10 July 1931

12th Parliament · 1st Session

The President (Senator the Hon. W. Kingsmill) took the chair at 11 a.m., and read prayers.

page 3749


Is it the intention of the Government to make any change in the sitting days next week ?

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

– I have at present no knowledge of any proposed change.

page 3749



Senator SAMPSON:

asked the Minister representing the Prime Minister, upon notice -

In view of the statementof the Treasurer, that the bounties cm gold, cotton, flax, linseed, iron and steel products, sulphur, power alcohol, and wine for export are to be reduced, will the Government take action without delay that will ensure a substantial reduction in the price of sugar for the manufacturing, domestic, and otherconsumers?

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

– - The fullest possible consideration was given to the provisions of the sugar agreement before it was executed on behalf of the Commonwealth Government. Clause 1k iv. of the sugar agreement makes provision for the reduction in certain circumstances of the price charged to manufacturing and domestic consumers. The Government is satisfied that the present arrangement is the best possible in the interests of Australia generally.

page 3749



Senator LYNCH:

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

If it is a fact that the Government has applied the principle of a considerable reduction in the payment of bounties on the production of certain primary products ranging from50 per cent. downwards, will the Government apply the corresponding principle of an equally considerable reduction in tariff rates imposed on secondary products?

Senator BARNES:
through Senator Dooley · ALP

– The Government has adopted a tariff policy which it considers is the best in the interests of Australia generally. Suggestions for a variation of the tariff proposals in any particular direction will receive consideration.

page 3749


Senator DOOLEY:
New South WalesAssistant Minister · ALP

– I lay on the table of the Senate, by command -

Estimates of expenditure for additions, new works, buildings, &c, for the year ending 30th June, 1932.

The Budget, 1931-33 - Papers presented by the Hon.E. G. Theodore, M.P., in connexion with the budget of 1931-32 (preliminary issue ) . and move -

That the papers be printed.

Debate (on motion by Senator Sir William Glasgow) adjourned.

page 3749

BUDGET 1931-32

Senator DOOLEY:

-by leave - read a copy of the budget statement as delivered in the House of Representatives by the Treasurer (the Hon. E. G. Theodore) (vide page3737).

Senator Sir GEORGE PEARCE (Western Australia) [11.50]. - A departure has been made from the usual procedure. Hitherto, when the Estimates and budget papers have been laid upon the table, the Minister has made a speech on the motion “ That the papers he printed”, and, in the subsequent discussion, we have had an opportunity of referring to whathas been said in that speech. This morning, however, the Minister merely moved that the papers bo printed, and the debate having been adjourned, he then read the budget statement as delivered in another place this morning by the Treasurer. I wish to know whether, in the subsequent discussion, references to what appears in the statement that has been read will be permitted.

The PRESIDENT (Senator the Hon. W. Kingsmill) . - While the procedure is, I understand, somewhat different from that followed in the past, it is not out of order. For the convenience of honorable senators, the statement will be placed on the table, and reference may be made to it in the budget debate.

Senator DOOLEY:
New South WalesAssistant Minister · ALP

– It was my intention to lay the statement on the table, but the Leader of the Opposition (Senator Pearce) asked me a question, and the motion that the papers be printed was put before I had an opportunity of doing so. Earlier this morning I was asked if the Government proposed to alter the days of Bitting of the Senate next week. I have just received a request from the Government that the Senate should meet a day earlier next week; and I now give honorable senators notice that I shall move later that the Senate, at its rising, adjourn till Tuesday next.

page 3750


Second Reading

Debate resumed from the 9th July (vide page 3605), on motion by Senator Dooley -

That thebillbe now reada second time.

Senator PAYNE:

– At the conclusion of my remarks yesterday, I expressed regret that, after the terrible period of stress experienced for the last year or two, we should now be faced with the dislocation of a most important industry in the Newcastle district, through the strike of a thousand miners. I understand that the dispute has not yet been settled. I visited Newcastle a short time ago, and was gratified tolearn that, after having passed through a period of extraordinary difficulty, the coal trade was reviving. The week before I was there, the largest output of coal that had occurred at Newcastle for a considerable time was witnessed. The local inhabitants, who had been seriously inconvenienced, many of them having been brought to bankruptcy, through the cessation of the industry, were optimistic regarding its future. But we now learn of the disastrous strike at Cessnock.I saw somethingat Newcastle which made mo wonder whether the people of Australia had even begun to learn thelesson of these adverse times. I saw a crowd in the main street of the city, comprising from 300 to 400, apparently intelligent men, drinking in the doctrines being preached by a professed communist to such an extent that one could scarcely realize that it was possible in a country like Australia for such doctrines to be accepted. The speaker was urging his audience to follow his example. He said that he had worked for the capitalists for years, and had earned good wages, but he intended never to work for them again. Using a colloquial phrase, he said that he was “ on the bum,” and intended to remain so. On the following day which was a Sunday, a procession was organised to march through the streets. It consisted of about 300 individuals, including, I regret to say, 30 or 40 youny women, who carried bannerettes on which were the words, “Hands off India.” and “ Long live the Soviet Republic.” That is the temper of a certain section of the people in Australia, and, unless that spirit it smashed, wo, who have been optimistic regarding the future of this country, will be asking whether our optimism is justified.

Senator Kneebone:

– We must heal the trouble, not crush it.

Senator PAYNE:

– Desperate diseases demand desperate remedies, and no remedy can be too desperate for this cancer.

I have taken the trouble to turn up the Year-Book, of 1930, in which I find what, in my opinion, is the greatest contributory cause of the internal difficulties of Australia. Letus read the record of the cost of industrial disputes during the last three years, up to and including 1929. We can reasonably assume that the actual cost of industrial disturbances is greatly in excess of the figures that I am about to quote. These disputes have been mainly brought about at the dictation of those in control of industrial organizations. The figures are as follow : -

It will be seen that, in 1929 the cost increased to the enormous sum of approximately £5,000,000, and that figure must be multiplied at least four or five times in arriving at the actual cost of these strikesto the community. In 1929, the loss of working days on account of all industrial disputes in Australia totalled 192, representing, in all, 4,671,478 working days, compared with 777,278 in 1928. Therefore, the actual loss of working days was five or six times greater in 1929 than in 1928. The two principal strikes that contributed to that awful condition of affairs in 1929 were those in which the timber-workers and coal-miners were concerned. The timberworkers’ strike in New SouthWales lasted from January until October, and in Victoria, from January until June, and involved directly no fewer than 3,000 employees. The coal-miners’ strike lasted from March, 1929, to June, 1930, and involved directly 10,000 employees. But the fact that these 13,000 persons were on strike for this long period caused probably three times as many other employees to suffer more or less. I mention these facts to support my contention that this bill is not a remedy for the evils which have brought about the present state of affairs; it is merely a palliative. I would compare it with a dose of morphia which a medical man administers to a patient in acute, agony in order to allay his pain, and make possible a careful investigation of the causes of his trouble. When we have applied this palliative to the ills from which we are suffering, we should set to work to make a complete investigation of the causes which have brought about the complaints from which we have suffered during the last, three years.

