20th Parliament · 1st Session
The Deputy President (Senator George Rankin) took the chair at 11 a.m., and read prayers.
Reservation of assent notified.
– Is the Minister representing the Minister for Commerce and Agriculture aware that the Government is making payments to berry fruitgrowers to compensate them to a small degree for fruit that cannot be sold and is now rotting in the fields ? Is the Minister aware that the envelopes covering the cheques to the farmers have postage stamps attached on which appear the words “Produce food”? If that is so, why is the Government encouraging these farmers to produce more food only for it to be wasted?
– “Responsibility for the matter referred to by the honorable senator rests solely with the Government of Tasmania. I suggest that the honorable senator should direct his question to the Premier of that State. As I said a few days ago, the Government and the Fruit Industry Sugar Concession Committee made a very valuable contribution to the finances of Tasmania to enable the Premier of that State to do the right thing for the berry fruit-growers.
– Will the Minister for Trade and Customs state whether it is a fact that at present Commonwealth scholarships are granted on the basis of full-time study only? If that is so, will the Government consider making scholarships available on a parttime study basis for students whose eco-1 nomic position precludes them from engaging in full-time study?
– T understand that Commonwealth scholarships are reserved to those who undertake fulltime study, the reason being, I should imagine, that those who are not engaged in full-time study aTe able te work and thus to earn money. However, the suggestion of the honorable senator is worthy of consideration and T shall be happy to consider it.
– Can the Minister say whether it is a fact that recently a prominent member of the Government promised the tobacco-growers that every effort would bo made to sell the Queeusland tobacco crop? I should also like to know what quantity of Rhodesian tobacco is being imported into Australia. Has any agreement been made by either the British Government or the Australian Government to take certain quantities, up to millions of pounds, of that tobacco ? Will the Minister give the fullest information - I know that he has it at his command - to the Senate with regard to the tobacco industry in Queensland?
– The Australian Government gave no undertaking at all that it would sell Australian tobacco, but it promised to lend its best endeavours to ensure that the available crop was sold at the best prices, and it has honoured that promise. The honorable senator, as a Queenslander, will know that for many years relationships between the growers and manufacturers have not been cordial. It was only after many interviews that my colleague, the Minister for Commerce and Agriculture and I wore able to bring them together. A much better understanding has been established as a result of negotiations between the growers and the manufacturers in the presence of the Minister for Commerce and Agriculture and myself. Arising out of the last conference, the growers agreed to take back the unsold tobacco then on hand. That was tobacco that had been offered previously. For a part of it no bid was made, and in respect of the remainder the bids made were unsatisfactory. With a view to selling the unsold balance of the 1952 crop, the growers, after negotiations, agreed to take back that tobacco for the purpose of re-grading it. The manufacturers agreed that if certain low quality and unusable leaf were eliminated and the re-grading proved to be satisfactory there would be every possibility of a sale being effected. In order further to assist the tobacco-growers, the Minister for Commerce and Agriculture announced that the Government would agree to make an advance to the growers with respect to that unsold tobacco which, whilst it is not a very big proportion, is, nevertheless, a substantial proportion of the total crop. The Government will also guarantee an advance to be made through the Commonwealth Bank for the purpose of promoting the sale of this residue of tobacco. Furthermore, the Government will make a substantial contribution of approximately £4,000 to help these growers to meet practically the whole of the cost that will be incurred in re-grading, rc-holding and re-offering this tobacco. The honorable senator will thus see that the Government has made a practical contribution towards stabilizing the tobacco industry. I am confident that a happier and more cordial relationship has now been established between the growers and the manufacturers and that, as a result, the industry can look forward to a bright future. With respect to the importation of Rhodesian tobacco, I assure the honorable senator that the Government, as a government, does not buy tobacco at all. Sales of that tobacco are effected on a trader-to-trader basis. Therefore, the Government has not entered into any agreement for the purchase of Rhodesian tobacco. However, Rhodesian tobacco is being imported. As the honorable senator is aware, we arc very short of dollars and, according to those who buy tobacco leaf, the next best leaf for which dollars arc not payable is Rhodesian leaf. Offhand, I am unable to state the exact quantity of Rhodesian leaf that is being imported, but I shall obtain that information and furnish it to the honorable senator.
– Will the Minister representing the Minister for Commerce and Agriculture state whether press reports of the failure of the international conference on wheat to arrive at a decision on wheat prices are correct ? If they are correct, in view of the importance to the Australian primary producers of a definite agreement on wheat prices, will the honorable gentleman arrange to have a statement made to the Senate to explain the present situation ?
– T understand that the reports that have appeared in the press are substantially correct. I also understand that the Minister for Commerce and Agriculture will meet State Ministers in Canberra on the 30th March.
I shall see my colleague in the meantime and will ascertain whether he is prepared to make a statement on the general situation, but I assume that he will not do so before he has conferred with the State Ministers. However, that is a matter for his decision and I shall be pleased to bring the honorable senator’s request to his notice.
– Will the Minister for National Development tell me whether there is any truth in the claim by the Communist party that there is a probability of unemployment in the New South Wales coal industry?
– The honorable senator’s question opens a fairly wide field. Coal production at present exceeds requirements by about 500,000 tons per annum. This has established a situation in which those who want coal are buying the coal that is best suited to their needs at the prices that are most attractive to them. The result is that it is becoming difficult to find a market for other coal which, when coal supplies generally were inadequate, was readily saleable. Some of the mines, mainly open-cuts, that are producing that type of coal will have great difficulty in continuing to find markets and some of them will have to close down. This situation was anticipated long ago by the Government, which is tiding over this period by stockpiling coal. Stockpiling, combined with the granting of long-service leave to employees in the industry and the normal wastage of man-power due to the retirement of miners, is causing the pendulum to swing to the other extreme. We are passing through a period of reorganization, but the present situation does not involve a threat of unemployment in the industry. In fact, there are about 500 vacancies in the industry for which men cannot be found. The mine-owners need more men so that they can properly staff their mines. I think it can be said with justification that the Commonwealth has handled this position well. The Joint Coal Board has done a good job in somewhat difficult circumstances. I do not deny that, during a period of transition, some men have not been employed for a few days or perhaps a week, but the transitional period has now been passed without any detriment to the employees of the industry. I hope that that position will continue. In my opinion the present circumstances show that both employers and employees appreciate that the Government has made a worthwhile contribution to the industry, and that the position is being handled well. Losses of coal because of industrial disturbances are at an all-time low. Such disturbances are less frequent than they have been for a long time. Recently, the owners made an extraordinarily valuable contribution to peace in the industry by evolving a scheme under which they will contribute towards the cost of transporting miners and their families who lose employment in one district to another district in which they desire to seek employment.
– Is the Minister for Shipping and Transport in a position to make a statement regarding the recommendation of the Commonwealth Railways Commissioner, which appeared in his report tabled in the Parliament this week, that the gauge of the railway line from Port Pirie to Broken Hill should be widened to 4 ft. S-J in.? Has any preliminary work been done in connexion with the project? Are the great strides being made by the Playford Government in South Australia in the recovery of uranium near Olary, on the Broken Hill line, and subsequent treatment of the product at Port Pirie not indicative that this should be a matter of the highest priority ?
– The alteration of the gauge of the railway line from Broken Hill to Port Pirie has been under active consideration for some time. Preliminary surveys of the route have been made, and negotiations have been .undertaken with the owners of the Serviceton Tramway Company in order to see whether they would be agreeable to that portion of the railway being handed over. The honorable senator will appreciate that shortage of loan money and other factors have had some influence on the decision of the Government concerning the appropriate time to commence the work. I assure him that the Commonwealth Railways Commissioner regards the matter as one of the highest priority, as I do also, but so far, no decision has been made as to when the work will be commenced.
– I address a question to the Minister representing the Treasurer. In view of the national humiliation that has arisen as a result of the muddle about holding the Olympic Games in Melbourne in 1956, and the “ duck-shoving “ and lack of definite decision concerning site, buildings and administration, mainly because of the expense involved, will the Minister consult his colleague with a view to floating a special Commonwealth Olympic Games loan of £5,000,000 for a seven-year period? I suggest that repayment of the loan could be made after the sale of the buildings to various State authorities and sporting organizations which might be interested in them, and also from a proportion of the proceeds of admission charges to the games.
– Arrangements concerning the Olympic Games were made by the Victorian Government, which is responsible for the games. The Australian Government wants the Olympic Games to be held in Australia. At all times we have shown our willingness to assist those who are responsible for the organization of the games. So far as I am aware, it is unnecessary to float a special loan for the purposes of the games. The immediate problem is the provision of housing accommodation for athletes. All that is required is that the Victorian Government shall make up its mind upon the matter. Obviously, it has the power to allocate a sufficient number of houses to accommodate the athletes. I think the Victorian Government builds about 3,000 houses a year with money provided under the Commonwealth and State housing agreement.. The next Olympic Games will not be held until three or four years from now. During that, period 9.000 to 12,000 houses will be built by the Victorian Government. It would be easy to- allocate 600 of those houses for the purposes of the Olympic Games.
The houses could be erected in suitable spots and ear-marked for the purposes of the games. When the games were finished they could be made available to people in Victoria in the ordinary way. The Commonwealth has made its attitude to this matter quite clear. It is prepared to facilitate any such scheme. .If a proposal of that kind were adopted, all the present indecision would cease, and the authorities concerned could get on with the job of organizing the games.
– Can the Minister representing the Prime Minister say whether the reduction of the number of government employees has caused a loss of efficiency in various gogernment departments? Is it true that the telephone and lines section of the Postmaster-General’s Department has money and materials for new telephone works, but is precluded from undertaking those works by a shortage of staff, and that, in consequence, new telephones are being denied to the public? Are the delays in issuing age pensions, unemployment benefit and sickness benefit caused by a shortage of staff’ in the Department of Social Services.? Do returned service personnel who apply for advances from the War Service Homes Commission suffer delays in current building arrangements owing to a lack of staff in that organization? Is the issue of taxation assessments being delayed owing to a shortage of staff in the Taxation Branch?
– I can understand the chagrin and disappointment of the honorable senator at the fact that this Government has been able to reduce the number of government employees and conduct the business of the Commonwealth with the utmost efficiency. When the Labour party was last in office, probably there were too many Commonwealth employees, and, consequently, a considerable degree of inefficiency. Under the Menzies Government, conditions have improved greatly. The Australian public has every reason- to be satisfied with the efficiency of the Public Service and the manner in which the business of the Commonwealth is conducted.
– At 11 a.m. Cabinet Ministers who are members of this chamber were called away from a Cabinet meeting. I do not wish to appear discourteous to the Senate, but I ask that further questions be placed upon the notice-paper, so that those Ministers can return to the Cabinet meeting, which is still in progress.
– I rose several times to ask a question without notice, Mr. Deputy President, and you were unable to see me or did not see me. I do not know what urgent business in the Cabinet makes the interruption of business in this chamber necessary, but I protest that I should have an opportunity to ask the questions that I intended to put. Honorable senators will verify that I rose in my place several times.
The DEPUTY PRESIDENT. - Order ! Ministers may answer questions or not as they see fit. Questions upon notice will now be taken
asked the Minister representing the Postmaster-General, upon notice -
Will the Minister lay on the table of the Semite all the papers regarding the grunting of a commercial broadcasting licence to the Manning Valley Broadcasting Proprietary Limited, at Taree, and also provide the following information: - (<i) Particulars of applicants for the licence at Taree and dates of their original applications; (6) list of shareholders in Manning Valley Broadcasting Proprietary Limited; (o) list of directors of Manning Valley Broadcasting Proprietary Limited; (d) full particulars of any shares issued for considerations other tha ji cash payments?
– The PostmasterGeneral has furnished the following information in reply to the honorable senator -
Whilst the Postmaster-General is not prepared to lay the papers relating to the grant of the licence on the table of the Senate, nor to disclose the names of applicants for the licence, which he regards as confidential, he has supplied the following information sought bv the honorable senator: -
List of Directors. - R. S. Butterworth (chairman). E. 0. Gordon, T. C. Jacobs, L. J. Gleeson, P. E. Lucock, G. H. Summerville.
asked the Minister representing the Minister for External Affairs, upon notice -
– The Minister for External Affairs has supplied the following reply to the honorable senator -
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator McLeat), read a first time.
.- I move-
That the bill be now read n second time.
This is a proposal to ensure maintenance of the flax production and processing industry under a government commission. The Government would much prefer not to become involved as a principal operator in this production activity. It brings forward this legislation only because the maintenance of flax production is essention as a part of the defence preparations, and because the efforts of this Government, like those of the Chifley Government, have failed to achieve an arrangement which would ensure the continuance of the industry in some other way, either by private enterprise, co-operative or otherwise, or by State governments. Early in 1948, the Chifley Government decided to dispose of the flax industry, which had been established as a war-time necessity. Brochures giving particulars of all the mills available for sale, and details of production capacity, were available throughout Australia and the rest of the world. Offers were sought for the purchase of the industry either as a whole or in part. The only offer received in response to these advertisements was from the Government of Western Australia, which finally purchased the mill at Boyup Brook in that State and has leased it to a local co-operative company, which is carrying on the industry in that district. Some tentative inquiries were made from other quarters, but no serious approach was made, and no other offer was received for any of the mills.
When the present Government took office, it immediately made further attempts to dispose of the industry on the condition that it would be maintained at a certain minimum level of production. With that condition basic, the Minister for Commerce and Agriculture (Mr. McEwen) discussed the situation with representatives of the Victorian and South Australian governments. These governments were eager for the industry to be maintained, but neither was willing to take any part, as a principal, in the industry. The Minister then approached the Victorian Flax Growers Association and also the Australian Flax Spinners.
He proposed that these two groups, representing producers and processors, should form a company to take over the mills and maintain the industry. He made it clear that the Government would be prepared to dispose of the mills to such an organization at a reasonable price and make financial arrangements of a nature which such an organization could be expected to be able to meet. On this proposal of the Minister the Victorian Flax
Growers Association and the Australian Flax Spinners spent a considerable amount of time in trying to evolve a proposal for submission to the Government. The idea was to form a company representative of the two groups and make an offer for a selected number of mills. Unfortunately, despite long and serious consideration of the matter, they found themselves unable to formulate any satisfactory proposal which they were prepared to submit to the Government.
It will be seen that both this Government and the Chifley Government made every effort to dispose of the industry, but without success. The industry is far too important in our defence preparations for us to allow it to disappear so we are forced to find some way of ensuring its continuance. That is the reason for this bill. The flax industry must be retained in Australia because flax fibre is an important raw material in the manufacture of equipment for the fighting services. Aeroplane fabric, parachute harness, hangar canvas, gun and boat covers, fire hose, tents and other camp equipment, yarns and twines for cordage, and all linen sewing thread for boots and uniforms for the services are made fr-mi this essential fibre, for which no effective substitute has yet been found.
During World War I. the flax industry was established in Australia to help to meet the war needs of the British Empire for flax fibre. At the end of that war, the production of flax in Australia was practically discontinued in spite of various attempts by private interests to carry on this industry. In World War II., there was again an acute shortage of flax fibre, and in June, 1940, the British Government made an urgent appeal for the sowing of as much flax as possible in Australia. By 1942 more than 60,000 acres of flax was under cultivation in Australia. This rapid expansion to meet pressing war requirements involved the expenditure of some hundreds of thousands of pounds in the establishment of mills to process the flax straw. There was no time for the careful planning which was required to put the industry on a sound commercial basis, and flax was sown in some areas which were not entirely suit able. Farmers with little experience in the growing of flax undertook its production as an urgent war measure, and there were no properly trained operatives available for the processing of the straw, vith the result that our costs of production were very high during the early war years. That was the price Australia had to pay for its failure to maintain this industry after World War I. to meet its defence requirements.
After World War II., flax fibre was still scarce in all Empire countries and the production of flax in Australia under Commonwealth control was continued. In August and September, 1950, following unsuccessful attempts to dispose of the industry, it was reviewed by the key industries sub-committee of the various service departments and the Joint War Production Committee of the Defence Department for the purpose of determining its position in relation to the defence of Australia. The Joint War Production Committee re-affirmed that the flax industry had a high defence significance. Because of the serious difficulties associated with any attempts to stockpile flax fibre, the Joint War Production Committee considered that Australia should maintain and expand flax production so that in time of war the country’s requirements would be assured. This can be attained only by giving stability to the industry for at least the next five years. As I pointed out earlier, it has not been found possible to arrange this without Commonwealth Government participation in the industry, at least for a period. Since the end of the war and during the period when efforts were being made to dispose of the industry as a going concern, the government-owned mills have been operated by the Flax Production Committee which functions within the Department of Commerce and Agriculture. This committee has been operating a purely commercial undertaking, purchasing flax straw from farmers on a contractual basis and selling the processed fibres to the flax spinners. The Government has never been involved in the industry beyond the point of production ot the flax fibre. The flax-spinning industry has long been established in Australia, and before the war it depended principally upon imported fibre. Experience has shown that a commercial undertaking of this character cannot be efficiently conducted as a part of a public service department. Therefore the Government has finally decided to establish a commission to ensure, in conjunction with the cooperative company operating in “Western Australia, the production of about 2,000 tons of flax fibre per annum. This will remove any danger of shortages of flax tor the manufacture of essential equipment for the Navy, Army and Air Force in times of national emergency.
At an appropriate time a further attempt will be made to dispose of the industry to private enterprise, subject to suitable guarantees that it will be continued on a basis of production adequate to meet our defence requirements. The bill is simple, and provides in effect, for the establishment of a commission of five members to carry on the powers and functions which were vested in the Flax Production Committee during the last war. The bill provides the necessary machinery to enable the commission to purchase the Commonwealth assets at present under the control of the Flax Production Committee. The whole basis of this proposal is the importance of flax production to our defence. I commend the bill for the favorable consideration of honorable senators.
Debate (on motion by Senator 0’FLAHERTY) adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator McLeay) read a first time.
(“11.42]. - I move-
That the bill be now read a second time.
The main purposes of the bill are to provide an additional dairy-farmer representative on the Australian Dairy Produce Board ; to delete that section of the act that enables the Minister to veto or alter decisions of the board if the chairman dissents from any decision of the board; and to amend the procedure for determining the terms and conditions of employment of staff of the board. At present direct dairy-farmer representation on the board is confined to two members. The Government considers that this representation should be increased. The strength of the dairy-farmers’ voice on the board was weakened by the unfortunate death last year of the chairman of the board, Mr. G. C. Howey, who, as president of the Victorian Dairy Farmer; Association, was directly associated with a most important section of the dairying industry of Australia, and was a strong advocate of primary producer interests. The bill provides for the appointment to the board of a third representative of the dairy-farmers of Australia. The bill is also designed to amend the provision in the act relating to the procedure of appointment of the dairy-farmer representatives. The Government considers that the act, as at present worded, i? unduly restrictive in that the source of nominations is strictly and permanently limited to a single organization, and that in the possible absence of nominations from that organization no appointments of dairy-farmer representatives could be made.
The bill also provides that the Minister’s power to veto or alter decisions of the board, as contained in section 10 (5a.) of the act, be deleted. The dairying industry considers that this provision, which was inserted in the act in 1947, constitutes an unwarranted intrusion into the affairs of the board. The Government is in agreement with the industry on this point, and considers th.it there is ample protection of government and industry interests in the remaining’ sections of the act, in that the major powers of the board are still subject to the direction of the Minister. Other amendments to the principal act contained in the bill are practically identical with those contained in the Egg Export Control Bill, which were explained by me in my second-reading speech on that bill.
The amendments relate to the determination of terms and conditions of employment of staff of the Australian Dairy Produce Board, the remuneration and expenses of members of the board andthe re-drafting of certain provisions of the principal act to bring them in line with more recent legislation. I commend the bill to the consideration of honorable senators.
Debate (on motion by Senator
Motion (by Senator McLeay) agreed to-
That, in accordance with the provisions of section 1.1 of the Australian National University Act 1946-1947, the Senate elects Senators McCallum and Tangney to be members of the council of the Australian National University fora period of two years from the 1st July, 1953.
Debate resumed from the 18th March, 1953 (vide page 1240), on motion by Senator Spooner -
That the billbe now read a second time.
– The act establishing the Commonwealth Bank was passed in 1911 and the bank opened its doors to the business of the Commonwealth Savings Bank in July, 1912. Next July the bank will have completed 41 years’ service to this country. In 1913, the bank commenced trading bank activities and in 1920 it assumed control of the note issue. In 1924 the Commonwealth Bank Act was amended in order to permit the bank to engage in central bank activities. In 1925 the Rural Credits Department of the bank was established. At present the bank is engaged in savings bank business, general trading bank business, central bank business, the issue of rural credits, and last but not least the control of the note issue. The bank stands as a monument to its founder, Mr. Andrew Fisher, and its first Governor, Sir Denison Miller, who was largely responsible for much of its early planning and management. Since its establishment, approximately 41 years ago, the outstanding success achieved by the bank has been a revelation and it should be a source of pride to all Australian citizens. Notwithstanding its success, certain people in the community would like to wreck the bank. They would like it to be no bigger than it was in 1911. They would like it to operate merely as a. savings bank, similar to many other such institutions in this country.
This legislation, stripped of superfluous words and obvious trappings, has two main objectives. Its first objective is to divide, to undermine and gradually to weaken and to subvert the Commonwealth Bank which has successfully served the people of this country for the past 41 years. Its second objective is wantonly to destroy the existing system of special deposits which was instituted by the Curtin and Chifley Labour Governments for the specific purpose of preventing rising prices and inflation.
During the war and the immediate post-war years, the Commonwealth Bank was successful in preventing prices from rising and it arrested inflation. Rising prices and inflation which have recently caused considerable hardship and suffering to many Australian people are to a considerable degree the outcome of the maladministration of this Government, and inflation will be further intensified as a result of this legislation. The legislation which this bill will repeal was endorsed by the people in 1946. The Government has no mandate to amend the 1 945 banking legislation. It has no mandate to attack the charter of the Commonwealth Bank with its historic name and goodwill through the central bank, the General Banking Division, the Savings Bank, or any other section of the bank.
This legislation is designed,” not to ensure that there will be fair competition between the Commonwealth Trading Bank and the private trading banks, but to provide excessive and unfair profits to the private trading banks at the expense of the Commonwealth Bank, and its depositors who are the people of Australia. The arguments advanced by members of the Government in support of” the legislation are based on purely fictitious reasoning and supposition that bears more than a slight similarity to the arguments used by kindred interests when the legislation to establish the Commonwealth Bank was being considered by the Parliament in 1911. On that occasion, the Melbourne Argus declared that the whole scheme was conceived in idiocy, and that it constituted a malicious use of public funds to establish an institution to compete with private institutions which then enjoyed the full confidence of the public. It also claimed that there was not the slightest justification for the scheme, that its failure from its inception was inevitable and that the whole scheme would be abandoned after a few months of inglorious experiment. The success of the Commonwealth Bank since it wa.s established, approximately 41 years ago, is a complete answer to such malicious propaganda. The insidious hysterical outpourings of members of the Government in support of this measure are just as false as the propaganda that was issued when the Commonwealth Bank was established. Again time will prove that the Labour party’s contentions are correct.
Just imagine what would have happened if our immediate post-war reconstruction programme had been left in the hands of the private banking insti”tutions ! “When the war ended, and after the financiers discovered that their assets were safe, they came out of their fox holes and indicted the federal Labour Government in an attempt to create a belief among the general public that during the war Australia had indulged in a glorious financial spree. Metaphorically speaking, the private interests said - “in the cold dawn light of the morning after, with nerves on edge and with twitching fingers this national financial drunkard, the federal Labour Government, must be made to realize that such conduct cannot be continued and he must be duly chastised in the interests of the nation “. At the conclusion of the Avar that was the story splashed across the front pages of the vested interest press from one end of Australia to the other. That propaganda paid good dividends. In 1949, when the Chifley Government was defeated, the Australian economy was the most stable in the world and the envy of all other nations. However, within six months of the present Government assuming office our economy had been completely destroyed. The present position is that the purchasing power of the £1 is deteriorating further and further every day, and it will continue to deteriorate just as long as this Government remains in office. The loss of public confidence in the Government, due largely to its maladministration is responsible for money becoming unnecessarily tight. At the same time, mass unemployment in industry has become apparent and the people of this country, struggling against this maladministration find themselves high and dry on the shores of disappointment and disillusion. And that is not all. Because of the action of the Government in re-establishing the Commonwealth Bank Board we know that the sovereignty of power vested in this Parliament was overnight suddenly removed from the legislative halls here at Canberra to the board rooms of the associated banks.
We remember only too well the deflationary credit policy, instituted by the private banking institutions during the last depression, which caused the effect of the depression upon Australia to become deeply intensified by denuding our home market of purchasing power. “We also remember that it was just that policy which seriously embarrassed the Australian Government and the State governments when the Commonwealth Bank, under a board, and the private banking institutions refused to co-operate with the government in its rehabilitation programme, which was designed for the express purpose of relieving unemployment and getting industry back on a stable basis. And we also remember that it was just that policy which jeopardized the very existence of thousands of reputable business firms throughout Australia and, at the same time, was responsible for many others becoming insolvent. “We also remember that the policy instituted by the private trading banks during the depression was the greatest single contributing factor to the disastrous wave of unemployment which swept like a bush fire through Australia. Further, we remember the wart that was played by the Commonwealth Bank during the early months of World War I. when the private banking institutions found the position beyond them and a depression seemed about to overtake our primary and seconda ry industries. The Commonwealth Bank, in spite of the fears of private enterprise, undertook the stupendous task of financing our wool and wheat crops and other primary industries, and at the same time, incidentally, financed the Navy and the Army and the cost of a war. On that occasion the Commonwealth Bank found millions and millions of pounds for a purpose, not constructive but destructive. I say that if a bank could do that in those circumstances it could certainly do it again when every pound’s worth of credit that it would he asked to issue would be backed by our primary and secondary industries and our great public works. That, in the final analysis, is the real wealth of the community. After all, the pound note is merely the medium of exchange; and a very poor exchange it has been since this Government came to office. As I have said before, the purchasing power of the Australian £1 is deteriorating f urther and further every day, and it will continue to deteriorate for just so long as this Government remains in office. We remember that the credit restriction policy of the greatest team of international financial crooks that the world has ever known was the cause of World War I., and the poverty, distress, misery, malnutrition and even starvation that accompanied the depression. It is our sad job to-day to see that, in those circumstances, we will not revert to a policy of that description. In the light of present circumstances, would any government, other than this Government, be prepared to hand back to these people the control of the monetary and financial affairs of this country? The answer is obviously “ No “. I say that it is absolutely essential for all governments, irrespective of their political colour, to be safeguarded against attacks and challenges from any financial group, if Australia is to make the progress that we all desire to witness. Only a government so secure could ensure that its policy would be determinedly and expeditiously implemented. Financial control would then remain where it rightly belongs in a democracy - in the hands of the nation. The 1945 banking legislation is in accordance with the Constitution which gives to this Parliament the right to determine monetary and financial policy in the interests of Australia. Section 51 provides that the Parliament shall, subject to the Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to - (xiii.) Banking, other than state banking; also state banking extending beyond the limits of the state concerned, the incorporation of banks, and the issue of paper money.
