17th Parliament · 3rd Session
The President (Senator the Hon. Gordon Brown) took the chair at 3 p.m., and read prayers.
Formation - War Cabinet - Advisory Wak Council - Ministerial Representation in Chambers.
– by leave - I inform the Senate that’, on the 6th July, the Right Honorable F. M. Forde, Acting Prime Minister, waited upon His Royal Highness the Governor-General and tendered certain advice -with regard to the administration of the Government of the Commonwealth of Australia consequent on the death of the Prime Minister, thi- Right Honorable John Curtin. His Royal Highness commissioned Mr. Forde to form a Ministry to carry on the Government. The portfolios allotted were those previously held by Ministers, with the exception that the Honorable J. A.- Beasley was appointed Minister for Defence in addition to retaining the position of Vice-President of the Executve Council.
I also formally announce that, on the 13th July, following an the election of the Right Honorable J. B. Chifley as Leader of the Federal- Parliamentary Labour party, the Right Honorable F. M. Forde resigned his office of Prime Minister and . Mr. Chifley was commissioned by His Royal Highness the Governor-General to form a new Ministry.
The Government is constituted as follows: -
Minister for the Army (and Deputy Prime Minster) - The Right Honorable P. M. Forde.
Attorney-General and Minister for External Affairs - TheRight Honorable H.V. Evatt, LL.D., D.Litt.,K.C.
Minister for the Navy, Minister for Munition and Minister for Aircraft Production - The Honorable N. J. 0. Makin.
Minister for Trade and Customs - Senator the Honorable R. V. Keane.
Minister for Supply and Shipping:Senator the Honorable W. P. Ashley.
Minister for Post-war Reconstruction and Minister in charge of the Council for Scientific and Industrial Research - The Honorable J. J. Dedman.
Vice-President of the Executive council - Senator the Honorable J. S. Collings.
Minister for Transport and Minister for External Territories - The HonorableE. J. Ward.
Minister for Health and Minister for Social Services - Senator the Honorable J. M. Fraser.
Postmaster-General - Senator the HonorableD. Cameron.
Minister for Immigration and Minister forInformation - The Honorable A.A.Calwell.
Minister for the Interior - The Honorable H. V. Johnson.
The Honorable H. V. Johnson will assist the Honorable H. P. Lazzarini in his administration of the Department of Works and Housing.
Pending the return of Dr. Evatt to Australia, the Minister for Defence (Mr. Beasley) and the Minister for the Navy, Minister for Munitions and Minister for Aircraft Production (Mr. Makin) will act for and on behalf of the AttorneyGeneral and the Minister for External Affairs, respectively.
The members of the War Cabinet are - Mr. Chifley, Mr. Forde, Dr. Evatt, Mr. Beasley, Mr. Makin, Senator Keane, Mr. Drakeford and Mr. Dedman.
The Government will be represented on the Australian Advisory War Council by the following;: - Mr. Chifley, Mr. Forde, Dr. Evatt, Mr. Beasley and Mr. Makin.
Non-Government members of the Australian Advisory War Council will be - Mr. Fadden, Mr. Hughes, Sir Earle Page, Mr. Spender and Mr. McEwen.
Ministerial representation in the Senate willbe as follows: -
Senator the Honorable R. V. Keane will represent the Prime Minister and Treasurer, the Minister for Defence, the Minister for Post-war Reconstruction and Minister in charge of the Council for Scientific and Industrial Research.
Senator the Honorable W. P. Ashley will represent the Attorney -General and Minister for External Affairs, the Minister for the Navy and the Minister for Munitions, the Minister for Labour and National Service and the Minister for Information.
Senator the Honorable J. S. Collings will represent the Minister for Transport, and Minister for External Territories, the Minister for Works and Housing and Minister for Home Security, the Minister for Immigration and the Minister for the Interior.
Senator the Honorable J. M. Fraser will represent the Minister for the Army and the Minister for Commerce and Agriculture.
Senator the Honorable D. Cameron will represent the Minister for Air and the Minister for Civil’ Aviation, the Minister for Aircraft Production and the Minister for Repatriation.
– by leave - In pursuance of the powers conferred on me by section 92 of the Australian Broadcasting Act, I recently found it necessary to issue orders prohibiting certain persons from selecting, passing and rendering matter for broadcasting for periods up to three months. This action was taken as a result, of a complaint concerning a broadcast which, after investigation, was found to be objectionable. The provisions of section 92- were incorporated in the act on the recommendation of the Joint Parliamentary Committee, which was appointed by the Menzies Government in 1941 to investigate all phases of broadcasting in Australia. Believing that no other medi um of entertainment has such a powerful influence for good or evil, the joint committee very wisely paid much attention to the ethical standards of broadcasting. The act allows the broadcasters almost complete freedom in the selection of their programme matter, the only restrictions being such as are designed to avoid the inclusion of items of embarrassing vulgarity or indecent suggestiveness. In this regard, it. is reasonable to demand a higher standard from the broadcasting .services than the stage or the picture theatre. “Whereas the latter are patronized by the deliberate choice of those who attend, the broadcasting programmes daily come into the homes of the people, who are entitled to demand that adequate precautions should he taken to prevent the intrusion of objectionable matter. The broadcasters have practically the whole nf the nation for their audience and. for that, very reason, it is not too much to expect that those who are privileged to conduct the service should observe over the air the ordinary proprieties that, they would observe in any gathering in the home, or anywhere else where men, women and children may be assembled.
T am glad to acknowledge that the great majority of those who are responsible for our broadcasting programmes show a high appreciation of their obligations in this regard, but it is nevertheless, a regrettable fact that abundant evidence was tendered to the Joint, Par liamentary Committee on Broadcasting, which i indicated that a good deal of laxity had been displayed by some broadcasters over the year in the selection of programme material, notwithstanding the warnings they received from time to time. The joint committee felt so strongly on this matter that it made definite recommendations under which it was proposed that the Minister in charge of broadcasting should have certain summary powers in respect, of the punishment, of those who selected, passed or rendered offensive items for broadcasting. The Government accepted these recommendations and accordingly sections 91 and 92 were incorporated in the Australian Broadcasting Act, which was introduced into Parliament, in 1942, following the submission of the committee’s report.
During the debate on the bill, reference was made to the extraordinary powers which it was proposed to confer upon the Postmaster-General under section 92. but. obviously. Parliament felt that in the light, of the. very strong views expressed unanimously by the members of the joint committee, the circumstances were such as to justify the suggested legislation. The Joint Parliamentary Committee realized that there may be differences of opinions as to the propriety of some broadcasts, and accordingly it expressed the view that all complaint* concerning objectionable items should be referred by the Postmaster-General to an advisory committee for investigation and report. In. this regard I might say that it is the invariable practice to refer such complaints to the Broadcasting Advisory Committee in the State in which the alleged offence has been committed.
These advisory committees have been established in each State on the recommendation of the Joint Committee, and they consist of the Deputy Director, Posts and Telegraphs, who is Chairman, representatives nf the Australian Broadcasting Commission and the Australian Federation nf Commercial Broadcasting Stations, and four representatives of the general public. This procedure provides adequate protection for the broadcasters, as it is inconceivable that any PostmasterGeneral would take action under either section 9.1 or 92 of the act unless he was justified in so doing by the relevant report of the Advisory Committee. Before deciding to make the orders in the case under consideration, I carefully considered the report- of the Broadcasting Advisory Committee, which investigated the matter, and, after examining the script myself, came to the conclusion that the persons concerned should ihe given a salutary lesson. In reaching this decision I was influenced only by my conception of the duty imposed on me by the Australian Broadcasting Act, under which I have a definite responsibility to ensure that broadcast programmes comply with accepted standards of decency and propriety. That is a very great responsibility and. no matter how reluctant I may be to impose penalties on any person, I will not flinch from my obligations but will exercise the power conferred upon me by Parliament whenever there is adequate evidence, based on a report of a State Broadcasting Advisory Committee, that such a course is desirable in the public interest.
I have briefly referred to the origin of the powers which I have exercised because of the absurd suggestion in the press that I have constituted myself as a court and dispenser of penalties - in regard to these matters. The simple fact is that, after mature consideration, the law has been put into force, as Parliament intended it to be, for the purpose of raising .broadcasting standards from the low level of vulgarity to which certain programmes had descended; I am astonished that, instead of applauding such action, the press should see fit to take exception to the powers conferred upon the Postmaster-General for the purpose of ensuring that programmes shall be in accordance with good taste and accepted standards of propriety and that matter which borders on the salacious and indecent shall not be thrust into the hearing of decent citizens in their homes. As I have said, Parliament acted on the unanimous recommendation of the Joint Parliamentary Committee, which, following its very careful examination of this very distasteful subject, was in my opinion; well equipped” to advise the nation as to the measures which should be adopted to deal with the offensive broadcaster. “With its full knowledge of this matter, the committee expressed the opinion that stricter laws were necessary for broadcasters than for their stage counterparts. Official records clearly indicate that this evil has been one of the most difficult problems with which successive Postmasters-General have been confronted in their administration of the broadcasting laws. In this regard it is worthy of note that during the course of the debate on the Australian Broadcasting Act, two of my predecessors in office wholeheartedly endorsed the inclusion of the provisions under which I have taken action.
It is a fact that considerable time elapsed between the broadcasting of the offensive matter and the making of the recent orders. In this regard, however, delay is unavoidable because of the various stages in the procedure which has to :be followed. For instance, as I have already mentioned, the script has to be referred to the State Broadcasting Advisory Committee for consideration, and the persons concerned have to be allowed a reasonable time in which to offer an explanation of their conduct. Broadcasting is a great national asset and it must therefore be controlled in a manner which will meet with the general approval of listeners. I am sure that they have no desire to have inflicted on them, the subtle, double meaning type of humour which unfortunately has crept into certain programmes, and as far as I am able, I will use the powers conferred on me by Parliament to protect the public from this offensive matter.
– Why did the Postmaster.General penalize the employees of the commercial radio stations concerned, and not the operators of the stations? Was it because it is easier to punish the weak than the strong, or does the Postmaster-General consider profits more sacrosanct than wages?
– All the artists concerned are not employees of the stations. In .most cases they are employees of an advertising .firm, .and if the stations which broadcast the offensive matter had been suspended, .presumably the same pro-‘ grammes could have been broadcast by other stations. The station has been warned that should there be any repetition of the broadcasting of objectionable matter its licence will be dealt with. I have also been in communication with the advertising firm concerned, and it has given a written undertaking that no further objectionable matter will be broadcast. I did not consider then, nor do I consider now, that profits are more sacrosanct than wages.
Motion (by Senator Clothier) - by leave- agreed to -
That leave of absence for one month bc granted to Senator Tangney on account of ill health.
– On the 5th June, Senator Leckie asked me a question relative to a report published in the newspapers on the 4th June, to the effect that several tons of camouflage paint which had been dumped at a pit at Portland. South Australia, had been recovered by certain individuals who were able to sell it at rather high prices.
I had inquiries made regarding the matter and discovered that the paint had been dumped by the Department of Works, South Australia. At my request the Minister for Works had a thorough investigation made and he has advised nin as follows: -
During February and March, 1942, when the ill rent of Japanese invasion to Australia was most grave, a considerable quantity of camouflage paint was supplied to the South Australian office of my department for urgent defence cm mo nl I age purposes in that State. This paint was intended for the camouflage of dispersal areas for aircraft at various I ‘oya I Australian Air Force stations, and would have been painted on hessian, trees, wire, &c. As the threat of invasion disappeared, the service departments did not proceed with the whole of the camouflage works originally intended. No use could bc found for the camouflage paint and it remained in store at Port Adelaide until a decision was made to dispose of all surplus camouflage materials.
In May, 1044, samples of this camouflage paint were forwarded to the Munitions Supply Laboratories in Victoria with a view to investigation and examination of the condition of the paint. A report was subsequently received from the laboratory to the effect that the paint was below standard quality and was unsuitable for any use other than that for which it was originally intended.
It was then decided to offer the paint for disposal by public tenders, and advertisements were inserted in the Adelaide press. No tenders were received, and in accordance with departmental and Treasury instructions a board of survey then investigated the paint in stock and unanimously decided that the paint and the containers had no recoverable or commercial value and recommended that itbe destroyed and action taken to have thevalue written off as a charge to public funds-
Consideration was given to the question of salvaging the paint containers but it was found that the cost of cleaning these would have amounted to approximately 2s. Gd. per tin, whilst the recoverable value amounted only to ls. per tin.
The Chief Auditor, Commonwealth Audit Department, Adelaide, advised that there was no audit objection to the destroying and writing off of this paint and Treasury approval wu* subsequently received.
Arrangements were made with the town clerk, Port Adelaide, for the paint to be dumped at the rubbish pit at Portland. In accordance with the usual procedure for destruction of condemned stores, the containers wens hacked open with mattocks as they were rolled from the trucks into the dun.p. lt appears that information regarding the department’s intention to dump this paint had reached thu public as when the first lorry arrived at the pit scores of people were in attendance. Many of these people endeavoured to gather up the liquid which was running out of the tins and others to scrape out some of the solids remaining in the tins. It is pointed out. however, that neither the liquids nor the solids ha.d any value as paint.
As a result of my inquiries, I am convinced that all proper precautions were taken by my department to destroy the condemned paint, and I have no doubt that it had no value except for the purpose for which it was originally intended.
– On the 2Sth June, Senator Collett asked the following questions, upon notice: -
The Prime Minister has furnished the following replies : -
Quotations from Newspapers.
– Earlier to-day, Mr. President, following your ruling that I could not quote extensively from a newspaper, I gave notice of a question with respect to banking. As members of the Opposition in this chamber have quoted extensively from newspaper reports in asking questions in the past, does your ruling mean that they will not be able to do so in the future?
– I refer the honorable senator to the rules printed on the back of the “ Notice of Question “ forms for the guidance of honorable senators in asking questions. It has been the practice of the Chair to debar honorable senators from quoting extensively from newspaper reports when asking questions. In the past I have erred sometimes on the side of leniency. On occasions, I have allowed honorable senators to quote several lines from newspaper reports. However, Senator Lamp, in asking his question, was exceeding reasonable bounds in that respect. As I am not a clairvoyant I could not foresee the length of the honorable senator’s quotation. It isnot the rule to allow honorable senators, when asking questions, to quote extensively from newspaper reports. Personalities do not enter into the matter as far as the Chair is concerned. If any member of the Opposition errs to the degree to which Senator Lamp erred to-day, I shall treat him in like manner.
Prisoners of War - Releases
– I should like to preface a question which I desire to ask the Minister representing the Minister for the Army byreminding him that a few weeks ago whenhe was Acting Minister for the Army he assured the Senate that full and adequate pre parations had been made for the reception and welcome of Australian prisoners of war on their return to our shores. He made that statement following a visit to Sydney. Has he seen a press report dealing with the arrival, on the 7th July, of a number of prisoners of war, including 114 Western Australian soldiers, which stated that the cattle pavilion at the Sydney Showground was allocated to these men as sleeping quarters? Is he aware that the men objected to those quarters because the barbed wire enclosing the pavilion reminded them too vividly of a German Stalag? In view of the fact that approximately 20,000 Australian soldiers still held as prisoners by the enemy are expected to return to Australia, will full and adequate accommodation be provided for their reception, and will steps be taken to ‘ensure that such accommodation will not remind them of their incarceration in enemy prison camps?