Senator Kneebone:

– The honorable senator would aggravate our troubles by the abolition of arbitration.

The PRESIDENT (Senator the Hon W Kingsmill:

– I ask both the honorable senator who is addressing the Chair and the honorable senator who is interjecting to confine their observations to the bill.

Senator PAYNE:

– I submit, sir, that in considering a measure of this kind, we are entitled to pay some regard to the whole of the circumstances which made the introduction of it necessary.

I shallnow proceed to discuss certain provisions of the bill which, in my opinion, will need a good deal of explanation and probably some amendment. Sub-clause 2 of clause 19 provides that -

The amount of new securities issued in exchange to any holder for any amount of existing securities shall … as nearly as practicable be allotted equally among the several dates of maturity:

Provided that in the case of the conversion by any one holder of any amount of existing security not exceeding £1,000 or on the conversion of securities held by trustees the Treasurer may approve of the issue of securities being allotted over a lesser number of maturity dates.

This provision may inflict real hardship on small bondholders. This morning, I received a letter bearing upon this aspect of the subject from which I quote the following paragraph: -

I have had numerous inquiries not only from personal friends, but from people whose casual acquaintance 1 have made in different parts of Tasmania during my years of service. Most of them are small bondholders. They all express themselves as perfectly willing toconvert,but complain of want of enlightenment. Many ask why in the case of holders of up to, say, £600 or £700, it should be autocratically left to the Treasurer to choose what period they should be placed for.

The maturity dates, as every honorable senator knows who has read the bill, extend over a period up to 30 years. It will be small satisfaction to the holder of bonds to the extent of, say, £500 to know that he may not be able to secure possession of all his capital until 30 years have expired. It would be reasonable for the Government to agree to an amendment of this provision to provide that persons who hold bonds to the extent of, say, £500, and who convert in the new issue may be allotted bonds which will mature on the first maturity date, 1938. If small bondholders are only offered bonds maturing at five or six different dates they will be greatly discouraged from converting. Many of our small bondholders are aged people, and they should be given a reasonable expectation of the return of all their capital within their lifetime.

Senator McLachlan:

– The Treasurer has already provided for that to be done.

Senator PAYNE:

– I see nothing in the bill about it.

Senator McLachlan:

– The bill gives a discretion to the Treasurer in this regard, and the honorable gentleman has indicated in his speeches that he will exercise this discretion sympathetically.

Senator PAYNE:

– A speech by a Minister has no legislative effect whatever. If the Treasurer has a real intention to exercise a discretion in favour of the 8m a 11 bondholders, he should not object to a definite provision being placed in the bill. I shall deal with this, matter further at the committee stage.


– That is the right time to deal with it.

Senator PAYNE:

– This provision is part of the measure, and I submit that I am entitled to refer to it at this stage.


– The honorable senator is being as microscopic as he can be in a second-reading speech.

Senator PAYNE:

– Clause 24 of the bill provides that -

Kew securities bearing interest at the rate of four per centum or three and seven-eighths per centum per annum and having fixed dates of maturity shall bc accepted by the Commonwealth at par in payment of Commonwealth estate duty.

I have no objection to that provision, but I consider that there is equal justification for providing that such securities shall be accepted by the Government in payment of Commonwealth income taxation. In view of the fact that many of our people will lose a considerable proportion of their income from their investments in Commonwealth stock, it is surely not unreasonable to ask that these gilt-edged securities should be accepted in payment, of income taxation, particularly as the acceptance of them would reduce the debt obligation of the people.

I wish now to make some reference to Clause 15, which provides that -

Now securities issued in exchange for existing securities held by a government saving* bank shall mature upon the original date of maturity of the existing securities if the Treasurer of the Commonwealth or the State concerned, and the savings bank, so agree.

Unfortunately, the definition of government saving bank does not include two institutions which were the pioneers of the savings bank system in Australia. I refer to the Hobart Savings Bank and the Bank for Savings, Launceston. These banks were incorporated by an act of the Tasmanian Parliament, passed on the 22nd September, 1848, the preamble of which reads as follows: -

Whereas certain banks for savings have been established in Van Dieman’s Land foi the safe custody and increase of small savings belonging to the industrious classes of Her Majesty’s subjects, and it is expedient to give protection to such institutions, and the funds of same, and so on. These two institutions laid the foundation for the establishment of savings banks in other parts of Australia, and for the encouragement of the thrifty classes in our community. They have done, and are doing, a magnificent work. They are large institutions, but it must be remembered that their funds are liable to be called up at any time by their depositors. They are trustee banks, and not trading banks, because, under the act of Parliament to which I have referred, they cannot invest their funds except in real estate and government securities. They have no shareholders except their depositors, so no fat dividends are drawn from their funds. Everything that these banks possess belongs to the shareholders. The act under which they are incorporated provides that their reserve funds may not exceed a certain amount. Any excess of the stipulated figure must be returned to the depositors. This is done, of course, by way of interest payments. In view of the fact that all the funds of these banks are at call, they may be placed in an embarrassing position unless an amendment is made to include them in the provisions of clause 15.


– The honorable senator knows that that is a committee matter.

Senator PAYNE:

– I have only touched on the fringe of it, sir. I wish to intimate that at the committee stage 1 intend to move an amendment to give effect to my suggestion. I hope that those honorable senators who have spoken in disparaging terms of this scheme will realize that the worst gospel that can be adopted in Australia to-day is that of despair. We should try to inculcate into the minds of our people the confident hope that this Commonwealth will emerge triumphantly from its difficulties. We must definitely decide to avoid all unneccessary expenditure, as a community of individuals, and live within our means. Wo should refrain from purchasing expensive luxuries. I hope that out of this measure will emerge something for the permanent good of the, Commonwealth, and that within a few years when a brighter era has been reached, many of the burdens which the people are being called to bear will be lifted from their shoulders. What leads me to believe that I am right in expressing a confident note is the fact that we have established, during the last fifteen years, a record unsurpassed by any other part of the Empire. Our total War Debt to-day is £277,000,000. The total cost of the war to the people of Australia, up to the end of June of last year was £744,000,000, so that up to dato we have repaid £467,000,000 of our war debt. The splendid effort should certainly inspire the people with a hope for the future. Having performed that enormous task, surely it is reasonable to think that with proper care of the administrative affairs of this Commonwealth, we can look forward to a brighter period once we have overcome our immediate financial difficulties.