That is a complete answer to those who contend that the Chifley Government did something contrary to the Constitution and to the interests of the nation when it implemented the 1945 banking legislation.
The Commonwealth Bank Act 1945 contains many important provisions. Section8, which is probably the most important section in the act, reads -
It shall be the duty of the Commonwealth Bank, within the limits of its powers, to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia, and to exercise its powers under this Act and the Banking Act1945 in such a manner as,in. the opinion of the Bank, will best contribute to -
the stability of the currencyof Australia;
the maintenance of full employment in Australia; and
the economic prosperity and welfare of the people of Australia.
It is absolutely essential that our currency be stabilized and that a policy of full employment be implemented if we are to foster the economic prosperity and welfare of the people. This Government has never applied that policy. Senator O’Flaherty effectively demonstrated that the provisions of the Commonwealth Bank Act 1945 have been rendered useless by a small amendment consisting of about four words.
I shall refer now to the reestablishment of the Commonwealth Bank Board. We remember only too well what happened in 1.924 when the Bruce-Page Government first established the board. The Commonwealth Bank, which was originally conceived as a people’s bank, was taken out of the hands of the people by the Bruce-Page Government and handed over to vested interests. The original board was constituted of the following gentlemen : - Mr. J. J. Garvan, managing director of the Mutual Life and Citizens Assurance Company Limited ; Sir Robert Gibson, K.B.E., vice-president of the Victorian Chamber of Manufactures, Victorian representative on the Central Coal Board, director of the Mutual Life and Citizens Assurance Company Limited, managing director of the Lux Foundry Proprietary Limited and of the Austral Manufacturing Company Proprietary Limited, director of a trustee company and of the Chamber of Manufactures Insurance Limited; Sir Samuel Horden, who was a director of Anthony Hordern and Sons Limited, the Australian Mutual Provident Society and the Royal Insurance Company Limited; Mr. R. B. W. McComas, who was president of various wool-buying associations and proprietor of William Haughton and Company Proprietary Limited ; Mr. R. S. Drummond, who, probably, was the only member of that board who did not represent outside interests; and last but not least Mr. J. Mackenzie Lees, who was formerly chairman of the Associated Banks of Queensland and general manager of the Queensland Bank and the North Queensland Bank. Although the Commonwealth Bank was conceived as ;v people’s bank, the Bruce-Page Government took it out of their hands and handed over control of it to vested interests even though the latter were openly in conflict with each other. It is little wonder that Australia soon afterwards foll into the depression.
As I have said previously, a wise man once said, “The price of freedom is eternal vigilance”. That is a truism so far as the Labour movement is concerned. Time and time again when the Australian Labour party thought that the tide was flowing in its favour, the tide commenced to ebb and left the party high and dry on the foreshores of disillusionment. Time and time again, the Australian Labour party has been obliged to fight the same battle twice and then to fight it over again. We shall fight this battle again because on the 9th May next, when the people go to the polls at the election for the Senate, they will show exactly what they think of this legislation. Again, at the general election for the House of Representatives to be held early next year they will return another Labour Government which will prevent prices from rising and restore our economy on a stable basis.
Senator HANNAFORD (South Australia ( 12.9 J. - In every speech that Senator Nicholls rnakes in this chamber he displays a remarkable memory because invariably he speaks without the aid of notes. In addition, his language is quite picturesque. However, whilst I rather envy him in those respects, his speeches do not differ materially from those that are made by his colleagues in the Opposition. His remarks about the history of the Commonwealth Bank were interesting, but many of his other statements were incorrect. For instance, he said that the special accounts system was established by the Curtin Government. Although that Government may have been the first to incorporate that system in legislation, when it embodied it in the Banking Act 1945, the fact is that during the early part of World War II., when the Menzies Government was in office, the; private hanks voluntarily agreed to make lodgments in special accounts. That arrangement was continued under National Security Regulations until if. was embodied in the Banking Act in 1945. The honorable senator’s speech consisted, in the main, of a diatribe against the financial institutions of Australia. He declared that they had been responsible for many of our economic ills and had hastened and intensified the onslaught of the depression. His remarks on that subject were completely false as I shall demonstrate effectively later. They had no basis in reality and, in fact, were merely Labour “party propaganda.
Having entered the debate at a latt; stage, I have a slight advantage over honorable senators who spoke earlier. T have listened to many speeches by Government supporters and members of the Opposition, and, therefore, I have had the opportunity to study both sides of the questions that are involved and am better informed than I should have been had I spoken earlier. I am convinced that there is no reason why the Opposition should not support the bill. This statement may surprise honorable senators opposite, but I honestly believe that there is nothing in the measure to which they are entitled to object in all sincerity. It provides merely for a repetition of the process that was applied to the Commonwealth Bank in 1928 when the Commonwealth Savings Bank was established as a separate entity. Who will say that the Commonwealth Savings Bank has not continued on the even tenor of its way since then? It has wielded tremendous influence throughout Australia and has not suffered in the slightest degree from the separation. The purpose of this bill simply is to establish the General Banking Division of the Commonwealth Bank as a separate institution, to be known as the Commonwealth Trading Bank, under a general manager, but still under the direction of the Commonwealth Bank Board and the Governor of the bank. It will retain its present staff. In effect, it will be placed in exactly the same position as the private trading banks. There, will be no discrimination between it and the private banks and, therefore, it will bp able to compete with them on equal terms. Nobody can reasonably object to this proposal.
The present financial system in Australia, under which the trading banks work in conjunction with the central bank, has my full and unqualified support. This system has operated successfully over a long period of years, and it is completely in accordance with the recommendations of the Royal Commission on Monetary and Banking Systems. The commission made the following statement in the section of its report which dealt generally with the problems of the nation’s financial system: -
The general objective of an economic system for Australia should be to achieve the best use nf our productive resources, both present and future. This means the fullest possible employment of people and resources under conditions that will provide the highest standard of living . . . The next question is, what kind of monetary and banking system will best achieve this objective. In our opinion this result in the present circumstances of Australia will be most likely to follow from a system of central banking in which trading bunks and other financial institutions are integral parts of the system, with a central bank which regulates the volume of credit and currency.
I point out that there was only one dissentient to the opinion that I have quoted. On the question of the nationalization of banking, the report states, at page 252 -
The system which we contemplate is one in which a strong central bank regulates the* volume of credit, and pays some attention to its distribution. We are of opinion that the adoption of our recommendations will place the Commonwealth Bank in that position. We are satisfied to leave the distribution of credit to privately-owned trading banks, working for profit, but regulated in the manner indicated in our recommendations. A strong central bank, publicly owned, and not dominated by the desire to make profit, will exercise the necessary control over the activities of the trading banks, and the organization of these banks on a profit-making basis will conduce to efficiency, while the area of choice afforded to borrowers wm bc greater than if all banking were nationalized and brought under one control.
– Nationalization is a dead horse.
– I do not think it is a. dead horse. I have no illusions in that regard. The report continues -
We think that in this way the national interest will best be served.
I harbour no illusions concerning the attitude of the Australian Labour party to nationalization of banking. So many Opposition senators and members of the House of Representatives have said that, as soon as they regain office, the principal objective of the Australian Labour party will be to strive to bring the banking system of the country under central control. It is perfectly clear that the action which this Government is taking is not opposed to any principles enunciated by the Royal Commission on Monetary and Banking Systems in 1937.
I think it was Senator Benn who asked, during this debate, in what way the people of Australia would benefit from this bill. My answer is that the people will be better off because the bill provides that the private trading banks are to be protected and maintained against unfair competition and discrimination, which could arise under the provisions of the 1945 Banking Act and which could put them out of business if the policy of a succeeding government included nationalization of banking. Discrimination could be used against the private trading banks to bring about their downfall.
Before the present Government parties were elected to office they said that they would review the 1945 Banking Act. They have since done so. The banking issue brought about the downfall of the Labour majority in the Senate and gave the present Government parties a majority in both Houses of the Parliament. We re-established the Commonwealth Bank Board. That proved to be a very wise step. Despite the calamity howling in which members of the Opposition engaged when the measure for the re-establishment of the board was before the Parliament, no one could say with justice that the operations of the board have had an adverse effect upon the Commonwealth Bank. 1 do not think that even honorable senators opposite would say that, despite the great fuss that they made when the Government proposed to re-establish the board.
This measure represents a second forward step in the implementation of the Government’s banking policy. It is a much more important step than the first one, because we believe that the Banking Act 1945 hangs as a threat over the heads of the private banking interests of this country. Despite what has been said by honorable senators opposite, our private banking institutions have a magnificent record. Notwithstanding ups and downs, which cannot all be attributed to our banking system, the rate of development of this country has not been excelled elsewhere in the world. We have made that progress because we have a sound private banking system. I want that system to be maintained. All that this bill is designed to do is to give it a fair chance to survive. I shall not speak at any length about Labour’s nationalization policy. Labour is trying to convince the people that bank nationalization, or the nationalization of any other industry, is a dead horse, but it has not succeeded in doing so. Honorable senators on this side of the chamber believe, as do a great many of the Australian people, that, while socialization is a plank of the platform of the Labour party, Labour will do its utmost to socialize as many industries as possible. The first industry to which it will devote its attention is the banking industry. 1 want to make some comments upon the speeches that were delivered by Senator Cameron, Senator Sandford and Senator Nicholls. They indulged in the old familiar diatribe about how the bank caused the depression of the ‘thirties. Nothing is more calculated to mislead and confuse the people than propaganda of that kind. Senator Cameron, the old doctrinaire socialist, made his usual remarks about the diabolical nature of our present financial system and the ills and horrors for which it has been responsible. Senator Sandford and Senator Nicholls spoke in a somewhat similar manner. I can answer those honorable senators best by quoting the words of a former Prime Minister of Australia. 1 refer to the late Mr. Scullin, who suffered from the impact of the depression probably more than any other man in the country. His opinion upon this matter must be respected. Presiding at a conference of Commonwealth and State Ministers at Canberra, on the 6th February, 1931, Mr. Scullin, Prime Minister, said -
The causes underlying the position confronting Australia are sO well known as to need only the briefest .reference. In part, they arc world-wide in their operation; in part, they are of Australia’s own making. The general fall in prices, a movement entirely beyond the nation’s control, has brought about a world depression of unexampled severity. The world depression in itself ranks as a major disaster in most countries. Australia, as a trading country, is bearing a full share of its paralysing effects. Simultaneously, other misfortunes of equal severity have come upon us. The fall in prices has been much heavier in the case of raw materials and foodstuffs than in regard to other goods. Thus, the position of countries like Australia, which depend for their prosperity upon the export of raw materials and foodstuffs, is 111 11 Ch worse than that of manufacturing countries. Our plight is probably thi* worst’ of all since Australia has almost ihe highest net value of exports, per head of population, of any country in the world;
Mr. Scullin set out very clearly and, 1 believe, accurately the basic reasons for the depression. To say that the private banking institutions of Australia were responsible for the depression in Australia is the height of absurdity. No matter what the banking system whether it be operated by private banks or a nationalized bank, the same principles must be applied if it is to be successful. It is useless to suggest that the Commonwealth Bank would adopt other methods if we were confronted with a crisis. The Commonwealth Bank would have to adhere to the same principles of banking in any circumstances. Otherwise it would bring the country to the brink of ruin. The system of banking has been built up over the centuries by a long process of evolution. I cannot accept the suggestion that the private banks are responsible for financial troubles because they have a profit motive. What is wrong with profits? Everybody wants profits. If we do not have them we go broke. The principles that apply to every institution that wants to progress apply equally to the banks.
I believe that the bill is a good one and that it will place the new trading bank on exactly the same footing as the private trading banks. I am prepared to acknowledge that the special account system has made its contribution to the welfare of the country. The Commonwealth Bank has not been obliged to contribute to the special accounts but it will be obliged to do so under this legislation. If that provision were not made, it could obtain an unfair advantage over the private trading banks under a Labour government.
The bill insists that _the Commonwealth Trading Bank shall lodge a percentage of its deposits in a special account with the central bank. I am gratified that the other departments of the Commonwealth Bank are to be retained by that institution. Reference has been made in this debate to the importance of the Rural Credits Department, the Industrial Finance Department and the Mortgage Bank Department of the Commonwealth Bank in the banking system of Australia. I wholeheartedly agree that those departments are essential to our general financial system. A prominent official of the Bank of New South Wales, I understand, has expressed the opinion that the new Commonwealth Trading Bank should administer the Rural Credits Department, the Industrial Finance Depart ment and the Mortgage Bank Department of the Commonwealth Bank. That suggestion has not my support. I believe that the Commonwealth Trading Bank should operate in fair competition with the private trading banks, and that it would be placed at a severe disadvantage if it were to control those three departments. Those aspects of banking are not attractive financial propositions to the private trading banks. If the Commonwealth Trading Bank were made responsible for the conduct of those three functions, a severe limitation would be placed on its effectiveness. Therefore I am opposed to the suggestion that those three departments of the Commonwealth Bank should be administered by the Commonwealth Trading Bank.
As far as I can see, the new bank will be carried on exactly as heretofore. It has the opportunity to perform the same useful function as has been performed by the Commonwealth Bank in the past in this field of banking. I see no reason why it should not. Senator McKenna claims that certain restrictions have been placed on the new Commonwealth Trading Bank, and he mentions, as an illustration, that the institution will have a capital of only £5,000,000. I do not know whether that figure is correct, but I believe that the success or failure of the bank will depend upon the amount of money that it secures as deposits. The success of a bank is not determined principally by the amount of capital at its disposal. In my opinion, the capital of the new bank is sufficient. If the bank has the confidence of depositors there is no reason why it should not progress. I was not in the chamber during a part of Senator McKenna’s speech, but I have heard that he said the cost of the change-over from the Commonwealth Bank to the Commonwealth Trading Bank would be approximately £1,000,000. The honorable senator, I understand, expressed the view that it would be a waste of money. I do not know whether that figure is correct, but I have heard mention of £500,000.
– The Leader of the Opposition did not mention any figures at all.
– I understand that he mentioned the figure of £1.000,000. Apparently Senator Aylett is, as usual, making false statements.
– I was in the chamber listening to the speech, and I know that no figures were mentioned.
– Probably the honorable senator was having a little doze. I stand by what I have said. My informants are not people who get a wrong idea of things. In any case, I think the Treasurer (Sir Arthur Fadden) himself has acknowledged that the cost of the change-over will be from £500,000 to £1,000,000. Let us consider a hypothetical case - and I hope it is indeed hypothetical : Should a Labour government come to office and decide to proceed with its bank nationalization policy, what cost would be involved? Does any one imagine foi’ a moment that the abolition of the nine private banks in this country could be accomplished without substantial expenditure? Obviously it could not be. The cost to this country would be far in excess of the figure mentioned by the Leader of the Opposition in connexion with this legislation. Therefore, the honorable senator’s argument carries little or no weight. .
I shall not take up much more of the time of the Senate. The measure has been discussed exhaustively by honorable senators on both sides of the chamber. I support our present banking system. I know from my own experience, limited though it may be, that the system is good. In my dealings with the private banks, I have been given every consideration. Honorable senators opposite may be surprised to know that I have an account with the Commonwealth Savings Bank. If the Commonwealth Trading Bank could provide me with financial accommodation or banking facilities that I required I should have no hesitation in dealing with that institution. Primarily I support private enterprise, but I concede that the Commonwealth Bank, right down the years, has been an important factor in our progress and development. I should he strongly opposed to any measures that were designed to reduce its effectiveness. The aim of this bill is to maintain the effectiveness of the present banking system, and for that reason I give it my wholehearted support.
– It was rather amusing to hear Senator Hannaford deride the mentality of the Opposition. His speech lasted for 2S-i minutes and of that time he spent one minute on the special account system, two minutes on rural credits and the rest of his time on matters unconnected with the bill. Fancy an honorable senator whose own record is so poor reflecting upon the mentality of the Opposition ! I have no doubt that any one who reads Senator Hannaford’s speech will be quite able to judge that honorable senator’s own mentality. He sought also to give all the credit for the development’ of Australia to the private trading banks.
– No. I said the present banking system.
– Very well. The honorable senator gave the credit to the present banking system. Until the Government started meddling with it, the banking system in this country was not what it is now. If the Government is giving credit to the banking system, as it was before the war, for its part in the development of the nation, I wish to know what credit it intends to give to the millions of workers who died in developing this country. It was not the banks that developed the country, but the sweat, blood and tears of the manual workers. The bankers took their pound of flesh for every £1 that they let out, and in many instances they took it in sweat and tears. I make no secret of where I stand in relation to this matter. I am like the Minister for National Development (Senator Spooner) who introduced the bill. There are no half measures about him. I shall deal first with his speech, then I shall deal with the remarks of Senator Hannaford. It is easy to tell by the honorable senator’s speech that he has not even read the bill. At the beginning of his second-reading speech, the Minister for National Development stated in no uncertain terms the purpose of this bill. He said -
The Government considers that the present hanking legislation leaves room for the Commonwealth Bank through its central banking powers, to discriminate unfairly against thi private trading banks, and 50 to expand its own trading operations at their expense. Certain major provisions in the present legislation require amendment if the position of the private hanks in our banking system is to be protected in future from unfair attack by a central bank operating under a government with socialist aims.
The Minister made no secret of the real purpose of the bill. First, he said he expected that there might be unfair competition in the near future, and was afraid that the Commonwealth Bank would expand at the expense of the private banks. He did not tell us, and we have challenged several of the Government backbenchers who have spoken so far to tell us, the nature of this unfair competition and in what way it is taking place or might take place. It is apparent that Government supporters are embarking on a campaign of fear. In the past they tried to make the people believe that a Labour government, would commandeer the people’s savings bank accounts. They are engaging now in the same sort of campaign. Presumably there are still some honorable senators opposite who will speak on the measure. Will some of them tell us exactly where the private banks have been suffering a disadvantage as the result of the operations of the Commonwealth Bank, and in what way the things that the Government pretends might happen in the future could occur? I have heard a great deal of talk about the activities of the Commonwealth Bank, especially in the 1920’s. After an anti-Labour government had amended banking legislation in the years 1923, 1924, and 1925 the Commonwealth Bank was nothing but a clearing station for the private banks. It played no part in the development and economy of this country, because the nation’s financial policy was dictated by the private banks. The Commonwealth Bank had no say at all in regard to it. I, remind the House of the statement made by Sir Robert Gibson, the then Governor of the Commonwealth Bank when he walked out of the the Cabinet room after be had refused the request of Mr. Scullin, the Prime Minister, for a few million pounds for the purpose of relieving unemployment. Inside the Cabinet room Sir Robert had said to Mr. Scullin, “ If you do not make a reduction in old-age pensions you will get no money to pay the Public Service on pay day”. When he walked out of the Cabinet room he said, “ I have shown them the powers that rule this country, and the part that finance plays”.
– Pure fiction.
– Those remarks were made inside and outside the Cabinet room, here in Canberra, by Sir Robert Gibson, who was dictated to by the private banks which decided the financial policy of the country, and left men out on the roads to starve. That is what the private banks did towards the development of Australia.
Sitting suspended from 12.45 to 2.15 p.m.
– In the course of his second-reading speech, the Minister for National Development said -
We are not oblivious of the possibility, however, that a future government could find ways and means of dominating the board for its own political purposes, and, within the framework of the law as it now stands, subject the private trading banks to unfair and unscrupulous attack.
The Minister was trying to use the old socialist bogy. Having won one race on banking, the Government thinks that it can win again on the same horse. The Government hopes to win the Senate elections on the 9th May by making people afraid of what might happen. Let me tell the Senate what has happended because a government pan be judged only on what it has done. Did the Labour Government launch unscrupulous attacks on the private banks during thcwar or afterwards? If it did so, why have not honorable senators opposite stated what those unscrupulous attacks were? The Government is trying to instil a fear into the minds of the people. It cannot point its finger at one piece of legislation or .it one act of administration of the Labour Government which constituted an attack on the private banks. This bill will have the effect of returning the control of the Commonwealth Bank to private bankers and other moneyed people who decide the financial policy of the Government. Rothschild said that if he were given control of the finance of a. country he could control its government. The Government proposes to reduce the powers of the Governor of the Commonwealth Bank to give to the private banks and other financiers the power to dictate to this and future governments. The Minister for National Development also said -
Our purpose has been to obviate the possibility that the Commonwealth Bank, at the command of a socialist government, could place its own trading activities in a privileged position through the unfair use of its central banking powers.
If the Minister was referring to a future Labour government when he mentioned a socialist government Opposition senators do not mind his reference.
– Is the honorable senator a socialist?
– Yes. If the Constitution permitted such action, the Labour party would socialize any monopoly that was working against the economic welfare of this country. Neither the Commonwealth Bank nor the Australian Labour party asks for any privileges, but we on this side consider that the government of the day and the Commonwealth Bank should have the power to govern the economy of this country in the best interests of the people. Nobody could convince me that the economy of this country was governed in the best interests of the people when the private financiers previously had that responsibility. They controlled not only industry but also the life of every individual in the community, and their policy resulted in the establishment of huge pools of unemployed persons. There was stagnation in industry and starvation amongst the people. By stripping the Commonwealth Bank of its powers, the Government is attempting to apply that policy again. Already there can be seen long queues of persons collecting unemployment benefits when they should be at work in industry. If, because the economy of this country was going haywire, the Government wanted to implement a policy of development, it would have to go, cap in hand, and ask private associated bankers, or those controlling them, for their permission to do so. The Government would also have to ask them to guarantee to supply finance to the Government for that purpose. I challenge honorable senators opposite to point to any unscrupulous attacks that have been made on the private associated banks by Labour administrations. The Minister also stated in his second-reading speech -
The bill also provides that it shall be the duty of the new bank to develop and expand its business, and that it shall not refuse a person’s business only on the ground that business would thereby be taken away from another bank. In this respect the provisions in the present act are repeated.
Why is it necessary to repeat the provisions in this bill? The Minister’s plea about competition is negatived by that paragraph. If there is to be competition with the private associated banks, let it be free competition. The effect of this provision will be that the Commonwealth Trading Bank will be prevented from granting financial accommodation to a person who already has an account in a private associated bank. As a result of amalgamations, the number of private associated banks has dwindled. There are now only about seven private associated trading banks in this country. Ultimately, if this trend continues, the control of the economy of this country will be in the hands of one private trading bank. The only difference is that whilst the Government has no objection to the private banks being given a monopoly, it has a very grave objection to the Commonwealth Bank exercising any control in the hanking system at all. The Government realizes that policies that are applied by the Commonwealth Bank are, in effect, regarded as being the policy of the government of the day. No Labour government will shirk its responsibility in that respect, but this Government is prepared to place control of financial policy in the hands of vested interests. The Government realizes that so long as the provisions of the . 1945 act remain in force, it must accept responsibility for the general financial policy that may be applied in banking. For that reason, it proposes, under this measure, to strip the Commonwealth Bank of its present control over that policy. Consequently, when financial difficulties arise in the future the Government will be able to say that it is in no way responsible for them. Government supporters will say, as they have said in similar circumstances in the past, that there is not sufficient money in the country and that foreign capital must be attracted. The Prime Minister (Mr. Menzies) has suggested that a talking point for Government supporters is the fact that, to-day, over £900,000,000 is lying idle in the savings bank. Once the controls now exercised by the Commonwealth Bank are transferred to the private banks, the latter will be enabled to tie up every penny of those funds, or to release them as they please. The private banks will have the power to cause inflation, or deflation, whilst the Government will have no means whatever of controlling the volume of credit.
– Does the honorable senator really believe that those deposits of £900,000,000 are lying idle?
– I have not the slightest doubt that indirectly the private banks will use those funds to their own advantage.
This bill seeks to effect four main alterations of the existing system. They are: First, it takes from the Commonwealth Bank control over advance policy, concerning which the Commonwealth Bank may now give certain directions to private banks; secondly, it takes from the Commonwealth Bank the power to regulate interest rates; thirdly, it takes from the Commonwealth Bank power to regulate investments by the private banks in government securities, such as treasurybills; and, fourthly, the obligation now placed upon the private banks to lodge surplus investable assets in special accounts with the central bank is to be relaxed. Every one realizes the importance of control of advance policy in the interests of the economy generally. That control is now to be handed over to the private banks which will be enabled to tighten up advances with the object of stifling industry. We have had examples of such action on the part of the private banks in the past. At present, the Commonwealth Bank can direct the private banks to regulate the volume of credit and if the private banks refuse to carry out such directions the Commonwealth Bank, through its General Banking Division, can itself make good any shortage of credit and thus obviate economic stagnation. Under this measure, such power is to be taken from the Commonwealth Bank. Conversely, if the volume of credit being released at a particular time is considered to be excessive, the Commonwealth Bank, through its General Banking Division, can rectify that trend. We recall how, in the past, the private banks financed unnecessary and luxury industries, when, at the same time, essential industries- were unable to obtain adequate finance for their requirements. For that reason, the Labour Government retained capital issues control. This Government, soon after it assumed office, abolished that control but’ later was obliged to re-introduce it.