– I have no knowledge of the press report to which the honorable senator refers. To my knowledge Australian prisoners of war have been adequately provided for upon their return to these shores. I shall bring to the notice of the Minister for the Army the matter raised by the honorable senator and I am certain that steps will be taken to prevent such happenings.
askedthe Leader of the Government in the Senate, upon notice -
Does the Government intend that the proposed releases from the Army and Air Force of64,000 by December, 1945, will depend on applications for discharge, or will discharges he compulsory in accordance with the rules laid down in the Minister’s statement to the Senate?
– In informing the Senate on the 3rd July of the decisions reached regarding the special release of long-service men, repatriated prisoners of war, surplus air-crew and air-crew trainees, it was advised that detailed instructions regarding the procedure to be followed would be issuedby the services.
The following indicates the present position of the matter : -
Army. - Instructions have been issued to all formations, both on the Australian mainland and overseas, to ascertain the long-service men who are eligible and who desire to exercise their option of discharge. The wishes of those prisoners of war eligible for discharge are being ascertained.
Air Force. - Long-service personnel are being invited to submit applications for release. Air-crew personnel requirements and other personnel who are found on a general review to be surplus to present personnel requirements are discharged irrespective of their wishes. Action is being taken to ascertain the wishes of those repatriated prisoners of war eligible for discharge and also to ascertain the wishes of air-crew trainees who have the option of remuster to ground staff or release to civil life.
The procedure relating to the release of men on occupational grounds is being laid down by the Director-General of Man Power, after consultation with the services.
asked the Minister representing the Treasurer, upon notice -
– The Treasurer has supplied the following answers : -
Missionary Represen ta ti on.
asked the Minister representing the Minister for External Affairs, upon notice -
– The Acting Minister for External Affairs has supplied the following answer: - 1 and 2. Plans for the establishment of the South Seas Regional Commission have not boon completed and, therefore, the question of the membership of that body has necessarily been deferred pending the outcome of the discussions on dependent territories at Sun Francisco.
The question of membership is a matter for discussion between governments and I am not in a position to anticipate the outcome of such talks. Representations for membership emanating from such bodies as missionary societies will certainly be given full consideration at the appropriate time.
Women’s and Children’s Underwear
asked the Minister for Trade and Customs, upon notice -
Will the Minister consider reducing the coupon value of women’s and children’s underwear pyjamas and night-dresses, especially in the warmer States of Western Australia and Queensland ?
– The answer to the honorable senator’s question is as follows : -
The Rationing Commission is continually reviewing the coupon scale and has made and will continue to make revisions to ratings as the overall supplyposition permits. The coupon ratings of women’s and children’s underwear were reduced to two coupons ( representing reductions of 50 per cent. and 331/3 per cent. respectively), from the9th June last. Reductions in the ratings of woollen piece goods and woollen garments were made from the 9th July, but a grave world shortage of cotton-piece goods precludes any reduction at present in the ratings of cotton garments.
Standardization of Railway Gauges - Improvement of Facilities
asked the Minister representing the Minister for Transport, upon notice -
In giving effect to the proposals for bringing about a uniform railway gauge, is it the Government’s intention to make any improvements to the railway systems in those States where the uniform gauge proposals do not apply, so that such States may share in the Government’s expenditure on the improvement of the railway systems of the Commonwealth?
– The Minister “For Transport has. supplied the follow-, lng answer : -
Tasmania has not been included in the projects recommended in Sir Harold Clapp’s Report on Standardization of Railway Gauges, as that State, in a rail transportation sense, is a separate entity and, therefore, the question of changing the gauge of its railways is a matter for decision by the State Government of Tasmania. However, should the State Government desire to change the gauge of its railways, or embark upon a plan for modernization of its rolling-stock and the standardization of equipment and parts, the Commonwealth Government will be happy to co-operate in making available all technical information in its possession: and in any other manner subject to mutual agreement.
asked the Minister for Trade and Customs, upon notice -
Will the Minister see that the newly appointed Rent Controller administering the amended Landlord and Tenant Regulations pays immediate attention to the rooms let to old-age and invalid pensioners, with a view to preventing increases in pensioners’ rents when the impending increase in pensions is paid? (Senator KEANE. - One of the principal functions of the Rent Controller is to fix room rents in those States in which the rent fixing provisions of the Landlord and Tenant Regulations are in operation.. The rights of pensioners are better safeguarded under the amended regulations than they were under the former regulations in that there is now no necessity for room tenants to approach the Fair Rents Board in order to secure a .reduction of extortionate rents.
Acquisition of Land
asked the Leader of the Senate, upon notice -
– The answers to the honorable senator’s questions are as follows : - 1 and 2. In order to enable the Victorian Housing Commission to implement its housing scheme on a satisfactory basis, a general approval under regulation 15a of the National Security (War Service Moratorium) Regulations was given to the Commission to acquire, for its housing scheme, land owned by members of the Forces, provided that protection was given to the interests of the members of the Forces whose property was acquired. It is considered that these interests are adequately protected by the acts under which the Commission operates and by regulation 34a of the National Security (War Service Moratorium) Regulations. The acts referred to provide that claims for compensation may be made in certain circumstances within two years after the acquisition and in other circumstances within four years after the acquisition, and regulation 34a of the National Security (War Service Moratorium) Regulations provides that, notwithstanding the period of limitation fixed by law, an action may be connected or right enforced by a member of the Forces at any time within a period of. twelve months following his discharge.
However, the whole matter is being looked into further in the light of representations which have been received.
asked the Minister representing the Minister for Postwar Reconstruction, upon notice -
Tn the programme of post-war work, will thu Minister make provision for a survey of the gold and other mineral deposits of Australia?
– The Minister for Post-war Reconstruction has supplied the following answers : -
The chairman of the mining industry panel advisory to the Secondary industries Commission, Dr. H. G. Raggatt, who is also Commonwealth Government Geologist, and Mr J. M. Rayner, hia chief geophysicist. arc at present in -America.
These officers will study and report to the panel on the set up of survey departments in America and Canada and the latest practice in geophysics.
Tile general question of post-war mineral surveys, will in due course be the subject of a report to the commission and the Government. In the preparation of this report the panel will work in close collaboration with the respective States.
Spinning and Weaving - Cotton Growing
asked the Leader of the Senate, upon notice -
Have representations been made by the Queensland Government along the following lines, viz.: -
– The following answers arc supplied: - 1. (a) The Government has been in close touch with manufacturers for some time and discussions are still in progress having in view the expansion of the cotton textile industry in the post-war period. Many factors arc involved and the question of protection has so far been mentioned only in a general way. No decision on this aspect could be taken without reference to the Tariff Board. As regards woollen textile, present production facilities are more than adequate to meet all Australia’s requirements and to allow for export.
No, but representations on similar lines have been received from the Queensland Cotton Board.
asked the Leader of the Senate, upon notice -
Government to implement proposed land settlement schemes, and that some were buying farms privately without any financial help from the Government?
– The Minister for Post-war Reconstruction has supplied the following answers: -
asked the Minister representing the Minister for Post-war Reconstruction, upon notice -
– The Minister for Post-war Reconstruction has supplied the following answers: -
Demands of Commonwealth Shipping Board - Housing Needs - Tasmanian Saw-mills.
asked the Minister representing the Minister for Munitions, upon notice-
Was this mill offered to thu board under favorable terms and not accepted ‘i
– The Minister for Munitions has supplied the following answers : -
asked the Minister representing the Minister for Air, upon notice -
Bill received from House of Representatives and (on motion by Senator Keane) read a first time.
In. commit teo.; Consideration resumed from the 4th .July (vida page 4.040).
Clause 9 - (3.) If the Treasurer and the Bank are unable to reach agreement, the Treasurer may inform the Bank that the Government accepts responsibility for the adoption by the Bank of a. policy in accordance with the opinion of the Government and will take such action (if any) within its powers as the Government considers to be necessary by reason of the adoption of that policy. (4.) The Bank shall then give effect to that policy.
Upon which Senator J. B. Haves had moved by way of amendment -
That the following new sub-clause be added : - “(5.) A report of any action taken by the Treasurer under sub-section (3.) of this section shall be laid before each House of the Parliament within seven sitting days of that. House after such action has been taken.”
[3.4I5T,. - When the debate upon this matter was adjourned. I understood that the Minister for Trade and Customs (Senator
Keane) was about to state the attitude of the Government to this reasonable amendment. If a government has nothing to hide, surely there is no reason why it should not report to Parliament within seven sitting days of taking action under sub-clause 3.
– The amendment, if carried, would result in undue publicity and exaggeration of any difference of opinion between a Treasurer and the Governor of the bank, with consequent damage to public confidence. For that reason, the amendment is not acceptable to the Government.
– The Minister claims that the insertion of this provision in the clause might lead to undue publicity; but surely this Parliament is entitled to be informed of any action being taken by a Treasurer in regard to the Commonwealth Bank! A disagreement -between a Treasurer and the Commonwealth Bank on an important matter of policy would be most serious, and this Parliament should know of it. As the clause stands, knowledge of such a disagreement might be withheld from Parliament and from the public for months. That would be most undesirable. What is Parliament for? Surely its members have some privileges. We appreciate that the Government has been returned by the people, and has the numbers to pass whatever legislation it desires: but it is the privilege of Opposition members to disagree with any proposal which the Government may advance. I atn afraid that the Minister has not thoroughly considered this matter.
– The Minister for Trade and Customs (Senator Keane) has made the position even worse. I said earlier that a government should have nothing to hide, but apparently this Administration expects to have something to hide, and fully intends to hide it. Otherwise, why should honorable senators opposite not agree to the insertion of this amendment, the purpose of which is to make certain information available to Parliament? This clause deals with a very serious matter, namely, a possible dispute between the
Governor of the Commonwealth Bank and a Treasurer, on a matter of high policy. The only reason given by the Minister for the rejection of the amendment is that its acceptance might lead to undesirable publicity ; but surely members of the Parliament, should be given full information about any difference of opinion between the Governor of the Commonwealth Bank and a Treasurer. I am astounded by the Minister’s reply.
In justice to myself, and to the SolicitorGeneral, Sir George Knowles, I wish to clarify certain remarks which I made in regard to the Attorney-Generals’ Department earlier in the discussion of this measure. Beading the report of my speech, it seems that I went farther than I had intended to go at the time, and I understand that Sir George Knowles has taken exception to my remarks. As I said on that occasion, I had no intention of reflecting upon .Sir George Knowles, or upon any of his officers. In fact, I have a great regard for them. I was driven to making certain statements because of the fact that the Government had received some most extraordinary advice from the Crown Law authorities. Sir George Knowles has said that he takes personal responsibility for all opinions expressed by his officers. I repeat that I had no intention of reflecting upon the probity of the Solicitor-General or his officers.
In effect, the Minister has said that members of Parliament are not to be entrusted with information regarding disputes on matters of high policy between the Governor of the Commonwealth Bank and a Treasurer. Could anything be more vital ? Why should the Government of the day be afraid to tell the Parliament and the public of its policy? In other matters the Government proclaims its policy without hesitation, but, apparently, in matters of finance a “ hush-hush “ policy is to be followed, because the public is not to be told of the negotiations which take place between the Treasurer and the Governor of the bank. I ask the Minister to reconsider his attitude. Surely there can be no objection to telling the Parliament within seven days that a dispute has occurred.
Senator FOLL (Queensland) [4.21.- The Minister’s answer amazes me; he says that it is most -undesirable that publicity should be given to differences of opinion between the Treasurer and the Governor of the Commonwealth Bank. On that ground he contends that the elected representatives of the people should not be informed as to the negotiations that have taken place. It has already been pointed out that the amendment refers, not to trivial matters concerning which differences of opinion may arise, but to vital matters of policy which might lead to a financial crisis. The negotiations to which the amendment relates are those- of an important character between the Government of the day and the Governor of the Commonwealth Bank and may involve hundreds of millions of pounds of the people’s savings held in trust by the bank. It, must be remembered that the Commonwealth Bank acts not merely on behalf of the Commonwealth Government but also on behalf of hundreds of thousands of individual depositors. Surely, in such circumstances, a major dispute between the Government and the Governor of the bank is a matter which concerns the people. They should know about it. The Minister for Trade and Customs (Senator Keane) should give a better answer than the one he has given to the committee. During the regime of the present Government there has been too much withholding of information from the public. Believing that it is secure because of its majority in both Houses, the Government has adopted a totalitarian attitude in respect of administrative matters and legislation. Knowing how reasonably the Minister has acted on previous occasions, I am sorry that on this occasion he has adopted such an unreasonable attitude. I urge him to postpone consideration of the clause, at least until he can give to the Senate a better reason than he has already given, why the Parliament should not be advised of vital matters in dispute between the Treasurer and the Governor of the Commonwealth Bank.
– I cannot understand why the Minister for Trade and Customs (Senator Keane) is not willing to accept the amendment, unless it is that the Government has become so accustomed to war-time restrictions and regulations that it is endeavouring to carry the same principle into legislation which will continue into the post-war period. After the war, nothing will be more abhorrent to the general public than the unnecessary continuation of the restrictions which have been imposed during war-time, particularly if they should relate to disputes between the Treasurer of the day and the Governor of the Commonwealth Bank on important matters of financial policy. I believe that the withholding of information from the people on such matters will be resented by them. The non-acceptance of the amendment strikes at the root of parliamentary government because it means that the Parliament, instead of being acquainted with what takes place, will be kept in the dark in regard to many important matters. I urge the Minister to accept the amendment.
– Non-acceptance of my amendment will, I believe, cause widespread distrust in the Commonwealth Bank because the people will want to know what there is to hide. This clause relates, not to minor disagreements on unimportant, matters, but to disputes on major matters of policy. The clause already provides that, in the event of a major dispute between the Government and the Governor of the bank, the policy of the Government shall prevail after the bank has been notified that the Government accepts responsibility. My amendment merely asks that the Parliament shall be notified of the instruction given to the bank to carry out the Government’s policy in such cases. Surely, in such matters the Parliament should be advised. In any case, the public will want to know who is in control of the bank. In its own interests, as well as in the interests of tie bank, the Government would be well advised to accept the amendment.
Question put -
That the words proposed to be added (Senator J. B. Hayes’s amendment) be added.
The committee divided. (The Chairman -Senator B. Courtice.)
Majority . . 7
Question so resolved in the negative.
Clause agreed to.
Clause 10 agreed to.
Clause 11 (Commonwealth Bank to act as a centralbank).
– Inextricably linked with the clause are the provisions of Part III. as a whole, which deal with central banking. Shall I be in order in referring to other clauses within Part III. when dealing with the clause now before us?
– The honorable senator may refer to other clauses, within limits.
