6 May 1931

12th Parliament · 1st Session

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

page 1613


Telephonic Communication with Tasmania.

SenatorREID brought up the report of the Parliamentary Standing Committee on Public Works, together with minutes of evidence, relating to the proposed establishment of telephonic communication between the mainland (Victoria) and Tasmania.

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The following papers were presented : -

Tariff Board - Reports and Recommendations -

Brass, Muntz and Yellow Metal Rods, Bars and Extruded Sections ; Copper Sheets, Circles, Segments, Rods and Bars.

Buttons, Buckles, Clasps and Slides of Erinoid. Celluloid, Galalith or an; Casein material.

Denims, Drills, Jeans, Dungarees and Cloths in Grey, and other Cotton piecegoods.

Edible Fats: Bakkerol.

Galvanized. Iron.

Macaroni and Vermicelli.

Marzipan, Almond Paste, Almond Meal and Almonds in the Shell.

Sewing Machines.

Soap. Soap Substitutes and Compounded Detergents.

Table Salt.

Steamship Service with Tasmania. - Report of Rear-Admiral, Sir W. Clarkson.

Audit Act - Regulations amended - Statutory Rules 1931, No. 39.

Air Navigation Act - Regulations amended -Statutory Rules 1931,. No. 41.

Seat of Government Acceptance Act and Seat of Government (Administration) Act-

Ordinance No. 6 of 1931 - Advisory Council.

Advisory Council Ordinance - Regulations amended.

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Senator PAYNE:

– Is the Government aware that the Treasurer (Honorable Mr. E. G. Theodore) is reported in the Melbourne press to have referred to honor able senators as a gang, in the course of an address delivered by him to the Railway Union on Monday last? If the Treasurer has been correctly reported, does the Government approve of one of its Ministers applying such an epithet to honorable senators?

Senator BARNES:
Vice-President of the Executive Council · VICTORIA · ALP

– I have not seen the report, and I can see no useful purpose in endeavouring to answer the honorable senator’s question.

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Correspondence with Commonwealth Bank.


– Is it the intention of the Government to comply with the resolution passed by the Senate on Thursday last that the correspondence between the Commonwealth Bank and the Government in relation to the nonpayment to the farmers of the 3s. a bushel f.o.b. approved by the Wheat Advances Act 1930, be laid on the table of the Senate ?

Senator BARNES:

– The Government has written to the Commonwealth Bank seeking its permission to lay the information on the table of the Senate.

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Senator DOOLEY:
Assistant Minister assisting the Minister for Works and Railways · NEW SOUTH WALES · ALP

– On the 1st May, 1931, Senator Dunn addressed to the Minister representing the PostmasterGeneral the following questions, upon notice -

  1. How long did the member for Wilmot, in the House of Representatives (the Eon. J. A. Lyons) hold the position of PostmasterGeneral in the Scull in Government?
  2. How many employees were dismissed during his term as Postmaster-General? 3.How many of the employees who were dismissed were returned soldiers?
  3. How many were married and how many single ?
  4. What were the total numbers for each State in Australia, including Tasmania?

I am now in a position to inform the honorable senator as follows: -

  1. 23rd October, 1920, to 5th February, 1931.
  2. Figures for the exact period are not available, but between 1st October, 1929, and 31st December, 1930, 3,948 men were dismissed.
  3. Approximately 2,100 during the above period.
  4. This information is not available without a detailed scrutiny of each of the staff records, and it is suggested that because of the labour involved in preparing this information the honorable senator may feel disposed to dispense with these particulars.
  5. New South Wales, 1914;Victoria, 894; Queensland, 837-; South Australia, 411; Western Australia, 292; Tasmania, 100.

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Senator BARNES:

– On the30th

April, Senator E. B. Johnston asked the following questions, upon notice -

  1. What is the . total amount collected by the Government in primage duties on (a.) jutegoodsand(b) phosphoric rock, . sulphur, and fertilizers since the inception of primage duties ?
  2. . Are the exporters of wheat and wool entitled to a rotund of the . primage duties paid on the cornsacks and wool bales?
  3. If not, why not?

The answers to the . honorable senator’s questions are as follow: -

  1. Primage duty is not recorded against individual items of import. The following estimateof the amount of . primage duty collected is based on the value of imports of the commodities mentioned, since the inception of the duties: -
  1. No.
  2. The question of whether relief cap he afforded in respect of corn sacks and woolpacks is now receiving careful consideration.

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Five-day Working Week.

In reference to the announced intention of the Government to introduce a five-day working week in the Public Service, will he inform the Senate what number of members of the Public Service will be affected by . this change ?

Will he also give the Senate a statement showing the numbers affected in each department separately?

On what date is it proposed . to commence this new system?

Senator BARNES:

– The answers to the honorable senator’s questions are as follow.: -

  1. It is not at present possible to state definitely to what extent the change will apply in the various departments of the Public Service, but approximately from 7,000 to 8,000 permanentofficers (should be affected by the change.
  1. No date has keen fixed, but it is proposed that the change will operate as soon as certain necessary preliminary arrangements are completed.

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Rear- Admiral Clarkson’s Report

Will he lay on the table of the Senate or the Library the report of Rear-Admiral Sir W. Clarkson on the . question of a steamship service with Tasmania?

Senator BARNES:

– I lay a copy of the report on the table of the Senate.

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Senator OGDEN:

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

In view of the high direct annual cost of producing Hansard, viz., ?27,189, and of the urgent need for economy, will the Government consider the advisability of ceasing its publication altogether or at least of substantially reducing this expenditure?

Senator BARNES:

– As the publication of Hansard is under the joint control of the President of the Senate and the Speaker of the House of Representatives, the honorable senator’s question is one for consideration by them in the first instance, and is accordingly being brought to their notice.

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Bill read a third time.

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Motion (by Senator Hoare) agreed to -

That the report from the Printing Committee, presented to the Senate on the 1st May, 1931, be adopted.

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(No. 2).

Examination of Sir Robert Gibson, Chairman of the Board of Directors OF THE COMMONWEALH BANK

Pursuant to the resolution passed by the Senate on the 1st May -

That the chairman of the board of the Commonwealth Bank (Sir Robert Gibson) be called to the bar of the Senate on Wednesday, the6th May, to give evidence to the Senate in relation to such bill,

Sir Robert Gibson,, announced by the Usher of the Black Rod, attended at the bar of the Senate.

The oath having been administered by the Clerk,

The PRESIDENT (Senator the Hon.

Sir Robert Gibson. My name is Robert Gibson.


– Will you inform the Senate of the capacity in which you are now to give evidence before it?

Sir Robert Gibson. As Chairman of the Commonwealth Bank Board.


– With the concurrence of honorable senators I shall ask the witness to’ occupy a seat on the floor of the Senate,, to which the Usher of the Black Rod will, conduct him.

Honorable Senators. - Hear, hear !


– Before I askhonorable senators to direct, through me, the questions which they wish to ask Sir Robert Gibson, I should like to explain the procedure which I propose to adopt.. Our Standing Orders make provision for the examination of witnesses called to the bar of the Senate, as Sir Robert Gibson has been called this afternoon. They provide that the President shall examine such witnesses, and that honorable ‘ senators may direct questions to them, through the President. That is what I propose shall be done this afternoon. I may add that, as is the procedure when a witness is giving evidence before a select committee of the Senate, each honorable senator who is examining will be required to ask his questions without interruption until his list has been exhausted. Then, except by leave of the Senate, his examination will be regarded as finished.

I should like to point out, further, that Sir Robert Gibson is in attendance this afternoon to give evidence concerning theCommonwealth Bank Bill, and for that reason only. I need, therefore, hardly add that I shall require all honorable senators to observe in their questions, the’ strictest and most direct relevance to matters Contained in the bill.- As all questions must be asked through me. I shall not consent to any question being put to Sir Robert Gibson that is not, in my opinion, relevant to the matter at issue. I now ask the Leader of the Senate (Senator Barnes) if1 he wishes to direct any questions to Sir Robert Gibson?

Senator Barnes:

– All I wish to say at this stage is that the great anxiety of honorable senators to secure the utmost information possible to guide them wisely in dealing with the difficulties with which Australia is confronted has caused the Senate to decide to summon so eminent acitizen as Sir Robert Gibson to give evidence concerning matters relating to the Commonwealth Bank Bill, and that I shall, with your permission, Mr, President, reserve any questions which: I mayhave to ask the witness until a later stage.


– Then I ask the Leader of the Opposition (Senator’ Pearce-) if he desires to direct any questions to- the witness ?’

Senator Sir George Pearce:

– Yes, Mr. President, I desire to submit a series of questions, of which, the first is -

Is the board in a position which gives it a special knowledge of all matters affecting the credit of the Governments of Australia here and overseas?