Secondly, under this measure, the Commonwealth Bank will be stripped of its power to exercise any control over interest rates. This Government is eager to relinquish such power despite the fact that control of interest rates provides one of the principal means of ensuring stability in our economy. Indeed, had this Government taken a firm stand in respect of interest rates on Commonwealth loans the greater proportion of the deposits of over £900,000,000, now in the Savings Bank would have been invested in such loans. But no one would expect persons to invest money in Commonwealth loans at a rate of interest of 3J per cent, when they know that the private banks will soon be allowed to increase their rates to 4£ per cent. Strict control of interest rates is essential if adequate funds are to be made available for the development of industries. Every increase of interest rates places an additional burden upon the taxpayers and consumers whilst the benefit of such increases is derived only by one section of the community. For instance, an industry which obtains an advance of £500,000 and is obliged to pay interest at the rate of 6 per cent, instead of, say, 4 per cent., must pass on the additional 2 per cent, to consumers in the prices that it charges for its product. In that way, the consumer is obliged ultimately to pay all increases of interest rates. When the private banks obtain control of interest rates they will be free to increase them to as much as 1 per cent, or 8 per cent, as was done in the ‘thirties, when industries which required overdrafts to enable them to carry on their operations were practically crippled.
– The honorable senator is talking nonsense.
– That has happened in the past and under this measure the way will be left open to the private banks to follow a similar course. Every one is aware df the present tendency to increase interest rates.
– Surely the honorable senator knows very well that the Australian Loan Council fixes the rates of interest.
– My point is that under this measure power will be taken from the Commonwealth Bank to control interest rates and will be placed in the hands of the private banks. The Australian Loan Council may control interest rates in respect of loans which it sanctions, but it has no control over the rate of interest which a private bank may charge if I approach it for an overdraft. If the honorable senator is not aware of that fact, then it is no wonder that he has been placed third on the ballot-paper-
– At least I am on the ballot-paper, which is more than can be said for Senator Aylett.
– I shall be re-elected, which is more than I can say for the honorable senator. This is not a bill to protect the private Associated Banks against unscrupulous attacks by the Commonwealth Bank. Instead, it will give to those banks power to make further unscrupulous attacks upon the public. I suggest there is more merit in that contention than there is in the claim of honorable senators opposite that the legislation is designed to protect the private banks from possible future attacks.
It is said that the legislation is designed to regulate investments by private banks in government securities, treasury-bills, &c. That seems to be a very snide move. When Labour was in office it prevented the private Associated Banks from monopolizing government loans. That Govern ment used the facilities of the Commonwealth Bank. If it required to use treasurybill finance to balance its budget, as this Government did last year by the use of £45,000,000 worth of treasurybills, such finance was obtained from the Commonwealth Bank, so that the interest paid thereon was eventually returned to the taxpayers. I understand that already the Government has used almost £100,000,000 worth of treasury-bill finance this year. Such finance is henceforth to be provided by the private banks. Indeed, that is the purpose of this bill. Instead of the interest on the money being paid to the Commonwealth Bank and, through it, returned to the people, in future it will be paid to the private banks. That is the kind of unscrupulous attack which the Government is making on the taxpayers of the country. Apparently, it wishes to have a banking system similar to that which operated in 3929 and the ‘thirties.
I come now to the provisions of the bill which are concerned with the lodgment of surplus investable funds in special accounts with the Commonwealth Bank. The Government wishes to change the system in that respect so that, in future, only a certain amount of credit will be held by the Commonwealth Bank. Surplus investable funds are to be left in circulation and thus increase the inflationary trend, a policy which the Government previously condemned. The former Labour Government operated the special accounts system in such a way that surplus money was controlled. That Government used £364,000,000 of surplus credit during the war years for the prosecution of the war effort. Had that money remained in circulation, naturally it would have brought about inflation. This Government proposes that such money should be left in circulation, to be acquired by the private Associated Banks, who may use it as they wish, whether in the interests of the economy or otherwise, at whatever rate of interest they choose. It may well be used to finance the production of non-essential goods, which, of course, would be detrimental to our economic stability. The Government is somersaulting on everything that it has preached on this subject in the past. Honorable senators may remember that the present Government parties condemned the previous Labour Government for putting too much money into circulation. When money was taken out of circulation they complained again. The members of the Opposition do not care where surplus investable funds go as long as they are not used in such a way that they will affect detrimentally the economy of the country.
This bill is a very vital measure because it proposes to move from the hands of responsible representatives of the people power to control our financial policy and to place it in the hands of private financiers, outside the government, over whom the government has no control. I am sure that honorable senators opposite cannot deny that that is so. If they think that it is not so, all I can say is that they have not read the bill. A great deal has been heard from the other side of the chamber about that old dead horse, nationalization of banking. I think that the Leader of the Opposition (Senator McKenna) stated the matter very clearly last night when he said that even if the Australian Labour party regained office and was 100 per cent, in favour of nationalizing the banks, it could not do so without the sanction of a ma jority of the electors, plus a majority of the States at a referendum. The Government parties are attempting to use the dead horse of bank nationalization as a stalking-horse.
– If the Labour Government had called up all the uncalled money held by the private trading banks, it could have nationalized them, could it not?
– It was not the the policy of the previous Labour Government to call up all the money held by the private banks. The Labour party has no objection to the private trading banks assisting industry to expand or helping the development of the country, but it objects strongly to the private banks being able to tie up credits. Hundreds of thousands of people in Australia are homeless and they cannot buy houses because they cannot get finance. That is because of the restrictive financial policy of this ‘Government and its imple mentation by the banks. The Government intends to strip power from the Commonwealth Bank so that no future government can rectify the position. That is the object of this obnoxious measure which is said to be designed to put the private banks on an equal footing with the Commonwealth Bank. How innocent it all sounds !
– Not like Senator Aylett.
– I should hate to have some of the thoughts on finance that are held by honorable senators on the Government side. I should not like to think that the country’s development had to stand still until the Commonwealth Bank Board decided that something should be done. The Government has introduced this legislation on the eve of a Senate election so that the private banks will know that it is prepared for the pay-off to which it pledged itself in 1949. However, the Government will not last long. The Commonwealth Bank Board is only temporary. Honorable senators on the Government side cannot show any instance where the Commonwealth Bank. Board has done anything to give Australia a stable economy similar to that which existed under a Labour government in 1949. The Government appointed the Commonwealth Bank Board and claims that that body has a full time job. If that is so, the Bank Board-has been wasting time and energy because it has nothing beneficial to the economy to show for it. I do not doubt that the board has been sitting on a full-time basis to advise how this bill should be placed before the Parliament. The Government has submitted to the dictates of the board. Where do the members of the board come from? If their financial interests are traced back, it will be found that they are not with the Commonwealth Bank. This Government is making a grave mistake if it believes that any future government will adhere to the legislation that it is putting forward now to tie up the economy of the country. It wall soon discover that there are brains on the Labour party’s side and that a way will be found to step around this legislation in as many months as the Government has taken years to think it out. The Labour party will soon bring the Government’s powers back into line with those that were provided by the 1945 legislation on banking. Honorable senators on the Government side eulogized that measure when the Labour Government spoke of nationalizing the banks. Supporters of the present Government said that the Commonwealth Bank Act 1945 provided everything that was needed. It has taken the Government from 1945 until now to discover just what that legislation did cover.
– I do not believe that many honorable senators on the Government side understand what their masters are whipping them to do. They should realize it because the hostility of the people towards the Government has been shown at every election and by-election that has been held recently in Australia. Who is complaining about the present set-up of the Commonwealth Bank ? The clients are not complaining. They are quite satisfied. This bill is one of the greatest pieces of highway robbery that has been attempted in the history of parliamentary government in Australia. It has been initiated by a government that has one foot in the political grave and the other on a banana skin. Politically this Government is almost extinct. It realizes that the Labour party will rule again after 1954 or earlier if the Government is sincere and makes provision for a general election this year. The bosses who made the Government possible and provided the money for propaganda and door-knocking in 1949 and 1951 have forgotten that even the present Treasurer (Sir Arthur Fadden) told the people in 1949 that the 1945 banking legislation was all right. Neither the Prime Minister (Mr. Menzies) nor the Treasurer suggested in 1949 or 1951 during the election campaigns that any amendment of the 1945 legislation would be made. The people who made funds available to the Government realize that it is on the way out. In a final attempt to use dictatorial methods in the interests of big business, the banks have provided this bill. They have told the Treasurer to present it to the House of Representatives and the
Minister for National Development (Senator Spooner) to put it through the Senate before the Parliament rises on the 27th March just prior to the Senate election. I am sure that the public will object to interference with private interests at the behest of a few financial dictators. This Government, which was elected on the antinationalization cry in 1949, told the people that the Labour party, if returned to power, would wreck the banking system and take their savings. Talks that I have had with my business associates in Victoria have convinced me that the business community of this country now realizes that whatever risk there may have been of losing its savings under bank nationalization in 1949, it has no hope whatsoever of avoiding depletion of its funds by this Government’s excessive taxes. The Government’s policy, in effect is, “Before it is yours, it i3 ours “. That may not be nationalization, but it is certainly a national grab. The people of Australia are very hostile to the Government’s financial policy, and that hostility will be reflected in the Senate elections on the 9th May. I have no doubt whatsoever that the trend toward Labour that has characterized recent State elections and by-elections will also be reflected in the Senate vote.
The Commonwealth Bank was never wanted by the tories, who have always been opposed to the progress of Australia as a nation. All the arguments that were used against the establishment of the Commonwealth Bank in 1911 were repeated during the election campaign of 1949; but let us look at the record of the Commonwealth Bank. It started operations with a small loan of £10,000 from the federal Treasury, but that money was never required. To-day, the Commonwealth Bank is a vast institution. Its assets are owned, not by shareholders who live in the United Kingdom, the United States of America or Germany, but by the people of Australia. Because the Commonwealth Bank has been successful the tories want to wreck it. Honorable senators opposite have sought to show what the private banks have done for the development of Australia over the last 100 years. I have recollections of being told by my elders that, in the great depression of 1893, the private banks scooped the pool. Indeed, it was in those years of adversity that the idea of a national bank was born. One of the main aims of the founders of the Commonwealth Bank was that there should never again be confiscation of the assets of the people by individuals who call themselves bankers and who use the people’s money to make themselves financially secure.
– The bankers have not done badly by the honorable senator himself.
– I am able to look after myself, and I am certain that if the electors knew the calibre of honorable senators opposite as I do, they, too, would look after themselves. Unfortunately they do not know the true character of those individuals who in the press and over the air hold themselves up as little Eather Christmases. But we in this Parliament see honorable senators opposite in their true colours, and we understand their intentions. We hear them when they do not want to be heard, but are forced to speak by those interests outside the Parliament which support them. The Commonwealth Bank was established in the face of much adverse propaganda in 1912. It fought that propaganda and ultimately became a valuable asset, owned not by wealthy shareholders, but by every individual in the Commonwealth. The proceedings of the Parliament were not being broadcast in 1924 and consequently very few people knew what was being done in that year to the Commonwealth Bank by two very cunning gentlement, Dr. Page - now Sir Earle Page - and Mr. S. M. Bruce. Unknown to the electors, the Bruce-Page Government sneaked the Commonwealth Bank’s original charter away from it, and so stripped it of much of its power, as this legislation proposes to do again. The result was that between 1924 and 1939 the Commonwealth Bank functioned virtually as a savings bank only. In 1939, not a Labour government, but a Liberal government, realized that to win the war the Australian economy had to be stabilized, and so it turned to this great institution, the Commonwealth Bank. It disregarded the Commonwealth Bank
Board which, it will be recalled, had refused this Parliament finance to build homes and provide work during the depression years. The then chairman of the board, Sir Robert Gibson, may not have been a bad fellow himself, but he was the mouthpiece of big business, and big business had decreed that there’ should be a depression. Its attitude was, “We shall put the workers where they should be. We shall leave them without homes and without jobs “. Mr. E. G. Theodore, who was Treasurer in the Scullin Government, sought £30,000,000 from the Commonwealth Bank in 1930. Of that sum, £18,000,000 was required to assist primary producers, and £12,000,000 to provide work for the unemployed and to build homes. Mr. Theodore was told by the Commonwealth Bank Board that the money would not be made available. The associated banks, which had caused inflation after World War I., had decided to cause deflation in order to retrieve what they had lost because of the operations of the Commonwealth Bank. Reference has been made in this debate to the Royal Commission on Monetary and Banking Systems. I remind honorable senators that when that commission investigated our banking system in 1937 there were about 40 private banks. To-day, there are only seven or eight.
– Well, nine; they have decreased by more than three-quarters. The individuals who to-day tell the electors that a government banking monopoly would be dangerous apparently view with approval the prospect that, within ten or twelve year3, there will be virtually a private banking monopoly. I am quite convinced that many honorable senators opposite know this legislation to be against the be9t interests of the Commonwealth, but have mouthed platitudes in support of it at the behest of the outside interests that they represent. One member of the royal commission of 1937 was Mr. J. B. Chifley, who made a minority report and never deviated from the principles that he enunciated in that report. The nationalization of banking has been described by its opponents as a Chifley pipe-dream, but it has been a feature of Labour’s platform for years. Australia will enter its era of greatest progress when that part of the Labour party’s platform is given effect, as it will be. given effect, when the people of Australia say, “ Well done, the great Labour party. We shall alter the Constitution. We shall give you power over banking because the Labour party is the people’s party and is not subservient to private financial institutions “. Then banking will be nationalized in the interests of the people as a whole. Surely no one will accuse the Labour party of seeking to gain something out of the Commonwealth Bank. The bank is under government control, and there are no shareholders clamouring for profits. But who gets the profits’ of the private banks? They are distributed amongst a few shareholders who live in affluence, probably in the United Kingdom, the United States of America, or Germany These people “ cop “ the wealth that is produced by the sweat of the brows of Australian workers. Senator Wood laughs, but the electors will take the grin off his face on the 9th May. The Labour party still supports the principles that were expressed in Mr. Chifley’s report. We shall never deviate from those principles. In 1939, when war broke out, everybody clamoured to use the Commonwealth Bank. Any Australian government must use the Commonwealth Bank if it is to control inflation. Because of excessive taxation little credit money is available at present and there is stagnation in every State.
– There is none in South Australia.
– There was great political indignation in South Australia about a fortnight ago. An enormous majority of the people of South Australia declared that the Playford Administration should end and that Labour should take office. The people of Adelaide are not satisfied with the Playford Administration, but they are forced to accept it because South Australia, still has that bosses’ institute, the Upper House. It will take years to educate the people of South Australia as the people have been educated in Vic toria, where they now have the right to decide who will represent them in the Upper House.
The control of all finance must be in the hands of the people. Money should be made available now for all those public works that are lying idle such as the Snowy Mountains scheme, the Eildon weir and the Morwell scheme. It would break one’s heart to go to Morwell and see the £1,000,000 worth of electrical machinery which is lying idle and rusting away there. It would not require much money to complete the job there which would provide the people of Victoria with adequate power. But the Government has said that credit money is not available for this work. It now proposes to restrict the activities of the Commonwealth Bank with the object of preventing the Labour Government which will come into office in a few months from issuing credit. How many people are capable of purchasing their homes for cash now? How could Victoria complete the Morwell project and pay for it out of taxation? Posterity must pay for a part of projects such as this. Credit must be made available because these reproductive works are the life-blood of the country.
– Government senators have been trying to persuade the Opposition of that fact for three years.
– Who would grant loans to this Government? It has tried on numerous occasions to raise loans and has found it impossible because the people have no confidence in this Government. The people whom the Government now wants to purchase bonds at their face value can buy £100 bonds on the stock exchange for £87. The Government must use credit money. What is wrong with credit?
– That is what Government senators have been asking.
– Surely Senator Kendall is not like Senator Guy, who has been whipped along by the financial magnates. If Senator Kendall believes in the issue of credit, I invite him to vote against the bill so as to enable more credit to be issued.
– And cause more inflation.
– There will be no inflation if works that will pay dividends are constructed. There are families in the City of Melbourne which live in one room. Other people jj re without homes. Men and women are losing their health because of the conditions under which they have to live. Inflation is not caused by building homes for the people. If the Government would allow the Commonwealth Bank to use credit money for the building of homes it would provide a lot of relief for those people. Why would such action cause inflation? I could buy 2,000,000 bricks in Melbourne if I wanted themI could buy as much timber as I wanted and I could buy any other building materials that I required. Yet thousands of people in Melbourne are homeless. If this Government is not defeated shortly industries will stagnate and the Commonwealth Bank may never be wanted again. 1’n order to keep inflation in check the Commonwealth Bank must issue credit to the farmer. The Government of Victoria let a contract some years ago for the construction of -the Eildon weir. At present the job is progressing very quietly. No special effort is being made to complete it. The Victorian Government is only able to do as much work on it as is necessary to save it from paying a penalty of £1,000,000 for the nonfulfilment of its contract. What would be better from the point of view of defence or food production than to have the water necessary to irrigate those areas which could grow food? You, Mr. Deputy President, live in an area of Victoria which was a desert twenty years ago. It now has ample water and is a garden of Eden. Any action to issue credit for the purpose of bringing water to irrigate our land would be in the interests of future generations. But the Government is not allowed to take such action because the banking interests which control it have their main interests in other parts of the world. They do not want to remove the centre of their industry from Bond-street or New York. They do not want Australia to manufacture goods. They want Australia to produce primary products only and do as it is told.
– Does not Senator Hendrickson believe in making profits in the business in which he is interested ?
– Yos. But Senator Wood may examine my income tax return and verify that my business, during the term of office of the Menzies Government, has returned me no profit. All the profits that I earn have to be paid out in income tax but I am quite happy about that because I c:in afford it. If this bill is passed the primary producers will be left without money in the future. I venture to say that not 1 per cent, of honorable senators opposite understand this legislation. Yet it will be rushed through this chamber in the dying days of this session when tin’ Government is going out of existence. Prior to the Queensland State election honorable senators opposite announced that the people of Queensland were dissatisfied with the Labour Government.
– What about the gerrymandering that took place?
– The Go.vernment of Queensland is always returned by a majority of the people. The Gair Labour Government was returned with a majority of from 40,000 to 50,000 votes. However, I shall not speak at length about gerrymandering at this stage, because the Prime Minister is at present engaged on gerrymandering in an endeavour to save the Minister for External Affairs (Mr. Casey).
Some honorable senators opposite have referred to proposed new sections 22j. 22ic, and 22l. I remind them that the Labour party’s policy is to develop the Commonwealth Bank, because we believe in it. We do not think that it should be deprived of any of its powers. The Opposition represents all phases of industry, not the financial interest of this country. Primary producers, manufacturers, business men, and workers generally have all had a say in the formulation of Labour’s policy .to consolidate the Commonwealth Bank in order to enable it to carry out the functions for which it -vas established in 1911 by a Labour government. Honorable senators contend that the bank should engage in fair competition with the private trading banks. But let us consider the competition that they permitted to be offered to the Commonwealth Bank between 1924 and 1939. Following “World War I., the associated banks, by their policy of inflation, were responsible for untrue values being placed on commodities in this country. They charged soldier settlers interest at the rate of 6 per cent, on loans, because the Commonwealth Bank had no jurisdiction to prevent them from doing so. As a result, many soldier settlers who had bought farms of up to 640 acres in the Mallee district in Victoria derived a net average income of only £4 or £S a week. During the regime of the Bruce-Page Government they were charged interest at the rate of 6 per cent, on loans that they had obtained in order to purchase land at £10 an acre. They had to pay interest bills of more than £6 a week. After World War II., however, as a result of the policy that was enunciated by Mr. Chifley, ex-servicemen were able to acquire farms at 1940 valuations. It is to his credit that exservicemen settlers, who are not ill or lazy, now have every opportunity to succeed. I believe that 98 per cent, of them will succeed, unless in future the associated banks take away the charter of the Commonwealth Bank and increase interest rates to 6 per cent., 7 per cent, or 9 per cent.
I remind honorable senators opposite that they cannot fool the people all the time. I am convinced that if, in 1949, more people had been better informed about Labour’s proposal to nationalize the banks, Labour would not have been defeated at the general election in that year. Many of the people who voted against Labour had had no experience of banks other than the banks of the Yarra or the banks of rivers in the districts in which they lived. They believed that the Government’s propaganda was sincere, but they now know that it was not sincere. I wonder that the Treasurer, who previously applauded Labour’s banking legislation of 1945, has had the audacity to support the bill now before the chamber. It is one of the greatest pieces of chicanery that has ever been perpetuated in a democratic parliament.
Several supporters of the Government have referred to a newspaper report of a speech that was made by the honorable member for Melbourne (Mr. Calwell) at a picnic at Como Park, without taking the trouble to verify the facts. I was present when the honorable member for Melbourne outlined the progress that had been made by this country during the nine years from 1941 to 1949, when Labour was in office.
– How does the honorable senator calculate the period as nine years?
– I shall not argue the point with Senator Marriott, who is a new member of this chamber. He will learn from experience. The honorable member for Melbourne said that it would take a future Labour government eight years to restore the economy of this country to the healthy condition that it was in when Labour relinquished office. He stated that had the previous Labour Government, which believed in the people, not been defeated in 1949, it would have given to the people a degree of economic success and security that had never been attained by a nonLabour government in this country. During the 1949 general election campaign the members of the Government parties stated that they would not interfere with Labour’s banking legislation of 1945, and that their only complaint was about Labour’s intention to nationalize the banks. Now, three and a half years later, they are about to be defeated. If the Government parties were prepared to go to the country on the issue that was responsible for the double dissolution of the Parliament in 1951, I venture to say that the people would show clearly that they will not tolerate any attempt to interfere with the powers of the Commonwealth Bank, which was established to protect their interests.
The first Commonwealth Bank Board was established in 1924 by the Bruce-Page Government. However, in 1939 the present Prime Minister stated that for the period of the war, the Government must have control of the Commonwealth Bank. After one of the greatest war efforts in history, the Commonwealth Bank had a credit balance in London and an even balance in America. I remind honorable senators that the position was vastly different after World War I., when Australia was mortgaged to both America and England. It is significant that it was a Liberal government which took to itself power to control the Commonwealth Bank, by means of national security regulations. Just as the board was disregarded in 1939, so will it be disregarded again, because every sensible person knows that the success of this country depends upon the government’s control of the purse. We should not allow that control to be placed in the hands of foreigners, particularly people who may be nationals of a country that may be our enemy in a future war. The Australian Labour party has no objection to the private banks; but we say to the Government, “ At least leave the people with this institution which they endorsed at its foundation and have re-endorsed at every general election that has been held since that time “. If the Government fails to do that, I have not the slightest doubt that within the near future a Labour government will be entrusted with that task.
3.26]. - in reply - This debate has been fairly long and numerous points have been raised by honorable senators on both sides of the chamber. In the limited time available to me, I propose, first, to try to draw together the conflict on the general principles that are involved and, subsequently, to reply to as many as possible of the specific points of criticism that have been raised. I commence by stating what I think to be the purposes of this legislation as it has been presented by the Government, and the principal objections to it that have been advanced by the Opposition. The Government states the issue in simple terms. In my secondreading speech I said that the purpose of this legislation is to prevent the central bank from discriminating unfairly against the private trading banks. In other words, the purpose of the bill is simply that it seeks to protect the private banking system. The way it does this is by separately incorporating the trading branch of the Commonwealth Bank, so that it will operate entirely on its own, by making the staff arrangements that are necessary to achieve that result, and by providing for the transfer of the existing accounts of the customers of the Commonwealth Bank to the proposed Commonwealth Trading Bank. The provisions of this measure are complementary to those contained in the Banking Bill, which also is before the Senate. The two measures taken together contain the Government’s proposals to protect and preserve the private banking system in Australia in accordance with the Government’s policy which has, in truth, been endorsed repeatedly by the great majority of the Australian people. The Opposition’s criticism of the bill is, first, that it will weaken the central bank; secondly, that it will destroy the trading bank activities of the Commonwealth Bank; and, thirdly, that the Government has no mandate from the people to introduce this legislation.
I think that il have set out fairly distinctly the arguments in favour of the measure and the arguments that the Opposition has advanced against it. The first point I make is that at no stage during the course of this debate did L detect, on the part of any member of the Opposition, any desire, or intention, even to protect the private banks or even, indeed, to act fairly by the present banking system. Seven-eighths of the people of Australia are depositors with the private banking system. It has the overwhelming support of the people who, by and large, prefer to deal with the private banks instead of with the Commonwealth Bank. Yet those private banks, if my recollection is correct, did not have one friend among members of the Opposition throughout the whole of this debate. Not one member of the Opposition mentioned any good point about the private banks. It can be fairly said that the debate has revealed complete inability on the part of the Opposition to deal with such an important issue in a fair and reasonable manner. After all, the financial arrangements of this country, as in any other country, go right to the foundation of the well-being of every section of the community. Everybody is affected by the financial structure. When we find that one political party has not one good word to say for that section of the financial structure which the overwhelming majority of the people prefers, the views of members of that party must be taken with a good deal of reservation because they disclose a complete inability to approach this problem fairly and reasonably as they should, having regard to the importance of the subject.
My second point is that the Leader of the Opposition (Senator McKenna) stated that this legislation was transient and could be repealed. There has never been any dispute on that point. This Parliament is master of its own destiny and affairs. What one parliament does, another parliament can repeal. That is beyond argument. However, what the Government is doing under this measure is to establish a. structure and a set of circumstances which can be destroyed only by the Parliament. Any future parliament, in its approach to this matter, must make public the things that it proposes to do and the reasons why it proposes to do them. So, in this legislation, we have established for the private banking system a situation in respect of which we say to it, “ Here is your place in the financial structure of this country. Nobody can take that place from you without the matter coming before the Parliament.” In the circumstances that exist at present and having regard to the tenor of the speeches that have been made by members of the Opposition, that is a very valuable contribution to the future progress and welfare of this community. In the situation that will result from the passage of this bill the risk cannot possibly arise that a set of unbalanced, prejudiced people may destroy the private banking system without the people being made aware of what is being done and being given an opportunity to record their views on the matter. Honorable senators opposite have attempted to give the impression that the Government is merely raising a bogy in this matter, that although they themselves have no friendly feeling for the private banks yet they will not harm them, and, last thing of all will they ever dream of nationalizing them. On some occasions I am right, and on other occasions I am wrong. Perhaps, I am wrong more often than I am right; but I believe that a man is not a man unless he says what he believes. I throw into the teeth of members of the Opposition the statement that nine-tenths of -them are eager to see the banks nationalized but are not prepared to come out into the open and say so in order that the people may know their real views.