– I should like some information from the Minister in charge of the bill as to what is his conception of the Commonwealth Bank and its functions, and as to how he thinks it will carry out the functions of a central bank. Is the central bank to have a capital of only £4,000,000 plus certain other sums from the reserve fund, which amount to only £4,130,000, that is, a total of approximately £8,000,000? In this respect, we should bear in mind all the things which the central bank shall have to do as set out in clause 13. Apparently, the central bank is to deal with hundreds of millions of pounds. Bearing in mind the millions of money which the central bank will control, this is analogous to using a pop-gun to stop a 50- ton tank.
– Unless the committee deals with each clause separately, it will be very difficult for me to explain the various points that will arise under this Part.
– I suggest that the Acting Leader of the Opposition (Senator Leckie) confine himself to clause 11.
– I was of opinion that it would be more helpful to deal first with central banking as a whole. In view of your ruling, Mr. Chairman, I shall reserve my remarks on that aspect till we come to the appropriate clause.
– Dealing with the clause, the explanatory memorandum circulated by the Treasurer (Mr. Chifley) states -
Although the Commonwealth Bank has gradually assumed the functions of a central bank under such powers as it possessed under the 191.1-43 Act. and its subsequent war-time power under the National Security Regulations, no specific reference to central banking appears in the 1.911-43 Act. The object of Part III. is formally to establish the Commonwealth Bank as a central bank.
Clause agreed to.
Clause 12 (Commonwealth Bank to be banker for Commonwealth).
.- The clause reads -
The Commonwealth Bank shall, in so fax as the Commonwealth requires it to do so, act as banker and financial agent of the Commonwealth.
Does that mean that the bank must act according to the instruction of the government of the day, although the bank itself may not believe that the instruction is in accordance with sound banking principles? Will the clause compel the bank to obey the instructions of the Treasurer? May the bank refuse to carry out the behest of the Government in any of these matters? Will the bank be enabled to act on its own judgment when it believes that an instruction of the Government is not wise? The clause seems to me to place t 11 e bank at the beck and call of the Treasurer of the day in relation to banking or financial business.
– Dealing with the clause the explanatory memorandum circulated by the Treasurer states -
The Bunking Commission expressed the view (Paragraph 143) - “It is essential for a central hunk that its relations with the Government responsible for monetary policy should
Ik* close and cordial in order that there should be consistency between Government financial operations and those of the Bank “.
One of the prerequisites for such an understanding is that the central bank should hold the Government account and generally act. as its financial agent. ‘I he Commonwealth Bank has anted as banker for the Commonwealth Government since 1A12 with results that have been satisfactory to the Government and the Iia “k
I suggest that the clause is quite clear, and that the provision is very necessary.
– In view of the explanation just read by the Minister, is he willing to delete the words “ in so far as the Commonwealth requires it to do so “ ? The Minister has just repeated the statement made by the Treasurer that in the past the Commonwealth Bank has acted satisfactorily and without trouble as banker and financial agent of the Government. Now, however, the Government is providing that the bank must do exactly what the Treasurer of the day tells it to do. If the words “ in so far as the Commonwealth requires it to do so” do not mean that, what objection can the Government have to deleting them ?
– ‘Those words must remain.
– Apparently, the Government takes the attitude that it has the requisite numbers to force the bill through, and, therefore, the Minister need not reply to requests which are perfectly reasonable. I do not wish to see the Commonwealth Bank placed absolutely under the command of the Treasurer of the day. The Minister has just told us that in the past the bank has acted as the banker and financial agent of the Government and that that arrangement has worked amicably. It is clear that the Government now desires to be able to command the bank to do certain things even though the bank in its wisdom may not deem such instructions to be wise.
– It is clear that the clause means that the Commonwealth Bank, in its capacity as banker, or financial agent of the Government, must do anything that the Treasurer of the day directs it to do. Under the clause the bank will not be able to exercise its own judgment.
Clause agreed to.
Clause 13 (General powers).
– I raise the question of gold backing for our currency now because this is the first opportunity I have had to reply to some statements made by the Minister in charge of the bill (Senator Keane) in concluding the second-reading debate. In his speech, which we all know was a prepared statement, he ridiculed the idea that it was necessary to have a sheet-anchor for our currency, as the accumulation of gold reserves was capable of becoming a frozen asset, and of no value to Australia in time of crisis. He referred to the Theodore bills during the depression years and the shipments of gold from this country to Great Britain and the United ‘States of America, but what he did not mention - and this is vital - is that an adequate gold reserve in Australia need not become a frozen asset, because there are outlets for the movement of gold in support of our currency. He did not mention those outlets, but I did in my second-reading speech. One outlet is the issue of gold bullion in the form, of currency. That is liquid enough and would soon be absorbed by the people. Therefore, to suggest that a gold reserve could become an immobile asset is, to say the most of it, sheer buncom.be. The fact that the Lyons Government, which succeeded the Scullin Government, did not take steps to reintroduce the gold reserve only begs the question. I should like the Minister now to review his remarks on the question of a gold backing for our currency. It is necessary that subscribers to Avar loans and war savings certificates shall have reason to be confident of the value of the money that chey will receive in return for their investments.
– As Senator Allan MacDonald does not seem to have got even the slightest bite from the Minister, let us examine the powers prescribed by this clause for the central bank as distinct from the Commonwealth Bank. After having recited in paragraphs a to fc the general powers, the clause, in paragraph /, sets out that the bank shall have power “ to do anything incidental to any of its powers “.
– That is well restricted.
– How ?
– The powers are laid down.
– 1 do not knowthat that is so. Paragraph I enables the hank to do anything incidental to any of its powers. Other parts of this banking legislation provide for the surplus money of the private banks 10 be held by the Commonwealth Bank. Therefore, under paragraph I, the Commonwealth Bank could say to the private banks, “ It is incidental to the carrying-out of some of our powers that we should have another couple of hundred millions from you people”. Such wide powers cannot be controlled. The bank will be able to do anything incidental to them. If the Commonwealth Bank wanted to buy bullion and had not enough money to do so, under this provision it could call upon the trading banks to supply it. Will the Minister consider striking out paragraph Z? Surely, the powers listed in paragraphs n to le are sufficient to enable the bank to carry out its functions properly without the need for it to be enabled to do anything incidental to those powers.
– The honorable member, of course, knows that paragraph /. is taken from the existing Commonwealth Bank Act.
– We are talking at cross purposes. The Minister refers to the Commonwealth Bank Act, but this relates to the central bank, not the Commonwealth Bank as we have known it, and the paragraph enables the central bank to do anything incidental to any of its powers. That, it seems to me, gives it unlimited power. The other paragraphs specifying the powers of the bankare, in all conscience, wide enough to enable the bank to operate, and the Government should agree to leave out the overriding power provided in paragraph
– This is one of the most important, clauses in this bill. Paragraphs a to lt clearly specify the powers of the central bank, but paragraph I is of such a grab-all nature that I can easily imagine it leading to litigation. There is no definition of the powers that could be exercised under paragraph I. A private bank would not be allowed to include such an unlimited power in its articles of association and the Commonwealth Bank should not, be in a different, category. Is the Minister or his legal adviser able to say what powers will be incidental to the powers specified? This paragraph creates a most dangerous precedent. 1 recall nothing like it in any other legislation passed by this Parliament. I call upon the Minister to indicate what emergency could exist which would require the exercise of such a sweeping power as is provided for in this paragraph.
.- We all agree that paragraphs a. to k recite what the powers of the central bank shall be. It will require certain materials to carry on its business, such as stationery and furniture. Paragraph I will enable such things to be bought. There is no suggestion of anything else. The marginal note is “ General powers “. Those general powers are set out in paragraphs a to h. All that paragraph I does is to provide that the banks- shall have the power to do anything incidental to those powers. It is a machinery provision and nothing else.
– The Commonwealth Bank will be unique in that we shall have combined in one banking structure a central bank, a general trading bank, an industrial finance department, a savings bank, a mortgagebank, and a rural credits department. That is quite contrary to the accepted practice of central banking all over the world. The Royal Commission on Monetary and Banking Systems in paragraph 157 of its report states -
The Commonwealth Bank has taken the view that its centralbank activities are of paramount importance, and that its development its a central bank should go hand in hand with some limitation of its trading activities. This proposal, however, is for a general expansion of the functions of the central bank to embrace almost every banking activity including trading. That is where it clashes with accepted central banking practice. It is significant that the Bank of England for two centuries was purely a commercial bank, as was the Commonwealth Bank upon its inception. It was not until 1844 that the Bank of England began to assume central banking functions. Since then it has gradually divested itself of its trading bank activities, until to-day, they are purely nominal. Most other central banks do not have trading powers. I suggest that the separation ofthe central bank and the trading bank functions of the Commonwealth Bank is most desirable. Adequate justification for such action is to be found in the royal commission’s report. The complete dissociation of these two activities,by the formation of a separate institution as a central bank, is by far the most desirable course. The present proposal simply means that control of banking, currency and everything else will be in the hands of one man, the Treasurer.
– Honorable senators are somewhat handicapped in discussing this clause, because although it provides that the bank shall have power to carry out many activities, the provision of capital is dealt with in clause 14, which states -
The capital of the Commonwealth Bank for the purposes of this Part shall be the aggregate of -
the sum of Four million pounds, which shall be provided from the capital and Reserve Fund of the Commonwealth Bank as existing immediately prior to the commencement of this Part; and
such other sums as are transferred from the Commonwealth Bank Reserve Fund in pursuance of the. next succeeding section.
That sum of £4,000,000 hardly seems sufficient to enable the bank to carry out the many activities specified in clause 13. Sub-clause 3 of clause 15 provides -
The Governor may, from time to time, transfer from the Commonwealth Bank Reserve Fund to the capital of the Bank such sums as he thinks fit.
In his explanatory remarks on this clause, the Minister for Trade and Customs (Senator Keane) stated that the total accumulated reserve funds of the bank at present were £4,137,000, which, with the £4,000,000 to be provided under clause 14 makes a total of £8,137,000, “Will the Minister explain how all the proposed activities of the bank are to be carried out on this limited capital?Forexample, it is stated that one objective of the bank will be to prevent inflation or deflation of the currency. That will require the purchase or sale of securities and the establishment and subsequent release of credits. As these activities will involve hundreds of millions of pounds, how can. they be carried out with a capital of only £8,137.000?
– The bank will be able to operate also upon the funds of the savings banks.
– No. The Commonwealth Bank will not be able to obtain funds from the savings banks for central banking purposes. In fact, I should like to know precisely for what purpose the funds of the savings banks will be used by the Commonwealth Bank. By including in one measure, provision for the exercise of central bank, trading bank, rural bank, and savings bank functions, the Government has created a confusing situation.
– Clause 13 provides that the central bank may exercise certain functions. The bank will have power to receive money on deposit. When it comes into operation hundreds of millions of pounds will bo deposited in it. Its capital will not be limited to the £8,137,000 mentioned by the honorable senator. Some authorities claim that even this capital is not necessary to commence, operations. For instance, if the Acting Leader of the Opposition (Senator Leckie) were authorized to open a bank to-morrow, lie would not require any capital. Ample capital would be provided by the depositors.
– It is regrettable that trading bank and central bank functions have been confused. I understand the Government’s proposal to be that the central bank should be the bulwark of our financial institutions, but under the conditions laid down in this measure, that purpose will not be achieved because the central bank will be competing in every sphere of business activity. The result will he that when a reserve is required to meet certain contingencies, the central bank will be left high and dry. The functions of the central bank should be restricted in accordance with the generally accepted principles of central banking, and the trading banks should ‘be permitted to carry on ordinary trading activities. This proposal defeats the whole aim of i he hill’. Clause 13 sets out a list of activities of the central bank, and clause 14 provides the capital required. I should like to know where the hundreds of millions of pounds required to exercise central banking functions, and all the other functions specified, are to be obtained.
Clause agreed to.
Clause 14 (Capital).
– Perhaps the Minister for Trade and Customs (Senator Keane) will offer in connexion with this clause the explanation which he did not give on clause 13. Clause 14 provides that the capital of the Commonwealth Bank, for the purposes of this Part, shall be £4,000,000.
Clause 15 provides -
The Governor may, from time to time, transfer from the Commonwealth Bank Reserve Fund to the capital of the Bank such sums as he thinks fit.
The Minister is confusing central banking with general banking. Any deposits with the bank would come under its general banking functions, not its cen tral banking functions. The general banking section of the Commonwealth Bank cannot transfer to the central bank any money at all, because the bill lays down that the only money which can he paid to the central bank must come from tie reserve fund, which amounts to only £4,130,000. The Minister does not get out of his difficulty by paying that hundreds of millions of pounds belonging to depositors will be available, because their deposits will go, not into the central banking section of the bank, but into the General Banking Division. Therefore, the Minister is incorrect in saying that hundreds of millions of pounds will be available to the central bank.
– In the Treasurer’s memorandum this clause is commented upon ,as follows: -
In 1 024, the Commonwealth Bank Act was amended to provide that the capital of the bank should be £20,000,000, to be made up of £4,000,000 from the bank’s own resources, together with such sums not exceeding £0,000,000, as might be made available to the bank by the Commonwealth from borrowed moneys and further amounts not exceeding £10,000,000, to be raised toy the sale and issue of debentures. However, no capital has been provided beyond the £4,000,000 from the bank’s own resources. In the interim, the bank has accumulated a reserve fund, which as at the 30th June. 1944, totalled £4.130,000. making capital and reserves £8,130,000.
It is now proposed that the capital of the Commonwealth Bank for purposes of central banking should consist of £4,000,000, to be transferred from existing capital and reserves (a further £4,000,000 is to be transferred for the capital requirements of the General Banking Division), plus such other amounts as may be transferred to capital from a Commonwealth Bank Reserve Fund to be established under clause 15 of this bill. Transfers may be made from the reserve fund to capital, at the discretion of the Governor, to build up capital resources commensurate with the responsibilities of the bank.
Separate and additional provision is made in Parts IV., VIII., IX., and X., for the capital requirements of the General Banking Division, the Rural Credits Department, the Mortgage Bank Department and the Industrial Finance Department, respectively.
That explanation is clear. The officers who prepared these notes have done an excellent job.
– The Commonwealth Bank has been acting as a central bank and on the whole has done a. good job, but it has had at its disposal all the money in. the bank, including deposits. This bill divides the Commonwealth Bank into sections, one of which will deal with central banking. Specific provisions will control its central banking functions. Hitherto, all the capital of the Commonwealth Bank, including deposits-, has been available for use, but with the division of the bank into sections, the capital of the central bank will be only £4,000,000, plus certain additions from the reserve fund, which altogether will be a small sum to carry out a large job. The Ministers explanation does not cover that point. In carrying out its functions as a central bank, the bank hitherto, has had almost unlimited capital, including, as I have said, deposits by various governments and bodies as well as by private depositors. I. want to know how the bank will carry out its central banking functions wilh the small capital for which this bill provides? The committee is entitled to that information.
– The position would be made clear if the Minister could say what funds have been required from year to year to carry out the central banking functions of the Commonwealth Bank. A sum of £4,000.000 may, or may not, be adequate. If the Minister will supply that information the committee would be iti a better position to decide whether or not to accept this clause.