Sir Robert Gibson. I say definitely that the Bank Board is in a better position than any body or person in Australia to have special knowledge in respect of matters affecting the credit of the Governments of Australia.

Senator Sir George Pearce:

– Does your board consult fully and freely with the board of the Bank of England on all matters affecting Australian credit overseas?

Sir Robert Gibson. The Bank Board is in continuous communication with the Bank of England on all questions affecting finance in its broadest sense - world finance - and the reaction they may have on Australia. On all questions affecting the credit of Australia, we are at liberty, at all times, to communicate with the Governor of the Bank of England, who makes any information that is in his possession, or in the possession of his board, available to the Commonwealth Bank Board.

Senator Sir George Pearce:

– Have you found, in the relations of your board with the Bank of England, a disposition on its part to help Australia in her present difficult conditions?

Sir Robert Gibson. I should say, in the first instance, that the Bank of England, as such, has no direct financial engagements with any of the governments of Australia to-day, that is to say, the governments of Australia have no financial obligations to the Bank of England. The position as between the Bank of England and the Commonwealth Bank is one of inter-relation between two central banks. In all matters affecting finance as between the central banks of the world to-day, these banks are always prepared to assist, by information, by negotiation, or by helping in negotiations, to carry through affairs as between the nations. On the other hand the principle of the Bank of England is that, as a bank, it does not^ advance money to governments. Its particular function in regard to the banking of governments is confined practically to that of the British Government. So as further to explain the position, let me say that I am perfectly certain that the Bank of England would at any time do anything that lay in its power, and that came within its proper functions as a bank, to help Australia, either by influencing in its favour the market in London, or in any other way in which the directors felt that it would be justified in acting.

Senator Sir George Pearce:

– In respect to the bill to amend the Commonwealth Bank Act 1911-29, now before the Senate, did the Government seek the views or the advice of the Board of Directors of the Commonwealth Bank in respect to such bill; and, if so, what views were, or what advice was, tendered by the board ?

Sir Robert Gibson. The Government has never communicated officially with the Bank Board in regard to the bill to amend the Commonwealth act; that is to say, the bill has never been sent to us for our advice, nor have we ever sent any official communication to the Government on the subject. I want to be perfectly fair and not to create any wrong impression in the minds of honorable senators; therefore, I should like to say at this’ stage that, in my capacity as Chairman of the Board of Directors of the Commonwealth Bank, I, with Mr. Riddle, the Governor of the Bank, have discussed with the Prime Minister and the Treasurer the difficulties that exist in London, and the steps that might be taken to meet them. Both I and the Governor of the Bank pointed out that, so far as the bank was concerned, we were unable, on account, of the existing position in regard to gold, to make any further, shipments of gold to London, if we were to maintain the reserve required by act of Parliament. It was suggested that we might ship gold to London, and that, it might be held there pending future developments, our action to be ratified by Parliament. The view that Mr. Riddle and I took was that we should act strictly within the act of Parliament governing the matter, and that if anything should be done with that gold other than was prescribed by act of Parliament - which we in our wisdom were effectively carrying out - it should be a matter for the decision, not of the board, but of the Parliament itself.

Senator Sir George Pearce:

– Is it a fact that the board has informed the Government that the Commonwealth Bank is not able to provide funds in London to enable the Government to pay the amount of ?5,000,000 due to the London County and Westminster Bank on the 30th June next?

Sir Robert Gibson. The question put by the right honorable senator is not in accord with the facts. The bills referred to as falling due on the 30th June are not due to the Westminster Bank, but to the London bill market. These bills represent the sum of ?5,000,000, and they were discounted on the London bill market at . the end of last year. They are due for repayment in London on the 30th June next. The amount of ?5,000,000 owing to the Westminster Bank is another sum altogether. That was due on overdrafts granted to various State Governments, and has nothing to do with the ?5,000,000 due on the 30th June. The latter consists of bills on the London 1 market which must be either taken up or renewed.

Senator Sir George Pearce:

– I had proposed to ask a further question, based on a misapprehension that has been cleared away by the last answer, as to whether the London County and Westminster Bank was prepared to renew that accommodation. In view of the explanation given by the witness, that question does not arise. I now desire to ask, on what terms and when was the last re- newal of treasury-bills in London effected ?

Sir Robert Gibson. The last renewal of bills effected in London was on the 31st December last. These bills, I should explain to honorable senators, had fallen due, and the money was required to replace them. At that time, the market was not very favorable, and the Commonwealth Bank took them off the market and immediately went on the market for another ?5,000,000. These were renewed with some difficulty at a discount of 5 per cent. These are the bills that are due on the 30th June.

Senator Sir George Pearce:

– Have you any, and if so what, information as to the terms upon which it would be possible to renew the treasury-bills which will fall due at an early date?

