with that.
– Does the honorable senator suggest that the creation of credit to the extent of £12,000,000 for loan works would be sound, but that its creation to the extent of £20,000,000 would be unsound?
– It is not what you borrow, but how you spend it.
Senator Sir HAL COLEBATCH.The statement of the Prime Minister continues -
Government cannot deliberately coerce the administration of .the banks. Such a proposal means permanent inflation, which could not be checked as is implied and would demand further inflation …. All this talk about creating credits /ind inflation is most damaging and will seriously prejudice the conversion of maturing loans and treasurybills. Since inflation was suggested efforts have been made by men here to withdraw their money from Australia, as they would lose by payment in a depreciated currency. Depreciation in currency would decrease values of Savings bank deposits.
Savings bank depositors have probably taken his word for it. He went on to say-
Property would increase in price, there would be a rush to sell bonds for investment in properties, and financial panic may result.
It was his deliberate opinion that the issuing of credit for £20,000,000 would cause financial panic. I presume ‘that the issuing of credit for £18,000,000 would have a similar effect. There is very little doubt that the proposal to issue this credit has been the principal cause of financial panic. I commend to Senator Daly that opinion of the Prime Minister.
– I agree with it.
Senator Sir HAL COLEBATCH.The honorable senator says that he agrees that it is unsound to create credit for £20,000,000; yet he argues that we are responsible for the present trouble, because the other day we refused to allow the Government to create credit for £18,000,000 !
– The honorable senator knows that I would not be in order were I to attempt as this stage to explain the difference to him.
– I trust that the honorable senator will take an early opportunity to explain it, because, to my mind, it is utterly absurd for anybody to say, “ We agree that the creation of credit to the extent of £20,000,000 would be unsound, but at the same time we consider that the Senate has brought about all this trouble by refusing to agree to the creation of credit to the extent of £18,000,000.”
.- The Leader of the Opposition (Senator Pearce) is deserving of our thanks for having brought forward a matter of such importance, having regard to the absolute loss of morale by the Government that at present occupies the treasury bench. It has offered nothing constructive, nothing of a practical nature. It has brought forward proposals for a fiduciary notes issue, and other schemes to tickle the ears of the groundlings, with a view to consolidating its position at an election. The one specific that we are offered by the first man in the Commonwealth for the solution of our difficulties, is a double dissolution, notwithstanding the fact that, at the present time, 300,000 of his erstwhile followers, and thousands of primary producers, are on the verge of a calamity. This is merely a political gesture. The first man in this continent speaks in the interests, not of this great country, but of the party which he leads ! Months ago, all party considerations ought to have been sunk into oblivion. The suggestion was then made that there should be cooperation between all parties, in an effort to lift this country out of the financial abyss into which it had, unfortunately, fallen. The whole of the responsibility may not rest upon the Government, but at least it is responsible for proposing a remedy. All this talk of paper money is nothing but bluff, and an attempt to gull the people.
Letme analyse, for a moment, the meaning of this overdraft of £20,000,000. Our expenditure is, roughly, £70,000,000. Of that, amount £20,000,000 has been borrowed from the banks. In other words, 5s. in the £1 paid to every honorable senator and every public servant by way of salary has been found for the Government by these much maligned institutions - the trading banks of this country. Meantime, this Government is simply watching the political position. It is content to watch the contending forces with an eye on. the electorate, and will do nothing to right the position. Ministers are clinging like limpets to the treasury bench. All this is happening at a time when one of the greatest institutions in this country - one in which I, and I think every one else have still the greatest confidence - is undergoing a process which can only be painful to every person in the community. Up to the present this Government has taken no step to cope with the untoward happening in Sydney to-day. It has a most unenviable record in the political history of this country. It has shown a complete disregard of the best interests of the people; it has displayed incompetence at a time when it should have proved its worth as the real saviour of the financial and economic resources of the Commonwealth. It has ample means at its disposal, but has made no attempt to avail itself of them. The latest figures show that the losses in. connexion with Federal and State railways for the year ended the 30th June, 1930, which amounted to £9,500,000, exceeded the total deficits of all the States. Nothing has been done by this Government to check the drift.