– A perusal of the last balance-sheet of the Commonwealth Bank discloses that, although its capital was £4,000,000, its total assets were valued at over £600,000,000, or ISO times its capital. The funds of the central bank will be derived from deposits by Commonwealth and State Governments, trading banks, and special deposits. The Commonwealth Bank was established with a nominal capital of £1,000,000, but actually it started without any capital at all. To-day, as I have said, its assets are valued at over £600,000,000. We have it on the highest authority that banking is so attractive that there is practically no risk so long as proper controls are established.
– The Commonwealth Bank has liabilities as well as assets.
– Finance will be provided for each of the sections into which the Commonwealth Bank is to be divided. Senator Leckie could use the same arguments as he is using in connexion with this clause when other provisions come before us. The Commonwealth Bank has done a magnificent job, although it started without any capital at all.
Senator HERBERT HAYS (Tasmania; 5.10]. - The Minister’s explanation is not satisfactory. Hitherto the Commonwealth Bank has acted as a central bank, a rural bank, and a mortgage bank, in addition to carrying out general banking business and, as the Minister has said, it has operated profitably. Now, the bank is to be divided into sections, and a certain sum of money is to be set aside as the capital of the central bank. Oan the .Minister say on what basis a capital of £4,000,000 was arrived at? If that amount was fixed arbitrarily, why insert it in the bill at all? I ask” the Minister to say what amount of capital has been required by the Commonwealth Bank to carry out its central banking functions in the past.
.- It is evident that honorable senators opposite do not understand what amount of capital is required to establish a bank which is to function as a central bank, or what constitutes the working capital of a bank. The position is that a bank does not use its reserves for ordinary business ‘at all. A bank’s power to create credit against its assets represents its capital. I could quote many authorities to show that that is so, but there is no need to do so. Honorable senators know that money deposited with a bank earns interest at about 1£ per cent, whereas interest, at a. rate of about 4f per cent, is paid on overdrafts. The difference between those two rates of interest is about 3 per cent., but no bank in the world has built up its huge reserves merely by charging higher rates of interest on overdrafts than it pays on deposits. That proves that it does not matter at all what the capital reserves of a bank are. The simple fact is that a bank trades in credit, and that behind the credit which it creates stand the resources of the nation. Senator Leckie wants to know whether the capital of the central bank is to be only £4,000,000 plus certain additions, but we, on this side, say that it would not matter if the bank had no capital at all, and that the sum of £4,000,000 is merely a. figure decided upon arbitrarily. A bank uses the wealth of the community which is the .productive capacity of the community, as a basis for the issuing of credit. Mr. McKenna, an accepted authority on banking, says -
The amount of money in existence varies only with the action of the banks in increasing and decreasing deposits. Every loan or overdraft creates a deposit, and every repayment of a loan or overdraft destroys a deposit.
Thus, one of the greatest bankers in history has stated definitely that capital does not matter, and that the banks do not use capital, but create credit backed by the productive capacity of the nation. In McLeod’s Theory and Practice of Banking, we read -
The essential feature of a bank and a hanker is to create and issue credit, and this credit serves as money. A bank is not an office for borrowing’ and then lending money; it is a manufactury of credit.
Davenport’s Economics of Enterprise states -
Banks do not lend their deposits, but by the expansion of credits create deposits.
Lord Keynes, the greatest economist of our time, has said -
There can be no doubt that all deposits are created ,by the banks.
The Ma om ill an report states -
By granting loans, allowing money to bc drawn on an overdraft, or purchasing securities, a bank creates money.
The fallacy exists in the minds of honorable senators opposite that a bank requires capital to carry on its business; and that fact shows that they do not understand the fundamentals of banking.
– The basis of the remarks made by Senator Lamp is that the Commonwealth Bank need not have any assets, and that the whole of the resources of the nation are behind it. If the Government accepts
Senator Lamp’s explanation, it says in effect, “ We are going to lend credit without anything tangible to back that credit “. An ordinary bank does not lend money unless it has the requisite security. The clause simply states thai, the capital of the central bank is to be £4,000,000, with additions from the reserve fund. If Senator Lamp is right the Government need not provide that capital. The honorable senator’s explanation is surprising and I am wondering whether it is the explanation which will be given by the Minister. Is it wise to let it go out to, the people that, in the opinion of the Government, the function of the central bank is to create and sell credit? An ordinary bank must have something behind it before it can sell credit or borrow or lend money; but the Government is going to set a new criterion in banking. Its bank is going to start from nothing. Senator Lamp has not contradicted the statement that the capital of the hank is to be £4,000,000. Further, it is provided under this measure that some special credits shall not be placed to the credit of the general banking business. What I want to know is whether the sums, amounting to £240,000,000, forcibly taken from the private banks, will be at the disposal of the central bank for use in its ordinary functions? Will that money be used as a means of” placing the central bank on its feet?
– I can understand the Government saying that that £240,000,000 would be a fair backing for the central bank.
– The backing is as set out in the clause.
– The Minister now says that the money which has been taken from the private banks will not he used to help the central bank; and Senator Lamp’s explanation makes confusion worse confounded. Senator Lamp said that the central bank will create credit out of nothing and sell it at a price.
– I said nothing of the kind.
– The honorable senator said that it was not necessary for a government bank to have any backing at all behind it. He seems to be satisfied with the vague idea that the whole of the resources of the. community are behind it. We are not able to forget that’ at present the resources of the community ave very largely mortgaged.
– What rot.
– The nation owes £2,500,000,000, and our taxes are the highest in the world.
– And what about our assets and our capacity to produce?
– We live on what we produce; but when the honorable senator speaks so airily about the credit of the community he cannot ignore the fact that the community has already borrowed £2,500,000,000 from various sources, and must pay those debts. When the honorable senator speaks about the credit of the community, he must recognize that that credit is largely mortgaged, and also bear in mind that our present tax rates are so high that Ave can expect to raise very little more from that source. We can only overcome the problem by increasing our productive capacity. The Government now says that the money it has taken from the private banks is not to be used as a central bank fund; and Senator Lamp says that we do not require any money at all but need merely to create credit.
– If I remember correctly my history of the Commonwealth Bank, the only sum made available to it in the beginning was £10,000 from the Commonwealth Treasury, and that its actual funds came from the State of Tasmania where the State Savings Bank was taken over by the Commonwealth Bank. That really provided the working capital of the Commonwealth Bani?; and from that very small working: capital it was able in a very brief period to finance the first world war in 1914-18 to the amount of £350,000,000. It also has played a major part in financing the present Avar without the need of debentures for which provision was made in the measure passed in 1.924. T suggest to the Acting Leader of the Opposition (Senator Leckie), who is raising difficulties about the inadequacy of a capital of £4,000,000, that in view of the two performances which I have just cited he need have no misgivings as to how the central bank will be able to carry on its functions. If I understood the Acting Leader of the Opposition aright, he said that the general banking division, which is now separated from the central bank, would not be able to make deposits with the central bank. If he did say that, I disagree with him- on the point. I refer him to clause 17 which says - (2.) The Bank shall have such powers as are necessary for the purpose of carrying on general banking business and shall, without limiting the generality of the foregoing, have all the powers referred to in paragraphs (6) to (/) (inclusive) of section thirteen of this Act.
And sub-clause d of clause 13 provides that the general banking division ah all have power to lend money. I cannot find any prohibition in the bill against the general banking division lending whatever money it wishes to the central bank. The whole of the resources of the general banking division will be available to the central bank at all times, and, particularly, in emergencies. That is quite apart from the special deposits of £240,000,000 which the bank holds at present. .Senator Herbert Hays asked why the sum of £4,000,000 was to be allotted to the central bank and a similar amount, to the general banking division. I suggest that as the Commonwealth Bank has accumulated a reserve fund of more than £8.000,000, and its functions are now being divided into two separate divisions, it is a natural and normal thing to divide the capital equally between the two parts. Accordingly, the £8,000.000 which the bank has accumulated in reserves-
– If the Acting Leader of the Opposition refers to the explanatory memorandum circulated by the Treasurer he will find that the reserves amount to £8,130,000.
– No; that is the total of capital and reserves.
– On page 5, the explanatory memorandum, states -
In the interim the bank has accumulated a reserve fund which as at 30th June, 1044, totalled £4,130,000 making capital and reserves £8,130,000.
On preceding pages of the annotated co-y cf the measure we find that the capital of £4,000,000 was obtained from the bank’s own resources, and that was frozen as capital in 1934. I put it to the committee that the whole of that sum of £S, 130,000 represents profits made by the bank up to the present, after contributing one half of its profits to the National Debt Sinking Fund. The bank was without actual subscribed capital whether from the Commonwealth or debenture holders ; and the whole of that fund is now to be equally distributed between the two sections of the bank. [ submit that that is the explanation of the point raised by Senator Herbert Hays.
Clause agreed to.
Clause 15 (Profits and Reserve Fund).
– Subclause 3 reads -
The Governor may, from time to time, transfer from the Commonwealth Bank Reserve Fund to the capital of the Bank such sum’s as lie thinks fit.
Senator McKenna said that the reserves of the bank amounted to £8,130,000. He will see that the reserve fund amounts to only £4,130,000, and that capita] amounts to £4,000,000. Seeing that the central hank is being separated from the other section of the bank, I should like to know how the central bank is going to carry out all the functions allotted to it on such a small capital. We have not yet been given adequate information on that point.
Clause agreed to.
Clauses 16 and 17 agreed to.
Clause 18 (Bank to develop its general banking business).
– This clause reads - (1.) It shall he the duty of the Bank, through the General Banking Division, to develop and expand its general banking business. (2.) The Bank, through the General Banking Division shall not refuse to conduct banking business for any person, by reason only of the fact that to conduct that business would have the effect of taking away businessfrom another bank.
Does that mean- that the Commonwealth Bank, through its General Banking Division, shall seek the customers of the other banks and shall not refuse to conduct general banking for any person, or does it mean that it shall not refuse to conduct general banking business for any person for the reason that to conduct that business would take business away from another bank? Where will the bank get if it has to accept any business offered to it? I acknowledge the qualification contained in sub-clause 2. I am puzzled, however, whether the clause does not go further than would appear. If it mean.* that the Commonwealth Bank shall not refuse the general banking business of any one, the trading banks may he placed in. a great difficulty.
– In paragraph 5-59 of its report, the banking commission referred to the fact that the Commonwealth Bank, as a matter of policy, had restricted its trading bank activities, and pointed out that, although the bank had not refused credit accounts, it had not sought clients from a trading bank where it considered that the trading hank concerned was giving satisfactory service. The commission, subject to a dissent by Mr. Chifley, expressed the opinion that that wa3 a proper practice for a central bank to adopt. Paragraph 11 of Mr. Chifley’s dissent, published on pages 264-5 of the report, reads as follows: -
The present policy of the Commonwealth Bank is to restrict the activities of its trading section, and to refuse an advance to a customer of a trading bank, unless in the opinion of the Commonwealth . Bank the customer is not receiving fair and reasonable treatment from the trading bank. It has not been disclosed in the evidence that the Commonwealth Bank has never taken a customer on these grounds. People should, in my opinion, have the right to obtain advances from the Commonwealth Bank without question as to whether they are customers of a private trading bank. The only considerations, in my opinion, should he whether they are credit worthy, and whether in conformity with the central bank policy, advances should be made to them. At present, the Commonwealth Bank by its self-imposed restrictions as to the extent of its advances, deprives itself of any real power to prevent a rise in rates on advances. Although the Commonwealth Bank did not increase its advance rates in March, 1936, when some trading banks, in opposition to its wishes, increased deposit rates and later advance rates, it was unable to force the trading banks to respect its wish that rates should nut bc increased. That was an occasion on which the Commonwealth Bank, if it desired to enforce its wishes as a central bank, should have intimated that it would seek ^business at its lower rate from the trading banks who disregarded its wishes.
The reason for the clause is obvious from the explanation I have given.
– I agree with the Minister for Trade and Customs (Senator Keane) that the reason for the clause is obvious. It was deliberately inserted for the purpose of enabling aud encouraging the Commonwealth Bank to take accounts from the private trading banks. The Commonwealth Bank’s overdraft rate has always been lower than that of the private hanks. One honorable senator referred to an overdraft rate of 4$ per cent., but the Commonwealth Bank’s overdraft rate has never been more than 4J per cent., as far as I am aware. Its rate has always been one-half per cent, lower than that of the private banks. The Commonwealth Bank, however, recognized that it would not be good for the community to have all banking business done through it. To my knowledge, no accounts have been refused by the Commonwealth Bank, except when people have gone to it merely for the purpose of obtaining the benefit of the lower rate of interest on overdrafts. Under this legislation, the Commonwealth Bank will be able to charge almost any rate of interest, no matter how low it may be, because it will not matter to it whether it shows a profit or a loss, since it is provided that all its funds shall be governed by the Commonwealth Treasury. This clause is intended to give to the Commonwealth Bank power to take accounts in direct competition with the trading banks. That, of course, is the intention of the Commonwealth Government. Instead of the Commonwealth Bank actively cooperating with the trading banks, as it has done up to the present, it is intended that it shall scramble with them for their clients by offering lower rates of interest on overdrafts and higher rates’ of interests on deposits. Under this legislation, it will not be able to refuse to take any account offered to it. Senator McKenna referred to the great financial achievements of the Commonwealth Bank in this war, but those efforts have also been made possible by the* response of the people to loan appeals. Every loan has been fully subscribed. That ready response of the people and not merely the activities of the Commonwealth Bank has made the financing of the war effort possible. Under this clause, regardless of the circumstances, the Commonwealth Bank will not be able to refuse to take any account offered to it. It will not be able to say, “ We think the financial stability of this country may be better maintained by a wider spread of banking activities”. I know the Government’s intentions. It makes no secret of them. The Minister for Trade and Customs is not so explicit as are some of his supporters, but he knows as well as I do that the main reason for this legislation is to enable the Commonwealth Bank to monopolize the banking business of Australia to the total exclusion of private banks.
– That is not stated in the clause.
– No, but that it Ls die intention of the Government is borne out by the wording of the clause. What makes it worse is that the Government intends not only that the surplus funds of the private banks shall be held by the Commonwealth Bank but also that those funds shall be used by the Commonwealth Bank in competition, with the private banks.
– That is not right.
– The surplus funds of the private banks will be held by the Commonwealth Bank at a rate of interest of less than 1 per cent. It is intended that the Commonwealth Bank shall not refuse an account merely because it is to be transferred from a private bank.
– The Commonwealth Bank will not pay 17s. 6d. per cent, on money and then lock it up.
– Obviously the money of the private banks will be used to attract their customers from them.
– There will be competition.
– The honorable senator admits that that is the whole reason for this bill. I know that it is the Government’s desire to expand the Commonwealth Bank in every way. If it desires =that the general banking business shall be expanded, the necessary instructions to the Governor to that effect are emitained in sub-clause 1. The purpose of sub-clause 2 is that every manager of a branch of the Commonwealth Bank shall set out to rake in at more advantageous terms the business now being done by the trading banks, with the sole object of destroying competition so that there shall be a government monopoly of banking in Australia.