**Sir Robert** Gibson. Inquiries made in London latterly have indicated that Australian bills in London would be very difficult to discount and would have to be discounted - if discountable - at a comparatively high rate of interest. So 'as to explain the position, I would point oat that ?5,000,000 worth of treasury-bills fell due on the 30th March last. We then found the market so unfavorable that we did not attempt to have them rediscounted; and the Commonwealth Bank found the ?5,000,000 to pay them off. These bills, therefore, have not been renewed, and the ?5,000,000 referred to became an increased debt on the part of the- Governments of Australia owing to the Commonwealth Bank. From our internal knowledge we are aware that the bills which are now current, and become due on the 30th June, have been rediscounted on the London market at a rate very much in excess of the original rate paid by the Governments of Australia, namely, 5 per cent. The result, so far as the Commonwealth Bank is concerned, is that the directors feel that any attempt to put bills on the market now in the face of the present position would, from a banking and financial point of view, be prohibitive. It would be very difficult to get the London market to take the bills, and even if we were to get them taken up the price that we should have to pay would, in my opinion, be one that the Governments of Australia ought not to pay. {: .speaker-K0F} ##### Senator Sir George Pearce: -- In the event of this bill being passed by the Parliament, what, in your opinion, will be the effect on the Australian ?1 note? **Sir Robert** Gibson. According to the act of Parliament, the Australian ?1 note is a promise to pay to the holder so many grains of gold. The issue of notes in Australia is partially a fiduciary issue, and partially an issue backed by gold.- The act provides that the Bank Board must maintain a reserve of 25 per cent, of physical gold against every note that the bank issues. Pre-supposing that the whole of the gold held by the Commonwealth Bank was taken out of the custody of the bank the effect of the bill would be that the note issue would be entirely unsupported by anything else than faith in the country; that is to say, there would be no physical gold backing the note issue. The question asked is very difficult for any man to answer because, in the first place, the value of the Australian note would then be based upon the confidence of the people in the ability of the country to redeem those notes in some form or other. The gold reserve, besides having a definite value, has, in my opinion, and in' the opinion of my colleagues, a psychological value inasmuch as the feeling that there is a gold reserve behind the note issue - that there is something tangible behind the promise to pay - creates confidence in the minds of those who handle the notes. So far as our internal transactions are concerned, it would be possible to conduct business based solely on confidence. Confidence, however, is a very subtle thing, and it is easily destroyed. We have had evidence lately of what can happen through want of confidence, even when. the resources of a State were supposed to back public confidence. Honorable senators, then, can imagine for themselves what might be the consequences of a purely fiduciary issue. They will realize from what I have said that it is utterly impossible to give a direct answer to the question that has been asked. Personally, I am afraid that the effect would be decidedly adverse to the confidence reposed in our note issue. {: .speaker-K0F} ##### Senator Sir George Pearce: -- What is the total amount of gold held in Australia as a reserve against the note issue? **Sir Robert** Gibson. ; The total amount of gold held by the Commonwealth Bank to-day as against the note issue is ?15,150,000. {: .speaker-K0F} ##### Senator Sir George Pearce: -- What is the total amount of short-term indebtedness owing by the Commonwealth and State Governments in London falling due within the next twelve months? **Sir Robert** Gibson. ; The total of unfunded debts owed by Australian governments in London to-day is ?38,075,000. The sum of ?5,000,000 is due to the Westminster Bank; ?5,000,000 is due to the bill market; ?2,950,000 is due to Australian banks other than the Commonwealth Bank; and ?25,125,000 is due to the Commonwealth Bank. {: .speaker-K0F} ##### Senator Sir George Pearce: -- Is it a fact that your board issued a warning to the Government as to the position that would arise in London in connexion with the floating debt there? If so, when was that warning issued, and what was the nature of it? {: .speaker-K1L} ##### Senator Barnes: -- I think that it would be only fair for me to object to that question. It savours more of extracting information for propaganda purposes than for the purpose of enabling honorable senators to consider the advisability of this bill becoming law. {: .speaker-K0F} ##### Senator Sir George Pearce: -- I rise to a point of order. I point out that this bill is a proposal to take from the Commonwealth Bank the control of the gold reserve, in order to enable the Government to send that gold reserve overseas to meet Australia's short-term indebtedness there. Surely it is in order for me to ask the witness whether a warning was issued to the Government by the bank, which is the custodian of the gold reserve, as to the dangerous position that would arise, and, if so, when that warning was given. As the Senate has to make up its mind whether to accept or reject this bill, it ought to have this information. {: .speaker-K1L} ##### Senator Barnes: -- As the gold is in charge of the bank- {: .speaker-10000} ##### The PRESIDENT: -- The examination of the witness must not degenerate into a debate. The question, as explained by the Leader of the Opposition in a statement which should have found a place in the question originally submitted, is in order. {: .speaker-JTL} ##### Senator Daly: -- I think other honorable senators- {: .speaker-10000} ##### The PRESIDENT: -- Does the hono'rable senator wish to dissent from my ruling ? {: .speaker-JTL} ##### Senator Daly: -- No, sir. But I submit that if that question is permitted, I shall be in order in asking whether a warning was issued to any other Prime Minister, and, if so, what was its nature ? {: .speaker-10000} ##### The PRESIDENT: -- Yes, if it can be connected with this bill. **Sir Robert** Gibson. ; I find myself in a somewhat difficult situation. The Bank Board, and myself as its chairman, might be involved in a position in which I definitely say we should not be put. I should like to say to this honorable assembly, if I may be permitted to do so, that the Bank Board has endeavoured to discharge its obligations without fear or favour of any government, and without regard to any political party. I would, therefore, ask honorable senators, no matter to what party they may belong, if they will be good enough - because I am in a difficult position - to refrain from asking me anything that would in any way suggest that either I or my board have failed in our duty either to the country or to the Parliaments of Australia. In reply to the question submitted by **Senator Pearce,** I should like to point out chat, for a very extended period, communications of an official nature have passed between the Bank Board and the government for the time being concerning the growing, difficulty which the financial position of. Australia would eventually lead to. Naturally, honorable senators understand that, as between the bank and the government of the day, there must be many conversations which we, as bankers, must take to be of a confidential nature. I think it can be said that on no occasion has the Bank Board, either through the press or in any other way, disclosed communications between the government of the day and the Commonwealth Bank. Tor these reasons, I find myself in a somewhat difficult position in referring to the great number of communications which have officially passed between the bank, the Government, or the Loan Council, from the 1st July, 1929, when the previous Government was in office, to the present time. I have no desire to embarrass any government; but there is a communication to which I feel quite at liberty to refer, and that is a letter which, as chairman of the Bank Board, I sent to the honorable the Treasurer **(Mr. Theodore),** in his capacity of Treasurer of the Commonwealth and as chairman of the Loan Council. That letter was read in another place, as was also the Treasurer's reply to it. I think that I should read the full text of that letter to the members of the Senate. It was addressed to the Honorable E. G. Theodore on the 6th March, 1931, and is as follows: - >Referring to the discussion which the Governor and I had with the Prime Minister and yourself on the 24th February, when the position in regard to London obligations of the Government was referred to, and 1 pointed out the inability of the bank to assist the Government in respect of these obligations in view of certain 'eventualities referred to hereafter, this matter has been the subject of discussion by the Bank Board at the meeting which has just closed, and it is desired that 1 place on record the position as discussed with you. You are aware that the board shipped to London some six months ago £5,000,000 worth of gold for the purpose of holding there a reserve against contingencies which might arise in respect of govern* ment needs. Owing to unfavorable market conditions preventing the Government from acquiring temporary loans on the London market, as you are aware, this reserve was used to meet a position which arose in connexion with treasury-bills amounting to £5,000,000, which fell due on the 31st December Inst. Subsequently the bank was able to negotiate treasury-bills for the same amount on the London market, and thereby replaced the bank funds which had r-eu used temporarily. Again a similar position arose in connexion with the bills due on the 2nd March of the same amount, and the bank reserve was again used to meet the situation and pay off these bills. At present the probability of disposing of treasury-bills to replace this fund is distinctly unfavorable, and the hoard is quite unable to forecast if. arid when, it might be possible to discount bills on the London market. It follows, therefore, that the bank is no longer in possession of funds in London which might be required either to meet the claims of the Westminster Bank Limited, df £5,000,000 which is due for settlement at the end of the month, or the further sum of £5,000,000 to meet the treasurybills falling due on the 30th June and which might not be again renewed. As pointed out to you at the interview referred to, the gold reserve now held by the bank is not more than sufficient to maintain the statutory reserve required under the Commonwealth Bank Act. and allow for a bare margin for fluctuations of note issue. The board therefore deems it its duty to point out the position to your Government, so that it may give consideration to the question, and take such steps as it deems necessary to meet the position. My board desires me to say that it is possible that a position may arise in London in the near future which the bank would be powerless to meet. As it has a bearing on the same subject, I think that I should also read the following letter, dated the 6th of March, and addressed