South Australia

– This measure is the first of a series to be introduced in an effort to bring about the reconstruction, and, to some extent, the financial stability of Australia. I approach its consideration with a head bowed with humility, but not with despair, because I feel that this legislation connotes the failure of democracy as applied to the practical affairs of Government. To us, representing, as we do, the people of this country, and elected on the broadest franchise, has been entrusted since the inauguration, of this Parliament, control of the finances of this Commonwealth. We are now obliged to fall back upon an expedient which does, although not from a moral point of view, commend itself to those who believe that the nation’s integrity should stand triumphant over everything else, that we should maintain our national honour in every respect. We are assured that this plan will make for the rehabilitation of Australia, and a greater measure of foresight in regard to public finances. It will have to make for that, otherwise we shall be utterly undone.

This proposed conversion loan is not a new expedient. It involves a breach of the contract which we entered into with Australian bondholders. This proposal to fix the current rate of interest on government money in this country is as old as the .ages. It was a part of the old Justinian code and the Mosaic law. It has been given effect from time to time with more or less uncertain results. But while we are stirred, from the moral point of view, with the gibes thrown at this conversion scheme, we, in turn, ask those who criticize it to offer some alternative. We ask them to offer some constructive scheme to replace the plans which have been put before us by the Government of the day after conference with the Premiers of the various States. The only tangible proposals that are likely at the moment to lift Australia out of the financial morass in which it has been allowed to fall are those which have been introduced by the Government. There would be no necessity whatever for this bill, as part of the reconstruction scheme, if the other proposed methods of economy and savings in various directions had been applied some eighteen months ago. We have read the views expressed at the Premiers Conference by economists, such as Professor Giblin, in regard to the future of money. Money, like every other commodity, is to be affected under this scheme, and had we, by stern measures of economy, put our financial house in order, and made a decent attempt to balance the budget, just as Mr. Goschen did years ago in England, we should not to-day be asked to agree to this conversion plan, with the ‘ fact being thrown in our teeth that there is need for compulsion. Had we begun to economize eighteen months ago, money would now be offering for governmental purposes and there would have been no necessity for other than a purely “voluntary conversion loan. There is plenty of money available overseas. We know that in America it is almost impossible to find a suitable investment. According to this morning’s press there is a plethora of money in London. Sir Robert Horne, who is so much interested in this country, has referred optimistically to Australia’s future, and he is prepared to hold out a helping hand to Australia in the event of our giving effect to a scheme of rehabilitation such as is now proposed. It is to our humiliation and shame that we have to go cap in hand to our borrowers asking them, to accept something less than we promised to give them under contract. Behind this conversion scheme is the threat that interestmay have to be reduced by, means of taxation. While that may be regarded as class taxation, the fact remains that the interest earnings of the bondholder, except in special circumstances, have always been subject to income taxation, and if the solvency of this country depends upon either the imposition of taxation or tho reduction of interest, it matters not which method we adopt.

We must take drastic measures to face the present financial crisis. When Sir Robert Gibson gave evidence in this chamber recently in respect to the Commonwealth Bank Bill he was asked, if default had to be made, whether he would prefer to default overseas or here. After a moment of manifest anguish, he said that he would prefer to default to our own people. Australia should, if possible, maintain its integrity unsullied in regard to the outside world. It should stand up to its oversea obligations. The bondholders are equally responsible with the other section of the community for our present position, and they must bear their share of the sacrifice. This measure is inadequate for the future protection of Australia, because it does not provide for some control on the part of those who lend money to Australia. No director of a company who has raised money by debenture has the easy disposal of that money. He cannot squander it on the construction of useless railways and public works in this and that district as governments do to win popularity. If the public works that have been constructed solely for political purposes in one little State had never been undertaken its national debt would bc about half its present dimensions. What protection has the bondholder who lends his money, or the trustee who invests funds in government securities, which hitherto have been regarded as gilt-edged, when the money is handed over to treasurers throughout Australia to be expended as, when, and where they will? Democracy does not control public finance as it should be controlled, and for a long time I have held the view that the treasury should be controlled, not by an individual, but by a commission upon which bondholders could be represented. They would then have an opportunity to ensure that money was not squandered, that adequate contributions were made to sinking funds, and proper provision was made for the redemption of debts on the due dates. In the treasury, as iu every department of state, individual control is bad for the body politic. I know of no large private concerns whose finances are entirely controlled by one man, and, after all, what is this Parliament but the directorate of Australia Unlimited? Parliament purports to exercise some control of the public purse, but the control that is really wanted is that which keeps a tight rein on all forms of governmental expenditure - control such as Sir George Turner exercised when Treasurer of Victoria. Urgently though such control is needed to-day, it will be even more necessary in the future if Australia is to bc financially and economically rehabilitated.

This bill deals with only one phase of our indebtedness - the internal public debt amounting to £556,000,000, and distributed r.s follows: - States savings banks, £83,000,000: Commonwealth Bank, including the Savings Bani branch, £65,000,000; joint stock banks, £20,000,000 ; superannuation funds. £0,000,000: other governmental and semi-governmental funds, £12,000,000 ; insurance companies, £35,000,000; friendly societies, £3,000,000; and the public, £329,000,000.-

This measure and the others related to it must be regarded as merely the first steps towards rehabilitation; we have to grapple with that much more difficult problem presented by Australia’s external indebtedness. I repeat what I said to the Senate on a former occasion - that the only way in which we can re-establish our credit overseas, and the present time seems opportune, is to bring the -sinking fund to bear on the external debt. If we give to the bondholder overseas assurance that his debt is secured, and that Australia will eventually pay every fraction it owes, we may rest assured that we shall be freed of further anxiety The present crisis is causing anxiety to the governments and parliaments of Australia, and that concern is reflected throughout the length and breadth of the land, in every commercial house, bank and insurance office. Such untoward happenings as the closing of the Government Savings Bank of New South Wales accentuate the apprehension felt in all branches of commerce and industry.

I reiterate, in the hope of impressing the Government, two things, that must be done in order to re-establish confidence. Firstly, the bondholder must be assured that the money he lent is being wisely used. He is entitled to a voice in the expenditure of it, and in the provision made for its repayment. In effect, ‘a trustee should be appointed for the debenture-holder in public, as well as in private, finance. Up to the present, no such protection has been afforded to him. Parallel with such provision, an effort should be made to improve the overseas loan position. If the bill now before the Senate is passed, as I believe it will be, and it proves successful, there will be available to Australia the money that is at present tied up in London. That will ease our difficulties for a little time, but the loan position abroad has to be faced, and what more fitting time than now? The sympathies of the people of the Old World are with Australia. They have not lost confidence in us, as Sir Robert Home has pointed out. Large sums of money are at present available for investment. Let us restore stability and give to the bondholder some protection, and there will be available to us overseas much more money than the Treasurer can expect to get otherwise: during the next few months. But a premature attempt to fund or convert our overseas indebtedness would be fatal tothe future credit of Australia. We must first do our job of work in this country,, convert our internal debt as the bill proposes, and convince the world that Australia, is willing to live up to its boast of honesty and honorable dealing. When we have shown that we are prepared to balance our budgets, and live within our incomes, all will be well for us on the other side of the world.