– And 60 per cent. of railway revenue is represented by the interest bill.
– My honorable friend talks wildly about the interest bill. All this propaganda about the reduction of interest is so much political clap-trap, in which this Government and its supporters have been indulging with a view to an appeal to the people. Actually they have shown no real concern for the interests of the people. There need be no difficulty about the payment of interest. When the Prime Minister put before the Government of the Mother Country the other day the position of Australia, he was promptly informed what Great Britain was prepared to do off-hand about our war indebtedness. In view of all the facts which are known to honorable senators, let us not hear so much talk about this interest burden. Let us resolve to pay our way, and to have less regard for the probable eventualities of the political situation. If we do the right thing, the rate of interest will quickly come down. This Government is largely responsible for the existing rates of interest. The Leader of the Opposition (Senator Pearce) has done well to direct the attention of the Government to these matters, and even at this late hour, I appeal to the Ministry not to sit idly by while such untoward happenings are occurring as that which was announced, I understand, this afternoon in another place. When speaking in support of the second reading of another measure a few days ago, the Leader of the Senate (Senator Barnes) made an appeal to our hearts rather than to our heads. I now appeal to him to urge the Prime Minister to do something. If this Government has any real concern for the welfare of the Commonwealth and for the hungry men and women, about whom the Prime Minister prates so much, I urge him to consider some of the points that have been stressed by Senator Lynch and other honorable senators this evening and see whether it is not possible to alleviate the position of our people. I believe the speech to which we listened from the Leader of the Senate the other day came from his heart. Let me no w impress upon him the urgency of the appeals that have been made by honorable senators during the discussion this afternoon and to-night, and ask him to induce the Prime Minister to do something to rehabilitate the commercial and industrial position of the Commonwealth. This may be done by restoring some measure of confidence in the minds of the people who are only too ready to believe in us.
110.6]. - I regret as much as any honorable senators the happening in New South Vales, to which reference was made thiB afternoon in another place. I suggest, however, that this Government is not responsible for the present financial situation. I have no desire to minimize the seriousness of what has happened, and I can assure the Senate that the Government will strain every nerve and make every effort to keep it within bounds. Much has been said in the course of the debate this afternoon and this evening a.bout the unfortunate position in which this country finds itself to-day. Honorable senators opposite blame this Government. They forget that for fifteen years prior to the advent of the present Ministry another party had Australia by the throat. The previous administrations spent millions upon millions of pounds. It piled up Commonwealth debts overseas to such an. extent that eventually our credit was destroyed, and during its last year of office the Bruce-Page Government was unable to raise two loans on the London market. This Ministry came into power at a most unfortunate time. It was obliged to carry the burdens bequeathed to it by the previous Government - which included some honorable gentlemen opposite who are now presuming to advise us as to what should be done in the interests of the people.
– The Prime Minister has said that he could have obtained all the money he required when in London had not certain resolutions been carried by the Federal Labour caucus.
– The action of the previous administration, and the attitude of the calamity howlers in the ranks of the honorable senator’s party utterly destroyed the confidence of overseas investors. The newspaper press, which supports the Opposition, has been conducting a carefully thought out compaign of condemnation of this Government, with the result that investors in .other countries, who read their articles, have been led to believe that we are responsible for the present state of affairs in Australia.
– The Prime Minister has told us that he could have obtained all the money he wanted but for the action of the Labour party.
– I remind Senator Foll that he must permit the Minister to make his statement without interruption.
– When the Minister makes a mis-statement I ‘ must correct him.
– The honorable senator is not required to do that. If he disobeys the Chair again, I shall name him.