by me to **Mr. Theodore** : - >I have to acknowledge your telephone message per **Mr. Heathershaw,** received yesterday afternoon as follows : - "The Treasurer is very apprehensive that a serious jamb may occur in London at any time. The Commonwealth must be ready to meet such a situation and therefore must be in a position to dispose of the gold held in reserve. " The Treasurer suggests that the board gives its approval to an amendment of the law to enable the gold to be disposed of ". > >Whilst there is a certain ambiguity surrounding the exact- meaning of this message, the board has assumed in the light of all the circumstances that the Treasurer proposes to bring in legislation which would authorize the Bank Board to dispose of the gold reserve for the purpose of meeting obligations falling due overseas, and that the Treasurer desires that the board gives its approval of such legislation. > >The board is unable to see its way to subscribe to this suggestion, and I am requested to advise you that a letter of this date addressed to you, dealing with the London situation, is to be taken as answering your telephonic message. I am further to add that the letter referred to had been drafted prior to the receipt of your telephonic message. The letter referred to is that read previously. {: .speaker-K0F} ##### Senator Sir George Pearce: -- Are there any steps that could be taken by the Government, other than those it has taken, or proposesto take, which, in your opinion, would enable satisfactory arrangements to be made for the funding of the floating debt in London, and, if so, what are they ? {: .speaker-10000} ##### The PRESIDENT: -- -The question is too wide in its scope. The right honorable senator should amend it to bring it within the field of the bill. {: .speaker-K0F} ##### Senator Sir George Pearce: -- I shall submit it in another form. Are there any steps which could be taken by the Government, other than that proposed in this bill, which, in your opinion, **Sir Robert,** would enable satisfactory arrangements to be made for the funding of the floating debt in London, and if so, what are they ? **Sir Robert** Gibson. ; Without in any way suggesting that the question is one which should not be put to me, I should like to ask you, **Mr. President,** whether in replying to it I might not be led into criticizing the budget policies of the Governments of Australia. I feel that the only way in which I could answer the question would definitely lead me into such a position, and I do not think that it is one in which I, as chairman of the Commonwealth Bank Board, should be placed. {: .speaker-10000} ##### The PRESIDENT: **- Senator Pearce** informs me that he does not wish to press the question. {: .speaker-K0F} ##### Senator Sir George Pearce: -- This bill is only one of a series of proposals by the Government for dealing with the financial and monetary policy of Australia. What in your opinion, **Sir Robert,** would be the effect on our currency and credit if the whole of such measures were passed by this Parliament? {: .speaker-K1L} ##### Senator Barnes: -- I strongly object to that question; it is going outside the scope of the bill. {: .speaker-KNF} ##### Senator GREENE:
NEW SOUTH WALES · NAT -- I rise to a point of order. I draw attention to Standing Order 394, which does not permit of a discussion in the presence of the witness. {: .speaker-10000} ##### The PRESIDENT: -- For an honorable senator to seek my ruling is not to raise a discussion. I have very much the same objection to this question that I had to the previous one; it refers not only to this bill but to some other bills and proposals of the Administration to deal with the present financial position. I ask the Leader of the Opposition not to press it. {: .speaker-K0F} ##### Senator Sir George Pearce: -- I shall not do so.' I had only one other question to ask, " What, in the opinion of your board, will be the effect on Australian credit and currency if all the gold now held in reserve is sent out of Australia ?" ; but as **Sir Robert** Gibson has already given the answer in reply to previous questions, I have no desire to submit it. {: .speaker-K1L} ##### Senator Barnes: -- In regard to the letter written on the 6th March, was the main object of it to show that the bank's resources in London were exhausted, and that the Government must accept responsibility for meeting the ?5,000.000 of treasury-bills maturing on the 30th June? **Sir Robert** Gibson. ; Obviously that was the purpose of the letter. {: .speaker-K1L} ##### Senator Barnes: -- Was it reasonable for the Government to assume from your letter that there was danger of default unless special steps were taken to meet the situation ? **Sir Robert** Gibson. ; I think so. {: .speaker-K1L} ##### Senator Barnes: -- Would you regard the consequences of default overseas as likely to be very serious to Australia? **Sir Robert** Gibson. ; Default on the part of governments of Australia, whereever made, will be very serious for this country. From the point of view of our credit, I do not think it is material whether the default is made in London or in Australia. As an Australian citizen, if the decision were left to me, I would rather default to my own people than to people overseas; but from the national view-point, the effect of default is the same in either case. You are either able to pay your way or you are not. {: .speaker-K1L} ##### Senator Barnes: -- I asked whether you would regard the consequence of default overseas as likely to be very serious to Australia. {: .speaker-10000} ##### The PRESIDENT: -- The witness has already answered that question. I ask honorable senators to endeavour to make their questions less general, and more applicable to the provisions of the bill. {: .speaker-K1L} ##### Senator Barnes: -- **Sir Robert** Gibson, would you regard the shipment of gold from Australia as a better alternative than default? **Sir Robert** Gibson. ; Undoubtedly. {: .speaker-K1L} ##### Senator Barnes: -- Quite recently the Commonwealth Government was obliged to come to the assistance of a certain institution in New South "Wales in order to meet a serious financial situation that had arisen. Do you not agree that any action the Commonwealth Government could take would be preferable to default? {: #debate-11-s1 .speaker-10000} ##### The PRESIDENT: -- Has that question any connexion with the bill? {: .speaker-K1L} ##### Senator Barnes: -- I think so. The bill is designed, to get over a very difficult financial situation, and the Government's attitude is that it will seek to amend the act providing for the retention of a gold reserve in order that some of the gold now held in Australia may be shipped overseas, rather than allow Australia to break its promise to people overseas. {: .speaker-10000} ##### The PRESIDENT: -- The question is outside the scope of this inquiry. {: .speaker-JYB} ##### Senator Dunn: -- In connexion with the Commonwealth Bank Bill did the Prime Minister recommend to you, **Sir Robert,** the shipment abroad of the gold reserve in the Commonwealth Bank so as to avoid default? If so, did you agree to that course, and does this mean that the gold reserve of the bank will be exhausted? If this be a fact does not it mean the abandonment by the bank of the gold reserve system of finance and, if so, what system will the bank introduce in its place? Further, are you prepared to recommend to the Government a financial system more suited to modern conditions based on, for example, a goods standard? {: .speaker-10000} ##### The PRESIDENT: -- Do you consider, **Sir Robert,** that the question should be divided ? **Sir Robert** Gibson. ; I think it should be divided and subdivided. {: .speaker-JYB} ##### Senator Dunn: -- Then, I ask you, **Sir Robert,** did the Prime Minister recommend to you the shipment abroad of the Commonwealth Bank gold reserve so as to avoid default? **Sir Robert** Gibson. ; Again I find myself in a somewhat difficult position. I do not know whether conversations between myself and the Prime Minister should be disclosed by me. I should like to say, without any reflection on the Prime Minister, that in another place he has referred to conversations which are alleged to have taken place between himself and me. The propriety of disclosing any such conversations is a matter for the Prime Minister himself to decide. A statement as to conversations is not evidence. If, for example, the Prime Minister said that Robert Gibson had said so and so, that would not be evidence. Similarly, if Robert Gibson said that the Prime Minister had said so and so, that, also, would not be evidence. My inclination is to try to hold myself in the most correct position possible. I do not wish to be drawn into any controversy with the Prime Minister as to what he or I said or did not say. I consider that the official document from the board, which I have read, discloses the position as between the Bank Board and the Government. Therefore, I would ask honorable senators who, I assume, have no desire to place me in a difficult position, to refrain from asking me questions of the nature of the one just put to me. {: .speaker-JYB} ##### Senator Dunn: -- Would not the shipment of the gold reserve necessarily mean the abandonment of the gold reserve system of finance, and, if so, what system would the bank introduce in its place ? **Sir Robert** Gibson. ; There are only two systems of which I know - either a gold reserve or a purely fiduciary system. A fiduciary currency system limits the trustees of it to the amount of the fiduciary issue they can put out. The Leader of the Opposition asked me a question which had some bearing on this matter., and I explained as far as it was in my power to explain the views which the board holds concerning an unsupported system. Personally I am utterly against such a system, and have no recommendation to make to the Senate or to any honorable senator. All the central banks of important countries which are engaged in international trade of any magnitude have issues based upon a system which has some points of comparison with the Australian system. They are either on a purely gold basis or are on a partially gold and partially fiduciary basis, which is the present Australian system. Since Australia has large external .obligations and is doing a big volume of overseas business involving transactions international in their character, the Governments of Australia would be well advised to maintain a monetary system which is still accepted by the leading nations of the world. I consider that a serious departure from it must, in the end, militate against the interests of Australia. I have studied, and have instructed the staff of the Commonwealth Bank to look up, the records relating to central reserve banking systems of other countries, and I know of no reserve bank in the world which has its issue on an entirely fiduciary basis. That is as much as I can say in reply to the question. {: .speaker-JYB} ##### Senator Dunn: -- Are you prepared to recommend to the Government a financial system more suited to modern conditions, such as, for example, One based on a goods standard ? **Sir Robert** Gibson. In the first place, I do not know that I am entitled to answer that question until the Government itself puts it to me. In the second place I do not know the system to which the honorable senator refers. {: .speaker-JYB} ##### Senator