I have been much impressed by a letter received recently from an erstwhile resident of Australia, who has been living in London for many years, and with whom I was iu close association for a short period in my student days. Writing to a mutual friend, he said - 1 don’t share our old friend’s pessimism, and believe that, ultimately, Australia will put her house in order and regain the confidence of the financial world. The Australians are an honorable, upright race and have a proper pride withal, and they will pay their debts. English, by birth, I am proud to bo an Australian by’ adoption. When people run down Australia, I say, “ Look at home “. Here trade is leaving us fast. Every industry is depressed and taxation is appalling, while nearly 3,000,000 people are unemployed. Two threatened strikes of colossal proportions have just been patched up1 - only for a while; the trouble just covered, but remaining underneath, only waiting to boil over again. Parliament indifferent and ineffective. Leaders manoeuvreing for position and not caring for the country and the people . . . Taxation is killing industry, and even Snowden has admitted that any increase would be the last straw. And yet the dole is to be increased and extended; it now means one hundred millions a year. Yes. T say. “ Look at home “ and leave Australia to light her battles and pay for the extravagance of her youth.

That is well put. We have to fight our battles ; we have to pay for our mistakes. There is no gainsaying that we have been thoughtless and thriftless, and the money received from, the bondholders has not been spent by us to the best advantage. We are told that the present troubles are the aftermath of the war. In a measure that may be true. But when depression assailed the world in 1921, attacking even our sister dominion, New Zealand, where I saw sold for £4 and £5 each, cows which formerly were worth £40 or £50, why was Australia immune? The answer is obvious: the two exportable commodities spoil which this country mainly depends, wool and wheat, were unaffected in the markets of the world. Whilst not claiming to be a prophet or the son of a prophet, I realized, even before the price of wool fell, that paltering with Australia’s affairs must cease. I yield to no one in admiration of the Australian in the fields of commerce and war alike, but though the present depression causes intense suffering and great hardship, it is, I believe, a blessing in disguise. Nothing could have saved us if we had continued borrowing and spending at the old rate. Had the price of wool remained high, we should have been forced on to further extravagance by an insistent democracy, ever clamorous for benefits. “Bread and the games “ was the cry of the populace In ancient Rome; and the thoughtless importunity of our people would have prolonged the policy of reckless expenditure to the detriment of the nation. The present set-back will, in the long run, prove to have been for the good of Australia. I. welcome it, because it gives us pause for thought. We shall have to revert to those old and well-tried methods, from which Justinian sought to escape by legislation, and give attention to those factors which really count in the economic make-up of a nation.

Sitting suspended from 12.45 to 2.15p.m.

Senator McLACHLAN:

– Before the adjournment I was dealing with the follies of the past. Might I just point, by way of reference, to one of our great public utilities that is more or less controlled by the governments of the country, the railways of Australia. For the year ended 30th June, 1930, our railway systems that are go vernmen tally controlled, lost, between them, £9,500,000, just a shade short of the total amount of the deficits of the six States concerned. That appalling position is largely due to inefficient control, and the result of the protrusion of governments into the business affairs of the country. No proper provision has been made for depreciation on our railway rolling-stock. According to the press, the position of the railways will occupy the early attention of the Prime Minister. If such problems are not faced, what relief can we obtain overseas or internally from the new money that is necessary to restore to employment all those who are now out of work; those who are causing the country a tremendous amount of money, and, what is more important, who are losing their own morale, and undermining that of the people generally? If it be true that government is finance, and finance is government”, then we have neither government nor finance in Australia, so far as the business affairs of the Commonwealth and the States are concerned. It was all moonshine for honorable senators now behind the Government to claim when in opposition that the country could profit by a participation in business affairs. Governments that have indulged in such practices are now realizing the pitfalls into which they have been led. It is pleasing to note that there is an awakening on the part of the people of Australia to the fact that their utilities must be well managed, free from political interference, and that they must pay their way. No longer will they tolerate the log-rolling that took place in the past with regard to the construction of railways, breakwaters, jetties, and that sort of thing, without economic justification. The position of our railways to-day is an illustration of the stupidity of the whole system which prevailed in the past.

That the position in Australia is uncertain at the moment is evidenced by the price of our stocks. Their depreciation may be due to several factors, even to a predominance of sellers. But I venture the opinion that a number of those sellers of bonds that are transferable on delivery are taking cover in respect of their past bond holdings, in order that the whereabouts of those bonds may not be discovered in this period of reckoning. Every stock in Australia has to come into the Treasury, whether converted or not, in order that a new Commonwealth register of all stocks issued in Australia may be compiled. I do not think that the prevailing low price of our stocks represents their true market price. It is amazing to calculate the return that could be obtained by a person who had money available to purchase Australian bonds in the United States of America. Taking into consideration the advantages of exchange and interest rates, the return would be much greater than that obtained by Australian bondholders. This conversion will press very heavily upon some institutions which stand for thrift, and which, taking time by the forelock, have bought bonds at reduced prices in order that they may bc able to live up to their fiduciary obligations with their beneficiaries. However, more of that later. The bill betrays tremendous solicitude for the quasi-governmental and governmental institutions.

That which the bill intends to accomplish is a reversion of all principles known to law. When an ordinary trader or private individual gets into financial difficulties he is obliged by the law to convene a meeting of those to whom he is obligated. What happened in this instance was the very reverse of that process. A meeting took place between persons immediately in control of the affairs of the nation to see what could be done to relieve themselves of their obligations to their bondholders, who will have to accept the proposals - I admit in their own interests.

Great care will have to be exercised lest the Government brings about difficulties in relation to other bodies than the actual bondholder, as scheduled in this bill. I refer to bodies which have placed their faith in the securities of the Commonwealth and the States as an investment for the funds for which they are the trustees. I observe that under the measure governmental savings banks, State and Commonwealth, and certain other privileged institutions enumerated in the measure, are placed in a position far apart from that of friendly societies and insurance companies. Earlier in my speech I indicated that our friendly societies hold bonds to the amount of £3,000,000, while stocks held by insurance companies total £35,000,000. Those sums represent funds that have been invested, on actuarial advice, in order that the institutions may be able to fulfil their obligations to their members or policy-holders, as the case may be. The liabilities of friendly societies and insurance companies are rauch alike, inas much as these actuarial calculations in respect of their liabilities are common to both. While I know that in Australia there is one great institution which calculates its return from moneys so invested at a much lower basis than does any other similar concern, the great bulk of insurance companies in this country calculate their returns on what is known as a 4 per cent. Sprague basis. Such investments are segregated from the ordinary funds of the institution in order that the directors may be able to see from time to time that the interests of their policy-holders are secured against all eventualities. I admit that, in such investments, there is a margin beyond the 4 per cent, calculation and the actual earnings of the money, and that that aspect was dealt with at the Premiers Conference in Melbourne. It is the margin between the 4 per cent, and the actual earning power of the money at 5 to 5-J per cent., and is known as the margin of safety. It is a necessary precaution. The actuarial calculations of insurance companies assume that “ risks “ will live over a certain period, the average life of an individual. But they omit from consideration the possibility of an epidemic or some holocaust, which might render the fund absolutely, insolvent if no provision were made for a margin of safety. Given that, for the future, these companies are going to earn only 4 per cent., they must endeavour to ensure that their policy-holders, great and small, will receive the amount for which they are assured on the maturity of their policy. It looks very much as if the return in the future cannot exceed 4 per cent. I noticed in the press a day or two ago, and the sum must have been a large one otherwise it would not have attracted the attention of the pi-ess, that a large amount of money was offering at 4 per cent, in Victoria. As these institutions, which have providently made investments at from 5 to 5-J per cent., are to have their earnings reduced to 4 per cent., Parliament should consider where it is leading the trustees of the policy-holders of the nation. After all, not one penny of the money belongs to any individual, except the person who is entitled to it on the untoward happening of his death, or on his attaining the age stipulated in his policy. I suggest that the provisions of the measure should be made somewhat .wider in that connexion. Clause 7 of the bill provides that -