There are several ways in which the private banks could be destroyed, and under this legislation the Government is doing what it can to make it as difficult as possible for a future socialist government to achieve that result. It is true that the High Court has ruled that the Parliament has not power to nationalizethe private banks ; but all that the court did was to give a decision in respect of a particular bill, and no lawyer will dispute that in the future, the court may give a different decision on a bill that might be more expertly drafted to achieve the purpose of a socialist government. The only reason why the Chifley Labour Government, while it still had time to do so, did not attempt to have such a bill drafted after it was rebuffed by the High Court was that it knew that the people would not stand for such action. The second way in which the private banks could be destroyed is by the passage of legislation which, whilst it falls short of nationalization, places such burdens and responsibilities upon the private banks as to make it impossible for them to survive. Thirdly, the private banks could be destroyed by administrative action, initiated by a socialist government, directing the Commonwealth Bank Board to do certain things. Under this legislation we have done what we can to meet that possibility. We take the view that the private banking system is an important and integral part of the financial structure of the country. We believe that there should be a strong central bank charged with the overall responsibility of controlling
I1.-.? financial position of the nation. and that the control of such responsible institutions should not be in the hands of one individual but should be directed by a board composed of men of proved experience and capacity. We also believe that the central bank should include in its functions specialized functions such as those which already exist and that there should also be a general trading bank within the Commonwealth Bank. We believe that within that pattern one of the most important components is the private banking system. That is the basis of the clash between the Government and the Opposition in this matter. We believe in the central bank and also in the central bank having its subsidiary activities. We believe in the private banking system, whereas members of the Opposition, according to the platform of their party, believe in nationalizing the banks so as to establish only one bank. The great financial political issue is not whether the central bank is to continue. That is now beyond the realm of argument. From the late ‘thirties onwards the central bank became accepted as a new development and technique in financial arrangements, and, to-day, the central bank has established its position. The great issue is not whether the central bank is good or bad ; it is accepted. The great financial political issue that exists between the Government and the Opposition is whether the private trading banks are to be allowed to continue; and it is idle for members of the Australian Labour party to deny that fact and to pretend that they are prepared to give the private banks fair treatment and a fair go if, and when, they should ever be returned to office. Before concluding that summary of the real issue that arises in this matter, I repeat that a sound financial system is of importance to every citizen regardless of whether his, or her, station in the community be high or low. The great component of a good sound financial system is confidence between the people who are interested in banking and are concerned with banking transactions.
– And fair treatment as well !
– Exactly. In this bill I believe that we are providing a formula which will ensure fair treatment between the central bank, the general trading bank and the private banks.
– The honorable senator is an optimist.
– Is it not idle to expect confidence, stability and friendly co-operation between the private banks and the central bank when the private banks have an uncalled liability, for no useful purpose, of more than £500,000,000? Is it reasonable that such a position should continue to exist? Is not that a situation which should he rectified? Honorable senators opposite have asked for instances to be cited in which the private banks have not been fairly treated. That one statement alone is sufficient for all purposes. It is not possible to expect both parties to an arrangement to feel that there is fairness, decency and correctness in their dealings if one party maintains over the other a constant threat to call up an astronomical sum which could not possibly be met in any circumstances and which, if called up, would mean the complete financial failure of that party. We have attempted, by means of this bill, to cancel that liability and to separate the functions of the Commonwealth Bank so that the General Banking Division will in future stand on its own feet against the private banks.
I believe it to be true that the management and staff of the General Banking Division of the Commonwealth Bank will welcome this arrangement. For too long have they felt aggrieved because of suggestions that the success of the Commonwealth Bank has been due to the strong arm of the central bank. In my opinion, the management and staff of the trading section of the Commonweal t!i Bank will greet these arrangements with a sigh of relief. This bill will send a breath of fresh air through the trading banks and the monetary structure of th? community. I believe also that the npt result of it will be to add prestige and effectiveness to the central bank, which is the dominant power in the financial arrangements of Australia. Above all. it is necessary that that bank should be beyond the realm of party politics and receive the support of all sections of the community. As far as I am concerned, the important point that emerges from this great financial political issue between the Government parties and the Opposition is whether the private banking system is to continue. Whatever honorable senators opposite may say to the contrary, deep in their hearts they are enemies of the private banking system and are determined to destroy it if the. can.
– Hear, hear !
– I congratulate Senator Aylett for having the courage of his convictions. We take pride in the Commonwealth Bank and its progress. We have shown, by means of practical legislation, our determination to help the bank. We look forward to seeing it go ahead in the future, but not as a monopoly corporation with sole control of financial arrangements. While breath is in our bodies we shall not agree to a situation in which there is only one bank in the Australian community, so that there is only one authority to consult about financial arrangements.
I regret that T shall not have sufficient time to deal with all the matters that have been raised during the debate, but I propose to discuss some of the criticism of the legislation. I think other honorable senators opposite will pardon me if I deal first with the criticism directed at the bill by the Leader of the Opposition. The honorable senator stated that the wide powers of the central bank are to be seriously curtailed. He criticized the bill on the ground that the central bank may make loans only for legitimate banking purposes and that it could not make a loan to the trading bank for its expansion and development, in which circumstances the provision requiring the Commonwealth Bank to develop and expand is meaningless because it will not have the financial resources to do so. He also criticized the bill on the ground that the only provision made for increasing the capital of the trading bank is that the central bank is required to make available to it £286,000 a year from note issue and central banking profits for the next three years.
My reply to that criticism is that it portrays a lack of knowledge of the funda mental principles of banking practice. Alternatively, it is criticism made with tongue in cheek. The trading activities of a bank are determined, not by its capital resources, but by the level of ita deposits. Only to a very minor degree does the extent of the capital resources of a trading bank determine the level of its activities. The progress or development of a trading bank turns upon the degree of confidence which it engenders in the community and the number of people whom it can attract to deposit money with it. Having received deposits from its customers, it is able to lend out those deposits elsewhere and make a profit on the transaction. The honorable senator’s criticism concerning the capital structure of the bank is of comparative unimportance.
The Commonwealth Bank was originally established without capital. Nevertheless, it was able to promote confidence and to attract deposits. It was not until 1924 that the bank had any capital at all. I remind honorable senators opposite, that the first capital was made available to the bank by a government of the same political colour as the present Government. The Bruce-Page Government, in 1924, provided £4,000,000 as the bank’s first capital. When the General Banking Division was established in 1945 it also was given an original capital of £4,000,000. Those capital sums are the equity of the proprietors; they are the amounts that would be lost if the bank failed. But those sums are meaningless by contrast with the tremendous amount of deposits and liabilities.
The Leader of the Opposition also claimed that the central bank would be precluded in future from making advances to the trading bank, and he said that that would be a very grave weakness. The truth is that the central bank has never made advances to the General Banking Division. It is, of course, difficult to be a prophet in these matters, but I suggest that, as far as the future is concerned, it will be necessary for the central bank to make an advance to the trading bank only in the extremely unlikely event of a run on the bank or money being required urgently to preserve its stability or liquidity.
The honorable senator made great play with the words “ Only for the purpose of the central bank “. The “ only “ is, of course, used in a definitive and not a derogatory way. I am told that draftsmanship is one of the skilled arts. I understand that it is of the utmost importance that the power of the bank should be defined clearly and accurately. After all, this bank is not the same as a manufacturing, pastoral or shipping organization. It is the central bank. As such, it is the most important financial and trading institution in the country.
Senator Benn claimed that the real purpose of the bill is to weaken the Commonwealth Bank. He also said that the present Government had never done anything to develop the bank. I do not retreat one step from the position that the purpose of this bill is to protect the private banking system. I say, however, with all the force of which I am capable, that it is grossly unfair to criticize the Government on the ground that it is attempting in some way to prejudice the Commonwealth Bank. The legislation which this and similar governments have introduced over a long period of years alone refutes that suggestion. It was a government of our political colour which, in 1924, introduced legislation which turned . the Commonwealth Bank into a central bank. That, I suggest, was the greatest single step forward that has ever been made in our financial arrangements. Similar governments provided the first capital of the bank, and legislated for the Commonwealth Bank to take over the note issue. Can any honorable senator imagine more momentous financial decisions than those? It was our Government which provided for the private banks to settle their exchanges by means of deposits with the Commonwealth Bank. It was a government of our political complexion which established the Rural Credits Department of the Commonwealth Bank.
The DEPUTY PRESIDENT. - Order ! The Minister’s time has expired.
Question put -
That the bill be now read a second time.
The Senate divided. (The Deputy President - Senator George Rankin.)
Majority . . . . 6
Question so resolved in the affirmative.
Bill read a second time.
– Before the Senate goes into committee I move -
That it be an Instruction to the Committee of the Whole on the bill to consider an amendment to section169 of the principal act.
I take that course under chapter 24 of the Standing Orders, which states, in effect, that when it is desired to move an amendment to a section of a principal act which is not under review by the bill, that can be done only by way of instruction from the Senate to the committee. If honorable senators will refer to Standing Orders 328 to 333, they will note that the procedure is set out there. In case any honorable senator may be tempted to take advantage of Standing Order 333 which reads -
An Instruction to a Committee of the Whole requires notice, and can only be moved before going into Committee on any Question.
I would point out that the Standing Orders have been suspended to enable this bill to be dealt with expeditiously. In those circumstances, notice is not required and the Senate at the moment is free to consider this motion. I would make the point, before I announce the type of amendment that I have in mind, that this motion, if carried, does not deal with the merits of the amendment at all. It is merely an authority to the committee to enable an amendment to be moved to a clause that otherwise could not be considered. Therefore, if the Senate records an affirmative vote in this matter, it is doing no more, in effect, than upholding the principle of free speech. Without such a motion, the matter that the Opposition desires to raise cannot be raised. I am not at liberty on this motion to discuss the merits of the proposed amendment, but I think it is proper that I should advise the Senate as to what is in mind in seeking this authority. The section that it: is proposed to amend is section 169 of the Commonwealth Bank Act 1945- 1951. The marginal note is “Excess Officers It is not a particularly difficult clause. In effect, it states that if the bank finds at any time that it has too many officers, it may declare one or more of them to be excess. Then the obligation falls upon the bank to transfer the excess officer to another position. If another position of equal value cannot be found, he may be transferred to one of a lower classification. Finally, if no position can be found, the officer may be retired. There is provision for one month’s notice to be given in that case. The amendment that is proposed is the addition of a new sub-clause 4 to section 169. I remind the Senate that honorable senators will not be voting on the merits or otherwise of the proposed new sub-clause . now if the motion is upheld. The proposal is to include -
Where an officer is transferred or retired under this section, the officer may appeal to the Promotions Appeal Board.
I merely wish to add at this stage that there is provision in the act for a Promotions Appeal Board to deal with the question of preferments and promotions. There is also a Disciplinary Appeal Board to deal with charges of incompetence and misbehaviour and so on. But there is no provision for an appeal in the case of an officer who is declared to be excess. I leave it to the Senate with the hope that by passing this motion, honorable senators will give to the Senate in committee an opportunity to debate the merits or otherwise of the right of appeal for members of the Commonwealth Bank service in the circumstances that I have mentioned. That is all that is sought. In view of the fact that we are not dealing with the merits of the proposed amendment in this motion, and that if the Senate does give this instruction the whole question of the merits or otherwise of the matter will have to be debated in committee, I should be surprised if any honorable senator would feel disposed to deny an opportunity at least to discuss the matter on its merits. The motion that is now before the Senate is -
That it be an instruction to the Committee of the Whole on the bill to consider an amendment to section 16!) of the principal act.
I repeat that that is not a move to approve or disapprove of the amendment which is not before honorable senators formally. It is merely seeking an opportunity for such an amendment to be considered in committee, and I suggest to the Minister for National Development (Senator Spooner) and his supporters that there should be no difficulty about that.
– As I understand the submissions of the Leader of the Opposition (Senator McKenna), he is asking the Senate to adopt this motion so that when the bill goes into committee, he will be enabled to propose an amendment to a section of the principal act which is not affected by the bill that is now before the Senate.
– That is the position exactly.
– One does not like to be discourteous on these matters. It is desirable to’ allow matters to arise for deliberation. However, I must say that I am not enamoured of this proposal because it has no relevance to the measure that is before the Senate. Section 169 of the principal act covers the contingency of excess officers. The proposal is to give those excess officers the right of appeal.
– “We are not proposing to debate its merits now.
– I understand that. I am trying to get the particulars fully in my mind because this is the first I have heard of the proposal. It is like a yorker directed on to the middle stump. I am trying to collect my thoughts to ascertain what it is about. Perhaps the best thing that I can do is to play a straight bat. I do not know that we can deal with the intricacies of the rights of appeal of members of the staff of the Commonwealth Bank in a measure dealing with other matters in the legislation. I should like to be fortified with advice from those who are affected by the amendment before I can express an opinion upon it when it goes into committee. I am opposed to the motion.
– I appeal to the Minister for National Development (Senator Spooner) to reconsider his attitude. As the Leader of the Opposition (Senator McKenna) has pointed out several times, we are not being called upon at this pointto decide whether or not the right of appeal should be given to excess officers. The Minister said he would like to be fortified by the opinion of the officers who might be affected; but he cannot possibly be assisted by that opinion if he kills the matter at this stage. I cannot see any possible harm in granting to the Opposition the right to move an amendment which the Minister knows he lias the number to defeat if he so decides. I appeal again to the Minister to give t.o the Leader of the Opposition the right to move an amendment at a. later stage of the proceedings. In the intervening period the Minister will have ample time to achieve the end that he seeks to achieve. He will have an. opportunity to think the matter over, and to be fortified by the opinions of some of the officers concerned. I suggest with respect that the proposed amendment is relevant because the Commonwealth Bank Act is being substantially amended. The right of appeal would not be exercised extensively, but it would be a safeguard. It is a right that is given .to every other public servant. No harm, and possibly a great deal of good, could be done by agreeing to the motion. The Minister has made much of the claim that the bill will do something for the Commonwealth Bank : will he not let us assist him at this stage?
.- I should like to know why the Leader of the Opposition (Senator McKenna) has adopted this most unusual course. The bill has been in his hands for a considerable time. Why was notice of the Opposition’s intention to adopt this procedure not given to the Government as is usually done in such instances? It is all very well for the Opposition to argue that we should agree to this instruction being given, but once we agree to that, the very point that is sought to be decided has already been decided. I should like the Leader of the Opposition to explain why no notice was given of his intention to move this motion, so that adequate consideration could have been given to it beforehand.
– in reply - That is quite a fair question, and my answer to it is this : The fact that the Opposition proposed to move two amendments to the Commonwealth Bank Bill, including the one that is contemplated in this motion, was published in the press several days ago, and I had no doubt that the Opposition’s intention was known to every member of the Government. I do not accept the statement that Government members generally did not know that the Opposition proposed to move two amendments.
– Were there any official communications on the subject?
– The Leader of the Opposition did not hand his proposed amendment to the Minister in advance as a matter of courtesy?
– The Minister heard about it for the first time when I moved the motion that we are now discussing; but no discourtesy wa3 intended.
– It is an unusual procedure.
– No. This is a very formal matter. It would be very different indeed if the Senate were to be asked to vote at this stage on the merits of the amendment, but all that the Opposition seeks is an opportunity to deal at a later stage with a section of the Commonwealth Bank Act which is not being amended by the bill. If this motion be defeated, the important matter that I have foreshadowed will not be discussed at all. We shall be denied an opportunity to confer the right of appeal on officers of the Commonwealth Bank service in certain rather rare circumstances.
– The matter is not relevant to the bill.
– That is why I must adopt this procedure. However, ir, is relevant to the bill in the sense that the measure will substantially amend the portion of the Commonwealth Bank Act which deals with the Commonwealth Bank Service. Almost the whole range of that service will be under review in considering this measure. Therefore, in a practical sense, if not in a technical sense, this matter is relevant to the bill. If my motion be carried, the Senate will have ample time to consider the merits of the proposed amendment because the committee stage of the bill will take some time. It would indeed be unfortunate if an arbitrary decision of. this chamber were to deprive the Opposition of an opportunity to seek an amendment of a portion of the act which already is being substantially amended by the Government. No advantage is to be gained by defeating this motion.
– Why did the Leader of the Opposition not tell me something about it?
– Frankly, it did not occur to me to do so. I regarded the matter as completely formal. However, I agree that it would have been better if I had informed the Minister beforehand of my intention. I regret that that was not done.
– The Opposition wants to argue some particular point on which it is fully informed, but about which we have no information at all.
– The Government is not being asked to determine at this stage the merits of the proposed amendment. It is merely being asked to give to the Opposition an opportunity to move an amendment, the exact nature of which has been disclosed. It is not a complicated matter. Indeed, the issue can be put quite simply : Will the Government allow us to move an amendment to section. 169 of the act - a course that we cannot follow normally under the Standing Orders? Section 169 is in the portion of the act that deals with the Commonwealth Bank Service, and this bill will amend substantially other sections that deal with that service.
– We are being asked without prior consultation to consider an amendment that will completely override the powers of the Governor and the Deputy Governor of the Commonwealth Bank.’
– That would be going into the merits of the proposed amendment.
– What chance have we to check up on it ?
– I suggest that we shall not be through the committee stage of the bill in a very short time.
– Do not threaten me. I will not stand it from you or anybody else.
– The Minister is displaying unnecessary heat.
– Do not tell me that you are going to retard the business of the Parliament.
– I assure the Minister that he is exceedingly touchy. At no stage was there a threat in my words, expressed or implied. I was merely replying to a Government supporter who asked what opportunity there would be to consider the merits of the amendment. I said that the committee stage of the bill would take some time. I was about to point out that the section which the Opposition proposes to amend is one of the late sections of the act. At that stage I was interrupted by the Minister, who said that my opening remark had constituted a threat. I assure him that his imagination has played him false on this occasion.
– There was no imagination about it. What you said in effect was, “ Accept this or the committee stage will drag on”.
– I assure the Minister that he is completely in error in taking that view. I can do no more than I have done. The Senate must determine whether the Opposition is to have an opportunity to move an amendment to a certain section of the principal act. The matter now rests with the Senate’s sense of fair play.
Question put -
That it be an instruction to the Committee of the Whole on the bill to consider an amendment to section 169 of the principal act.
The Senate divided. (The Deputy President - Senator George Rankin.)
Majority . . . . 5
Question so resolved in the negative.
Clauses 1 to 3 agreed to.
Clause 4 (Bank and Treasury to establish liaison).
SenatorMAHER (Queensland) [4.29]. - During the debate on the second reading of the bill the Leader of the Opposition (Senator McKenna) claimed that colossal sums were involved in altering the name of the General Banking Division of the Commonwealth Bank to the Commonwealth Trading Bank. I should like the Minister for National Development (Senator Spooner) to make an authoritative statement as to the actual cost of making that change. It has been claimed that between £500,000 and £1,000,000 is involved.
– As this legislation was first drawn, it placed an obligation on the Commonwealth Bank to transfer its trading business to a new legal entity. In making that provision the Government contemplated the transfer of securities from the General Banking Division of the Commonwealth Bank to the Commonwealth Trading Bank. That process would have been fairly expensive and might have cost £500,000. However, when the drafting of the bill was under way better ways and means were found of attending to this matter. It was decided to transfer all the assets of the General Banking Division to the new trading bank entity by legislation. The adoption of that course obviated the need to transfer the securities individually. Under this bill all the documents that are described’ as documents relating to the General Banking Division of the Commonwealth Bank will be valid and effective so far as the new trading bank is concerned. It had been estimated that the expenditure of £500,000 might be required under the procedure which was discarded before this legislation was brought into the Parliament. The new procedure will apply even to the cheque forms of the General Banking
Division. The view of the Commonwealth Bank itself is that the greater part of the cost of the transfer will consist of wage, salary and overtime payments. If a change is made at a reasonable speed, as it is expected that it will be made, the greater part of the costs will disappear, because it will be possible to do the work in ordinary office hours. The components of the cost will be overtime, if any, over-printing and stationery and a moderate amount will be spent on nameplates for the various branches of the bank throughout the Commonwealth. Any suggestion that the change of name will require the expenditure of £500,000 is completely fantastic and unjustifiable.
The Leader of the Opposition (Senator McKenna) has asked why the name “ Commonwealth Bank “ has not been retained for use by the trading bank and some other name given to the central bank. Again, this -is a subject on which the views of the Commonwealth Bank itself should not be ignored. The Commonwealth Bank is in the best position to judge the most suitable names to give to the central bank and the new trading bank. The Commonwealth Bank would not be pleased about a name which would prejudice its business. The view of the Commonwealth Bank is that it would be dangerous to alter the name of the central bank from “Commonwealth Bank” to any other name. Consequently, the centra] bank is to be known as the “ Commonwealth Bank “. I think that it is beyond argument that the functions of the central bank exceed in importance the functions of the subsidiary organizations and therefore it would be completely unreal to call the central bank anything but the “Commonwealth Bank “. It has been generally accepted, despite the .Leader of the Opposition’s view to the contrary, that the “ Commonwealth Trading Bank “ is a satisfactory name.
– I still consider that a very substantial amount of money will be involved in changing the name of the General Banking Division. It is rather extraordinary that the Minister for National Development (Senator Spooner), anticipating this question, has gone to the trouble of obtaining a written answer to it, yet his answer did not contain the vital information as to the bank’s estimate of the cost of the change.
Senator -Spooner. - It was not £1,000,000.
– Why should we be denied-
– Why should the honorable senator make such reckless statements without any foundation ?
– I am still not satisfied about the cost of the change of name. The Minister has surveyed the position in melodious words, but has failed to inform the Senate of the cost of the transfer. Despite what the Minister has said it seems to me that the cost of changing the name of the General Banking Division will be substantial. Although the Minister has stated that the only cost will be for labour to change nameplates, &c, I have been informed that, although this measure has not yet been passed into law, a considerable number of officers of the bank have been working on other matter connected with the changeover. I do not believe that the only expense that will be involved will be in relation to the changing of nameplates. If the Minister has received an estimate of the total cost that will be involved in the changeover, he should reveal details of it to the committee. Without wishing to prejudge the Minister, I think that he should very carefully consider the estimate. As far as the proposed title of the new bank is concerned, the Minister has taken refuge in the statement that the officers of the Commonwealth Bank consider that the title “ Commonwealth Trading Bank of Australia “ is the best name to give to the new bank. I consider that it is primarily the responsibility of the Government to decide the name. Down the years it has been the responsibility of the Australian Government to plan the career of the Commonwealth Bank, particularly when the bank was subjected to controls. I am firmly convinced that it would be much simpler to alter the name of the central bank, which does not have contact with the masses. Millions of people will do business with the new bank, whereas comparatively few people have dealings with the central bank. Consequently a change of the name of the central bank would be more effective and cause less inconvenience to the people, than would a change of the title of the trading section of the bank. I should like the Minister to place before the committee a well substantiated estimate of the cost of the change-over, and to state the Government’s own opinion about the name of the new bank. The responsibility for selection of the name should not be placed on the bank officers.
– One of the supposed reasons for this legislation is the necessity to provide for fair competition. I consider that it is unfair to call the new bank the Commonwealth Trading Bank of Australia. Why should the people’s bank be forced by legislation to change its title to include the word “ trading “ ? Although some of the private trading banks include the word “national “ in their titles, they are no more national in character than is the corner shop. If the Commonwealth Bank is to be forced to change its title to the Commonwealth Trading Bank of Australia, why should not legislation be introduced to compel, say, the Bank of New South Wales, to alter its title to “The Trading Bank of New South Wales “ ? Why should the Commonwealth Bank be singled out and forced to include the harsh word “ Trading “ in its title? The private trading banks trade in money as a commodity for profit; they do not use it for the interchange of goods in the community. I protest emphatically against the people’s bank being forced to include the word “ Trading “ in its title, while the private trading banks, which are traders in the true sense of the word, do not do so. The Government claims that this measure has been introduced to provide for fair competition. Why should it force the Commonwealth Bank to include the harsh-sounding word “ Trading “ in its title ? It is unfair to do so, in view of the fact that private trading banks are permitted to include the pseudo title “ National “ in their names. They are not national banks, but ordinary money shops. I consider that the new bank will be placed at an unfair disadvantage by having to carry the title “ Trading “.
Senator GRANT (New South Wales) 1.4.46 J. - I protest at the cavalier manner in which the Minister for National Development (Senator Spooner) has treated an inquiry by a supporter of the Government. Senator Maher asked how much the alteration of the name of the bank would cost. The Leader of the Opposition in the House of Representatives (Dr. Evatt) has stated that the alteration may cost £500,000.. Although I am possessed of a. degree of imagination, I was astounded to hear other estimates ranging from £1,000,000 to £1,500,000. In common with the majority of people in this country. I should like to be informed of the official estimate. I know that the Minister has had a hard campaign and has only recently emerged from pea soup fogs–
– He attended a meeting of the Cabinet this morning.
– Yes, and I believe that it was not a successful meeting. It is not fair for the Minister to say that the change-over did not cost £500,000. He has been asked, not what the changeover did. not cost, but what it will cost.
The honorable member for Fremantle (Mr. Beazley) has referred in the House of Representatives to the use by private trading banks of the title “ National “. On a number of occasions I have referred in this chamber to commercial organizations, such as Australian National Airways Proprietary Limited, which used the title “ National “ although they are not national concerns. Why should the title “ Trading “ be applied to the name of the new bank? I do not think that any institution has any more right to trade in currency than it has to trade in water. Nevertheless, as society has been doped with the idea that the banks really benefit the community, surely the correct procedure would be for the title “ Trading “ to be incorporated in the names of the private trading banks rather than in the name of the people’s bank.
– That would not d.o any good.