Dunn: -- Since the Commonwealth Bank Bill is designed to make credit available to Australian industry, can you, **Sir Robert,** say why the Commonwealth Bank on more than one occasion declined, on the grounds that funds were not available, to release credit in the interests of Australian industry and yet, when ?700,000 was required to meet interest payments overseas for the New South Wales Government- {: .speaker-10000} ##### The PRESIDENT: -- Order ! The honorable gentleman is, I am afraid, about to make a statement. {: .speaker-JYB} ##### Senator Dunn: -- If I had been aware that I should have to put my questions seriatim I would have been prepared to do so. {: .speaker-10000} ##### The PRESIDENT: -- I was merely calling attention to the fact that the honorable senator's last few words seemed to indicate that he was about to make a statement. {: .speaker-JYB} ##### Senator Dunn: -- Then I ask you, **Sir Robert,** why the Commonwealth Bank could not make credit available to the Commonwealth Government for Australian industry and yet released ?700,000 to meet interest payments overseas for the New South Wales Government. {: .speaker-10000} ##### The PRESIDENT: -- I- do not think that the honorable senator has yet complied, with my request not to make a statement. {: .speaker-JYB} ##### Senator Dunn: -- Then I shall put the question in this form: Since the Commonwealth Bank Bill is designed to make credit available to' Australian industry will you, **Sir Robert,** say why the bank declined on more than one occasion to comply with the request of the Commonwealth Government to make credit available in the interests of Australian industry ? {: .speaker-K0F} ##### Senator Sir George Pearce: -- I rise to a point of order. The question which I asked, and which you, **Mr. President,** ruled out of order, related to a matter that is contained in another bill. The question just asked by the honorable senator clearly relates to a matter outside the scope of the bill, which has nothing to do with the making available of credit. {: .speaker-10000} ##### The PRESIDENT: -- The right honorable gentleman evidently has a keener appreciation of the points involved in the question than I have. I must confess that I do not gather what **Senator Dunn** desires to ask the witness. Can the honorable senator assure me that the question is connected with the bill before the Senate? {: .speaker-JYB} ##### Senator Dunn: -- With all due respect to you, **Mr. President,** I claim that it is. The purpose of the bill is. to make credit available to industry. I was about to explain when the Leader of the Opposition **(Senator Pearce)** intervened and told you all about it. {: .speaker-KTR} ##### Senator McLachlan: -- I rise to order ! *No* honorable senator should base a question on false premises. All questions should be relevant to the issue before the Senate. **Senator Dunn** has suggested that the purpose of this bill is to make credit available to Australian industry. That is not a fact. The bill has nothing to do with Australian credit, though it may have something to do with Australian discredit, which is another matter. {: .speaker-10000} ##### The PRESIDENT: -- Then I must ask you, **Sir Robert,** if you understand the question sufficiently to answer it. **Sir Robert** Gibson. ; I am afraid that **Senator Dunn** has somewhat obscured his intention. I do not understand exactly what the honorable senator wants to know. I do not know what this bill has to do with the making available of credits in Australia. Its purpose, I understand, is to empower the Treasurer to take from the Commonwealth Bank gold, which is in its custody, for the purpose of discharging overseas obligations. If I am wrong, then I know nothing about the bill. {: .speaker-JYB} ##### Senator Dunn: -- The introduction of the Commonwealth Bank Bill having given rise to an outcry on the part of some political opponents of the Labour party- Opposition Senators. - Order ! {: .speaker-JYB} ##### Senator Dunn: -- I am leading up to my question. It is all very fine for honorable senators opposite to call " Order." {: #debate-11-s2 .speaker-10000} ##### The PRESIDENT: -- I suggest that the honorable senator should put his question without any leading up to it. {: .speaker-JYB} ##### Senator Dunn: -- My fourth and last question is, did **Senator Pearce,** before the Senate met this afternoon, submit to **Sir Robert** Gibson a list of the questions that he proposed to ask him? {: .speaker-10000} ##### The PRESIDENT: -- That is a question which should be asked of **Senator Pearce.** {: .speaker-K0F} ##### Senator Pearce: -- I am prepared to answer it. I did submit to **Sir Robert** Gibson, before the meeting of the Senate this afternoon, a list of the questions that I proposed to ask him. I sent with the list a covering letter to meet **Sir Robert** Gibson upon his arrival in Canberra to-day, in which I informed him that I proposed to ask him these questions when he was called to the bar of the Senate. I also stated that if, in his opinion, any of the questions ought not, in the public interest, to be asked, and if he would indicate such questions, I would withdraw them. {: .speaker-KLU} ##### Senator Sir William Glasgow: -- Would not the shipment of gold, without the retirement of notes, be a simple increase in the degree and amount of inflation? **Sir Robert** Gibson. ; If I were to address the Senate on the question of inflation, I am afraid that it would become tired of hearing what I had to say about it. In reply to the honorable senator I should like to say, however, that inflation as such is not necessarily governed in any way by the evidence of the issue of notes. A note issue is rather the thermometer which indicates the temperature of the amount of inflation. The process of inflation does not begin in the issue of notes; it begins by banks making available credit which is not based upon any tangible or real asset that can be converted into terms of money. The mere action of sending Home ?5,000,000 worth of gold to meet these London bills would inflate to a very minor extent. If we had ?10,000,000 worth of gold left, and did not reduce the note issue, the amount of physical backing in the form of gold to the notes which were already out would be reduced, and to tha extent the issue would be an inflation of paper as against actual assets. The difference is supposed to be supported by national credit. You could go on pawning - if I may use such an objectionable word - your national credit to such an extent that it would be destroyed, and the credit which had been issued would be purely inflated credit, and would become valueless. The danger of inflation lies in the gradual depreciation of the ability of credit to buy. To give a simple illustration : if you have a very large production of wheat in the world and the demand for wheat is very much less than the supply, the natural effect is that the price of wheat falls, and wheat becomes less valuable per bushel. If you issue credit, which is not based on sound principles . and sound assets, the value of that credit soon begins to fall; and as it falls it will buy less in the form of commodities, with the result that you get what is called the rising of the price level. The rising of the price level is created by one of two things: A shortage of the articles which are to be sold, or a lesser buying power of the currency that purchases them. I do not know that I can make the position clearer. It is a very difficult question to answer, but I think that I have said as much as I can say about it in a few brief words. {: .speaker-KLU} ##### Senator Sir William Glasgow: -- Would not this cause the exchanges to go still further against us? {: .speaker-JYB} ##### Senator Dunn: -- I rise to a point of order. I submit that anything that may be said in relation to the question of the exchanges between Australia and any country overseas might adversely affect Australia, and on that ground the question ought to be disallowed. {: .speaker-10000} ##### The PRESIDENT: -- The point of order is not sustained. The question just asked is connected with the former question, and is relevant to the bill. {: .speaker-JTL} ##### Senator Daly: -- The former question was answered in the negative. {: .speaker-KLU} ##### Senator Sir William Glasgow: -- Oh no, it was not. **Sir Robert** Gibson. ; The question asked by the honorable senator probably has a much wider scope than he intended. It would be very difficult to answer unless I gave some explanation to this honorable Senate of the manner in which exchange operates. There are several factors which govern exchanges between nations. One of them, and a very common one, is the ordinary law of supply and demand. If, for instance, some one in Australia wishes to buy credit in London, the price he has to pay for it is governed by the credit available in London which has been created by the export of goods from Australia. It,, therefore, must follow that if your exports are very low in value, and if the amount of London credit available is very limited, and the demand for it is very great, competition immediately develops for the purchase of that credit; just as the nations compete against one another for their wheat requirements when there is a shortage of that commodity. This causes prices to rise. The result is that the exchanges between Australia and London may be affected purely on the basis of those balances. That can be corrected - and it has been corrected in Australia - by the ability of Australia to borrow money overseas. By borrowing overseas we increase the supply of money available in 'London, and the effect is to reduce the exchange rate. For example, supposing that the credit of Australia was sufficiently good to-day to enable it to go to London and borrow *?75,000,000,* the exchange rate between London and Australia would certainly be at par; indeed, it is possible that it might be slightly in favour of Australia. By sending away our gold, we are reducing our ability to meet our overseas obligations. We cannot ship the same gold twice, and it must follow, inevitably, that as we dispose of any real asset that we have here for the purpose of sending it overseas to meet our obligations, the attrition of asset arising out of that transaction, presupposing that it cannot be replaced, must eventually lead to an increase in the exchange rate. {: .speaker-KLU} ##### Senator Sir William Glasgow: -- The Leader of the Government **(Senator Barnes)** asked whether you would regard the shipment of gold as being the preferable alternative to default. Are default and the shipment of gold under the provisions of this bill the only available alternatives ? **Sir Robert** Gibson. ; That question leads me into another ditch. If I were to tell honorable senators how this action could be avoided, or how it might have^ been avoided, I should certainly be accused of entering into politics, and I would, no doubt, get another of those nice little admonitions informing me that I am over-stepping my position as Chairman' of the Commonwealth Bank Board and am seeking to dictate the policy of governments. I prefer not to find myself in the position of its even being suggested that I am attempting to dictate to any government of any country. {: .speaker-KLU} ##### Senator Sir William Glasgow: -- I do not desire the witness to mention the alternatives. I merely inquire whether there is another alternative or alternatives. **Sir Robert** Gibson. ; There is another alternative. {: .speaker-KP8} ##### Senator E B Johnston: -- Would the necessity for this legislation be avoided if the bank made available, for the purchase of exportable commodities, the sum of about ?20,000,000, which the bank agreed to find under its alleged unconditional promise to pay 4s. per bushel at sidings for wheat-- {: .speaker-JYB} ##### Senator Dunn: -- I rise to a point of order. {: .speaker-10000} ##### The PRESIDENT: -- The honorable senator has not yet heard the whole question. {: .speaker-JYB} ##### Senator Dunn: -- I submit that the bill which we are considering has nothing to do with any guarantee of 4s. a bushel for wheat. The questions submitted by the Opposition are a frame-up, purely and simply, against the Government of the day. {: .speaker-10000} ##### The PRESIDENT: -- Order! {: .speaker-JYB} ##### Senator Dunn: -- I denounce the Opposition for having brought **Sir Robert** Gibson- {: .speaker-10000} ##### The PRESIDENT: -- Order! {: .speaker-JYB} ##### Senator Dunn: -- to the chamber- {: .speaker-10000} ##### The PRESIDENT: -- Order! {: .speaker-JYB} ##### Senator Dunn: -- in order to get his evidence to use as political propaganda against this Government. {: .speaker-10000} ##### The PRESIDENT: -- Order ! Before I report the honorable senator to the House for his repeated and wilful refusal to obey the order of the Chair, I ask him to rise in his place and say anything he can as a reason for his action. {: .speaker-JYB} ##### Senator Dunn: -- With all due respect, I shall move to dissent from your ruling, **Mr. President.