The Governor-General may authorize the Treasurer to pay ofl’, re-purchase, or redeem any existing or new securities or any part thereof.

For the future the Treasurer of this Commonwealth may become a dictator as to whether an insurance company shall be solvent or insolvent; whether it will be able to meet its liabilities on a given date, or not. That is what it boils down to. I suggest that some body should be interpolated between the Treasurer of the Commonwealth and the bondholder in that regard. I do not say that they should be entitled to have their money - they must fall in with the rest of the people in that respect - .but if funds placed in the hands of the Commonwealth or State Treasurers as a trust investment are not kept intact, some thousands of persons will be affected, anc will lose the benefits for which they have striven. An economic crash may occur, such as visited this country in 1893.

Senator Kneebone:

– The superannuation funds in some of the States are in danger already.

Senator McLACHLAN:

– I am obliged to the honorable senator for that interjection. I ‘ have no doubt that under clause 7 the Government hopes to guard against such a happening, but it seems to me that owing to the hustle and bustle, and the rapidity with which this legislation has had to foe drafted, some of these factors have escaped consideration at the hands of the Ministers. I know that we must pass this measure, and do it speedily, because we have heard from the Prime Minister and the Treasurer of the parlous condition of the country; yet I think that the Government would be well advised to reconsider the provisions of clause 7.

There is no doubt that, under clause 15, a measure of protection is afforded to the savings banks, which is not given to bodies such as superannuation boards and friendly societies, which I have in mind, as well as insurance companies, which are much more largely interested. Clause 15 does not give the savings banks a free hand iri the matter, because it is provided that any securities held by a government savings bank are to mature on the original date of maturity of the existing securities “ if the Treasurer of the Commonwealth or the State concerned and the savings bank so agree, but otherwise shall be subject to the provisions of this act.” Then the clause goes on to define “ a Government Savings Bank”. I fully realize the necessity for such a provision, but are the savings banks, the friendly societies, and the superannuation boards to be dictated to by the Treasurer of the Commonwealth or a State? When we are seeking at the hands of the bondholders the use of their funds, surely a greater measure of justice is due to them than is meted, out under clauses 15 and 17. I believe that their rights have not been intentionally disregarded. The absence of sufficient safeguards in the bill is due, no doubt, to a lack of understanding of the position in which these bodies find themselves. It is probably due to the belief that the funds which they have invested are the property of the bodies concerned. They are no more the property of the insurance companies, or the friendly societies, for instance. than they are the property of the trustees of the savings banks or the superannuation boards. All these funds are in the same category. I believe that it would contribute greatly to the success of the voluntary conversion to insert some provision to ease the minds of those in charge of these funds, and let them understand that, in the event of hardship - because we can only put it on that ground - their funds will be made available to enable them to meet a crisis, and that they will te permitted to approach some tribunal which will decide between them and the Treasury. The funds to which I refer comprise £59,000,000, or a shade over one-tenth of the whole of the internal loans.

We must take the long view in financial matters. The conversion will cause tremendous hardship in some cases. Certain insurance companies that I know have just passed through the period that all small companies have to undergo, and. are now emerging from the chrysalis stage and becoming worth while to the policy-holders. If the rate of interest be reduced to 4 per cent., and no provision be made to enable such a company to lay its hands on its funds periodically as it requires them, seriousresults may follow. I do not suggest that there should be a free and easy provision, but one that would safeguard the Government, and help the country. Only the other day, we noticed that an insurance company in New South Wales collapsed. I have no desire to introduce matters that will injure the credit of the country or of any individuals, but the result was that 16,000 persons were deprived of any benefit from all the money that they had put into this company. Their policies were taken round to see if other companies would underwrite them, but the business was so unattractive that the policies could not be underwritten with safety by any other company. This incident caused a sensation in New South Wales, and I venture to say that, if we do not make some provision ahead with regard to these institutions, we shall find ourselves in considerable trouble. The criticism has been offered, and not without foundation, that the governmental institutions are being treated rather better than the private institutions. After all, this is a transaction between governments and those to whom they owe money. Let us leave it at that. Let us drop government interference in all outside matters, because this bill deals only with the Government and its own credits. I do not propose to stress that matter further, and I trust that the Government will consider it from the point of view that I have taken.

The suggestion was made yesterday that the Government might find itself embarrassed because conversion loans will be necessary at various periods, but I contemplate no difficulty in that regard. As I have already said, I feel that the price of money will fall. For the benefit of Senator Duncan, who sounded a note of fear in regard to the first conversion in 1938, I remind him that, roughly speaking, the loans mature in ten periods spread over 30 years. I commend the scheme because in that respect it gives us breathing space. It is true that the amount that will be converted in 1938 will be far above one-tenth of the total of £556,000,000. It is contemplated, as I read the bill, that sums up to £1,000 will be paid off during the first three periods, and these amounts may press a little heavily with regard to the first loan. Suppose £65,000,000 is to be converted in 1938, may I suggest that the sinking funds will play no small part in dealing with the securities maturing in that year ? These funds by that time will have amounted to something like £6,000,000 per annum. That will give us £42,000,000 to ease down the position in that year. I venture to say solemnly to the bondholders of this country that they will be fortunate, indeed, if after the next year or two, when confidence is restored to Australia, they get 4 per cent. on their securities. There is no escaping from that position. Professor Giblin pointed out that money will be cheap in that period.

Senator Sampson:

– Where will it be cheap ?

Senator McLACHLAN:

– It is cheap in Melbourne now. On good security money is offering there at 4 per cent. Let confidence be restored, and the price of money will be below 4 per cent. before that period has expired.

Senator Crawford:

– We will borrow, boom and burst again !

Senator McLACHLAN:

– No government will be able to borrow unless it puts its house in order. It is obvious that, neither here nor overseas, will money be available under any other conditions, and we had better face the position right away.

Senator Crawford:

– That is good news.

Senator McLACHLAN:

– It is the best that I have heard, because the money that has been borrowed by governments in the past has not been spent in the best interests of the nation.