– - Nothing would do the honorable senator any good.
– It ‘would not separate the two Commonwealth banks.
– I am not talking about that aspect of the matter. I consider that the incorporation of the word “ Trading “ will lower the prestige of the bank, because it will make it appear to he average person that the people’s bank is an appendage of the private banks. I consider that the objective of this bill is uo try to undermine the confidence of the people in the Commonwealth Rank, so that it will become less powerful. This is a part of the policy that was implemented when the Government subsidized Australian National Airways Proprietary Limited by an amount of £4,000,-000. It is a part of a new orientation to bring about a reduction of the standard of living. However, I shall not deal with that aspect of the matter at present. All I want to know is the amount that it is estimated the change-over will cost, and whether the Minister does not consider that it would be better to incorporate the word “ Trading “ in the titles of the private trading banks than in the title of a section of the people’s bank.
– It is understandable that a change of title will involve a good deal of expense. I am prepared to believe that considerable expenditure will be incurred in the proposed change-over. I point out, however, that additional expense would be involved if the Minister were to require the officers of the Commonwealth Bank to prepare an estimate of the cost, which in itself would entail a considerable amount of work. Obviously considerable expense must be incurred in the changing of the name of a large banking institution, but I am quite certain that it will not run to the fantastic amount that has been mentioned by the Leader of the Opposition in the House of Representatives (Dr. Evatt), or to the figures that have been stated by the Leader of the Opposition in this chamber (Senator McKenna) and Senator Armstrong. I have had a lot of experience in the commercial world, particularly in matters connected with the land, and I know that a. good deal of expense is involved in the changing of the name of a commercial undertaking. Whenever there is a change of the name of a partnership, for instance, expense is involved to change the name of the concern on cheques, letterheads, and titles on buildings. It is an ordinary commercial proposition. Effect must be given to the decision to change of name of a section of the Commonwealth Bank. We have to face up to that.
– How much will it cost?
– I must confess that I do not know how much it is expected that the change-over will cost.
-ant. - Is the honorable senator prepared to vote in favour of the change-over, in the absence of an estimate of the cost?
– Yes, because I recognize that the cost is a corollary of the alteration of the title. If the directors of a public company decided, for various reasons, to change, the name of the company, obviously the cost would be a charge on- the shareholders. Expense must be incurred in effecting all legal changes necessary and to implement the alteration in the books and documents of the concern, as well as in connexion with its advertising. I realize that it will cost a fair sum of money to effect a change in the title of a large banking institution, but I disagree entirely with the loose talk that has been indulged in, to the effect that the change-over will cost a colossal amount of money. Nothing of the sort! There will be a reasonable amount of expense incurred in changing the title of the Commonwealth Bank, just as reasonable expenses are incurred every day of the week in changing titles in the commercial life of Australia.
.- Honorable senators on this side of the chamber have sought from the Minister for National Development (Senator Spooner) an estimate of the cost of the proposed change-over. We realize that, at this stage, the Minister could not furnish a firm figure, but at least he could state the bank’s estimate of the cost. We realize also the importance of a name in connexion with the activities of a commercial or trading institution. Usually it refers to the ownership of the institution, its functions, and other purposes. Names are most important in the trading world, and are protected. I consider that the name General Banking Division should have been retained. At the very least a title resembling the original title should have been applied to the new bank, because a person wishing to open a banking account would not know from the title “ Trading Bank “ that that bank was associated with the Commonwealth Bank. Such a person could be pardoned for thinking that an institution bearing the title “ Trading “ was one that engaged in the sale of soap, matches and other things - that it was an ordinary trading concern. If the Government intends to apply the title “Trading” to the new bank, I consider that the cost of effecting the change should be borne by the private trading banks. The Government “ makes no bones “ about the fact that the General Banking Division of the Commonwealth Bank is to be established as a separate trading bank for the purpose of protecting the private banks. That being so, why should not the private banks be asked to bear the whole of the costs involved in this matter? Perhaps, the difficulty that arises in respect of the change of name could be overcome by arranging for all the private banks to display on the walls of their chambers the notice, “Not the Commonwealth Trading Bank”. The provisions relating to the re-registration of private and public companies provide that notices of that kind shall be exhibited. Such notices would leave the people in no doubt about the identity of each of the private banks.
– I am perturbed about the position that has developed so early at the committee stage. Not only members of the Opposition, but also the public are bewildered by the desire of the Government to tack the word “ Trading” on to the name of the trading branch of the Commonwealth Bank. Perhaps, persistent questioning by members of the Opposition will evoke a satisfactory reply from the Minister. I presume that Senator Maher asked his question in respect of this matter in an attempt to gain party political kudos by emphasizing the fact that members of the Opposition in another place and. in this chamber have cited varying amounts as the estimate of the cost of effecting the change of name. The honorable senator merely asked his question and then sat back in all his glory to await a reply. He reminded me of the saying that one cannot teach an old dog new tricks. However, when the Minister made no attempt to answer his question, he sought to get out of his predicament as gracefully as possible. Now that this matter has been raised, I trust that the Minister will inform the Senate of the cost involved. It should not be difficult for him to do so because, if information that has been supplied to us is correct, officers have been working on this matter for a considerable time.
– I do not desire to prolong the discussion on this matter, but as reference has been made to the failure of the Minister for National Development (Senator Spooner) to give any indication of the cost that is likely to be involved in effecting the proposed change, I take the opportunity to raise the more serious aspect whether any estimate of the” cost has actually been made. Senator Maher, of course, dismissed the matter very lightly. He said that any commercial organization would treat it as an ordinary commercial proposition. I point out that any worthwhile organization would weigh the benefits likely to be derived from proposed improvements against the cost of the improvements. It is important that the Minister should assure the committee that an estimate was in fact made and carefully considered by the Government. Honorable senators should not be left to assume that the Government, having decided on a certain course of action, completely disregarded the cost involved. The Minister is under an obligation to inform the committee, first, whether an estimate was made; and, secondly, what the estimate was. With respect to the proposed name of the new trading bank, he said that regard had to be paid to the opinion of the Commonwealth Bank Board. Apparently, this proposal emanated from that body. However, compared with some of the other changes that are to be effected under this measure, the change of title of the bank is comparatively unimportant. Yet, tie Government sought the opinion of the board on the latter matter and adopted its recommendation. At the same time, the Government failed to pay regard to the opinion that the board expressed to the effect that the integration of the General Banking Division and the central bank -was very valuable and highly desirable. On that important matter- the Government has completely disregarded the opinion of the board.
– If I understood the Minister for National Development (Senator Spooner) correctly, he implied that the bank had made some estimate and that it indicated that the greater part of the cost involved in this matter would be incurred in wages, salaries and overtime. The other two headings he mentioned were “ overprinting” and “ nameplates “. I should like to know from the Minister whether they are the three main headings. It is quite certain that the staff of the Commonwealth Bank would not be engaged in over-printing. After the matter to be printed was decided it would be passed to a printer and there would be no wages, salaries or overtime involved in respect of the staff of the bank. No clerical work would be involved in the setting up of nameplates. Once a decision had been made at the office level about the matter to be recorded on the plates, it would be .passed over to people outside. Did I correctly understand the Minister to say that they were the three main headings of expenditure? If they are, will he inform me upon what work will the wages, salaries and overtime be incurred ? I am sure that he will not argue that the greatest proportion of the cost will be incurred on over-printing or in nutting up the new nameplates at the branches of the bank throughout Australia. I should also like the Minister to comment upon what appeared in the press as a reply by the Treasurer (Sir Arthur Fadden) to the right honorable member for Barton (Dr. Evatt), as Leader of the Opposition in the House of Representatives, in which the Treasurer intimated that the greater proportion of the cost involved in this change-over would be incurred in relation to stamp duty. What stamp duty is involved in this instance? Is it in respect of cheques and re-registration of mortgages and documents? To what was the Treasurer referring when he spoke about stamp duty?
I summarize what my colleagues have been putting to the committee on this matter by posing the following three questions : First, has the bank made any kind of estimate of cost? Secondly, does the Government know what that estimate is? And, thirdly, will the Minister disclose, or does he refuse to disclose, that information? If he refuses to disclose it, I should like him to say why he adopts such an attitude. Will he kindly comment upon the cost, whatever the magnitude of it may be? Is the burden of this transfer to fall upon the Commonwealth Bank, reconstructed as the central bank, or is it to be debited against the Commonwealth Trading Bank? Will those costs be capitalized and written off over a period, or will they be debited to the current year’s profits? As the Government is promoting this change, has it considered making an offer to bear the cost involved in the transfer? I realize that I have posed quite a number of questions, but if the Minister would face them directly he would resolve many matters that have been troubling the Opposition and he could thus shorten the debate on other clauses of the bill.
– The attitude that the Government is adopting in this matter is typical of its technique when anything unfavorable to it has to be brought out into the light of day. In such circumstances, it allows a spokesman to speak for it. Is it not a fact that the estimate of over £500,000 was made originally by the management of the bank? If that is not correct, the Opposition would be justified in moving an amendment for the purpose of limiting the amount that may be expended on this work.
– Two points arise with respect to. the cost of changing, the name of the General Banking Division. They are, first, the cost that is likely to be involved ; and, secondly, the circumstances in which tthat question arises. The Opposition has forfeited its right to receive a reasonable answer to that question because it has made extravagant statements either knowing them to be wrong or having failed to exercise sufficient care to ascertain whether they were correct. During the debate on the motion for the second reading, both the Leader of the Opposition (Senator McKenna) and his deputy (Senator Armstrong) cited amounts that purported to be the cost that would be involved in this matter. The Leader of the Opposition said that it would probably be £1,000,000, but w hen I interjected he retracted and said that it would probably be £500,000. He had no ground for citing either figure. Such figures have been stated both inside and outside this chamber as sensational criticism of the Government’s proposal. That criticism has been taken up by the press. Several newspapers have published articles dealing with the probable cost. The “truth is that the writers of those articles have been misled by statements made by persons who should have known better. In those circumstances, I should be quite justified in refusing to give any information at all on this matter. However, I do not propose to adopt such an attitude. I propose to be as fair and as reasonable as possible. I also propose to supply as much information as I think the circumstances warrant. As the Leader of the Opposition, has said, there are three components in this matter of cost. There are staff costs, such as overtime, stationery costs, and the cost of painting bank premises. I think that there must also be other costs. A transaction of this magnitude could not be confined to those three items of cost. Of course, the bank has made computations and is of the opinion that, whichever way the matter is approached, the overwhelming proportion of the costs will be in respect of overtime. The bank cannot estimate what that overtime will amount to. However, it considers that there is ground for the view that the change-over may be effected without cost at all, in the normal working hours1 “of the bank.
– The honorable senator surely does not include in that the painting and the over-printing?
– No. I am speaking entirely of the bank’s staff item, which is the main item. The bank considers that there may not be any staff costs, but of course is unable to say definitely that there will not be. I do not think that in a change of this magnitude it is possible to know at this stage what will be involved.
I have not before me details of the other sets of costs, except that I know that the view of the bank is that the suggested co.?t of painting premises has been grossly exaggerated. In this connexion the bank says, “ If you ask us to put a figure on this cost, we must state a figure which is the upper limit. We cannot foresee circumstances in which the cost will exceed £200,000; indeed Ave do not think that it likely to reach that figure “.
– Is the honorable senator referring to the total cost?
– Yes, the whole of the costs in connexion with the arrangement.
I consider that it is grossly unfair for responsible senators on the other side of the chamber to pluck figures out of the air and, as the Attorney-General (Senator Spicer) reminds me. put them over the air, in an endeavour to give rise to public feeling for which there is absolutely no justification. The costs involved in this matter will depend on how events work out. It is within the realms of possibility that, instead of the costs being £1,000,000 or £500,000, they may turn out to be only a nominal amount.
.. - I asked the Minister a question, and I suggest that I am entitled to an answer. I wish to know whether the £500,000 that has been mentioned is an estimate by the banking authorities of the Commonwealth ? If the Minister does, not know, I shall be satisfied if he says so, but I should like an answer to my question.
Senator O’BYRNE (Tasmania) [5.15’. - The Minister has explained that the main charges will be in respect of overtime, salaries and wages, overprinting of stationery, and painting, but there are other factors which must bc taken into consideration. For instance, most branches of the Commonwealth. Bank throughout Australia have, on the outside, the words “ Commonwealth Bank of Australia “ in concrete. Thousands of cheque books bearing the letters “ O.B.A. “ and the words “ Commonwealth Bank “ have been printed, and considerable cost will also be involved in the transfer of accounts. I deal with the Commonwealth Bank, and I personally object to having to change my account to the Commonwealth Trading Bank. The bank will have to negotiate with me in order to keep my business. Considerable expense will be involved in such transfers. I believe that honorable senators are entitled to receive from the Minister an estimate of the costs involved. It is a matter of importance not only to the Opposition hut also to the public who will have to meet these charges in the long run.
– We are indebted to Senator Maher for having raised this matter, despite the fact that he will, no doubt, renege on it later. When the Minister for National .Development (Senator Spooner) was speaking to-day I waited for him to reply to the remarks made by the Leader of the Opposition (Senator McKenna) last night, but he did not do so. First, the Minister said that he did not think the Opposition was entitled to an answer, and then he said that he did not think that the press knew what we were talking about. He proceeded to give a sort of answer, in the course of which he said that according to some people to whom he has spoken, the top limit of the costs involved will be approximately £200,000. I do not think that the honorable senator really believes that the work which will be necessary could be done on overtime. Any one who knows the price of brass and bronze at the moment will appreciate how expensive the making of new name plates will be. Marble is also very costly. It seems to me that the honorable senator deliberately broke down his estimate. I remind him that there must be tremendous stocks of stationery, such as envelopes and letterheads, which it will be necessary to scrap or over-print. What is to happen to those stocks? From the cavalier way in which he has treated this matter, I think that it is reasonable to deduce that the estimate of the Leader of the Opposition in the House of Representatives (Dr. Evatt) was fairly accurate. I should like to know whether the estimate given by the Minister was made, not by the Commonwealth Bank, but by competent people–
– Does the honorable senator consider that the Commonwealth Bank is not competent?
– Everything is relative. In comparison with the honorable senator, I should say that the bank is exceedingly competent.
– Order! The honorable senator will come back to the clause.
– It was the fault of Senator Kendall that I departed from it. I should like to know whether a competent contractor has been asked for an estimate of the cost involved in removing the brass plates from every Commonwealth Bank building in Australia and substituting others. Has any firm been asked to estimate the quantity of brass that will be required to replace the present plates? Have estimates been obtained of the cost involved in erasing the initials “ C.B.A.” from the marble floors in Commonwealth Bank buildings all over Australia, or the lettering from the exquisite glass doors? Has this bill been introduced only because the Government needs money from its supporters, the private banks, for the forthcoming Senate election ?
– I may set at rest the mind of Senator Grant and other honorable senators opposite if I inform them that New South Wales has carried on for more than 50 years with many government buildings still bearing inscriptions which they carried when the State was a colony.
– I wish to mention two matters which the Minister has apparently overlooked. First, I ask him to indicate to what the Treasurer (Sir Arthur Fadden) referred when he spoke about the costs of stamp duty in relation to this matter, and secondly, who is to bear the cost, whatever the amount may be, of effecting the transfer. He may recollect that I asked previously whether the cost would be borne by the central bank, the new Commonwealth Trading Bank or the Government. The Minister has been good enough, under -some duress perhaps, to give us an estimate which, in his opinion, is approximately £200,000. I think he told us that an earlier estimate, based on a different method of approach, was £500,000. If the major portion of the £200,000 to which he has referred is made up of salaries, wages and overtime, some date for the completion of the transition must have been in the minds of those who prepared the estimate. “Would the Minister indicate whether the period involved was one month, two months or three mouths? I suggest that whatever the estimate was in relation to salaries, it must have been based on a certain period. Was that period three months or six months? Finally, I wish to know whether a separate account will be kept of all of these transitions costs. Will it be available for parliamentary information, at least, in due course? The Minister in dealing with that phase of the matter might also deal with my question as to whether these costs will be treated as a capital item to be written off over a period or whether they will be debited to the profits of the year in which the expenses were incurred?
– I believe it is true that the costs of this re-organization may be capitalized if the bank so desires. I cannot go beyond that. If the bank capitalized the cost, obviously it would appear on the balance-sheet which is a public document and available for all to see. I shall ask the Treasurer (Sir Arthur Fadden) to convey to the bank the request that if it does not capitalize the cost, it should state the amount in its next annual report. I think that that is the best way. I am unable to answer the next question that was asked by the Leader of the Opposition as to how long it would take before the transfer was completed. I do not know the answer.
– Upon what period was the estimate based?
– It is the same thing. What is the cost in relation to period? I cannot give the answer, but I shall try to find out during the dinner adjournment, and possibly I shall be able to answer the question when the committee is dealing with some other clause of the bill. I do not know the terms of the Treasurer’s reply on the question of stamp duties, but I believe that it is logical to assume, particularly in view of the dissertation earlier, that originally there was a proposal that all securities should be transferred, but the proposal was dropped because of the procedure of statutory transfer of accounts. I think that it is reasonable to assume that when the Treasurer gave his answer, he had the first procedure in mind rather than the second one.
– The statement was made during the last two or three days.
– I regret that I do not know the answer. If it was given in reply to a question without notice, I can well understand the Treasurer believing that the reference was to the earlier procedure. Senator Ashley said that the statement had appeared in the press. I did not see it and I do not know anything of it. Ministers cannot be responsible for reports that are published in the newspapers. I do not know how it originated.
– Who is to bear the cost - the central bank, the trading bank, or the Commonwealth Bank?
– Primarily the cost would fall on the Commonwealth Trading Bank, but I am advised that it has not yet been decided. The Commonwealth Bank Board will reach a decision at a later stage as to how the cost will be apportioned. The board has to make the decision. That is all the answer that 1 can give now. I think that I should withdraw the statement that I made primarily with regard to the trading banks. That is not for me to say. I was putting ordinary business knowledge to bear upon the matter instead of parliamentary knowledge. The answer is, therefore, that the Commonwealth Bank Board will decide the question at a later stage.
– I should like to ask the Minister for National Development (Senator Spooner) a question upon a matter that will be canvassed throughout Australia in the next month or so. Can the Minister give an estimate of the cost of changing the name on the branches of the Commonwealth Bank? Certainly the amount appears to be so large that the Minister has bluntly refused to give any estimate of the cost. It appears certain that the cost will have to be borne by the Commonwealth Trading Bank.
Clause agreed to.
Clause 5 agreed to.
Clause 6 (Establishment of Trading Bank).
– This clause relates to the establishment of the Commonwealth Trading Bank of Australia. If the main purpose of the bill is to bring the trading section of the Commonwealth Bank into line with the private trading banks and subject them all equally to control by the central bank, why should the Commonwealth Trading Bank be established as a new corporation? Would not one or two clauses briefly drafted have ensured that the General Banking Division of the Commonwealth Bank should be subject to the same controls as those exercised by the central bank over the private trading banks? Why could not that be done without involving all the disturbance that is tied up in the change-over from the General Banking Division to the new corporation?
– For what reason apart from the imposition of controls?
– That is a matter for debate on the second reading rather than in committee. The Leader of the Opposition is asking me to return to the second reading and marshal all the arguments as to why there should be a separate incorporation.
– I did raise the matter on the second reading. I am raising it now because the Minister did not deal with it in his reply, although I realize that he had limited time.
– In brief, the Government believes that there should not be any possibility of the central bank merging with the functions of the trading bank. The trading bank should have its own manager and organization and be free to conduct trading business in the same way as are the ordinary private trading banks. The Commonwealth Trading Bank, as it will be constituted in future, will make its deposits under central bank arrangements. It will conform to the directions of the central bank in the same way as do the trading banks. It will suffer all the advantages and disadvantages of a trading concern and so that that position will be quite patent, it is to become separately incorporated in the same way as are rural credits and industrial finance sections. Special sections of the act are devoted to them and they have their own managers.
– 1 thank the Minister for his answer and merely wish to place on record that his reply does not carry the matter any further. It is not my desire to enter into a long debate but the Minister has posed the proposition that it is desired to give to the trading section its own organization and manager and to make it entirely separate from the central bank. The only new element that has been introduced is a new general manager in place of the officer who is at present in charge of the General Banking Division.
– What about the provision for “ a body corporate with perpetual succession and a common seal”?
– The General Banking Division was an integral part of the Commonwealth Bank with property and its own seal and it had the advantages that are associated with incorporation.
– It was a department.
– It still had all the benefits of incorporation. I merely record how unnecessary it is to incur the expenditure of £200,000, and the amount might well be a great deal more, when the result that is desired by the Government could have been achieved by a simple clause stating that the General Banking Division of the Commonwealth Bank shall be subject to all the directions and control that are exercised by the central bank division of the Commonwealth Bank over the private trading banks. I do not want the Minister to embark upon a long argument unless he wants to controvert that proposition, but not one argument has been addressed to the Senate to justify the expenditure of all that money in the setting up of a separate body with a corporate entity, because everything else remains the same. The bank will be under the control of the Government, the Commonwealth Bank Board will be the same, and there will be the same interchangeable staff. The one new element is the interpolation of a general manager instead of some officer, as at present, in charge of a general banking division. There is not even a change of form. What was the fundamental element that caused the Government to avoid doing the sensible thing? If the Minister does not want to embark upon an argument, I am content to leave it at that with the comment that we have had no statement on the matter.
Clause agreed to.
Clauses 7 to 10 agreed to.
Clause 11 (Disciplinary Appeal Board).
– This clause provides for the amendment of section 175 of the principal act. From memory, I believe that that section related to the Disciplinary Appeal Board. It is under Division 4 of the act relating to the Commonwealth Bank Service. The section provides for the setting up of a disciplinary appeal board, and sub-section (3.) reads -
The Chairman of the Disciplinary Appeal Board shall be a person who is or has been a police, stipendiary or special magistrate of a Stateor Territory of the Commonwealth.
That sub-section is to be deleted. I can understand several reasons why a police magistrate or a stipendiary magistrate, either practising or retired, might not be suitable as chairman of such an appeal board. I realize that, with the elimination of that provision, the appointment of a chairman will be made by the GovernorGeneral in Council on such terms as he may determine. I have no objection to that, but I should be interested to know why the Government has decided not to appoint a chairman of the kind specified in sub-section (3.).
– In practice, it has been found that the provision in the present subsection (3.) seriously restricts the number of persons available for appointment to the position of chairman of the Disciplinary Appeal Board. The purpose of the amendment is to widen the scope for appointment to this position by deleting the requirement that the chairman must have specified qualifications. Despite the removal of the restriction, it should be understood that a person who is appointed as chairman of the board must have an adequate legal training and background. As appellants who appear before the board are entitled to be represented by counsel, those attributes are necessary in the chairman to enable him to conduct proceedings in the proper manner. The amendment has been recommended by the Commonwealth Bank Board.
Clause agreed to.
Clause 12 (List of officers).
– This clause will amend section178 of the principal act, which states - 178. - (1.) The Bank shall, as soon as practicable after the thirtieth day of June in each year, prepare a list of all officers in the Service of the Bank at that date, together with particulars of the classification and salary of each officer, and shall circulate copies of the list among the officers of the Bank in the prescribed manner.
In other words, the section now provides that a list of all officers in the service of the bank shall be prepared annually and circulated amongst bank officers. The words “ as soon as practicable after the thirtieth day of June” are to be omitted and the words “ from time to time, and whenever the Treasurer so directs “ inserted in their stead. I should like to know the reason for that change. The words “ from time to time “ are most indefinite. They may mean every five years or even every ten years, and officers who wish to appeal against promotions or appointments may lack the information that they require to enable them to exercise their rights. I should like to know also why the circulation of the list when it has been prepared, is to depend upon the authority of the Treasurer. Why does the Treasurer want to be bothered with that detail of the Commonwealth Bank service? Has the amendment been considered by the Commonwealth Bank Officers Association and if so, is the association in favour of it?
– The amendment will modify section 178 so as to require the preparation of a list only from time to time, and whenever the Treasurer so directs. The change has been recommended by the Commonwealth Bank Board. Because of the amount of work involved, the bank has been experiencing difficulty in preparing a list of officers each year. Moreover, printing delays have resulted in the list being out of date by the time it is circulated. When similar difficulties were encountered in the preparation of an annual Commonwealth Public Service list, the Public Service Act was amended to remove the requirement for annual printing and circulation. The Public Service Act now provides for the printing and circulation of a list of officers “from time to time, and whenever the Prime Minister so directs “. The amendment of the Commonwealth Bank Act will therefor bring that act into line with the Public Service Act. The amendment will not affect the interests of Common wealth Bank officers. They are kept fully informed of staff movements and promotions through weekly circulars. I do not know whether the amendment was discussed with the Commonwealth Bank Officers Association.
Clause agreed to.
Sitting suspended from 5.^6 to 8 p.m.
Clause 13 (Additional amendments).
– This clause is a simple one. It reads -
The Principal Act is amended as set out in the. First Schedule to this Act.
The schedule, however, is a very comprehensive document. I propose, at the appropriate time, to comment upon one of the amendments contained in the schedule and also to move an amendment to the schedule. I should like to be assured that the passing of this clause will not prevent me from dealing with the schedule when the committee reaches the schedules and that it will not prevent my moving as I have indicated.
– The honorable senator will be able to move his amendment when we come to the schedules.
Clause agreed to.
Clauses 14 to 17 agreed to.
Clause IS (Business of General Banking Division to be carried on by Trading Bank).