.- This is a most necessary clause. I sincerely believe that the Commonwealth Rank .should engage in general banking. The Opposition has always lauded competition. ‘Competition, they say, is necessary to make the wheels of industry turn. Competition is their cure all. They now throw that principle overboard. Competition is good with them until it threatens the interests they represent. Then they want a monopoly.
– This bill proposes to set up a monopoly.
– No fear! This bill provides for the fair and honest competition that honorable gentlemen opposite have been advocating all their lives. Now, when it. is offered to them on right lines, they do not want it. When Sir Ernest Riddle was Governor of the Commonwealth Bank, he laid it down that it was not to compete with the private banks for ordinary banking business. I bought a house and was paying interest at 8 per cent, on the money I borrowed for the purpose. When I had paid off one-half of the debt and had a concrete asset, I asked the Commonwealth Bank to take over the mortgage. I was told that the bank did not engage in general banking business. The Commonwealth Bank Board was established to stop the Commonwealth Bank from competing against private banks. The effectiveness of the brake upon the Commonwealth Bank is shown by the small number of branches of the Commonwealth Bank established in the last ten years. In Tasmania, one finds about five private banks in almost every locality, but only four branches of the Commonwealth Bank are operating throughout the State. That proves that honorable senators on the opposite side do not want the Commonwealth Bank to compete with the trading banks. No bank can carry out business without premises. I am very pleased that this bill has been introduced, and that it includes this clause authorizing the Commonwealth Bank to conduct general banking business in competition with the private banks.
– From the remarks of Senator Lamp one might be led to believe that, when this legislation becomes law the Commonwealth Bank will enter into fair competition with the other banks. The fact is, however, that this bill will remove whatever small measure of fair competition exists at present. For instance, the Commonwealth Bank does not pay rates or taxes to State authorities upon its properties. Under the Constitution, exemption from such dues is granted to all Commonwealth instrumentalities. To that degree, therefore, even in the past there has not been fair competition .between the Commonwealth Bank and the private banks. What have the private banks done to deserve to be penalized as they will be under this measure? They commenced operations in this country long before the Commonwealth Bank was thought of, and carried on business successfully, not only so far as their own interests were concerned, but also in the interests of the development of this country. In the past, the practice has been for the Commonwealth Bank to discourage the transfer of accounts from the private hanks, and the private banks have taken similar action in regard to Commonwealth Bank accounts. That is fair competition. If the Government believes that it can engage successfully in commercial enterprises why does it not permit the Commonwealth Bank to enter the trading hank field on a competitive basis? The effect of this measure will be to create a virtual banking monopoly in this country. How can honorable senators opposite reconcile this legislation with their frequently expressed opposition to monopolies? No Government supporter will deny that this measure provides the subtle means w here by banking in this country may be nationalized if the Government so desires. It does not provide for straightout nationalization, but provides the machinery whereby the private banks may be forced out of business by the Commonwealth Bank.
– Does the honorable senator not believe in competition? (Senator HERBERT HAYS. - I do, but this measure will not put the Commonwealth Bank on a competitive basis. I do not argue that the Commonwealth Bank has not been a useful institution, but this legislation will make it the plaything of politics. There are clear indications throughout the Commonwealth that the Labour Government will not be in office after the next elections. The people of this country are eagerly awaiting an opportunity to remove it from the treasury bench. When that has been accomplished, we shall restore the Commonwealth Bank to its former position in the banking field.
– You would not be “ game “.
– Make no mistake about that. The people of this country will be “ game “. If honorable senators opposite believe in nationalization, socialization, or whatever they may call it, and are of the opinion that government enterprise is more efficient than private enterprise, why have they not the courage to permit the Commonwealth Bank to enter into fair competition with the private banks”, and, by its super-efficiency, drive them out of business?
– This clause places a definite obligation on the Governor of the Commonwealth Bank. It provides that it shall be the duty of the bank - which means, of course, the Governor - to develop and expand its general banking business. That will be the law when this measure has been passed, and the Governor will have to obey the law. If he does not develop the general banking business, he will be breaking the law. He will be obliged to increase the business of the bank by hook or by crook. .Sub-clause 2 is rather unique in that it limits the power of the Commonwealth Bank to refuse business. What unlimited opportunities for political pressure this clause will present. A disgruntled would-be borrower will only have to cry that the Commonwealth Bank has refused, him because it would be taking businessfrom the private banks, and presumably the Government will come to his assistance. Minor matters such as credit worthiness, and security may very easily be brushed aside under these conditions. This clause is in complete conflict with the conclusions of the Royal Commission on Monetary and Banking Systems. Almost every speaker has quoted from the report of that body passages which suited his case. My learned friend from Tasmania, Senator McKenna., produced some tit-bits which supported his arguments, and I have found some which support mine. Paragraph 559 states that it has not been the practice of the Commonwealth Bank to accept clients from the trading banks, in cases where it considered that these banks were giving satisfactory service. The paragraph concludes -
In our opinion this is a proper practice for a central bank to adopt.
If, mandatorily, the Governor is obliged to expand the general business of the Commonwealth Bank, much of the increased business may be unsound. Referring to business on the opening day of the Commonwealth Bank, the official publication issued by the Commonwealth Bank itself - according to C. C. Faulkner in The Commonwealth Bank of Australia - stated -
As usual with a new bank, many “ lame ducks “, whose business had not been favorably regarded .by the private banks offered their patronage; but the Commonwealth Bank from its beginning was very discriminating, and only accepted first-class business.
I hope that the bank will continue to accept only first-class business. Under this clause there may be temptation to accept business of an unsound character, merely to comply with the obligation to expand the business of the bank. However the real danger is that political pressure may be brought to bear. The clause is a dangerous one and I am opposed to it.
Clause agreed to.
Clause 19 (Capital).
– This clause provides -
The capital of the General Banking Division shall be the aggregate of -
the sum of Four million pounds, which shall be provided from the capital and Reserve Fund of the Commonwealth Bank as existing immediately prior to the commencement of this Part, and
Such other sums as are transferred from the General Banking Division Reserve Fund in pursuance of the next succeeding section.
Earlier to-day, it was stated that the funds of the general banking division would be £4,000,000, plus a portion of the reserve fund of the Commonwealth Bank. Under this clause, that reserve fund is to be used in the general banking division. I was reckoning, on a sum of £8,130,000 being in the central bank division, but it would appear that I was over optimistic because, under this clause the whole of the reserve fund of the Commonwealth Bank is to be absorbed by the general banking division.
Clause agreed to.
Clauses 20 and 21 agreed to.
Clause 22 -
The Special Accounts established by banks under Division 3 of Part II. of the Banking Act 1.945, and the accounts established by banks for the purposes of section fifty-two of the Banking Act 1945, shall not be kept in the General Banking Division.
.- This is an important clause in that it anticipates the passing of other legislation. I should like the position to be made clear, because this clause sets out that special accounts are to be established under legislation not yet placed on the statute-book. 1 want to know whether wool broking firms and pastoral companies are to be included in the other legislation proposed tobe brought before us.
– The companies referred to by the honorable senator will not be included.
– An awkward position will arise because many of those firms carry on what is now regarded as banking business; they provide overdrafts ; they make advances on wool, and for purchasing of sheep ; and they finance transactions between one firm and another. If their funds are to be tied up, difficulties will arise. I point out, that under clause 18 (2.) of another bill which has not yet come before us, a direct relationship is to be established between the trading banks and the wool-broking firms. If that be so, hardship will be inflicted on persons engaged in the pastoral industry. However, I accept the Minister’s assurance that pastoral companies and wool-broking firms will not have to provide funds for this purpose under other legislation which is to come before us.
– This clause offers the greatest insult to the Senate that it has ever received. It assumes that other legislation which has not yet come before the Senate willbe passed. Reference is made in this clause to the Banking Act 1 945, although no such act is on the statute-book. Under legislation passed by the House of Representatives, woolbroking firms may have to yield to demands made by the Commonwealth Bank, and their money would be put into special accounts. This clause provides that those special accounts shall be kept in the General Banking Division of the Commonwealth Bank, but the Minister has not said where they shall be kept. Earlier to-day, he notified the committee that such moneys would not be used in the central banking business of the Commonwealth Bank, but he did not say how they would be used. I do not imagine that the moneys will be left idle, and not used at all. They will have to go into a special account,and they will be used in some part of the bank’s business. If that were not so, there would be no object in the Commonwealth Bank having the money, except that by “ freezing “ such funds the private banks would be deprived of money with which to carry on their legitimate business.
SenatorFoll. - It is the policy of the Government to strangle the private banks.
– That would appear to be the purpose of this clause. I do not hesitate to speak about other legislation recently passed by the other branch of the legislature, because of reference in this clause to the “Banking Act 1.945 “. It would appear that the purpose df this clause is to reassure the banks by indicating that their money will not be used to compete against them. Will the Minister say where this money will be placed?
.- This clause strikes at a. principle which the Government has professed to believe in, namely, that money should be used for developmental purposes. One reason given for the depression by supporters of the Government is that there was no free flow of money. It was said that 100 much money was tied up and not made available . for the development of industries. Yet, under this clause, the Commonwealth Bank will take away the surplus funds of the private banks, apparently in order to “ freeze “ them. Of what use can “ frozen “ funds be in the development of this country? One would have thought that, instead of “ freezing “ funds, every encouragement, would be given to the use of surplus funds by banks. It seems entirely wrong to take money away from the private banks, and not to use it. We should bc told what is intended to be done with this money.
– The Treasurer’s memorandum explaining this bill states -
This clause refers to the special accounts which the trading banks will foc required to maintain with the Commonwealth Bank under the proposed Banking Act and also the trading banks’ accounts with the Commonwealth Bank for purposes of clearing house settlements. It provides that these accounts shall not be kept in the General Banking Division. ThU will remove any grounds for complaint that competitive activities may be conducted with faulds deposited by the trading banks.
The special accounts will be kept in the central bank, but I cannot say for what purpose the money will be used. Certainly, it will not be used to help competitive activity against the private banks.
, - I move -
That the following words lie added: - “and the funds comprised in such special or other accounts shall not be used by the Bank directly or indirectly so as to compete with the .business of the’ banks establishing such accounts “.
In view of the Minister’s assurance that these Special Accounts will not be used in competition with the private banks, he can scarcely refuse to accept the amendment. The clause provides that the Special Accounts shall not be kept in the General Banking Division, but as the money must be used somewhere, I want to ensure that it shall not be used to compete with the private banks. My amendment includes the words, “ directly or indirectly”, because it is apparent that otherwise these moneys may be paid into the Rural Bank Department, or theMortgage Bank Department, or used tostrengthen the General Banking Division. The Minister said that the clause would remove any ground for complaint that the funds of the private banks would be used to compete with those institutions. That objective will not be achieved under the clause as it stands. If that be the objective of the clause the Minister should accept my amendment.
.- The amendment proposed by the Acting Leader of the Opposition (Senator Leckie) is similar to one moved by the Leader of the Opposition (Mr. Menzies) in the House of Representatives. The Treasurer (Mr. Chifley) promised that the proposal would receive consideration. In the meantime, he has discussed the matter with the Government’s legal officers who are of opinion that the amendment would not add to the protection already given under the clause. It should be noted that the clause provides that the special deposits of the trading banks shall not be kept in the general banking division, and, therefore, cannot be used in that division in competition against the trading banks. Safeguarding clauses have been placed in other parts of the bill dealing with the various departments of the bank. For instance, in Part IX., which covers the Mortgage Bank Department, clause 78 provides that the funds shall not be used in the business of the Mortgage Bank Department except as expressly provided by the act, and the provisions of the act limit the funds of the Mortgage Bank Department to its capital and advances from the Treasurer, provided that in the ease of the Bank itself the advances outstanding at any time shall not exceed £1,000,000. Therefore, the Government cannot accept the amendment.
.- The Minister for Trade and Customs (Senator Keane) has now informed us that the surplus funds taken from the private banks are not to be used by the Commonwealth Bank. They will not -be used in the General Banking Division because they will not be paid into that division ; and he says that they cannot be used in the Mortgage Bank Department because the act definitely limits the amount of capital which can be made available to that department. In those circumstances, what is to become of the funds? What is the use of taking these surplus funds from the private banks if they are not to be used ? Surely, it, would be better to leave them with (hose institutions in order that they may use them. It seems, as the Acting Leader of the Opposition (Senator Leckie) has pointed out, that the Government, purely out of pique, is taking this course as a step in a plan, to strangle the private banks. The Government is taking the surplus funds from the private banks to freeze them; and, apparently, it intends to do this a3 one step in its plan to destroy the private banks. On the Minister’s own admission, the position is most extraordinary. These funds are to be taken from the private banks, but will not be used by the Commonwealth Bank. Why does not the Government leave them with the private banks to be used in providing legitimate advances in order to assist industry in this country?
Senator HERBERT HAYS (Tasmania) IS.24]. - The’ explanation given by the Minister for Trade and Customs (Senator Keane) clearly indicates that the object of the clause is to limit the activity of the trading banks. Such a proposal could be readily understood as a wartime measure, or as a remedial measure in a time of financial stringency or economic depression in order to enable the Commonwealth to undertake urgent public works. But the Government has declared that whilst it believes in the principle of government control in respect of certain undertakings it will work in co-operation with private enterprise. The Government has declared as a matter of policy that it desires not to destroy private enterprise but on the contrary to co-operate with it. Under this measure, however, it proposes to take these surplus funds from the, private banks whether it requires to use them or not. Unless these funds be required for some national purpose, they should be allowed to remain with the private banks because they are the working capital of the private banks. Should the Government require to take over these funds for some specific purpose it already possesses power to do si. under the national security legislation. There is no need to insert this provision in a measure of thi3 kind, because this is not a war measure. It is a measure dealing with the control and management of the Commonwealth Bank in peace-time. I am sure that no honorable senator would contend that the measure is related directly, or indirectly, to war purposes. The private banks require these funds in order to carry on their legitimate business.
– We cannot expect conditions to return to normal within six months after the end of the war.
– The announcement, has gone forth to the people that this measure is virtually a war-time measure. That is not its purpose at all. It is not related in any way whatever to war-time conditions, because the Government already possesses the power to do all that is covered by this provision. Apparently, the Government intends to destroy the private banks .by restricting their activities; and this is one step in that plan.
– The private banks will be allowed to have as much money as they had before the war.
– No; this measure provides for the control of the private banks by the Commonweal th Bank.
– Of course it does.
– That is entirely wrong. This is a peace-time measure which should not see the light of day while the war lasts. It is clear to mc that under the measure the Government is now taking power to destroy the private banks when peace returns.
Senator MATTNER (South Australia) S.25]. - No guarantee is given under the clause as to the use that may be made of these surplus funds. Even if these funds are not kept in the general banking division there is nothing to prevent the Treasurer from borrowing money against i Treasury-bills from the General Banking Division, or the central bank and lending to the Industrial Finance Department or the Mortgage Bank Department. Would 6UC,11 a course be possible under the clause as drafted?