In 1938, the Government will probably be faced with no difficulties in regard to this bill, but trouble may arise in the years to come, because the agreement is not quite sufficiently elastic. There is a period of nineteen years during which the Treasurer cannot convert, though it may be a most favorable period for conversion, and there may be plenty of cheap money about. The bankers, the Treasurers, and the economists believe this; it is a matter of fairly common knowledge. The Treasurer is tied up for that period of nineteen years. No doubt legislation could be introduced to overcome this difficulty.

I have dealt with the main facts that emerge from a consideration of the general aspects of this bill which should be discussed at the second-reading stage. But there is one other matter to which I must refer, for this Parliament should pay some regard to it. The Prime Minister is responsible for the conduct of the governmental affairs of this continent. I have no doubt that the State Ministers attended the conference in Melbourne at the request of the Prime Ministor, and as the outcome of earlier negotiations, and devised a certain plan. But extreme embarrassment will be met in trying to give effect to the plan unless comprehensive amendments are made to the trustee legislation of the Commonwealth and all the States, in order to absolve trustees from charges of breach of contract in respect to actions they may take, to give effect to the plan.

Senator Kneebone:

– Has not provision been made to absolve trustees?

Senator McLACHLAN:

– The honorable senator will realize that we can act only within our own sphere. Clause 25 of the bill deals, to some extent, with this point; but there is no doubt that full absolution must be granted to trustees who convert the holdings for which they are responsible. It is essential that the trustee legislation of the Commonwealth and States alike should be most carefully scrutinized in order to meet difficulties that may arise in this connexion. Honorable senators will undoubtedly have had scores of cases of the difficulties of trustees brought under their notice, each one of which differs in certain respects from every other one. The plain fact is that trustees will not he prepared to take the risk of converting unless they are fully absolved from charges of breach of trust.

Senator Kneebone:

– Is it not part of the plan to make legal any illegal actions of that kind ?

Senator McLACHLAN:

– It is; but. my point is that we cannot do that here, except within our own limited sphere. It is surely an obligation of the Government to see that the legislation of the States is made as perfect as possible in this respect. It appears to me that it will test the_ingenuity, not only of the learned gentlemen who assist us in the drafting of our legislation, but also, of the Solicitor-General, to frame a clause which will fully meet this position. I have suggested to the South Australian Government, and to various trustee companies in that State, that they should cause to be drafted a model clause wide enough in its terms to cover all such cases.

I have put one of these cases to Senator Daly for his consideration. The trusteeship in question was created in England. The trustee there appointed a secondary trustee. The object of the person who constituted the trust was to settle his descendants, who were beneficiaries in the estate, in Australia. He, therefore, made provision for investments to be made in Australia. The investments will ultimately be made in land upon which the beneficiaries will be settled; but it was . considered wise to invest a certain amount of money in Australian government securities. What will be the position of the trustee in such a case as this? He cannot obtain possession of his capital, and cannot give effect to the terms of ‘his trust. This trust is, of course, governed by the law of England, and is, I admit, a most complicated one; but many other complicated cases have been brought under my notice. Provision must be made for the carrying out of trusts of this kind.

Take another illustration. A person may have left a legacy to his son, with the object of providing him with an income of £1,000 a year when he reached the age of 21 years. Possibly, the money necessary for this purpose was left in trust, and has been invested in Commonwealth bonds to mature about the date when the boy will come of age. 1 admit that probably a trustee company handling a matter of this kind would be absolved from any breach of trust in respect of action taken under a measure of this description ; but, in these circumstances, the boy would not be able to get his income of £1,000. [Extension of time (/ranted.]

I do not think that the last word in this matter should be left to the States. What the trustee bondholder in particular wants, above and beyond everything else, is an assurance that he will be absolved from any charge of a breach of his trusteeship if he converts the holdings for which he is responsible. Unless an assurance of this kind is given, there is no doubt that many trustees will feel that they must signify dissent. There will be far more cases of this kind than the Government imagines likely. There is no doubt that trustees who invested in the conversion loan last year believed that there would be no doubt whatever about sheil- being able to get back their capital on the date of maturity that they selected. In fact, investors were assured that they need have no fear whatever that there would be any interference with the contract which they made with their country. They were assured that they would be paid excellent rates of interest, and that their principal would bc returned on the due date.

I have in mind the case of a person who is under an obligation to find £1,000 on i certain date in respect of a purchase he has made. The person to whom this money will become payable was privy to the investment of the £1,000 in government securities. He felt that it would be a good thing if the money were made safe in that way. He, on his part, entered into other obligations in the expectation of receiving on the due date the £1,000 to which he was entitled. Now, both parties are faced with the prospect that the money will not be available to either of thom until very much later than the anticipated date.

Cases like this cause me to think that the persons who invested their money in the loan last December are entitled to special consideration. I believe that they will receive every consideration at the hands of the Government. Unless that is so. many cases of severe hardship will occur. Although many people may feel Chat they simply cannot convert their holdings, I believe that the great majority of our people will make the sacrifice asked of them in order to ensure the financial rehabilitation of the Commonwealth. They will be happy to see the nose of the ship of State turned in the right direction. T believe that it is now turned in the right direction. I hope that this huge conversion loan will be a great success. It is belated, and the action of the Government is belated, but now that these steps have been taken. I feel that we are on the way to financial rehabilitation.

There are other angles from which this subject could be discussed; but the fact remains that we shall have to swallow this dose of unpalatable medicine. Though we may regard this transaction as immoral in some respects, we may hope that the experience through which we are passing will be a lesson to the people of Australia, which they will learn and not forget. In the circumstances, I shall support the second reading of the bill, but I sincerely regret that the introduction of such a measure was necessary.

Senator SAMPSON:

– The more I hear about this bill, the more intense becomes my headache. Like other honorable senators, I have received a very large number of letters from bondholders, friendly societies, and members of the general community in regard to the measure. The conversion of our internal debts under the scheme set out in it is, of course, an integral part of the rehabilitation plan agreed to at the conference of Commonwealth and State Ministers; in fact it is the pivot of it. A gigantic conversion is contemplated. The more one thinks about it the more one is impressed by the magnitude of it. It is proposed to convert internal loans totalling £556,000,000, covering 1,250 different classes of security, and to consolidate them into stock at 4 per cent, or thereabouts, with the object of effecting a reduction of 22£ per cent in our interest bill.

The plan, of course, is indivisible. It is proposed to achieve the objects set out in the preamble to the bill, “by means involving a common sacrifice “. That isan admirable objective, but can it possibly be attained ? I very much doubt it. The preamble of the bill sounds well, but it is mostly sound. It reminds me of” some of the military orders issued by the brass hats during the war, which were absolute dope; they amused the troops, who did not believe them, and did noharm. I am afraid that the grandiloquent preamble of the bill must beregarded in that light.