– This is a very important clause which contains the machinery provisions for effecting the transfer of the General Banking Division to the new corporation that will be set up under the bill. There are two matters to which I should like to refer. In sub-clause (1.) of the clause there i3 a definition of “ assets of the Commonwealth Bank to which this section applies “. I notice that in the balancesheet of the General Banking Division of the Commonwealth Bank which appears on pages 38 and 39 of the last annual report of the Commonwealth Bank there is nothing to indicate that the General Banking Division has any plant, equipment or office furniture. It is possible that it might be included in the sum of £63,000,000 shown against “Loans, advances, bills discounted and other assets after deducting provision for debts considered bad or doubtful “. It is possible that the plant, equipment, and office furniture are included in “ other assets “. But I suggest that that is very unlikely, because no provision has been made for depreciation. The Minister for National Development (Senator Spooner) will note that in the item to which I have referred, the novation appears “ after deducting provision for debts considered bad or doubtful “. If plant equipment and furniture were included in “ other assets “, I should expect that there would be a comment “ and after providing for depreciation “. Depreciation on buildings is provided for elsewhere. Bank premises are recorded immediately above the item at cost less amounts written off. Could the Minister let me know whether the assets of the General Banking Division include plant, equipment and office furniture? I cannot imagine that the Commonwealth Bank would have the very heavy item of plant equipment and furniture on its accounts and not show depreciation. The answer to my question may be that the item has been depreciated to a nominal figure or to extinction. However, I am interested in the ownership of all that plant and equipment. Will it be part of the assets that will be taken over by the new trading corporation or is it already included in its assets?
Sub-section (3.) of the clause reads as follows : -
Subject to the next succeeding sub-section, the business which was carried on immediately before the proclaimed date by the Commonwealth Bank in its General Banking Division shall, on a future proclaimed date, be carried on- by the Trading Bank, and the Commonwealth Bank shall take such action as is necessary to give effect to this sub-section.
It is intended under that sub-clause to transfer all the customers of the General Banking Division of the Commonwealth Bank en bloc to an entirely new legal entity, the new corporation. I question the power of the Parliament so to provide. The Parliament has ample power over banking, of course, subject to section 92 of the Constitution but does the Government claim that under this clause a person’s account with the General Banking Division of the Commonwealth Bank can be transferred to the new corporation without that per son’s consent? I should have thought that if a customer made a contract with a bank association, even the Parliament could not interfere in that contract and transfer his account, whether it is in debit or credit, to some other legal entity with which the customer has made no contract. I should have thought that it would be essential to have some novation - the concurrence of the whole three parties to the arrangement and particularly the concurrence of the customer. I should be interested to know whether the Government claims that the Parliament has power to enable a person’s account to be transferred without any concurrence or specific act on the part of the customer.
– In answer to the first question of the Leader of the Opposition (Senator McKenna) I inform the Senate that the General Banking Division does own its own plant and equipment.
– Where do the details appear in the balance-sheet?
– I had hoped that we might not’ pursue that question any further.
– I will not pursue the question in the circumstances. I now know the answer to my question, in view of what the Minister has said.
– The answer to the second question of the Leader of the Opposition is in the affirmative. I dealt with this point earlier when I spoke about the costs of the transfer. It was originally believed, in drafting this legislation, that a novation of securities would be required in respect of each customer. Further legal investigation resulted in the view that the Parliament had the power to legislate to create conditions under which the accounts might be transferred to the new banking entity without the need for new security documents.
– That is an extraordinarily wide power.
– Yes. Not being a lawyer I cannot argue it in detail. I can only give the committee the purport of the information that has been given to me. I do not know whether the proposed sub-section to which the Leader of the Opposition has referred is the sole authority, but the Government believes that it has the power to transfer these accounts.
I said earlier in the debate that 1 would make inquiries in response to the request of the Leader of the Opposition for an estimate of the period of time that would be required to transfer the business of the General Banking Division. I have found a. hesitation to express a point of view on this matter.. I have been informed that the actual date of the transfer will be largely determined by the progress of the preparatory work necessary beforehand, such as the re-organizaition of the accounts. The bank’s plan of campaign is to complete the preparatory work before completing the actual act of transference. The bank itself hesitates to express a view on this subject. The work may take two, three or four months but the bank would like to wait until this legislation has been passed and to commence its task before committing itself.
Clause agreed to.
First Schedule -
Additional amendments to the Principal Act-
Section 13 -
After “and shall” insert “for that purpose and “.
Section 177 -
Omit from sub-section (1.) “the Bank”, insert “ the Commonwealth Bank, from the Trading Bank “.
Before “Bank” (wherever occurring) in sub-sections (2.) and (3.), insert “Trading”.
– I should like some information in relation to section 13 of the principal act. Section 13 confers very broad powers on the Commonwealth Bank. The words “for that purpose and “ will be inserted in that section by the schedule. I should like to know the Government’s reason for the introduction of those words into the section. “Whereas, prior to the introduction of these words the powers of the
Commonwealth Bank were set out in unlimited fashion in sub-paragraphs (a) to (b) of section 13, they may be exercised only for the purposes of a central bank. It may be argued when, after the passing of this bill, that the powers of the Commonwealth Bank are being exercised for a purpose not connected with central banking. Accordingly, anybody who may be aggrieved by the exercise of those powers might apply to a court for an injunction, arguing that the Commonwealth Bank was not exercising its powers for the purposes of central banking. Such a contingency could not arise under the existing legislation. The possibility of attack by outside interests upon the actions of the Commonwealth Bank is opened up by the amendment. Will the Minister inform me what was behind the mind of the Government in introducing the four words, and comment on the proposition that I have advanced?
– This afternoon I mentioned an alternative point of view that if an institution is given power to do central banking, it is given power on a very high level. A central bank might be expected to have higher powers than an ordinary trading bank or any manufacturing or other kind of business. Therefore, the net result of inserting the words “for that purpose and “ - that is, the purpose of the central bank - is that the central bank would have very much wider powers than any other bankor any other kind of business. They strengthen the position of the central bank, and do not weaken it. The official note that I have is to the effect that the only significance of the amendment is to prevent the Commonwealth Bank from engaging in general banking business after the separate incorporation of the Commonwealth Bank. The addition of those words will not result in any weakening of the position of the Commonwealth Trading Bank. But I understand that the Leader of the Opposition (Senator McKenna) desires to be informed whether the inclusion of those words would result in the weakening of the central bank, not the trading bank?
– I cannot help but think that they might strengthen the. position of the central bank, because the central bank, in respect of various matters that are listed, would be expected to have infinitely greater powers than those possessed by an ordinary trading bank.
– I thank the Minister for National Development (Senator Spooner) for his comment. However, I see a difficulty in relation to the power that the Commonwealth Bank will have to have to carry on the business of a. central bank. Nowhere in the bill is the function of a central bank defined. I suggest that that leaves the matter rather at large. One can point generally to what central banks do in other parts of the world, and there can be argument about what constitutes the business of a central bank. Can the Minister tell me whether there is any provision in the measure that defines that with precision, or is it left somewhat at large? I fully understand and accept the Minister’s explanation, but, if the trading section, having been divorced from the former Commonwealth Bank, is vested with general banking powers, and then it is divested of its ordinary banking powers, the Commonwealth Bank, because of the inclusion of those words could not engage in general banking any longer. Therefore, I argue that the effect of the inclusion of those words is to delimit and circumscribe the power formerly enjoyed by the Commonwealth Bank under the Commonwealth Bank Act 1945.
I come now to my amendment which has been circulated. I move -
That the following amendments to section 177 bc inserted : - ‘‘Sub-section (3.), omit ‘where the Governor is satisfied that special circumstances exist’, insert ‘with the concurrence of the Governor’; after ‘lend’ insert ‘money’; omit money not exceeding at any time Two hundred and fifty pounds’.”.
Section 177 of the principal act deals with borrowing from the bank by officers of the bank. Sub-section (1.) of that section contains a complete prohibition against borrowing. It reads -
Subject to this section, an officer shall not borrow money front the bank or from the Savings Bunk.
There are two qualifications, the first of which is contained in sub-section (2.), which reads -
An officer may borrow money from the Bank for the purchase, erection, alteration, or renovation or enlargement of a. home in which he resides or intends to reside, Or to discharge any mortgage, charge or encumberance on any such home.
The second qualification is contained in sub-section (3.), which reads -
The Bank may, where the Governor is satisfied that special circumstances exist, lend to an officer upon such terms and conditions as the Governor thinks fit, money not exceeding at any one time Two hundred and fifty pounds and an officer may borrow money from the Bank accordingly.
Apart from housing loans, which we can put to one side, officers of the bank can only borrow, in the first place, a limited sum of £250, and then only where the Governor is satisfied that special circumstances exist. I can understand the need for some protection of the bank. It would be necessary, perhaps, in a small branch to have some safeguard against collusion between the branch manager and a member of the staff. I imagine that that is the evil at which sub-section (3.), as it stands, is aimed. However, I point out to the committee that the private trading banks, deal with their officers on exactly the same base as they deal with their customers. In fact, they go further and extend to them privileges that are not extended to customers. I can see no reason why there should be a restriction upon the Commonmonwealth Bank in relation to its own officers. After all is said and done, the Government is concerned about fair competition. If there is complete freedom to the private trading banks to lend money to their own officers, and they are in fact doing that, what possible exception can be taken to the Commonwealth Bank dealing with its own officers upon the same basis? Why should the Commonwealth Bank, in multifarious transactions apart from loans for the purchase of houses, including the purchase of cars and furniture, and investment in shares, have to say to its officers “ You can go to a private trading bank. We cannot deal with you “. I think that is unfair to the officers, and, in point of fact, the Commonwealth Bank Officers Association wants this alteration. It has asked for it. I agree that there ought to he some protection and safeguard for the bank-
– Is .there security involved in that?
– That is a matter for the bank itself. In normal circumstances, there would be security. Banks do not lend without adequate security. That is a matter entirely for the bank. If a bank likes to make a small loan of a few hundred pounds for a temporary purpose, to an officer who is insured, or who has superannuation rights that the bank knows about, the bank might advance the money without security. But the kind of thing that I contemplate is where an officer might want to buy a car. He does not want to go to an ordinary finance company which will charge him a flat rate of interest of from 6 per cent, to S per cent., which, in actual fact, runs out at 14 per cent, or 15 per cent., when he can borrow from the bank. Why should he not be free- to buy his car at a more advantageous rate of interest from his own bank - the bank having the security and the hire-purchase agreement? But the Commonwealth Bank is prohibited under this particular section. Perhaps the buying of a car is not a good illustration, because car transactions remain with the Industrial Finance Department, which is still with the Commonwealth Bank. The purchase of land, or a house in which the officer does not intend to reside, would be a better illustration. If a man has certain moneys and wishes to purchase a house as an investment - not to reside in - the Commonwealth Bank, under the section as it is drawn, cannot deal with him at all. It must send him to a private bank or to some other financial institution. The officer cannot deal with his bank, no matter how good his security is. Suppose he only wants to borrow 40 per cent, of the value of the house. No matter how good his security is he cannot offer it to the bank, and the bank cannot deal with him. Surely that is an unreasonable restriction upon the hank. It is also completely unfair to the officer. The normal procedure is that the Commonwealth bank advances money at an interest rate one quarter of 1 per cent, lower than the private trading banks. I cannot see why there should be the slightest objection to accepting the amendment, in order that the provision would read -
The Bank may, with the concurrence of the Governor, lend money to an officer upon such terms and conditions as the Governor thinks fit.
It would not be compulsory for the bank to lend money to an officer, and there would be no limit as to amount. As to the mechanics of the Governor’s concurrence, I do not imagine that under this provision the Governor would be called upon to supervise personally every one of these loans. I think what would be likely to happen would be that the Governor would lay down general policy and then delegate his authority to senior officers in the various States. From inquiries I have made, the practice in other banks is to deal with officers on a completely free basis. I learned, for instance, that in the Australian and New Zealand Bank Limited, general overdrafts are made to officers on the same basis and at same rates of interest, with the same security margin, as are loans to ordinary customers. In the Bank of New South Wales, the officers have the same facilities for borrowing as have ordinary customers. The Commercial Banking Company of Sydney Limited makes ordinary advances to its officers on the same conditions as to customers of the bank. These banks, which are quite the largest in the country, have very large staffs, and I cannot see why, in principle or in fairness - with which the members of the Government have expressed themselves to be concerned - the Commonwealth Bank should not be put in the same position and enjoy the same power, with the proper safeguard written into the statute “ with the concurrence of the Governor”, nor do I think that it is fair to the officers of the bank not to be able to deal with their own bank. I hope that the amendment that I have moved will not be regarded with suspicion. It has the complete concurrence of the Commonwealth Bank Officers Association, which has authorized me to say that in its talks with- the management of the bank no objection has been raised to this proposal.
– Why did it not approach the Government?
– I can only assume that the association approached the Government, but I do not know whether it did or not. I can only assume that an approach has been made and been rejected. If that is so, in view of the case that has been made to me and which I have just presented to the committee, I should like to know why the Government has opposed this completely reasonable and fair proposal.
– It is hardly appropriate, on an occasion such as this, for the Leader of the Opposition (Senator McKenna) to isolate one item relating to the bank’s staff arrangements and endeavour to make a case in respect of it. I understand that the Commonwealth Bank Officers Association has made representations to the Government and that those representations are now under consideration. I do not subscribe to the view that if the Government has a matter under consideration and does not think that the time is opportune to introduce it into a major measure of this kind the Opposition should canvas the matter before the Government has made a decision. The Leader of the Opposition has understated the position that now exists. This is a highly paid service. As the honorable senator is aware, the bank has its own housing scheme for its employees under which very good arrangements are available. Superimposed upon that scheme are these statutory provisions under which officers can obtain their requirements not only for the purchase of homes but also for the financing of alterations. Therefore, the housing needs of these employees are adequately provided for. In addition, this provision enables the Bank to make loans up to £250 to its employees. The Chifley Labour Government, of which the Leader of the Opposition was a member, did not amend the relevant section in the way that he now suggests that it should be amended. I have no doubt that representations were made to that Government, although I am merely guessing because I have no factual knowledge in that respect. If such representations were made, that Government did not accede to them. In any event, the relevant section was not altered. I am not prepared to accept an amendment as the Government itself has not reached a decision upon the representations that have been made to it.
– I should be grateful to the Minister for National Development (Senator Spooner) if he would indicate for how long the Government has had this particular proposal under consideration. The letter that I have received on the matter is dated the 3rd March. This is a simple proposition, and if the Government has had it under consideration even from that date I suggest that the matter ought to be resolved during the current sessional period; Is the Minister prepared to indicate that the Government will conclude its consideration of the matter before this measure passes from the Parliament for Royal assent? I am simply concerned about getting the result. If the Minister is concerned about the Government itself sponsoring an amendment along the lines of the amendment that I have proposed, I am prepared to withdraw my amendment. Or, if the Minister is of the opinion that the amendment should be inserted when the measure is returned to another place, I shall co-operate with him in that respect. I am only concerned about the end result and about doing the fair thing by both the bank and the officers concerned. I do not know whether representations were made to the Chifley Government in 1945 to amend the act in the way I now suggest. If they were made’, I did not hear of them, or, at least, I do not remember having heard about them. Of those two propositions I should lean to the first, that is, that I have never heard of them. But we are not dealing now with what happened in 1945. It is clear that the Commonwealth Bank Officers Association desires that this provision be inserted. It has informed me that the Governor of the bank is not opposed to the proposal. I do not know whether the Commonwealth Bank Board has considered the matter, but I should imagine it would not be opposed to the proposal either. I gather that the committee itself is not hostile to it. If the Minister is not prepared to accept the amendment at this stage, I shall not press it to a division, if he will assure me that the matter will receive consideration before the measure passes from the Parliament.
– I am sorry to say that I cannot give the assurance which the Leader of the Opposition (Senator McKenna) seeks. Since I spoke a few minutes ago, I have been informed that representations on this matter were made to the Chifley Government and that that Government rejected them. I do not know the reasons which actuated it to do so. I do not doubt for one moment the statement of the Leaderof the Opposition that the Governor of the bank has expressed concurrence with the proposal. However, I must protect the position that an application of this kind must be properly considered by the Government which must reach a decision in the ordinary way. I do not approve of a position in which the officers concerned make representations to the Government and, concurrently, ask the Opposition in this chamber to move an amendment designed to give effect to their desires. Those officers may rest assured that whatever representations they make will be given full and fair consideration. I am not prepared to defer this measure until the point is further discussed.
.- The Minister for National Development (Senator Spooner) did not reply to one of my questions. I asked when the Commonwealth Bank Officers Association made its representations to the Government on this matter.. It may be that the association was not in a position to. make representations or to pursue them until it had actually studied the bill. I should like to know just when those representations were made.
– They were made to the Government in recent weeks.
Question put -
That the words proposed to be inserted (Senator Mckenna’s amendment) be inserted.
The committee divided. (The Temporary Chairman - Senator A. D. Reid.)
Majority . . . . 5
Question so resolved in the negative.
First Schedule agreed to.
Second and Third Schedules agreed to.
– This schedule is designed to amend the Audit Act, the Broadcasting Act, the Hide and Leather Industries Act, the Reestablishment and Employment Act, and the Wheat Industry Stabilization Act. The purpose of most of the amendments is to enable certain utilities, such as the Australian Broadcasting Commission, the Australian Broadcasting Control Board, the Australian Hide and Leather Industries Board, and the Australian Wheat Board, to bank with authorities other than the Commonwealth Bank in prescribed cases. I mentioned this matter in another context in the Senate and suggested that perhaps provision is being made to enable those bodies to bank with banks other than the Commonwealth Bank where no branch of the Commonwealth Bank is available. If that is the position, I suggest that it should be written into the legislation. Otherwise, there should be an assurance from the Minister for National Development (Senator Spooner) that the proposed amendment is designed only for that purpose. If the Minister will tell us why it is desired to permit those bodies to open accounts with any other prescribed bank, he may be able to allay the suspicion of’ the Opposition that this is a method of taking accounts away from the Commonwealth Bank and .throwing them over to the private trading banks. Will the Minister indicate what is in his mind in this connexion? I noticed in other legislation which reached the Senate today that similar provision is being made in respect of other bodies, so that the bodies referred to in the Fourth Schedule to this bill represent only some of the Commonwealth instrumentalities or boards, set up under Commonwealth authority, which are to be given similar power.
– The proposed amendments of Commonwealth acts referred to in the Fourth Schedule are not designed to take government business away from the Commonwealth Bank. Certain other acts are being amended to’ provide that the relevant accounts may be kept at the Commonwealth Bank or such other bank as may be prescribed. Instances will no doubt arise where, with the separate incorporation of the Commonwealth Trading Bank, it will not be practicable or convenient for an account to. be kept at the Commonwealth Bank. The inclusion of the words “ or other prescribed bank “ will give the necessary flexibility. “ Prescribed “ means, of course, prescribed by regulation. If a bank other than the Commonwealth Bank is prescribed,, thi? Parliament will be informed and will have an opportunity to disallow the regulation. There is thus no, possibility that government business will be taken away surreptitiously from t.hp Commonwealth Bank or the Commonwealth Trading Bank.. I might mention that certain other legislation .did t”»t include this sa.fe2u.ard. The Ment Export Control, Act, wa.s amended in 194R- to empower the Australian Meat Board to open an account with the Commonwealth Bank or such other bank as the Minister approves. Again, the Whaling Industry Act of 1949 provides for the keeping- of the accounts of the Whaling Commission with the Commonwealth Bank or such other bank as the Treasurer approves. I refer to those acts because they were passed during the regime of the previous Labour Government. The legislation now before the committee makes provision for a stronger position than that in which either the Minister or the Treasurer may approve of a- bank.
Fourth Schedule agreed to..
Fifth Schedule agreed to.
Title agreed to.
Bill reported without amendment: report- adopted.
Bill read a third time.
Debate resumed from the 12th March (vide page 901), on motion by Senator Spooner -
That the bill be noW read a second time.
– This legislation is more or less a corollary of the Commonwealth Bank Bill 1.953’, with which the Senate has just dealt. The bill proposes, in effect, that banking operations shall be controlled throughout Australia, except State banking. Generally speaking, the administration of this legislation will be the responsibility of the central bank. In 1945, when the Banking Act was passed by the Parliament, certain restrictions and controls were placed on Australian banks. This Government considers that it is now necessary to remove some of those controls and, in doing so. it has evolved some highly technical formulas. In his second-reading speech, the Minister for National Development (Senator Spooner) has set out some of the formulas that will apply consequent on. the proposed amendment of the principal act. I defy anybody to understand what those formulas really mean. I again make the complaint that frequently bills are introduced in the Senate and all kinds of statements are mad’e concerning- them but- no reasons are given for their introduction. It is an old saying, and well known to people who have had anything to do with politics, that if a person has not a good case it is a wise plan to abuse his opponent in order to divert his attention from the weaknesses in the argument. I suggest that that is what the Minister has attempted to do with this legislation. A large part of his second-reading speech consists of nothing but abuse of the Australian Labour party. He has let himself go in a tirade of abuse, no doubt with the idea of distracting our minds from the legislation before the Senate. However, unconsciously his innate honesty comes to the fore now and then. In the course of his speech he said -
Although there is no cause for belief that the Commonwealth Bank has used its powers under the act otherwise than in promoting economic stability and in carrying out its other central bank responsibilities . . .
He then proceeded to express the view that the Government is suspicious of what Labour might do to the banking system should it ever regain office. I remind honorable senators that the Minister himself said that the Commonwealth Bank has not misused its powers in any way. Later in his speech he said that great political issues are involved in this matter. I quite agree that that is so, hut he might have added that great political ideologies are also involved. As I have stated on a previous occasion in the Senate, the Government parties support private enterprise for the benefit of private enterprise whereas we on this side of the chamber believe in allowing private enterprise to operate wherever possible but only for the benefit of the people of Australia. There is a difference between the two outlooks.
The great political issues to which the Minister has referred do not arise from the 1945 legislation and have not been submitted to the people, although I agree that nationalization of banking was an issue at the 1949 general election. The Minister also said -
The sinner cannot redeem his past misdeeds by simple protestations of future good faith.
That is an evident truth, but it must rebound upon the Minister. Only re- cently he said that something would not happen except over his dead body. But it did happen. Later in his speech the Minister set out the objects of the bill in two lines. He said -
To cancel the enormous uncalled liability of the trading banks to deposit their reserves in special accounts with the Commonwealth Bank .
That is the sum total of the meaning of the bill. It is designed to alter the controls that were imposed under the legislation of 1945 so that the private banks will be protected in the first case, and in the second case will be relieved of the responsibility of depositing nearly £600,000,000. That amount was mentioned in another place and the Minister himself said in this chamber that the amount was over £500,000,000. In other words, the Government proposes to forgive the private banks the payment into special accounts of nearly £600,000,000. I know that Government supporters have stated that the money in special accounts lies there unused. But the money that is put into special accounts is not idle. Most of it is composed of securities and credits that have been issued in one form or another, mostly from government instrumentalities. Amounts drawn against them are used by the private banks. While that money is in the central bank, it is used to finance national activities. Credits are issued against it and it can be used through private financial institutions in accordance with ordinary banking practice. The Minister stated -
In relation to these banks, this power over the situation of their assets is unnecessary and could be misused at the appropriate opportunity to disrupt the legitimate conduct of banking transactions between Australia and overseas countries.
The Minister has such a suspicious mind that he suspects everybody around him. Nobody will disagree that abuse of the powers is possible, but the Minister has a duty to prove that it has been abused by the Commonwealth Bank and used against the private trading banks. He knows that the power has not been used by the Commonwealth Bank. He has said that he is suspicious that the Labour party might abuse its powers, but he forgets that from 1945 until 1949 a Labour Government laid down a policy for the manipulation of special account.: and that power was not abused in those years. That was the period after the war when almost 1,000,000 people came out of the armed forces and large numbers of workers who had been engaged in the manufacture of war goods were transferred to peace-time activities. During the whole period there was full employment in Australia and the Minister has not proved that the regulations under the Banking Act were abused or that controls were used discriminately against the private banks. The Minister said that the powers could be misused in the future. If he is so suspicious he could put n stop to the possibility of abuse now. The provisions that the Government proposes could be used more harshly against the private banking institutions than any of the old regulations and controls. Th? Treasurer (Sir Arthur Fadden) himself has indicated that.
As to government securities, there has been a shift in the holdings of government securities since this Government was returned to office and particularly within the past twelve months. Treasurybills held by the private banks at the end of December last totalled £136,750,000, compared with £20,250,000 in 1950, when this Government came into office. That means that the Government has given the private banks more liquid assets in a time of high inflation, and it has caused secondary inflation. It eased controls on the private financial institutions and imposed harder controls on other sections of the community. It increased taxes, and in some cases they are intolerable, because it has been trying to return to the conditions that existed in 1938 and 1939. It does not seek exactly the same conditions, but it aims at a facsimile of the economy of that time. The result has been chaos in the Australian economy. There has been a change of formula with regard to the special accounts. Honorable senators have been told that that was necessary because the formula was too harsh. “We have been told that the private banks could not be expected to continue to pay into the special accounts. The Commonwealth Bank Board has said that, because of certain factors, the Commonwealth
Bank had to relax certain financial matters. Every time the Government has tried to do something in that direction it has had to do something else to cure the chaos that it caused in the first place. That has been the pattern since 1951. Dealing with the special accounts provisions, the Treasurer himself said in the House of Representatives that if the special accounts formula in this bill had been operative in previous years, the Central Bank would have had power to make all the calls to special accounts that were actually made under the 1945 formula. There is a vast difference between the old formula and the one proposed in this measure. The old formula is based on assets whereas the new formula is based on deposits. The Banking Act at present provides that the maximum amount that each private trading bank may be required to hold in its special account is the amount actually held by it in special account on the 21st August, 1945, plus the whole of the increase of the bank’s Australian assets since July, 1945. In future, the Commonwealth Bank’s call-up power will be based on 75 per cent, of the increase of Australian deposits instead of 100 per cent, of the increase of Australian assets. The point I wish to make is that so long as the Government is issuing either treasury-bills or loans, so long will the assets and deposits of the banks increase. That is why, under the new formula there will be as much in the special accounts in future as there has been in the past under the old formula.
– Then why object to the bill?
– The new formula has a little addition to it. First, it wipes out the uncalled liability under the present law and takes the balances in special accounts on the 10th October, 1942, as the new starting point. Then it provides for an annual adjustment of the uncalled liability. At the end of September each year, a bank’s uncalled liability will be automatically reduced to 10 per cent, of the new base level of deposits. Therefore, not only are the banks to be forgiven their uncalled liability under the present law, but also there is to be a scaling-down of their future liabilities.* The “base amounts” specified in the new formula is the amount actually held in special account on the 10th October, 1952 - almost the lowest point reached by special account deposits. The Treasurer further said -
In September, 1050, SpeCial account balances stood at £459,000,000. If the new formula had been in operation, the maximum amount the private banks could have been required to hold, would have been £529,000,000, or £70,000.000 more than the balances actually held.