Senator COOPER (Queensland) 1.3.26]. - On the one hand the bill seeks to facilitate through the Commonwealth Bank the borrowing of money in order to establish small businesses, but on the other hand it provides for the freezing of £240,000,000 of surplus funds taken from the private banks. If it is necessary to advance money to establish businesses, would it not be far better to allow the private banks to retain those funds and use them for that purpose? The alternative proposal is that the Commonwealth Bank while holding those surplus funds out of use will create fresh credit for that purpose. That seems to be the position in the light of the explanation just given by the Min.ister for Trade and Customs (Senator Keane). That is a ridiculous proposal. One can only conclude that the objective of the Government under the clause is to restrict the activities of the private banks, and, ultimately, to strangle them, because no reason at all is given for the proposal to take these surplus funds from the private banks.
.- I. am at a loss to know exactly what are the investable surplus funds about which honorable senators opposite have so much to say. No such sums are shown in the balance-sheets of the private banks. I challenge honorable senators opposite to produce a balance-sheet of the private banks as a whole which shows surplus investable funds amounting to £240,000,000. If the private banks have that amount it must exist in the form of deposits, and as deposits are liabilities how can they be loaned ? If this money were advanced for the manufacture of goods such a policy would result in inflation with a consequent rise of prices, and the money would be automatically cancelled out. The more money that isput on the market the higher prices rise. What are these surplus investable funds?’ Nobody seems to have a proper idea of what they are, hut I say that they have been accumulated by a secondary expansion of credit on top of the deposits that the private banks now have. I’ believe that this £240,000,000 is a swindle. If the banks have it, they should show it in their balance-sheets. If they cannot show it, it must be mythical.
– The Government admits having taken it.
– Well, I agree with the author of the article in the New Era headed “A £240 Million Swindle”, which says -
If honorable senators opposite can produce balance-sheets of the trading banks showing how that £240,000,000 exists, what it is and how they got it, I shall be satisfied to take their word that it does exist.
– As the Banking Bill is referred to in this clause, it would be as well to answer both the Minister for Trade and Customs (Senator Keane) and Senator Lamp by making appropriate references to it. Clause 8 of the Banking Bill provides -
Where any such application is made, the Governor-General -
The point made by Senator Gibson is that woolfirms and stock agencies could be licensed under conditions which would require the depositing of surplus funds with the Commonwealth Bank. That point is valid. It is not sufficient for the Minister to say that they will not be called upon to do so, for the Banking Bill provides that they can be. Clause18 of the Banking Bill provides -
That is exactly the point made by Senator Gibson. Then the bill goes on to provide -
Clause 20 provides for the lodgment with the Commonwealth Bank by any bank of any increase in its assets. Senator Lamp says that the special war time deposits amounting to £240,000,000 are a swindle, but the Commonwealth Bank has already given to the private banks receipts for that money. It has the money.
– A cheque !
– Money !
– Money beblowed !
– The Commonwealth Bank has money or securities. Of course it does not just take a mere cheque and nothing else. It must have securities. It must know that the money is in its hands. So the Banking Bill gives the lie to Senator Lamp’s claim that the £240,000,000 represents a swindle. The lie is also given to him by the returns of the Commonwealth Bank. It is also given to him in the Minister’s second-reading speech. So I advise the honorable senator to argue with his Minister whether the Commonwealth Bank has the £240,000,000. The Minister expressly stated that it had. I persist with my amendment. The money taken by the Commonwealth Bank from the trading banks is real. We want to ensure against its being used to stifle fair competition. It is against normal business probity and honesty that it should be so used ; but the Minister has carefully evaded telling us what is to be done with the money.
– Even if the honorable gentleman were right, this is not the right place to deal with the point.
– Then, where is the right place?
– The right place is the division of the Banking Bill dealing with special accounts. This clause is merely an embargo against the Commonwealth Bank keeping special accounts in the general banking division.
-Clause 22 provides -
The Special Accounts established by banks . . shall not be kept in the General Banking Division.
If that is not specific, I do not know what is. If Senator O’Flaherty thinks that this is not the proper clause in which to ensure that ‘ those special accounts shall be safeguarded I do not know what is.
SenatorO’Flaherty. - Iam not going to feed the honorable gentleman.
– This is the only clause in this bill dealing with the special accounts. So the honorable gentleman is again wrong. I ask the Minister to reconsider his attitude and to reassure the general public that this money is not to be used unfairly.
– I have said that.
Question put -
That the words proposed to be added (Senator Leckie’s amendment) he added.
The committee divided. (The Chairman - Senator B. Courtice.)
Majority . . . . 7
Question so resolved in the negative.
.- It is provided that the Commonwealth IBank shall pay 17s. 6d. per cent. on the £240,000,000 involved in the special accounts. I ask the Government whether it is prepared, through the Commonwealth Bank, to pay £2,100,000 per annum for that money and allow it to remain idle. I do not think it is. The money will be invested in Commonwealth loans or in some other way. It is a moral certainty that it will not be allowed to lie idle. The Government should at least say what is to become of the money. I concede that it is to the advantage of the trading ‘banks, to a certain degree, to have that money invested with the Commonwealth Bank at 17s. 6d. per cent., because it will be available on application to meet the bank’s obligations to depositors, but the bank could make much better use of it by advancing money to clients to whom the management cannot now make advances because it is unable to obtain the consent of the Government. However. I maintain that, if the Government is willing that interest shall he paid on the money, it will not allow it to be idle.
– The question which has been put to the Minister for Trade and Customs (Senator Keane) is quite clear, and is one which any member of this chamber has a right to ask. A very large sum of money - approximately £240,000,000- is involved. What we want to know is to what use will that money be put. The Minister may not have this information at hand, but surely he is able to obtain it from his advisers. I agree with Senator Gibson that the Government would not be paying about £2,000,000a year interest on this money if it were not being put to some productive use.
– In the balance-sheet of the Commonwealth Bank as at the 30th June, 1944, there appears tinder the heading of “Liabilities” the item “ Special war-time deposits by banks, £184,000,000 “. On the assets side appears a number of narrations such as “ Australian Notes “, “ Money at short call in London”, “Commonwealth Government securities including Treasury-bills”, “ Other semi-Governmental and municipal securities “, “ Bills receivable in London”, “Remittances in transit”, “Mortgage Bank loans “, &c. I am unable to say under which of these headings the £184,000,000 has been spent. This money is not frozen in the real sense. It is being used by the Government.
– What is the difference between the Government using it and the trading banks using it?
– The Government must have control of the excess spending power of the community. That is a national necessity if an inflationary period is to be prevented.
Clause agreed to.
Clauses 23 and 24 agreed to.
Clause 25 -
Thu Bank shall bo managed by the Governor
.- I move -
That the words “the Governor” be left out with a view to insert in Heu thereof the following words: - “a Board of Directors composed of the Governor and seven other Directors. Subject Lo this Act, the seven other Director’s shall consist of (a) the Secretary to the Treasury; and (h) six other persons who are or have been actively engaged in agriculture, commerce, finance or industry.”
During the second-reading debate on this measure, stress was laid upon the fact that one of the main differences of opinion between the Government and the Opposition on this legislation was the proposed abolition of the present Commonwealth Bank Board of Directors. Government speakers pointed out that when the bank was established, sole control was vested in the first Governor, Mr. Denison Miller. I remind honorable senators of the subsequent development of the bank. When it was established, it was a comparatively small organization, and apart from its governmental activities, its only other work was the handling of a proportion of the savings bank business of the Commonwealth. It was not until the outbreak of war, when government finance assumed a much more important aspect, that the bank’s functions expanded considerably. Finance was provided for various marketing schemes, and advances were made upon crops. Money was made available also to purchase accumulated stocks of primary products. After the war, the bank’s activities continued to increase greatly and certain new functions were undertaken. The result was that not long after the war the government of the day deemed it advisable to follow the practice adopted by nearly every large business organization, and appointed a board of directors consisting of individuals who had had experience in agriculture, commerce, finance or industry, to guide the operations of the bank.
– That was not the real reason for the change.
– It was. The expansion of the bank necessitated the creation of the board. No large business organization would dream of permitting dictatorial control by one person. Government supporters have criticized the personnel of the Commonwealth Bank Board, but I contend that, generally speaking, persons who have held office on that board have been public-spirited men whose wide experience in finance, industry, or primary production has made their services invaluable. Not only does this measure abolish the Commonwealth Bank Board, but also, by means of clauses already passed by this chamber by weight of numbers, it gives to the Treasurer complete control over the Governor of the bank. It provides that should a difference of opinion occur between the Governor and the Treasurer, the Governor must bow to the wishes of the government of the day. Earlier to-day, an amendment providing that any such difference of opinion should be notified to Parliament within a certain period was moved by an honorable senator on this side of the chamber but was rejected. That shows clearly that the Government’s aim i:– to exercise complete political control over the bank. I venture to suggest that millions of people who have invested their life’s savings in the Commonwealth Bank would prefer the destinies of the bank to be in the hands of an independent board of directors, rather than of a Governor who will be under the direction of the Treasurer. If a referendum of depositors were taken on that question the vote in favour of the retention of the Commonwealth Bank Board would be almost unanimous. The proposal for the abolition of the board is not new. The Government has carried on a campaign against the board for a number of years. Long before this legislation was introduced, certain Government supporters, including some Ministers, were urging that at the first opportunity the Government should take steps to dispense with the Commonwealth Bank Board. Unfortunately, the Government has had to bow to the wishes of the extreme elements of the Labour party, as it has to do on many other occasions. The abolition of the board, which in the oast has been the bank’s greatest guarantee of. security is a. serious step, taken at the very time when the services of men with wide experience in business, primary production, and industry generally would be most valuable. The activities of the bank are to be expanded greatly, and it is to undertake functions of which it has not had any experience. The bank will break new ground in the administration of industrial advances, and will undertake much wider activities in regard to housing. At a time such as this, any sensible businessman would strengthen the board rather than abolish it. In my opinion, the Government is committing a grave crime against the men and women of this country who have been the mainstay of the Commonwealth Bank by. depositing their money in it. T urge the Government to accept this amendment in the interests of the bank, and of the people of this country. The abolition of the board would be a retrograde step.
– I trust that the Minister for Trade- andi Customs (Senator Keane) will reject this amendment because I believe that by removing the Commonwealth Bank Board we shall at last be giving to the bank an opportunity to do the work of the nation which its founders intended it should do. Honorable senators opposite talk of having the activities of the bank guided by a board of independent business men; but of what are they independent? Most of the men who have held office as members of the board in the past, have had associations with the private banks, and have been more inclined to look after the interests of those banks than the interests of the nation. It is time that the Government took a stand, and refused to allow individuals who have interests conflicting with those of the community, to direct the financial affairs of this nation. The Advisory Council, which the Government proposes to create, will advise the Governor, in the interests of the people. The reconstitution of the Commonwealth Bank Board would be a retrograde step. Earlier to-day, it was stated that the policy of the Commonwealth Bank in the past had been not to encourage the transfer of accounts from the private banks to the Commonwealth Bank. Why was that policy formulated ? Was it in the interests of the people of this country, or in the interests of the private banks? Obviously, it was in the interests of the private banks. We are determined that the Commonwealth Bank no longer shall be hampered by the board of so-called independent men.- I strongly urge the rejection of the amendment.
.- This clause substitutes a Governor for the existing Commonwealth Bank Board. What is the reason for the change? Has the Commonwealth Bank, under an independent, non-political board, stagnated since the board was created in 1924? On the contrary, the bank has made remarkable progress. Here are some facts: In 1924 62 full branches of the bank operated in Australia; there are now 275 branches - four times as many. The most modern building built in any country town during the past ten years is the branch of the Commonwealth Bank; the staff has increased more than three times, from 1,800 to 6,300; the assets of the bank have risen from £134,000,000 to £457,000,000. Before the war the Rural Credits Department had lent £125.000,000; in the last four and a half years the bank advanced £244,000.000 on the sale of primary products. Surely these facts reveal the flexibility and progress of the bank under the administration of an independent board. What is the need for its abolition? The Royal Commission on Monetary and Banking Systems made no such recommendation.
The bank has been able to do wonderful work during this war and has earned the gratitude of the people. It has been able to do so because it has enjoyed the confidence of the people. That is because it has maintained proper banking procedure. If the Governor, or a branch manager, regards a man as not having a good security, or as not conducting his business properly, the bank should bo free to say, “ We are dealing with the deposits of the thrifty people of Australia. The money we hold has been lent to us, because the people trust us. It is up to us, as a banking institution, to make certain that the money we lend shall be wisely and safely used “. The administration of the bank must be free to judge the facts. In collaboration with an advisory council, as is proposed in clause 29, the Governor has no such freedom. The Treasurer is to be a dictator. The Governor, or the council, may declare that the people’s savings in the Commonwealth Bank and deposits in the trading banks, are being used to the best advantage, but the Treasurer is to have the power to override that decision. Outside pressure groups, led by extremists and currency cranks, will keep him up to the mark in granting financial assistance for any project - good or bad- The question of votes intrudes itself. These extremists will not be satisfied till every industrial establishment, from the great steel-works at Newcastle down to the smallest private enterprise, is government controlled. Bank credit in millions will be used to compensate owners and shareholders who have invested their savings in. these ventures,, but it must he remembered that the value of every £1. decreases as the amount of bank credit increases. Enterprises which in pre-war years provided employment for about 700,000. men and women, or 80 per cent, of Australia’s employable population, are to be taken over by the Government, and some extremists even advocate that no compensation shall be paid. This proposed change in the administration of the Commonwealth Bank is- dynamite designed to destroy what has. been built up over the years.
On many occasions I have said in this chamber that a greater use of bank credit should have been made during the depression years 1930-32, to carry out some national works, including housing, which would be of economic value at some future date. Should such a catastrophe unfortunately occur again, I believe a bank board, constituted as thebank board was in those depression years, would, in the light of experience, act differently. It would, as Senator J. B. Hayes has said, take up the slack and provide bank credit for economic national works. A government, linked with an advisory council . dominated by a Treasurer, is no substitute for a bank board. Such an authority cannot safeguard the savings of the thrifty people of the Commonwealth. I support the amendment.
– I listened carefully to the sermon delivered by Senator Brand, in which he used extreme language against members on this side who advocate banking reform, and this from a man who objects to being called a “brass hat “. I cannot understand why honors able senators opposite continually try to undermine the confidence of the people in the Common-wealth Bank. Honorable senators opposite say that the Commonwealth Bank has done a good job while under the control of a board. No one denies that; indeed, no one denies that the private banks have done a good job. We on this side give to them credit for what they have done. But that does not alter the fact that we must look to the future, and take steps to provide against the danger of inflation or deflation. Senator Toll’s speech was only so much propaganda designed to undermine the confidence of the people in the Government. He advocated a- referendum only because he -wants to delay this measure. He referred to the Government Savings Bank of New South Wales which, he said, was forced to close its doors, but he did not say anything about other banks which also closed their doors.
– Only one private bank did so.
– Two private banks in Queensland closed their doors, but honorable senators opposite never refer- to them. They say that we on this side should not dabble in finance because, according to them, we know nothing about the subject. They say that banking is a matter for experts, and when we propose to provide for the administration by experts they claim that the proposals of the -Government will mean the political control of banking.