The scheme of the bill is crude, incomplete and full of inequalities. Some of the proposals will involve the bondholders in positive hardships. For example, it is an outrage, incapable of palliation, that persons who have, by the exercise of the utmost thrift, saved a small amount of money for their old-age and invested it in Government stocks; should now be called upon to sacrifice per cent, of their income, which, in many cases, is already meagre in the extreme, while old-age pensioners escape wilh a reduction of 12-£ per cent. I was taught as a boy that thrift was a virtue; but this bill is treating it as a crime. The callous cruelty of it all is intolerable to every decent person.

The loan is called a “voluntary “ conversion loan. According to Chambers and Webster, “ volun tary “ means “ of ‘one’s own free will “. Bondholders are being asked not to dissent. If they do not signify dissent, their holdings will be automatically converted into the new stocks that will be issued. What the bondholders, and I with them, would like to know is, what is the alternative to conversion. There must be some alternative, and the bondholders should be told clearly and definitely what it is. The Government should say what is in its mind. If there is an option, the bondholders should be told what it is, so that they can choose between the conversion of their holdings and the alternative, whatever it may be. There is a good deal in this bill which will need explanation before investors can decide whether they will convert their holdings or not; but they certainly should be told what will happen to them if they do not convert.

The plight of the small bondholder will be grievous. I have recently been inundated with letters. and have quite a lot of correspondence here, but I do not propose to read it because doubtless other honorable senators have received similar communications. This bill involves a breach of contract. All the specious reasoning in the world will not lead us to lose sight of that fact. It is up to this Senate to devise some means by which this blow to the thrifty and the small bondholder can be softened in some degree. One letter that I received was from a man in Launceston, whose income only from bonds is £109 pei annum. He and his wife have to live on that sum, and when it is reduced, as is now proposed, they will be much worse .off than persons in receipt of the old-age pension. I have letters of protest from friendly societies, and also from the Bank for Savings in Launceston in regard to their holdings, which under this conversion will be tied up for a long period, thus preventing its assets from being liquid. A serious complaint is that no mention was made during the discussion that took place at the Premiers Conference of the position of the Banks for Savings at Launceston and Hobart. Both of these banks are fine and deserving institutions. They have been established for about 100 years, and were started for the encouragement of thrift. The directors act in an honorary capacity, and there are no shareholders. The people who benefit from the transactions of the bank are the depositors themselves. One of my colleagues from Tasmania has already foreshadowed an amendment which he proposes to move in committer with the object of safeguarding the interests of. those two institutions.

The treatment we are meting out to our old and thrifty people - widows and others - who are dependent upon small incomes from government guaranteed’ investments, as outlined in this bill, is unjust, callous and unnecessarily harsh. Surely we can discover some way, without wrecking this plan, of meeting their position. After hearing the budget statement as read by the Minister (Senator Dooley) this morning: after considering the bill and the report of the proceedings of the Premiers Conference, we must all agree that one word which above all others must be dropped from the Australian vocabulary for at least a considerable time is the word “ borrow “. It has been said that our salvation depends upon an all-round reduction of interest rates-, but that there is no necessity, once we have overcome our immediate difficulties, to keep the rate at that level. I wish to know whether there is any guarantee that the seven governments of Australia will not, so soon as this conversion is effected, go on the market for whatever money they require, and, being in great seed of money, be prepared to pay a Higher rate for it. There is nothing in this bill to prevent that. It is very necessary that there should be the most effective check placed upon new borrowing, because our extravagant borrowing in the past has been mainly responsible for our present position. Australian governments will find it difficult to borrow for some time, but there will be a big temptation to do so. I suggest that we should make it a condition of this conversion that if future loans are raised at over 4 per cent, by any of the governments of Australia, the additional rate shall automatically become payable on ali converted stock.

Because of our critical financial position the morale of the Australian people has become low indeed. We are prone to think, as we travel about and discuss current topics with others, that the bottom has well nigh fallen out of everything, that never at any other time has the country been in such an unholy mess, and that everything is black and dark. To use a vulgarism, “ We have our tails down “. There have been depressions before to-day, and there will be again. That is one of the biggest indictments of the present system of capitalism. It is the only system to which we pin our faith, and although it is now on trial, it is not standing up too well to the test. We must improve the morale of the people. It would cheer and comfort us if, instead of thinking that we are at a dead-end with no improvement in sight, we studied the history of the progress and evolution of other countries. In this connexion I hope that I shall not trespass on the time of the Senate if I read an extract from an essay by Lord Macaulay which appeared in the Edinburgh Review, in January, 1830, over 100

J ears ago. It dealt with the terrible depression existing in the United Kingdom at that time, after the long struggle 6f the Napoleonic wars culminating at Waterloo in 1815. This essay is truly prophetic of the conditions applying in Australia to-day. It states that England had just emerged from the greatest war of all times. To-day we refer to the Great War of seventeen years ago as the greatest conflagration that the world has ever experienced, and we are saying that

Australia has never before been in such a low state of depression, and that the outlook for the future is dark and forbidding. This essay, which, I repeat, has an extraordinary application to the position of Australia to-day, reads -

History is full of the signs of this natural progress of society. We see in almost every part of the annals of mankind how the industry of individuals, struggling up against wars, taxes, famines, conflagrations, mischievous protections, creates faster than governments can squander, and repairs whatever invaders can destroy. We see the capital of nations increasing, and all the arts of life approaching nearer and nearer to perfection, iti spite of the grossest corruption and the widest profusion on the part of the rulers. The present moment is one of great distress. But how small will that distress appear when we think over the history of the last 40 years - a war, compared with which, all other wars sink into insignificance; taxation, such as the most heavily taxed people of former times could not have conceived; a debt larger than all the public debts that ever existed in the world added together; the food of the people studiously rendered dear; the currency impudently debased and improvidently restored? Yet is the country poorer than in 1790? We fully believe that, in spite of all the mis-government of her rulers, she has been almost constantly becoming richer and richer. Now and then there has been a stoppage; now and then a short retrogression; but as to the general contingency there can be no doubt. A single breaker may recede; but the tide is evidently coming in. If we were to prophesy that in the year 1930 a population of 50,000,000, better fed, clad, and. lodged than the English of our time, will cover these islands, that Sussex or Huntingdonshire will be wealthier than the wealthiest parts of the West Riding of Yorkshire now arc - that cultivation, rich as that of a flower garden, will be carried up to the very tops of Ben Nevis and Helvellyn- that machines, constructed on principles yet undiscovered, will be in every house - that there will bc no highways but railroads, no travelling but by steam - that our debt, vast as it seems to us, will appear to our greatgrandchildren a trifling encumbrance, which might easily be paid off in a year or two - many people would think us insane.