He added that in May,’ 1951, special accounts were £5S3,000,000 whereas under the new formula, £765,000,000 could have been called to special accounts. The Treasurer omitted to state that the full liability of the banks was not called up under the old formula. If the provision of the existing law had been applied in full there would be no talk about the huge uncalled liability of the trading banks. The Treasurer further said that when the special accounts had receded to £183,000,000 the new formula could have supplied £542,000,000 to the special accounts.
Yet the Minister and some of his supporters told us during the debate on the previous measure that the old formula had dealt harshly with the private banks. It is clear that either the Commonwealth Bank or the Government did not enforce the calling up of the total liability of the banks under the old formula. Surely that proves conclusively that the private banks were treated fairly. Surely the Minister will not dare suggest that had the formula contained in this legislation been in operation in past years, its provisions would have been applied in full by the central bank. Obviously, no such action would have been taken, and I am certain that it will not be taken in future.
The Labour party is not out to kill the private banks by underhand methods. Everything the Labour party has done it has done openly. Our policy is clearly stated in *our platform. “We believe that where private enterprise and government enterprise exist side by side they should compete on equal terms. In fact, the manner in which the old special accounts formula was administered proves conclusively that there was co-operation between the private banks, the central bank, and the Commonwealth Government. Certainly there was co-operation until the end of 1949, and I believe that it continued until 1951 or even 1952. The Minister has spoken of ideological differences between the Liberal party and the Labour party on the subject of banking. Labour tried to give expression to its financial policy in the 1945 banking legislation. When the Liberal Government was elected at the end of 1949 it found a stabilized economy. No one who wanted work was out of work. From one end of Australia to the other there was no sign of unemployment. No one had. to tramp the roads looking for a job. The Australian economy had been stabilized, and one of the most important factors in that stabilization was Labour’s banking policy. The stability continued into 1950, but the economy deteriorated rapidly from then on, due entirely to the pursuit of an ideology different from that embraced by the Labour Government. The Liberal Government’s policy is, “ Hand everything back to the private institutions “ ; Labour’s policy is to maintain whatever controls are necessary to safeguard the Australian economy and to maintain full employment. Not until our economy has been stabilized again will Australia, be prosperous.
What else did this Administration do? Because it found itself in a jam as the result of its financial policy, it arranged with the private banking institutions to make available a greater proportion of their liquid assets to pay for the huge influx of imports that this Administration had: encouraged in the hope that, by ending shortages, the cost of living would be reduced. The Government knows now that it was wrong; In fact, within six months it had to try to remedy its errors, but ‘ it was too late. Notwithstanding assurances by Government spokesmen that very few people are out of work, figures provided by the Commonwealth Statistician show that 120,000 fewer people were employed in industry at the end of January than were employed in 1949.
– Mostly in New South Wales under a Labour government.
– The Government has succeeded in establishing its pool of unemployed. Whether the unemployed are in New South Wales, Western Australia or South Australia does not matter. The important point is that they have no jobs. That is what this Government has done to our economy. Nobody else is to blame. The private banks whole-heartedly supported the present Government for the purpose of defeating the Chifley Government. According to the Treasurer private banks would have had more money in the special accounts under the formula that was operating in 1945 than they actually have, under the existing formula. The Treasurer has stated that because of certain economic factors the Commonwealth Bank has found it necessary to release quite considerable amounts of special deposits and to refrain from calling other amounts into the special deposits accounts. The sum of £400,000,000 has been released to the private banking institutions from the special deposit accounts. The central bank has also refrained from calling into the special accounts about £200,000,000. This action, based on the Government’s new formula, has had the effect of returning the full control of our economy to the private banks.
Even a government of the same political character as the present Government was unable on one occasion to obtain money from the Commonwealth Bank due to the dictates of the financial policy makers. A government of the same political colour as this one had a quarrel with the financial institutions in 1939 and came to an agreement. When a Labour government put that agreement into operation by regulation loud protests were made but because we were at war no further action was taken. In 1945 the Labour Government embodied the principles of the agreement in an act which this bill proposes to amend. Nobody quarrelled about the operation of those principles during the war. It was only after 1945 that the banks started to fight the Labour Government for the control of Australia’s economy. The Prime Minister (Mr. Menzies), the Treasurer, and the Minister for National Development (Senator Spooner) have all stated that this bill is designed to protect the competitive trading bank system of Aus tralia from the onslaughts, hidden or otherwise, of socialization. A statement that the bill was designed to protect the competitive trading bank system might be accepted. But the statement that the bill is designed to protect that system from a socialistic regime of the future is purely hypothetical and is designed to conceal the fact that the Government is endeavouring to give the private banks control of the economy. If the full amount that should have been held in the special accounts had been called up in May, 1951, there would have been £906,000,000 iii them and there would have been no doubt that the Government controlled our economy. But in May. 1951, there was only £5S3,000,000 in the special deposit accounts which revealed that the private banks were being treated leniently. As soon as the Government was returned to office it wanted to restore competitive enterprise in order to protect the private banks. Consequently it took the advice of economists, many of whom had been retained by private financial institutions.
This Government ha.s been the most disastrous that Australia has ever had, particularly since it started to hand back to private enterprise those businesses which belonged to the people. The Government forgave the private banks the payment of about £600,000,000 under its new formula relating to the special deposit accounts. When the Labour Government introduced pay-as-you-earn taxation it forgave nine months of taxation payments to all the people, not to a few private banks. A few months ago the Government forgave an airline company the payment of some hundreds of thousands of pounds. It took the advice of the economists to whom I have referred. The Government has announced that it could not allow outside interests to compete in Australia. It protested loudly when interests from outside Australia proposed to secure control of Australian broadcasting stations. It prevented those interests from obtaining more than a given number of stations. It announced that it was contrary to Government policy for outside interests to control our radio stations. Then, almost immediately it sold Commonwealth Oil Refineries Limited to the
Anglo-Iranian Oil Company Limited, which is part and parcel of the second biggest cartel in the world. The Government’s policy is full of contradictions. On one occasion it announces that outside interests cannot be allowed to control Australian industry and on another occasion it hands over Australian assets to outside interests without receiving in return the full amount that they are worth. The Government now proposes to give control of Australia’s economy to some financial oligarchies which operate in Australia but do not reside here. The Government has forgiven those people the payment of approximately £600,000,000.
The Government has been responsible for the revocation of regulations controlling interest rates. The Commonwealth Bank used to control interest rates. Now the private trading banks will have control of those rates. As soon as the Government revoked the previous control, interest rates rose. There have been three distinct rises in interest rates. On the occasion of the first rise the loan market collapsed and some people who had subscribed to government loans during the war, when this country needed finance, had the value of their bonds depreciated at the rate of £150 in every £1,000. Yet the Government wonders why the loan market is disorganized. It is disorganized as the result of the action of this Government in revoking the control of interest rates by the Commonwealth Bank and releasing money from the special deposit accounts. The money market is in chaos. Even the Commonwealth Bank Board is not quite satisfied with the position of the money market. The last annual report of the Commonwealth Bank states that at the close of the year there was a. note of business uncertainty. That is an understatement. The report explains the composition of the central bank. I have already mentioned that from 1950 until mid-1951 there was a protection as a result of the actions of the previous Labour Government to stabilize the economy. The report reads -
The year 1951-52 opened with inflationary pressures very strong and the Commonwealth Government and Central Bank were taking active steps to deal with the problem.
That was done by releases from special deposits. The report continues -
The Central Bank was using the Special Account procedure to restrict the lending capacity of the banks and was requiring the banks to observe the selective Advance Policy laid down by the Central Bank. Under this policy, bank advances could not generally be used to finance capital expenditure or nonfluctuating working requirements of businesses.
There then follows a synopsis of developments as the year progressed, and it is stated that the special accounts system had its origin in 1941, during the war period. I have already paid tribute to the fact that that system was introduced by the present Treasurer. The statement on to say -
Within certain broad limits, the Central Bank had been given power by the Act to require the private banks to lodge sums in Special Accounts with the Central Bank. Withdrawals cannot be made from these accounts without the consent of the Central Bank.
Yet, approximately £400,000,000 has been withdrawn from the special accounts. It can be assumed, therefore, that the Treasurer’s consent was given for those withdrawals. The statement continues -
The accounts were built up by lodgments by the banks during a period of excessive liquidity due, in the first instance, to Treasury Bill issues for war finance and, subsequently, to the tremendous growth in our overseas funds. . . . The increase in funds was lodged to Special Account to ensure that this surplus liquidity would not lead to excessive lending which would have increased inflationary pressures and,-
That is why they were put there - by reducing their liquid ratios, would ultimately have weakened the capacity of the banks to meet a fall in deposits.
The statement then goes on to say that there was a fall in deposits, but includes this observation -
Releases from Special Account were made sufficiently freely to enable banks to finance new advances at a rate consistent with Central Bank ‘policy … To ensure that these loans were not incurred too freely . . .
After stating that loans could be obtained from the central bank against the deposits, liquidity was still obtained because of the central bank special deposits. The statement continues - and that the banks concerned had a real incentive to modify their policy to enable them to repay, the interest charged has been relatively high.
The interest charged was 3^ per cent., although the trading banks paid interest of only one-half of 1 per cent: The banks charged their customers 3^ per cent, interest on overdrafts, although I think that the rate has been increased to 4 per cent. The reason that the Government is determined to pass this measure into law is that it desires to help the trading banks of this country to make greater profits and to gain control of our economy. The statement goes on -
However, some banks drew heavily on these loans to finance advances over an extended period.
One of the banks that drew heavily on those loans has supported the Government’s stand on this matter.
The DEPUTY PRESIDENT (Senator George Rankin). - Order! The honorable senator’s time has expired.
– During the 60 minutes that this debate has been in progress I must say that on occasions I have been lulled into a state of slumber. However, during my wakeful moments, I detected in Senator O’Flaherty’s remarks only two observations that were relevant to the bill. He alleged that the Government, by means of this legislation, intends to forgive - to use the honorable senator’s own expression - payment of an amount of some £600,000.000 to the banking interests of Australia, I do not think that that statement was quite correct. In the first place, the expression “ forgive “ suggests that the banks have owed that large amount of money to somebody, whereas if the honorable senator would read the provisions of this bill alongside those of the Banking Act .1945, he would see that the banks do not owe that money until it has been called up. I fail to understand why it should be necessary for the Government to forgive the banks an amount in respect of which there is no obligation upon them. The only other relevant point that Senator 0’Flaherty dealt with was when, about half an hour ago, he stated that the Liberal party was taking action in this bill to protect the private banks. That is perfectly correct. We are taking action to protect the private banks. The honorable senator did not specify from what we are protecting the private banks. However, I shall complete the statement for him by saying that we intend to protect the private banks from absolute extinction under the provisions of the banking legislation of 1945. The bill now before the chamber is complementary to the Commonwealth Bank Bill, which has just been passed by the Senate, and it is designed for the specific purpose of protecting the private trading banks from attack by any subsequent government. The protectionist element is contained in the provisions relating to special accounts. The bill is wholly a political measure. It is founded on the distrust of the Labour party’s policy. As a matter of fact it could well have been entitled, “ A bill for an act to prevent the abuse by the Treasurer of the powers of the central bank so as to cause the gradual destruction of the private trading hanks “.
– Or “the Liberal party pay-off bill”.
– The real purpose of the bill is to prevent the destruction of the private trading banks. This bill proposes to amend an important provision that is contained in section 18 of Division 3 of the Banking Act 1945, which reads as follows : - (1.) On the day on which this Division commences, each bank shall establish with the Commonwealth Bank a Special Account for the purposes of this Division. (2.) On the day on which any bank (not being a bank carrying on business at the date of commencement of this Division) commences to carry on banking business in Australia, that bank shall establish with the Commonwealth Bank a Special Account for the purposes of this Division.
That section sets out briefly for the first time in an act of parliament in this country the special account procedure. Previously the provisions had been contained in an agreement between the banks on the one part and the Commonwealth Treasurer on the other. The present Treasurer (Sir Arthur Fadden) made the arrangements, which were incorporated subsequently in a national security regulation. Section 19 of Division 3 of the Banking Act 1945 reads -
On the day on which this Division commences, there shall, by force of this section, be transferred to the Special Account of each bank established by itunder this Division the amount then standing to the credit of that bank’s Special Account under the National Security (War-time Banking Control) Regulations.
That section is self explanatory. I now come to the all-important section - section 20 of Division 3 of the Banking Act 1945, which relates to lodgments in special accounts. It reads - (1.) Bach bank shall, not later than the twenty-eighth day in each month, lodge in the Special Account established by itunder this Division such amount (if any) as the Commonwealth Bank, by notice in writing, directs.
This is the all-important provision -
That was the paramount provision in the law of this country, that from the day of the commencement of the 1945 act, every private trading bank could be called upon to lodge in a special account an amount equivalent to every penny of the increase of its assets, and that money could be dealt with by the Treasurer of the day in accordance with the financial policy of the Government. Every hanker, every merchant, every businessman, and. indeed, every member of the community should read and understand that provision. There is an extraordinary potential concentrated in those few words. Had that provision ever been invoked, it would have completely destroyed the private trading banks within a few years. Its effect would be similar to, let us say, a merchant who,after a specified date was obliged to transfer the balance of his stock that remained after his weekly orders had been satisfied, without any right to replenish that stock.
Under such conditions the private banks would go bankrupt. That power was embodied in the 1945 act. Fortunately for the private hanks, the government of the day did not enforce that provision, and the suggestion has been made in this debate that we should not worry about it. because it has never been enforced. I emphasize the fact that it has not been enforced. In fact, the Australian Labour party changed its policy after that act was passed. The Labour Government was forced to the conclusion, as a result of the general election in 1946, that its political life was running out and that it would not have time to implement its socialist policy under the1945 act. Consequently, in 1947 it opened its frontal attack upon the private banks by taking direct action against them.. It is now history that the Privy Council decided that that legislation was ultra vires the Constitution. Already in this debate Senator O’Flaherty has stated that no Labour government would call up to special accounts the full amount permitted under the 1945 act, and I have no doubt that his colleagues will echo that statement. On this point, I challenge any member of the Opposition to answer two questions. The first of them is: If Labour did not intend to use the power under the 1945 act to call up to special account the full amount payable by the private banks, why was that provision inserted in that act? That is a simple question which calls for a simple answer. The second question that I put to members of the Opposition is: Would they not agree that if the Labour Government used that power it would have ruined every private bank in Australia ?
I turn now to another aspect of the central hank. In the good old days our note issue was backed 100 per cent. by a gold reserve. I shall advert to the history of the note issue from the time that the gold reserve commenced to slip. In 1911, the then Labour Government introduced a measure which reduced the reserve from 100 per cent. to 25 per cent. in respect of the first £7,000,000 of currency. In 1920, the Commonwealth Bank took over control of the Note Issue Department and thereafter that bank, instead of the Treasurer, issued the note currency. The gold reserve was further reduced in 1939 when the government of the day whittled it down to 15- per cent. with the proviso that it should be restored to 25 per cent. within a period of four years. That proviso was carried out. The gold reserve was also changed to a reserve of’ either gold orsterling. Then, under theBankingAct 1945 the Chifley Government completely abolished this statutory reserve. It is not a coincidence that since 1911 our reserves behind our currency have been whittled down and that, at the same time, there has been corresponding inflation of the Australian £1 note. The two facts are directly related. To-day Australia is the only country of ‘any consequence in the world that has not a reserve behind its note issue. At present, we have in excess of 300,000,000 £1 notes in circulation, but not one ounce of gold in reserve to back that currency. That is a serious position. What is the position in other British Commonwealth countries in this respect? In Canada, by statutory requirement, the gold reserve must be 25 per cent, of the note issue. The Reserve Bank of India is required by statute to hold in reserve gold to the value of two-fifths of the note issue. In Pakistan, 30 per cent, of the note issue must be backed by gold ; and in South Africa gold must be held in reserve to the value of 30 per cent, of the note issue. In this country, the Government is not obliged to hold anything in reserve against the note issue; and, in fact, we have nothing in reserve. I put it to the Senate that if anything should happen to our overseas trade as happened in 1930 this country would find itself in a position much worse than that which arose in that year. Honorable senators will remember that at that time we were fighting a depression and that in May of that year a crisis developed because our balance of payments in London had been reduced to such a degree that Australia was about to default. The only thing that saved this country on that occasion was its gold reserve. Gold to the value of £5,000,000 was transferred to London. But for the fact that we were able to make that transfer, Australia would have become bankrupt and discredited. I sincerely trust that nothing of that kind will happen again, but if such circumstances were to recur nothing could possibly save Australia from going bankrupt.
Modern economists of the London School of Economics hold the theory that it is unnecessary to have a reserve of gold behind our currency; but Australia is the only country that has been pre pared to take their advice. Those economists say that, after all, a country’s currency is merely the small change of the nation and that the Note Issue Department has an obligation from day to day to issue currency in accordance with the volume of credit that is released by the banks. Therefore, the issue of currency is outside the control of the Note Issue Department. Those economists further argue that a central bank is required to control the issue of credit. In other words, they substitute the central bank for a gold reserve. That is a common and elementary argument, but it is most dangerous and unsound because it states only half the truth. Those who argue along those lines do this country a great disservice because they omit to take into account certain other important factors. For instance, they omit to take into account the fact that the government of the day usually creates credit to a far greater degree than does any bank and, unfortunately, governments have a habit of failing to redeem credits. A more important fact which is overlooked by these economists is that the central bank does not control the credit policy of the government. The reverse is the case; the government controls the credit policy of the reserve bank.
I direct the attention of honorable senators to certain statements which are made by Mr. R. S. Sayers in his book, Banking in the British Commonwealth. Dealing with the growth of the central bank and, in particular, with the provisions of the 1945 legislation relating to the note issue, he says -
The most important change, however, related to the note-issue reserve. As Australian notes were no longer convertible into gold it was held that there was no need for any direct relationship between the note-issue and Australian overseas funds and/or gold. The Government held the practical view that it was essential that the Commonwealth Bank should issue sufficient notes to meet the day-to-day requirements of the public and that, under modern conditions, more emphasis should be placed on control over the credit base of the trading banks, the main constituent of which was now deposits with the central bank.
Then he makes the following profound statement : -
What the Government may not perhaps have recognized, however, was the necessity for the the Commonwealth Bank also to regulate its own credit policy along sound lines. Granted that condition, there was no inherent danger in the new position.
In that statement Mr. Sayers hit the nail on the head. If we substitute the word “ Government “ for the words “ Commonwealth Bank “ in the last few lines of that passage, it will then read -
What the Government may not perhaps have recognized, however, was the necessity for the Government also to regulate its own credit policy along sound lines.
Subject to that condition Mr. Sayers says that the absence of a gold reserve is not important. But that is the most important condition. History shows that there is always a grave danger that governments, regardless of party political colour, do not regulate their credit policy along sound banking lines. There is always the temptation for any government to issue just a few more millions of paper credit. That temptation has not been resisted by governments for many years. There is only one curb on governments and that is the obligation to provide adequate reserves behind the currency. When that is done, a government which desires to issue additional currency must first increase the gold reserve to a corresponding degree. I do not suggest that a gold reserve is a complete answer to our problems, but I do suggest that one of the remedies should be that there must be an adequate statutory reserve of gold behind our currency.
I now put the same proposition on the international level. No one will deny that at present the trade position of the world is grave. That situation has been brought about by one cause only, and that is a lack of adequate reserves of exchange. We cannot trade freely with other countries because we have not sufficient exchange. That again is due to the fact that there are insufficient reserves of exchange. I refer to a speech that wa3 made by the South African Finance Minister, Mr. Havenga, at the annual conference of the International Monetary Fund, which was held at Mexico City in September last. He stated -
In this connection the gold reserve figures published by the Fund in the June issue of “ International Financial Statistics “ are illuminating. Those figures show that in the case of every country including the U.S., the ratio of gold reserves to imports has declined.
In the case of the Sterling area, for example, gold reserves in 1938 were sufficient to cover nearly 6 months’ imports, whereas in 1951 they were only enough to cover imports for about 6 weeks. For the world as a whole, imports have increased in value by over 250 per cent., while gold reserves have risen only 36 per cent. A more or less similar disproportionate relationship has developed between gold reserves on the one hand and national debts and money supply on the other. It is obvious that this marked relative decline of gold reserves and the consequent deterioration ot international liquidity must have aggravated the balance of payments problem for a large number of countries. 1 also wish to read from the report of the Executive of the International Monetary Fund at Mexico City, as follows: - An aggravating factor in the recurrent balance of payments crises of the post-war years is the inadequacy of international reserves available to monetary authorities outside the U.S.
The report continues -
At the end of 1949, gold and dollar reserves of countries outside the U.S. and the U.S.S.R. were half as large as in 1938 in terms of the trade of these countries and there can be no doubt that the present situation calls for measures to increase reserves.
Despite the withering sarcasm of Senator Armstrong, I also believe in that proposition. Honorable senators will recollect that last December our Prime Minister (Mr. Menzies) visited London for the purpose of attending a conference of Prime Ministers of the British Commonwealth countries. I believe that our Prime Minister was largely responsible for the calling of that conference and that he was one of the leaders in advocating the policies that were accepted by the conference. Honorable senators will also recollect that the conference agreed, in principle, that the nations of the world were inadequately supplied with reserves of exchange, and that before multi-lateral trade could be adequately established in the world those reserves would have to be increased. I understand - I have only a newspaper report on which to base my knowledge - that at the conference it was considered that one way in which the reserves could be increased would be by increasing the price of gold. Recently, the British Foreign Minister, Mr. Eden, and the Chancellor of the Exchequer, Mr. Butler, visited the United States of America for the purpose of discussing similar matters. The British “Commonwealth, of Nations and the United States of America have agreed that there is an inadequate supply of exchange in the world and that until the world acquires better reserves it is hopeless to expect multi-lateral trade on an adequate level. If that position applies internationally, I suggest that it also applies nationally for the same reasons.
In conclusion, I wish to say that in 1945, during the debate on the banking legislation which was then before the Parliament, the present Prime Minister, who was then Leader of the Opposition, had something to say about such reserves. In Hansard of the 21st March, 1945, volume 181, page 756, the right honorable gentleman is reported to have said -
That brings me to the sixth of the proposals to which I have referred, namely, the abolition of the currency reserve. Here is’ another interesting example of how the Government has accepted that portion of the royal commission’s recommendation which suits it, and has ignored, or discarded, the rest; because the royal commission recommended the abolition of the currency reserve and the substitution of a note issue limited by law to a fixed maximum, subject to the right of the bank to exceed the maximum by a stated amount with the consent of the Treasurer. What does the Government do? It ignores the safeguard, the proposition that there should be a fixed maximum, with limited flexibility, in the note issue, and seizes eagerly upon the proposition that the currency reserve should be abolished, the effect of that being this: It is hard to conceive that any issue between the governor and the Treasurer” on the note, issue would not be a matter of policy. It would be hard for my friend the Treasurer to think up a case in which a difference of that kind would not bo a difference of policy; and. therefore, this bill places under the political control of the Treasurer the note issue of the country, and utterly and unconditionally abolishes all reserves behind that currency. For a long time we had a currency reserve of 25 per cent, gold, which was later modified to 25 per cent, gold or English sterling. That is how it stands to-day. When this bill has been passed no reserve requirement will be required. There is nothing whatever on to which any person protecting the currency can seize as a means of defence. Every Treasurer will be utterly and literally defenceless in the presence of those who, in some ignorant clamour, desire to have the note issue expanded for the purpose of meeting some passing whim or political demand.
The position to-day is exactly as it was then. We still have no reserve behind our currency. I sincerely suggest that this Government should give some consideration to the matter, which I know is difficult. I do not propose to state the difficulties because it is not relevant to do so. Those difficulties can be overcome, but I am not now going to suggest how they can be overcome. I merely say that a reserve cannot be built up overnight; it will have to be acquired progressively. If the price of gold were to rise next week, for instance, the Government would be in a somewhat precarious position if it wanted to establish a gold reserve then. This matter cannot be treated lightly. It has been discussed on the international level and accepted as most desirable and, indeed, essential. The same argument surely applies on the .national level. For that reason, I suggest that as soon as possible this Government should consider providing an adequate reserve for the Australian currency.
– In my judgment, the purpose of this bill is to bring about, as far as it is financially and politically possible to do so, restoration of the status quo ante, or restoration to the banks of the freedom of action that they exercised prior to World War II. That freedom of action will be given by wiping out or reducing their uncalled liability. That, to me, seems to be the whole object of the bill. The effect of giving the banks more freedom of action will be that the banks will have greater freedom either to increase inflation or to deflate, as was done before 1939. After that year there was inflation. That is a very dangerous power to give to the banks. In a period of deflation the banks would be able to buy up all government bonds that had been depressed in value. Where members of the public held small parcels of bonds, deflation would force them to put those bonds on the market. In the ‘thirties, a £100 bond was worth as little as £60. Such bonds were bought up by the banks. To the extent that the value of bonds is reduced, the interest rate increases. The banks are then able to reap their little harvest. In my opinion, inflation is always followed by deflation. Subsequently there may be re-inflation. That is brought about mainly by the banks in collaboration with the Government and has always happened in the past. I am concerned to prevent, as far as possible, anything happening in the future similar to the events of the past.
Inflation has been defined by economists as “ too much money chasing too few goods “. I suggest that that definition does not convey very much even to an intelligent person. I should define inflation as meaning, if anything, the issuing of paper or bank money representing value in excess of the intrinsic value of the wealth produced or services rendered, as measured in terms of gold or commodities other than gold, or in terms of labour time. In my opinion, that is the correct definition and conveys a clearer idea of what is meant by inflation than the other definition to which I have referred.