** This is a frame-up. {: .speaker-10000} ##### The PRESIDENT: -- I ask the Leader of the Senate to take the action usual in such cases. {: .speaker-K1L} ##### Senator Barnes: -- I ask the honorable senator to withdraw his remark and to apologize to the Chair. {: .speaker-JYB} ##### Senator Dunn: -- With all due respect to the President, and the Leader of the Government, I submit that these questions are a frame-up. {: .speaker-10000} ##### The PRESIDENT: -- That is sufficient. I ask the Minister to move that the usual penalty be inflicted on **Senator Dunn** for his refusal to obey the Chair. {: .speaker-K1L} ##### Senator Barnes: -- Is **Senator Dunn** determined not to apologize to the Chair ? {: .speaker-10000} ##### The PRESIDENT: -- The honorable senator has already refused to do so. {: .speaker-K1L} ##### Senator Barnes: -- As the honorable senator appears to be adamant in his refusal to obey the Chair- {: .speaker-10000} ##### The PRESIDENT: -- It is not a question of the honorable senator's refusal; it is a question of his having insulted the Senate and having refused to withdraw. There is only one thing to do. {: .speaker-K1L} ##### Senator Barnes: -- As the senator has refused to apologize to the Chair I have reluctantly to move - >That **Senator Dunn** be suspended from the sitting of the Senate. Question resolved in the affirmative. **Senator Dunn** *then retired from the chamber.* {: .speaker-10000} ##### The PRESIDENT: **- Sir Robert** Gibson, I feel that I have to apologize to you, on behalf of the Senate, for the scene that has just occurred. {: .speaker-KP8} ##### Senator E B Johnston: -- I shall repeat the question. Would the necessity for this legislation be avoided if the bank made available for the purchase of exportable commodities the sum of about ?20,000,000, which the bank agreed to find under its alleged unconditional promise to pay 4s. per bushel at sidings for wheat under the Wheat Marketing Bill, which was defeated on the 4th July, 1930? **Sir Robert** Gibson. ; I see considerable difficulty in connecting the question with the Commonwealth Bank Bill. While desirous of answering to the best of my ability questions put to me by any honorable senator, irrespective of the party to which he belongs, I cannot see- {: .speaker-10000} ##### The PRESIDENT: -- I think that the question is in order; but if the witness does not desire to answer it for the reason which he has given, it need not be answered. **Sir Robert** Gibson. ; The question refers to an alleged unconditional promise to pay 4s. a bushel for wheat. What have I to do with what has been alleged? I do not know what has been alleged, and how can I answer a question based on an allegation? If I were to attempt to answer the question, I should be involved in a discussion on the subject of a guarantee of 4s. a bushel for wheat. The question also refers to " the purchase of exportable commodities," and mentions " a sum of about ?20,000,000." I desire to be as clear as I can. If we have exportable commodities to the value of ?20,000,000, and they remain in Australia, then there is no money available in London arising out of those commodities. Only by the export of those commodities overseas can we create a credit in London in respect of them. The bill, as I understand it, is designed for the purpose of meeting overseas obligations. Presupposing, therefore, that the bank was both agreeable and able to provide ?20,000,000 here to buy exportable commodities, the London position would not be affected in the slightest degree. The bank would have to become an exporter, send the commodities overseas, and sell them there, before it could create credits in London. The ordinary process is not that a bank buys these things; they are bought by people overseas, and the bank attends to the financial transactions whereby money is received in London for the commodities exported, and is remitted to Australia or used in London to pay some one else, at the direction of the owner of the goods. Therefore, the provision of ?20,000,000 here for the purpose of buying wheat in Australia would not, so far. as I can see, alter the position in London in the slightest degree. I do not know whether I have clearly understood the honorable senator's question, or have made myself clear in my answer. I desire to answer all questions intelligently, and I hope that I have done so in this instance. {: .speaker-KP8} ##### Senator E B Johnston: -- The question that I wish to have answered is that if the Commonwealth Bank a few months ago promised to find over ?20,000,000 to pay Australian farmers 4s. a bushel for wheat at sidings, why that sum cannot be used for the present emergency by the means of transfers to the Old Country? **Sir Robert** Gibson. ; I think that my previous answer covered the position; a practical transaction would have to take place before credits could be created in London. Although it might benefit the farmers of Australia, as farmers, if the Commonwealth Bank provided ?20,000,000 to buy wheat at 4s. a bushel which could only be sold for 2s., it would not affect the position of the nation, as between Australia and the Old Country, in the slightest degree. In that connexion, I am glad that the honorable senator referred to an " alleged unconditional promise." I am not aware of it myself . So far as I am aware, no unconditional promise or arrangement was ever suggested by the Commonwealth Bank in regard to finding ?20,000,000. {: .speaker-JTL} ##### Senator Daly: -- I rise to a point of order. {: .speaker-10000} ##### The PRESIDENT: -- Does the honorable senator object to the question? {: .speaker-JTL} ##### Senator Daly: -- I object to the statement which has been volunteered by **Sir Robert** Gibson, Surely there are some rules which regulate the answers which witnesses may give to questions; otherwise we shall have the Wheat Marketing Bill debated here. {: .speaker-K3L} ##### Senator Sampson: -- The honorable senator would not like that. {: .speaker-JTL} ##### Senator Daly: -- I should not mind. {: .speaker-JZD} ##### Senator Foll: -- Are you aware, **Sir Robert,** that the Treasurer, when discussing this bill recently, stated that he had discovered that the Commonwealth Bank received a weekly bulletin from the Bank of England, and that, in some cases, it contained statements which almost amounted to dictation by the Bank of England to the Commonwealth Bank? Has there been any attempt by the Bank of England to dictate to the Commonwealth Bank? {: .speaker-JTL} ##### Senator Daly: -- On a point of order, I submit that that is not a question which should be addressed to the witness, He was not present at the meeting at which the Treasurer is alleged to have made the statement referred to, and how can he answer the question which has been asked? {: .speaker-10000} ##### The PRESIDENT: -- The question is asked in connexion with certain statements made concerning the bill now under discussion. It is, therefore, in order. {: .speaker-JTL} ##### Senator Daly: -- I did not understand the honorable senator to say that the statement was made in another place. {: .speaker-10000} ##### The PRESIDENT: -- I understood **Senator Foll** to assert that the statement was made while the bill was under discussion in another place. {: .speaker-JZD} ##### Senator Foll: -- No, sir. {: .speaker-10000} ##### The PRESIDENT: -- Then the question cannot be asked. SenatorFoll. - I should' like to ask the witness if there is a weekly communication between the Commonwealth. Bank Board and the Bank of England: with respect to the export of gold- and the reestablishment of our financial position in London, andi also if any attempt has been made by the Bank of England, to dictate our policy with respect to this bill? **Sir Robert** Gibson. No communication goes from the Commonwealth Bank Board which discloses any confidences that should be observed between the Commonwealth Bank Board and the- Commonwealth Government. At the invitation *of* the Commonwealth Government of the day, the Commonwealth Bank Board is requested" to co-operate with the financial advisers of the Government in London for the purpose of ascertaining whether conditions are favorable or otherwise for certain financial transactions in London on behalf of Australia. Theseare quite an every-day affair, and come more or less in the ordinary course of business. Incidentally, it is quite well known to the Government that in these conferences the advice of. the Bank of England is often invited, and is given to our management in London, and through it to the- Commonwealth Bank Board, and the financial advisers of Australia with respect to the general condition of the money market in London, a-nd so forth. That is an everyday transaction. The Government of the day is always aware of these communications. It always receives from the board the information which we obtain, in that connexion through the bank and through its financial advisers. {: .speaker-JTL} ##### Senator Daly: -- That is what the Treasurer stated. **Sir Robert** Gibson. ; The Commonwealth Bank, as a central bank, has the great honour of being looked upon by the Bank of England as an institution of good standing. The Governor of the Bank of England has been good enough to extend to the- Governor of the Commonwealth Bank a fortnightly letter in which are reviewed all questions with respect to world monetary conditions, trade prices, and so forth. It. is confidential as between banks, because it is the kind of information which it. is necessary for central banks of the world to possess. I may have mentioned to the Treasurer - although I cannot recollect whether I did so or not - that we are under a great obligation to the Governor of the Bank of England for very valuable