– The honorable senator claimed that the fact that the financial position of Queensland is better than that of the other States was due to the present Nationalist Administration there. When it came into office the unemployment figures in Queensland were down to 7.1 per cent. That is my reply to his statement as to the reduction of unemployment in that State. Senator Foll must know that the conditions of affairs in Queensland to-day is due in no small measure to the policy of the last State Labour Government. When the Moore Government came into power there was a credit balance of £5,000,000, which had been saved by the Labour Government which it had displaced.
– That is not correct. The amount of money available was £2,000,000.
– Order ! Senator Foll has repeatedly disobeyed the instructions from the Chair. I shall give him one more chance. If he continues to disobey I shall name him and ask the Leader of the Senate to take appropriate action.
– The Minister said that when the present Queensland Government took office there was a surplus of £5,000,000. That is not correct. The amount was £2,000,000.
– Order ! I regret that I have to report Senator Foll to the Senate for wilful disobedience of instructions from the Chair. I now ask the Leader of the Senate to take the necessary action.
– I appeal to Senator Foll to apoligize to the Chair. I am sure he has no desire to show disrespect to you, Mr. President.
– If the honorable the Minister will admit that the surplus available to the Queensland Government was only £2,000,000 instead of £5,000,000 I will apologize to the Chair.
– The apology must be unconditional, as the honorable senator well knows. I hope, therefore, that he will accept my suggestion and render it unnecessary for me to take further action.
– Is it the intention of Senator Foll to accept the advice of the Leader of the Senate?
– Can you say, Mr. President, what the Leader of the Senate has asked me to do?
– I am asking the honorable senator to apologize to the Chair unconditionally. I am advised that the figures which I have quoted are correct. The honorable senator may believe also that his figures correctly state the position. Nevertheless, his present duty is to apologize unconditionally to the Chair.
– I assure you, Mr. President, I have no desire to show any disrespect to you : but when the Minister stated that the last Labour Government in Queensland left a surplus of £5,000,000-
– Order ! The honorable senator’s trifling has gone too far. I cannot accept nor do I value his assurance that he means no disrespect to the Chair, because he has shown the grossest possible disrespect. Again I ask him, and I think I have already extended a great deal of leniency to him, to obey the suggestion of the Leader of the Senate and apologize unreservedly.
– I withdraw unreservedly what I said, Mr. President. Never theless, I contend that the Minister’s statement was wrong.
– The honorable gentleman who has had a long parliamentary experience knows that a withdrawal must be without reservation, and the apology to the Chair unconditional.
– If you, sir, will tell me anything else I should do, I will accept your advice.
– Leave out the last few words.
– I withdraw unreservedly, Mr. President, and leave out the last few words.
– I was observing, when you, Mr. President, intervened, that the credit of the Commonwealth was destroyed by the previous administration, and that, therefore, this Government is not responsible for the present unfortunate state of affairs. I do not blame the previous administration for bad harvests or the low prices for wheat and wool. But I do say that it left the affairs of the country in such a position that there was no possible chance of another government finding the wherewithal to meet the situation which has now arisen. It is true that there are hundreds of thousands of unemployed in this country, although there is plenty of work for them to do. The trouble is that we cannot get ls. to pay men to do that work.
– Because you have destroyed the credit of the country.
– I ask the Minister not to address honorable senators excepting through the Chair.
– Had the terms of the Melbourne Conference agreement been carried out there would have been no trouble.
– I rise to a point of order. The Minister keeps on quoting figures which are grossly incorrect. The previous Government was in office for seven years, during which period it reduced the Commonwealth debt by £6 per head of the population.
– No point of order is involved.
– It is quite easy for honorable senators, by means of interjections, to prevent me from giving an effective reply to the arguments used in the debate.
– The Minister must not impute motives.
– The Government claims to be free from blame for the trouble that Australia is experiencing. In reply to Senator Colebatch I point out that there is a great difference between an uncontrolled method of creating credit and a method which is well controlled.
Question resolved in the affirmative.
Senate adjourned at 10.18 p.m.
Cite as: Australia, Senate, Debates, 22 April 1931, viewed 22 October 2017, <http://historichansard.net/senate/1931/19310422_senate_12_128/>.