We have heard it said that 5 per cent, is the natural interest of money, that 12 is the natural number of a jury, that 40 shillings is the natural qualification of a county voter. Hence it is that though, in every age, everybody knows that up to his own time progressive improvement has been taking place, nobody seems to reckon on any improvement during the next generation. We cannot absolutely prove that those are in error who tell us that society has reached the turning point - that we have seen our best days. But so said all who came before us, and with just as much apparent reason. “A million a year will beggar us,” said the patriots of 1G40. “ Two millions a year will grind the country to powder,” was the cry in 16C0. “ Six millions a year and a debt of fifty millions,” exclaimed Swift, “ the high allies have been the ruin of us.” “ One hundred and forty millions of debt”, said Junius, “well may we say that we owe Lord Chatham more than we shall ever pay, if we owe him such a load as this.” “ Two hundred and forty millions of debt,” cried nil the statesmen of 1783 in chorus. “What abilities, or what economy on the part of a Minister, can save a country so burdened?” We know that if, since 1783, no fresh debt had been incurred the increased resources of the country would have enabled us to defray that burden, at which Pitt, Fox, and Burke stood aghast - to defray it over nui! over again and that with much lighter taxation than what we hare actually borne. On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us? lt is not by the intermeddling of Mr. Southey’s idol - the omniscient and omnipotent state - but by the prudence and energy of the people, that England lias hitherto been carried forward in civilization; and it is to the same prudence and the same energy that we now look with comfort and good hope. Our rulers will best promote the improvement of the people by strictly confining themselves to their own legitimate duties - by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment - by maintaining peace, by defending property, by diminishing the price of law, and hy observing strict economy in every department- of the State.

Let the Government do this - the people will assuredly do the rest.

No matter how we may regard the conversion loan, it has ‘to be a success. The whole scheme, of which it is part, has been adopted by a conference of Commonwealth and State Ministers, and for the time being that salient fact should end all controversy. In a sense the conversion will be voluntary, but commonsense tells us that in effect it will be compulsory, because if it and other parts of the plan are not successful a financial crash is inevitable. That prospect stares us in the face; therefore, I repeat, the conversion loan must be a success. Temporarily Australia is bankrupt, and has to compound with its creditors. Recriminations as to whether this government or that government was responsible will avail nothing; it would be an insult to our intelligence and patriotism. A crisis is upon us and we all, regardless of party or creed, have to face it unitedly. Out of an orderly reconstruction the creditors know approximately what they will get.

Out of a crash no one knows how much will be salvaged. If Australia goes on to national insolvency, bondholders, pensioners, public servants, and everybody else, will be involved in an unholy scramble to save something from the wreck.

Although the plan in many respects is crude, although many rough corners require rounding, it has to be accepted as it is. If the conversion is a success - and we must pray and work to ensure that it will be - it will do much to stiffen the national morale. We shall be able again to hold up our heads and square our shoulders; our national pride will be restored. To-day it is at a very low ebb, and it could not be otherwise, having regard to the financial and economic mess in which our country has been landed. I feel sure that the people, when they realize the difficulties in which the nation is involved, will come to its aid as they did in the dark and terrible days of August, 1914, when they faced courageously one of the greatest crises in their history. Notwithstanding the very many hardships that the rehabilitation plan will inflict, the people will ring true and manfully make the sacrifices that are required of them. The extract I read from Macaulay’s essay, regarding the conditions 100 years ago gives a ray of comfort. Our circumstances appear dark, and our problems extremely difficult, but if we are true to ourselves we shall again achieve prosperity.

Senator DOOLEY:
New South WalesAssistant Minister · ALP

– As Senator Sampson pointed out if there is an alternative to this bill it has not yet been revealed. The conversion is part and parcel of the general plan of rehabilitation; if it fails the whole scheme fails. The majority of honorable senators appreciate that fact. Although to much that has been said during this debate an effective reply could be given, I do not propose- to speak at length, because I am sure that the second reading will be agreed to. The Government is anxious that this legislation shall be passed as quickly as possible, because every day of delay means a great loss to the Commonwealth. Certain amendments may be considered in committee, and possibly further legislation willbe necessary for the operation of this scheme, ‘but there is in this bill nothing to which honorable senators, who appreciate the need of the nation, can take exception. Much has been said of the great sacrifice that is asked of the thrifty section of the people. The Government recognizes that, and is confident that the bondholders will patriotically stand up to their responsibilities. They will have at least this consoling knowledge that their capital will be intact. A person who has invested £1,000, or even £100,000, in bonds will retain his capital. Other thrifty persons who have invested in property and industry are not in that happy position; for the value of their assets has fallen considerably, and, in some instances, almost disappeared. The bondholders may, therefore, congratulate themselves that they are not suffering to the same extent as are many other people in the community.

Question - That the bill be read a second time - put. The Senate divided.

AYES: 21


Majority 19



Question so resolved in the affirmative.

Bill read a second time.

In committee:

Clause 1 agreed to.

Progress reported.

page 3765


Motion (by Senator Dooley) agreed to-

That the Senate at itsrisingadjourn till Tuesday next at3p.m. adjournment.

Debt Conversion Bill

Motion (by Senator Dooley) proposed -

That the Senate do now adjourn.

Senator McLACHLAN:
South Australia

– TheCommonwealth Debt Conversion Bill is, in certain respects, a measure of some complexity. I may have one or two amendments to move to it, resulting from representations that have been made to me by certain business men in Melbourne, but it will be impossible for me to obtain the details by Tuesday. It would be a personal convenience to myself and other honorable senators if the Minister were good enough to indicate that he will not push through with the committee stage of the bill until Wednesday next. The suggestion is designed to help towards the success of the scheme.

Senator Sir GEORGE PEARCE (Western Australia) [3.33]. - I have spoken to a number of honorable senators on this matter, and I am sorry that I appear to have omitted Senator McLachlan. I understand that the Prime Minister and Treasurer consulted with the Deputy Leader of the Opposition in another place (Mr. Latham) and expressed the desire that the progress of this bill should be expedited, as it was necessary to press on with the Debt Agreement Bill, which is associated with this measure. I believe that the Deputy Leader of the Opposition gave somesort of undertaking that the Opposition in this chamber would expedite the progress of the bill. I suggest that, before the Minister commits himself to a promise to hold over the bill until Wednesday, he should communicate with the Treasurer on the subject.


– I wish to assist the Minister and prevent undue delay in the passage of this hill. I referred during the secondreading debate to the position of bondholders of short-dated 6 per cent, loans, and indicated suggestions that I might translate into amendments. I prefer to avoid doing so, if the Minister representing tho Treasurer call assure me that my suggestions will be accepted to obviate my moving such amendments.

Senator DOOLEY:
New South WalesAssistant Minister · ALP

– I understand that the position with regard to the bill is as stated by tho Leader of the Opposition (Senator Pearce). I have just communicated with the Treasurer, and I cannot give any definite assurance that the bill will be held over until Wednesday next. I shall have inquiries made into the matter mentioned by Senator Thompson.

Question resolved in the affirmative.

Senate adjourned at 3.37 p.m.

Cite as: Australia, Senate, Debates, 10 July 1931, viewed 22 October 2017, <>.