and confidential' information which we are continually receiving here. That may. have been the reference although I do not know that it is. so. I can assert that on no occasion has the Commonwealth Bank Board ever dis-. closed to, the Bank of Englandinformation in- the possession of the board which is confidential, and which should; not be disclosed outside our communications with any government of the day. {: .speaker-JZD} ##### Senator Foll: -- Has there been, at any time, any attempt on the part of the Bank of England to dictate the policy of the Commonwealth Bank? **Sir Robert** Gibson. ; Absolutely on no occasion. Further, the Commonwealth Bank would not accept such dictation. {: .speaker-KN7} ##### Senator Guthrie: -- I should like to ask **Sir Robert** Gibson would not any form of inflation, cause prices to rise locally, and be prejudicial to the people of Australia, since we live by exporting primary produce, such as wool, wheat, &c, which we must sell in the markets of the world, but which markets would not be affected by inflation in Australia? {: .speaker-10000} ##### The PRESIDENT: -- I cannot see that there is any connexion between that question and the subject-matter of theCommonwealth Bank Bill. {: .speaker-KN7} ##### Senator Guthrie: -- I understood **Sir Robert** Gibson to say that the export of gold would lead to a certain form of inflation. {: .speaker-K7F} ##### Senator Sir Hal Colebatch: -- I ask the witness whether, in view of the magnitude of Australia's oversea obligations, and the comparatively small amount of gold available, the export of gold would furnish any permanent safeguard against default ? **Sir Robert** Gibson. ; The answer is " No" . {: .speaker-K7F} ##### Senator Sir Hal Colebatch: -- Has the Commonwealth Bank Board departed from the opinion expressed in its- letter to. the Treasurer late in 1929. that it would be highly detrimental to Australia to depart, even temporarily, from the gold standard? **Sir ROBERT** Gibson. The Commonwealth Bank Board is opposed to departure from the gold standard. The Bank Board, however, does see that unless something is done, it is going to be tremendously hard to extricate this country from its difficulties, and I am afraid that unless this country can, by its action, reconstruct the confidence- {: .speaker-JTL} ##### Senator Daly: -- I rise to a point of order. Again I take exception to the witness volunteering information. The question submitted by **Senator Colebatch** was definite and clear, and capable of an unequivocal answer. I do not wish to enter into a discussion with **Sir Robert** Gibson with respect to the extrication of this country from its difficulties. I should like your ruling, **Mr. President,** on the point I have raised. {: .speaker-10000} ##### The PRESIDENT: -- **Sir Robert** Gibsou is entitled to answer the question in his own way. **Sir ROBERT** Gibson. It is very difficult for me to answer all kinds of questions, and at the same time steer absolutely clear of everything that might be regarded as exceeding my proper functions. Might I ask the honorable senator to repeat his question. {: .speaker-K7F} ##### Senator Sir Hal Colebatch: -- I am quite satisfied with the answer that **Sir Robert** has given. The question I asked was, " Has the Bank Board departed from the opinion expressed in its letter to the Treasurer late in 1929, that it would be highly detrimental to Australia to depart, even temporarily, from the gold standard " ? The witness has answered that it would be. I now desire to ask **Sir Robert** if he regards the funding of our existing floating obligations abroad as a matter of urgency? **Sir ROBERT** Gibson. Yes. {: .speaker-K7F} ##### Senator Sir Hal Colebatch: -- Would the export of gold now forming our gold reserve be calculated to facilitate or hamper such funding operations? **Sir ROBERT** Gibson. That is a very difficult question to answer. Perhaps when we had shipped our last piece of gold to our overseas creditors and had said to them. : " That is all we have ", they might, out of pity, but not as a matter of sound business, view our position in a more favorable light. However, if it Jb to be a cold-blooded financial trans action, I cannot see that the sending of the gold overseas is going to improve our position in the matter of funding our overseas debt. Considered from the coldblooded view-point of the borrower and lender, it might decidedly hamper our position by making our credit less valuable than it is to-day. {: .speaker-K7F} ##### Senator Sir Hal Colebatch: -- Would such export of gold be calculated to help or hinder the conversion of Australian loans falling due in London within the next few years? **Sir ROBERT** Gibson. Except for the reasons I have previously given, I do not see how it could help us in London. If it were thought that our resources were so strained that we had been forced to send away the last of our gold, one would naturally think, if business is to be conducted on ordinary lines, that our credit would, to a certain extent, be further depreciated. This would necessarily make it more difficult for us to re-fund the debts which are falling due in the future. {: .speaker-K09} ##### Senator Payne: -- If the gold reserve now held by the Commonwealth Bank Board were depleted to the extent of ?5,000,000, could that depletion be' made good, and if so, when? **Sir ROBERT** Gibson. The only means by which that depletion could be made good would be the availability of credits in London whereby the Commonwealth Bank Board could re-purchase gold in London or elsewhere. If that credit were available in London why should we send the gold to England ? There would be no need to do. so. {: .speaker-K09} ##### Senator Payne: -- In view of the fact that the floating indebtedness in London, which has to be met by the end of the year, is, I understand, ?38,000,000, is it not possible that the whole ?15,000,000 of gold would have to be remitted to London if this bill became law? **Sir ROBERT** Gibson. Earlier this afternoon I informed the Leader of the Opposition **(Senator Pearce)** that the unfunded debts of Australian Governments in London to-day total ?38,075,000, of which ?5,000,000 is due to the Westminster Bank, ?5,000,000 is due on bills on the open market, and the balance to Australian institutions. The Westminster Bank has agreed to accept bills, due in September. The payment of this- ?5,000,000 is therefore postponed until September, and the only outstanding item which falls due in London between now and September to other than the Commonwealth Bank and the other Australian banks is the ?5,000,000 in respect of bills which fall due on the 30th June. If ?5,000,000 in gold was made available to redeem those bills, that debt would be wiped out. Before September along something else may happen. The period may be extended by the Westminster Bank; I cannot say. The second ?5,000,000 may not be required. The question is to what use would the third ?5,000,000 be applied? Would it be used to repay the Australian banks; because it would not relieve the London position so far as external debtors, who are not the Australian banks, are concerned. It would, for the time being, relieve the Commonwealth Government of the necessity to find ?5,000,000 of accruing interest which is at present found under the pooling system, and which the Commonwealth Government buys from month to month under that scheme. The banks have pooled the whole of their London funds, and every month, through the Commonwealth Bank, they sell to the Commonwealth Bank on behalf of the Commonwealth Government an amount equal to the accruing interest for the month. That is how interest is paid month by month. Since that system has come into operation, interest in London has always been met. The shipment of the whole '?15,000,000 from Australia would meet the bills due to the Westminster Bank in September; it would also meet the bills due on the open market on the 30th June, and it would enable the Australian banks to be repaid ?5,000,000 of their London money. But I do not think that it would help the Australian banks to send that gold to London. Alternatively, the third ?5,000,000 might be used by the Government foi' the purpose of postponing purchases from the banking pool for the payment of interest due in London. {: .speaker-K09} ##### Senator Payne: -- Would it not be better in the interests of Australia to pay the higher rate of discount which would be demanded for the renewal which is falling due at the end of June, rather than to deplete the geld reserve in Australia, and to use your own words, weaken the confidence of the Australian people in their own note issue ? **Sir ROBERT** Gibson. I should say that honorable senators are as competent as I am to pass judgment on the faith the people of Australia have in their own country. I do not think there is any other practical answer that I can give to the honorable senator's question. {: .speaker-KTR} ##### Senator McLachlan: -- Would not the proposed shipment of gold conduce to a lowering of the status of Australia, and tend to damage its future by conveying the impression of recurring insecurity? **Sir Robert** Gibson. I should say that the fact that Australia had been reduced to the necessity of disposing of an asset which normally is most valuable to it for the purpose of paying its overseas debts, would suggest to the enlightened mind that its available resources were becoming very reduced. Speaking as a cold-blooded business man, I think that if I saw my creditor getting rid of his assets and no evidence of any further quantity being available, I should not hold his credit at any high standard. {: .speaker-KTR} ##### Senator McLachlan: -- Except in so far as referred to in the bank's letter of the 6th March, 1931, the Bank Board has never been consulted in regard to any of the provisions of the bill that is now under discussion by the Senate? **Sir ROBERT** Gibson. No official communication has passed between the Bank Board and the Government on the subject of this bill. I did not see the measure until, in the ordinary course of events, by the courtesy of the Treasury, I was forwarded a copy of it. I do not know if any individual member of the board has been consulted on the matter, but I can say that neither I nor the board has been officially consulted in regard to it. {: .speaker-JTL} ##### Senator Daly: -- You have told us that no conversation took place with you in regard to this bill. Would you say that the principle underlying the bill was never discussed with you by either the Prime Minister or the Treasurer? **Sir ROBERT** Gibson. The last conversation I had with either the Treasurer or the Prime Minister was on Tuesday, the 24th February last. The letter I have referred to was written on the 6th March following, and that letter refers to- the conversation of the 24'th February. The only other communication, verbal or otherwise, was the message received by the board1, *to* which I have already read the answer. I am speaking of the telephonic communication, " The. Treasurer is very apprehensive that a serious jamb may occur in London ". I do not recollect any other1 communication that has passed between the Bank Board or myself and the Government which is in any way relevant to the1 bill. {: .speaker-JTL} ##### Senator Daly: -- What I desire to ascertain is whether, at any time between February and now, you advised