-son. - That is what it does. mean.
– At the same time that they complain of the political control of banking, honorable senators opposite ask that representatives of primary producers, and other interests, should be appointed to a board to control the Commonwealth Bank.
These men would not be experts in banking, but they would serve special interests which support honorable senators opposite. They speak with their tongues in their cheeks. We on this side want to remove the restrictions placed on persons who wish to transfer their accounts from private trading banks to the Commonwealth Bank, an example of which was given by Senator Herbert Hays this afternoon. The removal of those restrictions does not mean the political control of banking. Honorable senators have set out deliberately to undermine the confidence of the people in the Commonwealth Bank so that the private banking institutions may continue to control this country. It is time that they gave up the attempt to prevent this legislation from being passed.
Senator HERBERT HAYS (Tasmania;
– This Government has not said that.
– Many of the men whom members of the Labour party once denounced have been praised by the present Government for what they have done during the war. Let us be fair to these men, and, instead of denouncing them, give to them credit for what they have accomplished, even though some of them are associated with big financial institutions. Lot us acknowledge that these men who have done so much for governments and the country in the past are worthy of a place in the control of the nation’s bank. Having regard to their record of service to the nation, how can it reasonably be said that they would treacherously destroy this institution? The best tribute that we can pay to men of their type is to appoint them to the body controlling the bank, because in that capacity they will continue to assist this or any other government in strengthening the institution as the nation’s bank.
.- People who have enjoyed privilege all their lives think that they are of great importance in the community. Assessment of their value to the nation depend? upon one’s point of view, and one’s own economic position in ‘the country. Senator Herbert Hays said that the men of whom he spoke had rendered a great service to Australia. The fact is that while they were in control of the Commonwealth Bank they rendered service only to those privileged few who were entrenched in control of industry, and, during the depression, forced the people to the lowest possible level. Those interests must bear a fair share of the blame for the depression during which many people starved while the hankers lived in luxury. During the depression private banks increased their assets by millions of pounds. The balance-sheets of the private banks show that they made million!: of pounds profit during the depression. No one can deny that fact. This Government intends to take control of the Commonwealth Bank out of the hands of vested interest and thus ensure that the bank will be operated in the interests of the country as a whole. The Government intends to place it under the control of a man who, in respect of banking and monetary policy, will be responsible to the government of the day. He will be assisted by an Advisory Board consisting of experts who are trained in banking. Apparently, honorable senators opposite believe that if a man is a good pig-farmer he is a good banker, provided that upon appointment to the Commonwealth Bank Board he is subservient te the interests of hig business. Sir Robert Gibson, for instance, was an expert manufacturer of stoves and bedsteads, and upon his’ appointment to the Commonwealth Bank Board he was hailed as an expert banker; but as the chairman of the board he served the interests of the big financiers. Honorable senators opposite would like to see the old system continued. It was Sir Robert Gibson who said that unless the government of the day reduced wages, pensions and social service benefits, generally, the Commonwealth Bank could not make available to it the. finance necessary to enable it to carry on the functions of government. The day when such a thing could happen ha3 passed. This Government intends to implement its policy which is that the Commonwealth Bank shall be operated in the interests of the nation as a whole. That is the object of the measure.
– The clause provides that the bank shall be managed by a Governor, but, in fact, that will not be the case, because the Governor will not be a free agent. The truth is that under the measure the hank will be controlled by the Treasurer of the day. This is the crucial clause of the bill, because under it the Bank Board is to Iks abolished. Thus the way will be open for political control of the bank. That is the object of the bill. No provision is made for consultation by the Governor with independent experts. Senator Lamp spoke about the Advisory Council. That body is to consist solely of servants of the Treasurer or the Governor of the bank. In effect, this provision means that one man who will be subservient to political control is to control monetary and banking policy in this country in the future. The clause places tremendous power in the hands of one man. He will be not the Governor of the bank but the Treasurer of the day. [ do not know of any democratic country, certainly not within the British Empire, where such a system operates. We hear much talk about democracy and democratic control, but the underlying principle of the measure is reversion to one man control of the Commonwealth Bank. That idea is opposed entirely to the, democratic principle. The bill definitely means political control of banking in this country. But when one pauses to consider the proposal, he will find that it is a twoedged sword.
– I am not surprised at the outbursts of honorable senators opposite in their endeavours to reply to the criticism of the Opposition. It has been said that during the depression the Commonwealth Bank was not able, owing to its managerial set-up, to come to the assistance of the government of the day. I point out. that since the depression, the Royal Commission on Monetary and Banking Systems unanimously reported that the method of managing the bank by a board was satisfactory. The Treasurer (Mr. Chifley) who, possibly, is responsible for this measure to a greater degree than any other member of the Government, was a member of that commission. The commission in paragraph 575 of its report which was reported to Parliament on 24th August, 1927, unanimously made the following observations -
The present method of government of the Commonwealth Bank is by a board, appointed by the Commonwealth Government, and consisting of a Governor, the Secretary to the Treasury, and six directors who hold office for a term of years and retire in rotation. The board elects its own chairman. We are of opinion that that method of government is generally satisfactory.
That report has been made since the depression. Therefore, I disagree with the arguments advanced by honorable senators opposite in- favour of abolishing the board and placing the control of the bank in the hands of a Governor who will be subject to direction by the Treasurer of the day. The object of such a provision is to give to caucus, through the Treasurer, complete control of the policy of the Commonwealth Bank. Under the system of board control, the Commonwealth Bank has grown from very small beginnings to its present proportions; and it has successfully directed financial policy through periods of depression and periods of boom. The selection of the personnel of the Commonwealth Bank Board from, representatives of all spheres of industry was wise, because it gave to the bank the benefit of the wisdom and vision of men experienced in industry. It will be a retrograde, step to do away with that system and place the control of the bank in the hands of a Governor subject to the direction of the Treasurer of the day.
.- All ofus visualize the Commonwealth Bank as one of the bul warks of the nation, and all of us wish to see it succeed1. “We visualize Unprecedented expansion in the post-war period. Under the bill many provisions are made to enable the bank to operate in many new fields. In such circumstances, those in control of the bank will require, to a far greater degree than has been the case in the past, the advice of men of wide experience and knowledge in industy. Therefore, it is unwise to throw the whole of the responsibility of managing the bank on to one man. One can easily visualize the expansion that will take place in our mining, wheat, wool, dairying and timber industries. In spite of what honorable senators opposite have said, the proposed Advisory Council will, I believe, prove to be an absolute “washout”. It will not afford the Governor of the bank the assistance which he will require in order’ to enable the bank to cope with the tremendous industrial expansion we now envisage. No matter how brilliant the members of the council may be, the fact remains that they virtually lead a cloistered life like monks in a monastery. They are out of touch with the outside world. I do not suggest that they lack ability in particular spheres; but they certainly lack the indispensible experience which can only be gained by rubbing shoulders with the outside world. In order to enable the bank to assist industry as it should, the Governor must have the benefit of the advice of men actively engaged in industry.
I cannot understand the attitude of honorable senators opposite who decry a man simply because he succeeds in some undertaking, and brand such a man as a traitor. Men who have succeeded in business have rendered valuable service to this country. However, many people seem to think that it is a crime to succeed in life, whilst, at the same time, they laudthe unsuccessful man. If we wish thebank to prosper and flourish, those in control of it must have available to them the wisdom gained by experience in every section of industry. Every man, woman and child in the community will be affected by the policy of the bank in the future. The Government is to give all that power to one man. Has it any guarantee that that one man will be infallible? May he not make mistakes? I am not in favour of any Treasurer, regardless of the political party to which he belongs, controlling the financial destiny of this country. It is not right. It is against all the principles of democratic government. Honorable gentlemen opposite hark back to the depression. Under the very system proposed, the greatest depression could be created by one man. I would have twelve men on the board. They would give much sounder advice on what steps should be taken than could any one man in the community.
– There may be a Judas in the twelve.
– There may be, and the one man may he a Judas. That is what the Government has to consider.
It may not always be in power.
– Yes, we shall.
– Even so, the Labour party may not always have a financial wizard as Treasurer. I do not say that the present Treasurer is a wizard by any means, but I do respect his integrity. The appointment or otherwise of a Bank Board will make or mar the bill. “We want opinions, formed on the sound knowledge of more than one man, to guide us in the right direction, and I therefore support the amendment.
– Two points have emerged. The first is that the Commonwealth Bank has been a magnificent success. No one opposite denies that. It has been a magnificent success under the administration of a board composed of various elements of the community.
SenatorFinlay. - It was a magnificent success before the board was established.
– No, its great advances hare been since 1924, when it came under theboard, and itsgreatest task, that of financing thiscountry through this war, has been carried out by it under the board.
– What about the war of 1914-1918?
– It must not be forgotten that that war was financed by loans.
– And by the private banks.
– Yes, largely by the private banks, and, as a matter of fact, our total indebtedness on account of the 1914-1918 war was only £300,000,000; so it was a comparatively small thing looked at from the presentday point of view. In this six-year war, the Commonwealth Bank has done a magnificent job under the board. I have not heard one whisper from anyone opposite condemning that board for any of its actions, at any rate, since the war broke out. It is poor recompense to the board, after having carried out a magnificent job, to be suddenly attacked by honorable gentlemen opposite. It would be well for Government supporters to study their own party’s history. They have completely turned about-face. This principle of control of the Commonwealth Bank by a Governor and not by a board is a sudden development, because, when the bank was created, the Labour party was in power, and the late Andrew Fisher and Mr. King O’Malley, members of the Labour party that are credited by it with the honour of having established the bank, made it a cardinal principle that the bank should be divorced from political control. Later in the party’s history, in 1930, when Labour was again in power, it sought to amend the Commonwealth Bank Act.
– We were in office, but not in power.
– The Labour party was in office and in power in 1930.
– No, we did not have a majority in the Senate. We were “ murdered “ here.
– In 1930, the then Treasurer,Mr. Theodore, brought down a bill to amend the Commonwealth Bank Act. Clause 13 provided - (1.) The Reserve Bank shall be managed by a Board of Directors composed of the Governor and not more than eight other Directors, all of whom shall be British subjects, appointed in the manner set out in this Part. (2.) Subject to this Act, the other Directors shall consist of -
It provided in clause 20 for various terms of appointment, beginning at five years and ending at one, so that one directorshould retire annually. Therefore, in 1930, when the Labour party was in power, it introduced legislation affirming that a board provided the best way to manage the bank. Since then there has been a complete switch round, and, in spite of the fact that the Commonwealth Bank has done magnificently, the board is to be supplanted. For the life of me, I cannot understand the reversal of opinion.
– Communist influence.
– There must have been some driving force outside to bring about the change of mind. There must have been some one saying, “ We must get a grip on the finances of this country in order to control it “. So, when the Government puts forward the plea that a governor, not a board of directors, should control the Commonwealth Bank, it knows that a governor will be much more easily controlled by the Treasurer than would be a board composed of independent men who, if forced to do something against their will, would probably resign and thereby call public attention to the matter. The Government has refused even to make a provision compelling an administration to disclose whether there has been a dispute with the Governor whom it knows it could control more easily than it could central a board. This destruction of the Bank Board is a cruel act. I say “ cruel act “ in reference not to the board, because I do not suppose the members care very much, but to the people of Australia. The Government is departing from what it calls its democratic attitude by placing the whole financial structure and economic welfare of Australia in the hands of the Treasurer of the day. This clause is the crux of the bill. I have not heard it said in so many words, but it is very evident that the whole object of the bill is that the will of the Treasurer of the day shall prevail and that he shall be able to give orders to the ‘Commonwealth Bank to do whatever he thinks is right.
It is no good dwelling much longer on this matter, except to point out again that this is altogether a departure from the previous performances and opinions of the Labour party. The Government has not given one reason, in this chamber anyway, why it is supplanting the board by a single governor. Various charges have been made by junior Government supporters which amount almost to charges of corruption against members of the board. They have been too astute to apply the charges to any particular member of the board, but the inference from their speeches is that members have been influenced in their duties by the fact that, being engaged in, say, agriculture, they have probably banked with private banks and have carried out their duties for the benefit of those banks. That is an outrageous statement about people who have given the best years of their jives-
– Their sin is that they have succeeded.
– Yes, they have given the best years of their lives successfully in carrying out the financial policy of this country. They, are now talked about by Government supporters as if they were “ crooks “, because they have been successful. Naturally, any man who has been successful has been engaged in some industry. The proposed Advisory Council, which is to be substituted for the Board of Directors, is the most absurd body I have ever heard of. Before it is too late, I appeal to the Minister to amend this clause in order to preserve the Bank Board. “We will take all the other provisions if the Government will do this. The provision that the Bank Board shall disappear spoils the bill and will inevitably react against Australia’s economic security and mar the splendid record of success of the Commonwealth Bank under the board.
.- The effect of Senator Foil’s amendment would be to restore the Commonwealth Bank Board. That is contrary to the policy of the Government. The Government considers that an institution like the Commonwealth Bank should be under management which is divorced from profit interests and, after careful consideration, it has decided to revert to the original conception of control by the Government. This matter was the subject of a tremendous amount of debate in the Cabinet itself and, at the finish, the decision was unanimous.
– I cannot allow to go unchallenged the suggestion of the Minister for Trade and Customs (Senator Keane) that the Commonwealth Bank Board is anathema to the Government on account of associations of some of its members with profit-making institutions, because, in reference to some members of die present board, appointed by the Government, that is not correct. I gave their names in my second-reading speech. No one could associate them, as the Minister has done the Commonwealth Bank Board in general, with profitmaking motives. No one could associate Mr. M. B. Duffy with the profit motive, because he was appointed as the representative of the Melbourne Trades Hall. I mention him first because he is the only director whom I have personally met several times, and I hold him in very high esteem. To suggest that he is the creature of some profit-making machine is quite contrary to fact. Nor can Senator Keane point the finger of scorn at Mr. W. B. Taylor, another director appointed by this Government, who is Vice-President of the New South Wales branch of the Australian Labour party. He is certainly not actuated by any private profit-making motives. Next we have Dr. Coombs, who was appointed by the late Prime Minister (Mr. Curtin). No one could associate him with profitmaking motives. Nor could any one associate the Secretary of the Treasury with private profit-making motives. Then we have the Governor, the fifth on the list. Could any one associate him with private profit making? There we have five of the seven directors, and one can safely say that all would support the present Government. No suggestion of association with any private commercial enterprises can be made against any one of them. What astounds me is that, when he was a member of the Royal Commission on Monetary and Banking Systems, the Treasurer (Mr. Chifley) was in favour of a bank board. In those days he was supposed to be a left-winger. Now - the press, I think, is responsible - his category is definitely “moderate”. Now that he is a moderate he is to be a dictator. In my opinion, that is putting the cart before the horse. I would say that the left-winger of 1937, when the banking commission’3 report was made, has shown by his actions in connexion with this bill to have become distinctly red, not moderate.