the Treasurer of the necessity to ship more gold to- London ? **Sir Robert** Gibson. ; I have never at any time taken it on myself to advise the Prime Minister or the Treasurer to ship gold to London. I have no desire to involve myself in controversies with the Prime Minister or any one. else, and I do not know that I should do so. I can offer a perfectly satisfactory explanation of all these things. I wish to say that what the Prime Minister stated in regard to his conversation with me, as recorded in *Mansard,* showed that there was no intention or desire on his part to misquote anything I had said. If, however, it must be said, at the meeting to which I referred on that date, both the Prime Minister and the Treasurer pressed upon me the desirability of the Bank Board shipping more gold to London. The answer made by myself and the Governor of the bank, who was present, was that, having regard to the obligations placed upon the board under the act, the bank could not ship the gold to London; also that if the Government decided that it had to be sent away to meet the nation's obligations, it was not the duty of the Bank Board to ship it. It was the duty of the Government, if it believed thi3 course to be necessary, to obtain the consent of Parliament. {: .speaker-JTL} ##### Senator Daly: -- Is it not a fact that, at first the Prime Minister demurred to the proposal to ship the gold to London to pay the overdraft of the Westminster Bank? **Sir Robert** Gibson. ; As far as I am aware, the Prime Minister and the Treasurer have made every effort, through the Government's financial advisers in London, to obtain time from the Westminster Bank. Evidence of this is. seen in- the fact that the Westminster Bank has1 agreed to accept bill's which are not payable until September. {: .speaker-JTL} ##### Senator Daly: -- Is it- your opinion, **Sir Robert,** that it was the intention of the Government to ship the gold only as a last resort? **Sir Robert** Gibson. ; I cannot answer that question, because I do not know what was in the mind of the Government. I honestly believe, although this is only a. matter of opinion, that the Prime Minister would avoid sending this gold overseas if he saw a way out. {: .speaker-JTL} ##### Senator Daly: -- Is that opinion based upon interviews which you have had with the Prime Minister ? **Sir Robert** Gibson. ; My opinion could only be based upon such intercourse as. I have had' with the Prime Minister. I' am not able to read his mind, but my impression is that, personally, he would prefer to avoid snipping the gold. He did not ask me,, and I think very properly, how it could be avoided. It is not his province to ask me to help to direct the policy of- the. Government, and I think he is perfectly within his rights. Certainly I do not wish to direct the policy of the Government. {: .speaker-JTL} ##### Senator Daly: -- What alternative to the shipping of the gold is now available to prevent default on1 the 30th June next ? **Sir Robert** Gibson. ; That question places me in a very difficult position. If I answer it, it may be thought that I am suggesting or putting forth a policy for the Government. I am not here to do that. I gathered from what you, **Mr. President,** said at the outset, that I am not here to answer questions dealing with government finance generally, but to answer questions relevant to the . bill. The Government or Parliament must surely, in the last resort, accept full responsibility for arranging these matters. The bank is only the medium through which these things may be done. {: .speaker-JTL} ##### Senator Daly: -- Bearing in mind that we have in. Australia a gold reserve of a certain amount, and bearing in mind also that in London we shall have to meet certain commitments on the 30th. of June next - commitments which we cannot meet from the sales of our wool or wheat, what is your advice, as a banker, to the Senate ? Would you send the gold abroad, or if not, what steps would you take to prevent the nation from defaulting? **Sir Robert** Gibson. Again I find myself in the same difficult position. I do not think it is possible to answer this question without involving myself in what might be described as a controversial matter. {: .speaker-JTL} ##### Senator Daly: -- Bearing" in mind that this legislative chamber is called upon to deal with certain legislation, I desire to have your views as to what is going to happen in London if the ?5,000,000 due there on the 30th June is not paid, and, also, of what value is the gold lying in the vaults of the Commonwealth Bank? **Sir Robert** Gibson. In reply to the second question, I think I have already said that, if it were left to me to decide, I would rather send my gold away than default. I_ would prefer to discharge my external obligations, even if I suffered some hardship. But this surely is a matter for the Government to decide. {: .speaker-JTL} ##### Senator Daly: -- If we do not ship our gold, can we avoid defaulting on the 30th June? **Sir Robert** Gibson. I am afraid that I am now being subjected to crossexamination such as might be expected by a hostile witness. {: .speaker-JTL} ##### Senator Daly: -- We are trying to save the bill. Other honorable senators are trying to kill it'. **Sir Robert** Gibson. Is it suggested by the honorable senator that anything I have said here is calculated to destroy the .bill? {: .speaker-JTL} ##### Senator Daly: -- No; but I think you might be able to let the child live. **Sir Robert** Gibbon. It is not my child. {: .speaker-K3L} ##### Senator Sampson: -- Assuming that the gold was shipped overseas what, in your opinion, would be the effect on the public mind and on business in Australia when it became known that the Australian note had no gold backing. **Sir Robert** Gibson. I think I have answered that question in another form. {: .speaker-JVF} ##### Senator Dooley: -- you have said, **Sir Robert,** that you would prefer that we should default in Australia rather than default overseas. What did you mean by that statement? Are we to infer that by sending our gold abroad you believe we shall be compelled to default to our creditors in Australia? **Sir Robert** Gibson. I think the question is a leading one, and I fail to see how I can answer it. I do not. wish to involve the honorable senator or myself in difficulties. If by sending our gold away we depreciated our currency, and we paid our internal obligations in a depreciated currency, would it not be construed as some measure of default to those who have loaned money to us here? I am afraid that if I am obliged in my answers to questions to go into all the niceties, fine arguments and legal difficulties associated with financial problems, I shall be here for a long time. I am not trained to that sort of thing. {: .speaker-K3X} ##### Senator Carroll: -- In your second tetter to the Commonwealth Treasurer on the 6th March of this year, you expressed certain views with, regard to the transfer of gold to London. Do you still hold the same opinion ? **Sir Robert** Gibson. So far as I know the views of the board, I think it would rather see the gold shipped Home than that the nation should default. {: .speaker-KPT} ##### Senator Kneebone: -- From a banker's point of view, which would be preferable in the interests of the nation - to keep the gold here and default, or to send it away and honour our obligations? **Sir Robert** Gibson. I think that I have answered that question fully. {: #debate-11-s3 .speaker-KPQ} ##### The PRESIDENT (Senator the Hoa W Kingsmill:
WESTERN AUSTRALIA -- I desire to tender to you, **Sir Robert,** the sincere thanks of honorable senators for your attendance here and for the evidence that you have given. I ako sympathize with you because of the very close and somewhat lengthy examination to which you have been subjected, and which you have most admirably sustained. You have, I think, widened the views of honorable senators on both sides of the Senate in relation to questions connected with this bill, and through this bill with finance generally. We know, too, what a particularly stressing time you are having, and we cannot but admire the devotion to duty that you- have displayed by having undertaken two severe journeys and an afternoon's ordeal, the physical strain of which is as great as any long journey by motor car could be. I thank you most heartily on behalf of the Senate, and assure you that honorable senators feel deeply indebted to you for the advice that you have given and the opinions that you have expressed. Honorable Senators. - Hear, hear! *The witness then withdrew.* {: .page-start } page 1632 {:#debate-12} ### NORTHERN TERRITORY. (ADMINISTRATION) BILL *In committee:* Consideration resumed from the 1st May *(vide* page 1533), of House of Representatives' message and report of conference managers. No. 1 (Clause 4)- >Section three of the Principal Act is amended by inserting before the definition of " the Territory ", the following definitions : - " ' the Council ' means the Advisory Council constituted under this Act; ". > > *Senate's amendment.* - Leave out " ' the Council ' means the Advisory Council constituted under this Act". > > *House of Representatives' message.* - Amendment disagreed to for the following reason: - > >Because it is the policy of the Government to give representation to the people of the Northern Territory and the amendments made by the Senate will prevent the carrying out of that policy. > > *Conference report.* - That the amendment made by the Senate be not agreed to. Upon which **Senator Dooley** had moved - >That the amendment be not further insisted upon. Question put. The committee divided. AYES: 5 NOES: 18 Majority . . . . 13 Nos. 2 to 5 (consequential). Motion (by **Senator Dooley)** negatived - That the amendments be not further insisted upon. Resolutions reported; report adopted. AYES NOES {: .page-start } page 1632 {:#debate-13} ### ADJOURNMENT Examination ofSirRobert Gibson - Supply of " Hansard " Proofs. Motion (by **Senator Barnes)** proposed - That the Senate do now adjourn. **Senator Sir GEORGE** PEARCE (West Australia) [5.52]. - As I assume that the debate on the Commonwealth Bank Bill will be resumed to-morrow, I should be glad if arrangements could be made for honorable senators 'to receive, in the morning, a report of to-day's proceedings, when **Sir Robert** Gibson was subjected to interrogation by honorable senators. {: #debate-13-s0 .speaker-KPQ} ##### The PRESIDENT (Senator the Hon W Kingsmill:
WESTERN AUSTRALIA -- They would have to be unamended proofs. {: #debate-13-s1 .speaker-K0F} ##### Senator SIR GEORGE PEARCE: -- Honorable senators in perusing the proofs would know that they had not been revised. It would be of considerable assistance to honorable senators in the dis- ' cussion of the bill if they had even an unamended report of the questions and answers referred to. {: #debate-13-s2 .speaker-10000} ##### The PRESIDENT: -- Honorable senators are aware- that *Hansard* has been working under considerable strain lately ; but I feel sure that it will live up to its reputation of always achieving the seemingly impossible, and supply honorable senators to-morrow morning with unamended proofs of to-day's proceedings in connexion with the Commonwealth Bank Bill. Question resolved in the affirmative. Senate adjourned at 5.54 p.m.

Cite as: Australia, Senate, Debates, 6 May 1931, viewed 22 October 2017, <>.