The Minister for Trade and Customs should curb some of his supporters in their use of extravagant language, such as “ this Commonwealth Bank Board, hiding under a cloak of privilege”, because none of the gentlemen on it should be pilloried, as Senator Lamp, for one, has tried to do, for they are all very reasonable men. They arc men who reasonably could be expected to support the Treasurer of the day. Therefore, I cannot understand why the Government has decided to abolish the board. In the course of this debate, loose statements have been made with regard to the freedom of the Commonwealth Bank to establish new branches throughout the Commonwealth. I cannot see in what manner this freedom is restricted in any way. The bank continually has been opening new branches throughout the Commonwealth. In Western Australia there was a proposal recently to open two new branches, one at Wagin and the other at York. In Victoria also, two or three months ago, it was announced that at least, six new branches were to be opened. Under what rule - or misrule - is the Bank Board prevented from opening new branches? I am sure that there is no such rule, except, of course, the rules of banking which are scientific in their application. There is nothing in the charter of the Commonwealth Bank to prevent the board from opening new branches wherever it is thought that proftable .activities may be carried out. The practice is to establish first a savings bank branch in the post office of a country centre, and then, should business warrant it, to open a separate branch.
There is no need for this measure at all, because the Commonwealth Bank already . has power to do all that is necessary in the interests of the safety and progress of the bank. The activities of the bank are limited only by banking practice. The Commonwealth Bank was not started by public servants nor has it developed under the control only of the Treasurer or his financial advisers. It was placed upon a sound footing by ex-officers of the private trading banks. I recall that when the Commonwealth Bank was established, the cream of the senior staffs of the private banks was selected for the new organization. These men were offered higher salaries and better prospects of promotion to work for the Commonwealth Bank. It was these competent officers who established the present system of banking, which I do not think has been excelled anywhere eli-e in the world. They have done an excellent job.
I make this last-minute appeal to the Minister to accept the Opposition’s amendment.
– ‘Clause 25 reads -
The Bank shall be managed by the Governor.
That is a simple provision. There is nothing revolutionary or drastic in it. There might be cause for some alarm if this were an innovation, but I remind honorable senators that the bank was managed by a governor for thirteen years - from its inception till 1924.
– That was when it was in its infancy.
– I should say that the bank had progressed far beyond its swaddling clothes by 1924. Within three years of its inception it was called upon to finance the war of 1914-18.
– Not completely.
– No; -but it was very largely responsible for financing the war effort. The then Governor of the bank said that the bank could have financed the war effort to an amount equal to that already expended. The second point I wish to make is this : The Australian Labour party has been advocating the abolition of the Commonwealth Bank Board since 1924.
– The present Treasurer (Mr. Chifley) did not advocate the abolition of the board as a member of the Royal Commission on Monetary and Banking Systems in 1937.
– Support in broad terms can be found in the report of that commission for the action which the ‘Government is taking now. The commission’s third recommendation reads -
The limitation on the field of choice of directors in section 11 (2) (b) of the act should be removed. The members of the board should be selected for capacity and diversity of experience and contact, and not as representatives of special interests.
I emphasize the concluding words “ not as representatives of special interests”. This measure takes control of the bank from the Governor and a Board of Directors, and places it in the hands of the Governor and an Advisory Council. The only distinction I see is that whereas the board is composed of representatives selected from agriculture, commerce, finance or industry - a part-time board and one to which I do not attribute any wrong motives, but which, at least, is open to the suggestion that it is biased in favour of its own interests - the Advisory Council will consist of high executive officers of the Government and of the bank, whose sole interest will be that of the bank and whose statutory duty will be to attend to the welfare of the people of Australia. They will not have any other interests to serve. Surely honorable senators opposite will not suggest that that is not a worthy objective. It cannot be argued that these men will not advise the Governor in the interests of the welfare of the nation.
The bill provides that the general banking department of the bank may carry on general banking business. That provision leaves the generalbanking organization as free as any private trading bank to seek advice wherever it believes that useful advice may be obtained. In addition to obtaining advice from the Advisory Council, the Governor will be quite at liberty to consult men of wide experience in agriculture, commerce, finance and industry. I repeat that there is no innovation in the proposed clause, and in the interests of Australia, it has everything to commend it.
Question put -
That the words proposed to be left out (Senator Foil’s amendment) be left out.
The committee divided. (The Chairman - Senator B. Courtice.)
Majority . . 7
Question so resolved in the negative.
Clause agreed to.
Telephone Services: Trunk Calls - Australian Army: Censorship of Mails; Food Supplies;Cooks; Leave; Tobacco; Clothing - Rail Transport : Standardization of Gauges; Improvement of Facilites - Housing : Acquisition of Land.
Motion (toy Senator Keanb) proposed -
That the Senate do now adjourn.
– For some time I have made representations to the PostmasterGeneral (Senator Cameron) for a better trunk line telephone service between Adelaide and the other capital cities, but because of difficulties in connexion with the supply of materials, it has not been provided. Indeed, the position is getting worse, because it is almost impossible to speak from Adelaide to Canberra or vice versa. It frequently happens that a trunk line connexion applied for in the morning of one day is not made until the next day; or, it may be that the caller, is notified that no one is answering at the other end. That is understandable if the connexion is made after business hours. I ask that the telephone service between Adelaide, Melbourne and Canberra be improved. If that cannot be done by opening new channels, I suggest that a connexion be made between the terminal cities without passing through Melbourne every time. Adelaide should be given the same telephonic facilities as exist between Sydney and Canberra.
.- Earlier to-day I asked a series of questions for which the Minister representing the Minister for the Army (Senator Fraser) asked for notice. My questions related to instructions recently issued to members of the Australian Military Forces that no officer below the rank of lieutenant-colonel shall, in future, be permitted to censor his own mail. Once a man has received the King’s Commission it has been the practice to allow him to censor his own letters. He is placed on his honour, and, so far as I am aware, that confidence has never been misplaced. If the recent instructions have been issued under the authority of the CommanderinChief of the Australian Military Forces, General Sir Thomas Blarney, I can only say that it amounts to an insult to every officer below the rank of lieutenantcolonel. In some operational areas officers of the Australian Military Forces serve with officers of the Royal Australian Air Force and of the Royal Australian Navy, but only the military officers are subject to this ban; officers of the other services are still permitted to censor their own letters. What is the reason for this differentiation? In some forward areas, officers with the rank of lieutenant, captain or major may not have another officer serving with them. Such men commit a breach of Army orders if they write home to members of their families. That such an order should have been issued is disgraceful, and I hope that the Commander-in-Chief of the
Australian Military Forces will be instructed immediately to withdraw the instruction.
– Earlier to-day, I asked the Minister representing the Minister for Transport the following question: -
In giving effect to the proposals for bringing about a uniform railway gauge, is it the Government’s intention to make any improvements to the railway systems in those States: where the uniform gauge proposals do not apply, so that such States may share in theGovernment’s expenditure on the improvement, of the railway systems of the Commonwealth!’
The Vice-President of the ExecutiveCouncil (Senator Collings) informed me: that the Minister for Transport (Mr. Ward) had supplied the following answer : -
The Minister for Transport has supplied the following answer: - Tasmania has not been included in the projects recommended in Sir Harold Clapp’s Report on Standardization of Railways Gauges, as that State, in a rail transportation sense, is a separate entity and, therefore, the question of changing the gauge of its railways is a matter for decision by the State Government of Tasmania. However, should the State Government desire to change the gauge of its railways, or embark upon a plan for modernization of its rolling stock and the standardization of equipment and parts, the Commonwealth Government will be happy to co-operate in making available all technical information in its possession, and in any other manner subject to mutual agreement.
I did not ask that the Tasmanian railways be converted to the standard gauge of 4ft. 8-J in., but that in the expenditure of large sums of money, not only in bringing the railways of the’ Commonwealth to the standard gauge hut also in improving the permanent way and in other directions, Tasmania should not be overlooked. I do not suggest that the 3ft. 6in. railways of Tasmania be converted to 4ft. 8½in. gauge, but I do say that as the Tasmanian railways have carried extremely heavy traffic for defence purposes during the war, and have suffered from lack of man-power, a portion of the £70,000,000 which, I understand, is likely to be expended in improving railways generally, shall be allocated to Tasmania. In that State, as well as in the mainland States, bridges need strengthening and portions of the track require regrading. I ask that the claims of Tasmania be not overlooked in this connexion.
– Recently, 1 have received numbers of letters from men serving with the troops in Pacific areas, and some of the matters referred to have been taken up with the Minister representing the Minister for the Army (Senator Eraser). I wish, however, to refer now to certain matters which the men have emphasized, particularly in relation to food, tobacco, clothes, beer and leave. I shall deal, first, with the food position. The Army establishment lays down that a certain number of cooks shall be provided for each unit, but in island warfare it is frequently necessary that men shall be split up into small numbers. The result is that the standardized cooking arrangements break down. It should be possible to enlarge the cooks’ establishment so that the food provided can be used to the best advantage. In my opinion, not sufficient attention is given by the Army authorities to the men who are responsible for the cooking of the meals of the fighting men. I should like to see cooks given the rank of corporal or sergeant, so that men of the best type may be encouraged to act as cooks. Usually, in the Army men are not anxious to take jobs as cooks. Men should be trained as cooks, and should be encouraged to take such jobs. This could fcu done by initiating some system of promotion for cooks, say, to the rank of corporal or sergeant. My experience is that, so far as food and cooking are concerned, men in the militia forces are better catered for than men in the Australian Imperial Force. Therefore, I urge that steps be taken to increase the number of cooks in Army establishments. I am told that our deficiency of cooks in the total establishments of all arms of our forces is 1.2 per cent. That may not seem to be a serious shortage, but upon examination it will be found, to be so. The accumulation of leave is also causing concern among members of the fighting services. To-day, many men have accumulated 70 days’ leave, and at the present rate their turn will not come around until 1947. I realize the difficulties which exist in respect of this problem. I do not need to stress the importance of providing adequate and regular rations of tobacco to members of the service. Such amenities tend towards the contentment of the forces as a whole. I also bring to the notice of the Minister for Trade and Customs (Senator Keane) the shortages of clothing, particularly shirts and. trousers, and also boots. 1 realize that the Minister is anxious to rectify complaints in this respect and J am sure that once these matters have been mentioned he will give prompt attention to them.
.- One evening last week I attended a meeting of about 500 persons in a Melbourne suburb. The meeting represented a cross section of thrifty people of moderate means, and it was called to express indignation at the action of the AttorneyGeneral (Dr. Evatt) in approving the compulsory acquisition by the Victorian Housing Commission of blocks of land . owned by members of the fighting services. Resentment was also expressed at the commission’s high-handed methods in acquiring at low valuation building block? owned by non-service nien and women. Honorable senators are aware that the reason for regulation 15a of the National Security (War Service Moratorium) Regulations was to safeguard the assets of those who are fighting for the freedom and protection of Australia. It is true that the Attorney-General has the right to exercise his discretion in granting approval, presumably in exceptional cases; but I do not think that it was intended that the principle underlying those regulations could be destroyed by one stroke of the pen. The regulation as it now stands might as well be repealed. At the meeting to which I refer it was stated that land belonging to discharged servicemen, prisoners of war and others now serving overseas has been compulsorily acquired at half its purchase price. I asked the Minister representing the Attorney-General, upon notice -
W-ill steps be taken to ensure that regulation 15a of the National Security (War Service Moratorium) Regulations is complied with g
The answer which was supplied to me this afternoon was most unsatisfactory. The Minister quoted regulation 34a of those regulations, whereby claims for compensation can be made in certain circumstances within two years. What compensation is an owner likely to obtain after battling for his rights for two years? The assessment of the Housing Commission in the instances to which I refer should be at least the purchase price of the blocks in question. Some blocks which the commission assessed at £75 were bought before the war, when’ prices were normal, for £140. That is an injustice to these men many of whom are still serving overseas. Who is going to occupy the homes built on these blocks? Not the owner, but persons who have been able to record their names on the commission’s first list of applicants for homes. I ask the Minister representing the Attorney-General to reconsider the question I asked, and see if he cannot supply a more satisfactory answer.
– In reply to the complaint made by Senator O’Flaherty, the officers of the PostmasterGeneral’s Department are fully aware of the inconvenience to which users of trunk-line services are now subjected. Consistent with the resources at their disposal, they are doing all they possibly can to meet the demands being made on those services. I am advised that approximately 7,500 members of the staffs of the department are now serving in the armed forces, and that approximately 800 officers of the department arc also in the services. In addition, the department is short of equipment. Owing to these shortages of man-power and equipment the department is not able to keep pace with the demands now being made upon it. I assure the honorable senator that his complaint will be fully investigated. I suggest that honorable senators who experience undue delay, particularly when they arc in Canberra, in obtaining trunk-line connexions, should let me know and I shall be glad to do all I can , to minimize such delays. I have already been able to afford some relief in that way.
Senator ASHLEY (New South WalesMinister for Supply and Shipping) [10.241. - The matter raised by Senator Foll with respect to censorship is most important. If his statements are in accordance with facts there must be some good reason for the action of which he complains. However, the Government is well aware of the effect of such a decision upon the morale of the troops.
I shall bring the honorable senator’s complaint to the notice of the Minister representing the Minister for the Army, and I am sure that if a satisfactory explanation is not forthcoming the complaints will be remedied. The matters raised by Senator Herbert Hays, Senator Mattner and Senator Brand will be brought to the notice of the appropriate Ministers.
Question resolved in the affirmative.
The following papers were pre sented : -
Air Force Act - Regulations - Statutory Rules 1945, No. 105.
Arbitration (Public Service) Act - Determination by the Arbitrator, &c. -
No. 40 of 1945- Federated Public Service Assistants’ Association of Australia.
Commonwealth Public Service Act - Appointments - Department of -
Commerce and Agriculture - R. H. Lawrie, J.S. McGahey. Health- W. L. Sayle.
Lands Acquisition Act-Land acquired for - Commonwealth purposes -
Rocklea, Queensland (2).
Postal purposes -
Bankstown, New South Wales.
Nationality Act - Regulations-Statutory
Rules 1945, No.98.
National Security Act - National Security (Emergency Control) Regulations - Order - Military powers during emergency.
National Security (General) Regulations
Control of -
Essential materials (No. 14).
Liquor (No. 3).
Feminine outerwear (No. 2).
Knitted goods (No. 2). Prohibited place. Protected area.
Taking possession of land, &c. (13).
Use of land. National Security (Industrial Property) Regulations - Orders - Inventions and designs (71). National Security (Maritime Industry) Regulations - Order - No. 50. National Security (Rationing) Regulations - Orders - Nos.93-99.
National Security (Shipping Coordination) Regulations - Order - No. 04. National Security (Supplementary) RegulationsOrders by State Premiers -
Queensland (dated 10th June, 1945).
Western Australia (dated 4th July, 1945).
Regulations - Statutory Rules 1945, Nos. 100, 101, 102, 106, 107.
Wine Grapes Charges Act - Regulations - Statutory Rules 1945, No. 104.
Senate adjourned at 10.26 p.m.
Cite as: Australia, Senate, Debates, 18 July 1945, viewed 22 October 2017, <http://historichansard.net/senate/1945/19450718_senate_17_183/>.