Theoretically, this Government is opposed to inflation, and on more than one occasion the Prime Minister (Mr. Menzies) has declaimed emphatically against it. But unofficially, or in practice, the Government has been inflating the currency all along the line. I do not ask honorable senators to accept my word that that is so. Instead, I shall refer them to the statement of a man who is, perhaps, the leading financier of Australia., made as recently as the 10th of this month. I refer to Mr. Staniforth Ricketson, chairman of directors of Haliburton Investments (Australia) Limited, who, during his address to the second annual meeting of shareholders of the company, had some interesting things to say. Incidentally, the annual report devotes four pages to the business of the company and 28 pages to very scathing criticism of the Government. This gentleman cannot be classed as a mere neophyte in the scheme of things financial or banking. He also holds the position of chairman of directors of J. B. Were and Sons.
The ACTING DEPUTY PRESIDENT (Senator Tate) . -Order ! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -
That the Senate do now adjourn.
Question resolved in the negative.
– In his statement, Mr. Ricketson said -
Mr. Menzies had stated on 16th December last that “ Defeat of inflation is the first condition of development. . . .’ Indeed, looking back over the last two years, the conclusion is drawn that the Government’s capacity for execution fell short of its conception of an effective anti-inflationary plan. It is against this background, unfortunately, that we have to assess the possibilities of the implementation of the ideas which the Prime Minister expressed in his broadcast address last December. . . . Rather than staging an all-out attack on inflation which was stated as “ the first condition of development “, many Government decisions and acts are operating towards the renewal and intensification of inflationary pressures. Even the number one plank of its original antiinflationary platform has bean thrown overboard. I refer to its repeated expressions of unequivocal opposition to the use of central bank credit for the financing of capital works.
The first indication that that policy had been reversed came when it was disclosed that the treasury-bills had been increased by £45,000,000 from £108,000,000 to £153,000,000 during the 1951-52 financial year.
That bears out what I have said. Theoretically and officially the Government has declared emphatically against inflation, but by its administration it has inflated the currency to the extent mentioned by Mr. Ricketson. In his statement, he continued -
On the 4th of February, the Prime Minister had some interesting things to say about the sources’ of finance available to Governments and particularly about the use of central bank credit.
Then he referred to the statement of the Prime Minister (Mr. Menzies) and I shall read part of the statement with reference to bank credit -
To spend new money created by the central bank, therefore, tends to reduce the value of money. Inflation is, therefore, a tax, though it may not look like one.
I have said repeatedly that inflation is an indirect tax, and the Prime Minister has supported my contention, but inflation continues. Mr. Ricketson also referred to a statement by the Earl of Selborne, chairman of the National Provincial Bank, one of England’s five big banks, who said at the annual meeting of shareholders early this year -
Some politicians still persist in maintaining that our salvation depends on injecting repeated doses of “ controlled “ inflation into our economy. This prescription is recommended by them as providing a high level of economic activity, and consequently of employment at ever-increasing wages, and a steady depreciation in the burden of capital debts. Such a policy is not only immoral in that it involves a fraud on every one who has lent money, but it also defeats its own object.
That is true. A stage is reached when inflation becomes financially impossible oi’ there is a collapse in the currency. The passages that I have read show that I am supported in my views by men who arc highly placed in the financial world. 1. can foresee a state of affairs similar te that which existed in the 1930’s unless the Government takes the action that it should take. So far the Prime Minister has not defined what he means by inflation, nor has he indicated in what way Ite can balance the economy by a deflationary process within the limitations of the power that this bill proposes to give the private banks. Finally Mr. Ricketson stated in a reference to inflationary influences -
The dominant element in the present situation is inflation, with the prospect of its intensification during the coming months. As already explained, the present Government is making much greater use of Central Bank credit to finance State public works which munna an increase in the volume of money in circulation.
It also means an increase in velocity which is important. The banks having more capital by the wiping out of uncalled liabilities, have much more freedom of action in the direction of inflation or deflation. The banks can see the possibility of profit because inflation and deflation give them opportunities in that direction if they have sufficient powers. Under the National Security Act, their freedom in that respect was restricted and by the 1945 legislation the restriction by regulation became law. Now the Government proposes to give them a. free hand. In his broadcast address on the 4th February, the Prime Minister referred to recurring crises. When referring to the financial conference that was held in London, he said that the basic objections as defined by the London con ference were to get away from crisis after crisis. Everybody can support that view theoretically but what does the Government propose to do? In this bill, it proposes to give the banks more power to bring about a crisis just as they did in the ‘thirties. The historical background is there to be studied.
On the 12th May, 1915, in the House of Commons, Lloyd George said, “ Distress, misery and wretchedness always follow every great war “. That is perfectly true. “ The Napoleonic wars enabled the Rothschilds to lay the foundations of their great wealth. Then there followed the hungry ‘forties. The Crimean War was followed by a short period of wretchedness and distress. After the Indian Mutiny the same crisis recurred and crises happened periodically’ between 1857 and 1902 when the South African war ended. A crisis followed World War I. and now we are in the post-war years of World War II. The trend is in the same direction. The Government is not doing anything to prevent the recurring crises to which the Prime Minister has drawn attention. It is all very well to meet in conference in London and emphasize a perfectly obvious ideal, but nothing has been done to transfer the, theory of an ideal into action. To the extent that the private banks become superior to the Government in .power, the Government is subordinate to their will. That occurred in the ‘thirties when the chairman of the Commonwealth Bank, Sir Robert Gibson, justified the ultimatum that had been delivered by the Associated Banks that government expenditure had to be reduced and wages had to be cut. If I am any judge, when the Treasurer (Sir Arthur Fadden) brings down the budget this year it will include proposals to reduce government expenditure. To the extent that these expedients are adopted, the army of unemployed will be increased. Lloyd George said that after every war there is distress, misery and wretchedness, and that is exactly what is going to happen here. I consider myself obliged to say these things because I know exactly what will happen. The damage will be incalculable. Hundreds of thousands of workers will be deprived of their jobs and robbed of their equity in the homes and furniture that they are purchasing. The Government says apologetically that there is no money available. The truth is that there has never been any real shortage of money. All- the finance that is required for public works throughout the Commonwealth could be obtained if the Government had the initiative and moral courage to take the necessary action.
– What action does the honorable senator suggest?
– I have already explained that, and I do not propose to explain it further at this stage. What is physically possible is financially possible. After all, what is money? It is simply a medium of exchange. It has no value of itself. It is an instrument by which one commodity can be exchanged for another. The worker exchanges his commodity - his labour power - for money and uses that money to purchase the necessaries of life. And so it goes on. We were told in the depression years that no money was available. In those days the private banks had the power that the Government now proposes to confer upon them again. Two English bankers, Sir Otto Niemeyer and Professor Gregory, visited this country and fostered an atmosphere of fear. They encouraged the Australian people to believe that if the deflationary measures that they advocated were not adopted the country, would become bankrupt. That was bad enough,’ but, worse still, many people believed them. However, when the war came, money was available without stint, and hundreds of thousands of men, who, before the war, had been regarded as dispensable in the labour market, overnight became indispensable to save the properties of wealthy interests. The food and clothing that had been denied them between 1930 and 1939 suddenly became available in abundance. The Labour party will not swallow all this superficial theorizing about a shortage of money. From the floor of this chamber and from public platforms we shall make known exactly what was done in the years to which I have referred. The responsibility will then be on the people to ensure that history shall not repeat itself If present signs are any guide, history will not repeat itself.
Mr. Ricketson was reported on another occasion to have suggested the adoption of another Premiers plan. The original Premiers plan was the creation of the private banks, assisted by leading economists in this country. From recollection, the plan was supported by Professor Giblin, Professor Copland and Professor Melville.
– And Mr. Colin Clark.
– Yes, they all supported it, and because they were highly paid economists who had considerable prestige in the community their views were accepted as ex cathedra pronouncements. I repeat that the object of this bill is to restore the status quo ante. The Government wants conditions to be as they were prior to 1939. It wants the private banks to have power to withhold credit, call up overdrafts, and do everything else that will cause an economic crisis. The object is, of course, to reduce wages, social services, and governmental expenditure. Mr. Ricketson said at the conclusion of his address -
What we need most in this country is a strong and growing movement to reduce costs and increase production. In that way, Australia’s feet could be set firmly and unerringly on the path of national progress.
He was simply repeating what was said when the Premiers plan was adopted. In those days the call was for reduced labour costs, which, of course, meant reduced wages. That is exactly what the private banks want now - reduced wages and reduced governmental expenditure while urgent public works languish through lack of finance. To the extent that unemployment is increased, production must decrease. With one breath the Government is urging producers to increase their output, and with the next it is advocating measures that can result only in more widespread unemployment and, therefore, lower production. How can production possibly be increased if unemployment is increasing? The proposition is ridiculous.
The purpose of this bill is to put the Commonwealth Bank back where it was in the ‘thirties - virtually under the control of the associated banks. Once again our banking system will virtually be a private monopoly. The result will be minimum production and maximum prices and a consequent rake-off for the private bank racketeers in this glorious democracy.
– I enter this debate at this late hour for two main purposes which will ‘ become apparent as I proceed. I have always regarded a second-reading speech made by a Minister when presenting a measure to the Parliament to be a means of explaining the principles upon which the legislation is based and stating its main provisions. Speeches of that kind are relatively formal and are deemed to indicate Government policy at a high level. A speech on a measure designed to amend banking legislation would be awaited with great interest -at least in the English-speaking countries, and probably in other lands as well. However, the Minister for National Development on this occasion completely ignored the high principle to which I have referred. He discarded all parliamentary tradition at the very outset, and embarked for many minutes, and for page after page of typewritten matter, on what could only be regarded as a blatant political attack on the Opposition in this chamber. I rise, therefore, to protest against the introduction of attacks of that kind in second-reading speeches. Such a practice can only derogate from the dignity of this chamber, and injure the prestige of the Government and of the Minister concerned. The reason for the attack is clear. It is a part of a concerted attempt by Government supporters in this Parliament to endeavour to raise, on the eve of the Senate elections, the old fear of bank nationalization. It is very significant that the introduction of this measure has been delayed until now, but the Government has not fooled the Opposition, and I am sure it will not fool the people of Australia. If Government supporters believe they can get that old horse to raise one more gallop on the track, they are welcome to their ride. I do not believe that the private banks have any real fear of what may happen to them under the special deposits system whilst control remains with the central bank, subject in the ultimate analysis, of course, to direction by the government of the day.
– Does the honorable senator think that the employees of the banks fear what may happen?
– No. They have witnessed the defeat in the High Court and in the Privy Council of what I would describe as a most ingenious and complete attempt to nationalize the private banks. It is quite obvious that if the Government has any fears, they are completely imaginary. The Minister himself confirmed that in the passage that Senator O’Flaherty quoted earlier to-night. The Minister said -
So, there is no fear on the part of the Government about anything that has happened in the past, and I invite the Senate to remember that the Labour party was in office from 1941 until 1949. That period included not only four years of war but also four years of peace. Labour remained in power for several years after its, attempt to nationalize the private banks had failed. My candid view is that the banks are more afraid of this Government than they are of the Labour party and they have a very good reason for that fear. I remind the Senate that not long ago the Government sought at a referendum the authority of the people to control Communists and communism. Of course, if power had been granted in those terms it would have enabled communism to be put into effect in this country as well as making available the power to destroy communism. It is very significant that the Government was very careful in that legislation to avoid any application of section 92 of the Constitution which provides the great protection to interstate trade and commerce and which afforded great protection to the banks.
It does not surprise me, when I remember that communism implies community ownership of property, that when the banks of Australia understood that position they threw their weight harder than anybody else in the community against the Government’s proposals. I am prepared to concede that they may have played a major part in the defeat of those proposals. Why were they afraid ? What Drought about a remarkable change in public feeling in this country towards the end of the referendum campaign? I suggest that Government senators find out, as a piece of research, what part the banks played in influencing the result of the referendum when they realized the imminent dangers of the Government’s proposals. If those proposals had been carried at the referendum this Parliament would have had power to nationalize the banks overnight. There is no doubt about that. I have reason to believe that the banks understood that position very thoroughly. I suggest that the banks have far more reason to fear this Government than they ever had to fear the Australian Labour party. However, there need be no fear in view of all that has happened. During the regimes of the Labour governments and the present Government there has not been one suggestion that the Commonwealth Bank has used its powers improperly. It has not used them, otherwise than as an antiinflationary agent. It was good that the Commonwealth Bank had the special deposits quite recently when the flood of imports poured into this country throughout .1.951 and 1952 and our London balances were depleted. The local banks were called upon to finance importers to the amount of hundreds of millions of pounds. If that money had not been available in the special deposit accounts and had not been fed into the currency of the community it is certain that many importers would have been unable to meet their commitments. They would have gone bankrupt and the banks would have foreclosed upon them.
– The Government prevented that from happening.
– The special deposits system prevented it. Admittedly, that was an extraordinary set of circumstances. The Minister for National Development (Senator Spooner) in the course of his second-reading speech acknowledged the difficulty of forecasting economic developments in Australia.
Our economy is subject to violent fluctuations. That fact should indicate to the Government and the Commonwealth Bank that they should always play safe. Nobody has suggested that the ‘Commonwealth Bank acted improperly from 1941 to 1953. So why should the Government raise such fears after twelve years? The reason is that a Senate election will soon be held and the Government wants the old horse of bank nationalization to run once more. This is a most obvious and petty political trick.
Under the existing banking legislation, if the Commonwealth Bank was’ to do something improper in relation to the special deposits, the government of the day could override it. If the Government initiated such a move without justification, would the Commonwealth Bank not protest against an improper use of the special deposit system ? Are honorable senators opposite prepared to say that the Commonwealth Bank would be false to its trust? The Commonwealth Bank would be in duty bound to report to this Parliament any disagreement with the Government. If both the remedies that I have put forward were to fail, which they would not, then the banks could go to the court for two reasons.They could take advantage of section 13 of the Commonwealth Bank Act, which will confine the Commonwealth Bank to exercising its powers as a central bank. If the Commonwealth Bank took action which was outside its power as a centra! bank, every bank in Australia could seek an injunction in the courts against the bank’s ultra vins exercise of its power under section 13 of the Commonwealth Bank Act.
– Is that the opinion of the Leader of the Opposition (Senator McKenna)?
– It is obvious. I have no objection to disrespect for my legal opinion. Legal opinions differ even in high places such as the High Court, and I am never embarrassed to find that I am with the minority of the High Court. Lawyers long ago ceased to be embarrassed when people differed from them. But I affirm the positive fact that anybody, who considers that the central bank has gone beyond its proper functions’ as a central bank as defined by legislation, may seek an injunction against the bank in the court. If that proposition does not appeal to every honorable senator I have another to. put to them As bank nationalization cannot be achieved’ by legislation under the Constitution, the courts of the land will not permit the same result to be achieved by indirect methods. That is a proposition that nobody could controvert. Even without the provisions of section 13, which confers the right to approach the courts, under the law at large anybody who considers that the central bank has taken a step towards, bank nationalization would be able to obtain immediate relief in the courts. I merely put this proposition before honorable senatoi’3 opposite in order to confirm them in their belief that bank nationalization is as dead as their chance of winning the Senate election.
I shall not traverse the detailed provisions of the bill. The Opposition stated its views in relation to this matter during the debate on the previous bill. It is unfortunate that the formula which will operate until September and the formula that will operate thereafter have been introduced at this time. These formulae are untested and have been introduced to replace a formula that has proved adequate for all the antiinflationary purposes of the central bank during twelve years. The only criticism that has been voiced against that formula has been that it permits too great an amount to be called in to the special accounts. Having regard to the stature of the Commonwealth Bank I do not believe that the private trading banks need fear if the Commonwealth. Bank had unlimited power to call up the whole of their deposits or surplus assets. They would be in no better or worse position. I am confident that the trading banks realize that fact. There is at least this much agreement between all’ parties ; the trading banks should be subject to a. requirement that the central bank may call up some amounts into special deposit accounts.. The principle has been accepted continuously since 1941 when the present Treasurer- (Sir Arthur Fadden) embodied it in an agreement to a, limited, extent. Later it was incorporated in national security regulations and then in the banking legislation of 1945.. The principle has- been confirmed by the present Government which” has entrenched and enshrined in the banking legislation the provisions necessary to ensure the deposit of funds by the private trading banks with the central bank. So that point is not at issue. It would not make the slightest difference if no limit were placed on the amount that the private banks could’ be required to deposit with the Commonwealth Bank. The position would be the same. If it were not,’ there are all the opportunities of approaching the court that I have mentioned^ The matter could also be ventilated in Parliament. No one can. point the finger of blame at any political party in Australia for anything that it has done- in relation to the special deposit accounts. I say publicly and emphatically with the concurrence of the Leader of the Opposition in another place (Dr. Evatt) and the whole of my party that at no time will the special deposits procedure. be used by us as a government other than for its primary purpose as an antiinflationary safeguard and that safeguard will be administered, so far as a Labour government intervenes in the matter, with care and wisdom and with full regard to the best interests of Australia.
– in reply - Before replying to the debate I wish to- state that when the bill is dealt with in committee I shall move an amendment to clause 7. The purpose of the amendment will he to require the Commonwealth Bank to pay the 3ame Tate of interest on the special account balances of all banks including the1 Commonwealth Trading Bank.
Apart from the rather dramatic note upon which the Leader of- the Opposition (Senator McKenna) ended his speech. I think it can be said that this debate has not raised any number of new issues which were not dealt with during the debate on the previous bill. I exclude from that remark the contribution of Senator Vincent which raised issues of great general interest, but which do not come within the scope of this bill. I do not propose to withdraw a word of my second-reading speech on this bill. That second-reading speech did observe the canons that the Leader of the Opposition (Senator McKenna) considers should be observed in a Minister’s secondreading speech, to the extent that it explained the principles of the bill, and did, in fact, supply a description of the bill and the reasons for it. It went a stage further in that it contained some forthright criticism of the Australian Labour party. I have no compunction on that point, because as I have said earlier, this bill represents our approach to what we consider to be the greatest single financial political issue that confronts the present political generation. That issue is the protection and preservation of the private banking system. I make no apology, in those circumstances, for setting out in my second-reading speech the fears that we have of the manner in which that system would be destroyed upon a socialist government attaining office in Australia. I suggest that honorable senators might pay particular attention to the declaration that the Leader of the Opposition has made. All that he has said is that the Labour party will duly and properly observe the operation of the special deposit system.
– What would be the position if honorable senators opposite got a direction from their executive?
– There has been no diminution of the stated objectives of the Labour party, or of the platform of that party, and no diminution of the ill will that has been expressed to the private banks throughout the whole of the debate by members of the Australian Labour party. All that the Labour party says is that it will observe the statutory obligations and the statutory arrangements with relation to the special deposit accounts. All that the Labour party says, in effect, is that it will observe the law, which is set out in this bill. The effect of that declaration is that the Labour party will observe the provisions of this measure. The Labour party can do no more or less than that. It is bound by the law to the same extent as is any one else, until such time as the law is altered. What we have done in this bill is to stipulate circumstances under which any alteration in the status of the private banks must be a matter that comes before the Parliament for its consideration and attention. Having dealt with that point, I do not think much more needs tobe said. I ask honorable senators to pardon me for not attempting to deal in detail with the other points that have been raised. In that strain, I commend the bill to the Senate.
Question put -
That the bill be now read a second time.
The Senate divided. (The Acting Deputy President - Senator J. P. Tate.)
Majority . . 7
Question so resolved in the affirmative.
Bill read a second time.
Clauses 1 to 5 agreed to.
Clause 6 (Assets of banks).
– Proposed new section 15 provides - (2.) Except with the authority of the Commonwealth Bank, a bank shall hold assets (other than goodwill) in Australia of a value of not less than the total amount of its deposit liabilities in Australia.
Penalty: One thousand pounds for each day during which the contravention continues. (3.) The last preceding sub-section does not apply to a bank incorporated in the Queen’s dominions and carrying on banking business in Australia at the date of commencement of this sub-section.
That provision obviously lets out banks that are incorporated in Australia and, I presume, incorporated anywhere in what I shall call the British Empire. If that is correct, will the Minister for National Development (Senator Spooner) inform me of the names of the banks which, under this provision, will be required to maintain adequate assets in Australia?
– The provisions of the proposed new section apply to banks incorporated outside the Queen’s dominions. They are banks which are colloquially termed “ foreign banks “. The purpose of the proposed new section is to give power over the situation of assets, and to regulate the affairs of those foreign banks the bulk of whose assets are not normally held in Australia, and it may be applicable to new banks. At present there are only two such banks in that category, namely, the French bank, Comptoir National D’Escompte de Paris, and the Bank of China.
Clause agreed to.
Clause 7 - (l.)….. (2.) Division 3 of Part II. of the Principal Act is repealed and the following Division inserted in its stead: - “Division 3. - Special Accounts. 22a. The Commonwealth Bank shall pay interest, at half-yearly intervals, to a bank on the daily balance of that bank’s Special Account at a rate determined from time to time by the Commonwealth Bank with the approval of the Treasurer.”.
.- I move-
That after proposed new section 22a the following new sub-section be inserted : - “ (2.) The rate of interest determined under the last preceding sub-section shall be the same in respect of each bank.”.
The purpose of the amendment is to require the Commonwealth Bank to pay the same rate of interest on the special account balances of all banks, including the Commonwealth Trading Bank. It has been moved following the consideration of a suggestion that was made in another place. The Government considers that there is merit in writing into the legislation a provision which will prevent the possibility of discrimination by the central bank in the rate of interest paid on the special account balances of the various banks, including the Commonwealth Trading Bank.
– I think that the Minister for National Development (Senator Spooner) detected a slight deficiency in the amendment as he read it. As drafted, it refers to a sub-section. Should not the number of the section be inserted in order that reference to a sub-section may be correct : or should there not be a new section and then the reference would be not to a subsection, but to a preceding section? I mention that matter merely to draw attention to the fact that the amendment is untidy.
– I am informed that the adjustment will be made automatically when the act is printed.
Amendment agreed to.
Clause, as amended, agreed to.
Clauses 8 and 9 agreed to.
Clause 10 (Interpretation).
– The main purpose of this clause is to repeal section 2S of the principal act, which prohibits the private trading banks from acquiring government and semigovernmental securities and securities listed on the Stock Exchange without the consent of the Commonwealth Bank. That provision is now to be completely repealed. I question the wisdom of such action at a time when inflation certainly has not been halted, when the Government is using a considerable sum in treasury-bills and when the private trading banks, if they hold large quantities of treasurybills, can found the issue of fresh money against them. Whereas at the 30th June, 1952, treasury-bills issued were of the order of £153,280,000, that figure, at the 2Sth February last, had risen to £2S5,000,000, that is, an increase of approximately £132,000,000 in the course of a period of only eight months.
– And all of it has been required for State purposes.
– I doubt the truth of that statement. It may be partly required for Commonwealth purposes as well. But the increase is substantial, and it is interesting to note how that money is distributed. The General Banking Division of the Commonwealth Bank holds £22,500,000, the major private banks £188,300,000 and other private banks £7,400,000. The figures that 1 have cited total only £216,000.000; but the Treasurer (Sir Arthur Fadden), in supplying this information, indicated that he could not cover the whole field in respect of the distribution of the total of £285,000,000. The figures that I have given indicate that the major private banks to-day hold treasury-bills to the value of £.188,300,000 out of a total of £216,000,000. If that process is to go on - having regard to the Government’” altered policy in respect of the use of treasury-bill finance, and the indications arc that it will go on - there is banking up in the hands of the private banks assets which can lead to a secondary inflation. The use of treasury-bills, in the first instance, is inflationary in character. I nin simply directing attention to the fact that this position needs to be watched carefully. I strongly question the wisdom of removing the prohibition now ‘placed upon the banks from purchasing securities in these categories before Australia is out of the inflationary wood.
Clause agreed to.
Clauses 11 to 17 agreed to.
– Proposed new section -47k reads -
The Treasurer may. by instrument in writing, exempt a hank, the Commonwealth Trading Bank or ‘the Commonwealth Bank from the obligation to prepare and deliver any balance-sheet or statement in accordance with this Part.
I should like to know why the Treasurer would require that power to exempt. In what circumstances might it be applied? I point out that it is an exemption from the obligation to prepare as well as deliver any balance-sheet or statement in accordance with the power.
– At certain periods of the year, such as holiday periods and at Christmas, it is not possible for the banks to complete their statements. It has been the custom for a considerable period to relax this provision at such periods. That is the purpose of proposed new section 47a.
Clause agreed to.
Clauses 19 to 23 agreed to.
Clause 24 (Bank holidays).
– I take it that this is an entirely new provision, the effect of which is to authorize the Treasurer, by notice published in the Gazette, to declare a day specified in the notice to be a. bank holiday. I am interested to know why this power is now sought by the Treasurer. I understand that, hitherto, the declaration of bank holidays has been a matter for the State parliaments. Is there any substantial reason why the Treasurer should assume to himself power to declare a day to bc a bank holiday? I do not know whether the declaration of bank holidays carries with it a holiday for the community. Is the Treasurer seeking to restore his lost popularity by making himself a curator of holidays so that when the sun shines he may send the populace to enjoy it in the fields? However, seriously, I should like to know why this power is being taken at this stage.
– At present, there is no Commonwealth law providing for the declaration of bank holidays. That is done under State laws which are not uniform as between the States, particularly in respect of the period of notice of such holidays. It is considered that the Commonwealth banking law should contain authority to declare a bank holiday. If, because of some international crisis of a financial, or other, nature, it became necessary to declare a bani holiday, the Commonwealth would, in tho absence of this proposed provision, be powerless to act.
Clause agreed to.
Clauses 25 to 29 agreed to.
Title agreed to.
Hill reported with an amendment; report adopted.
J3ill -read a third time.
The Parliament - Northern Territory - Papua AND NEW GUINEA
Motion (by Senator SPOONER) proposed -
That Mie Senate do now adjourn.
– I direct the attention of the Senate to an article which appears in this morning’s edition of the W-est Australian, and which, in my view, reflects upon members of both the Senate and the House of Representatives. The article deals -with the ^projected visits to the territories of members of all parties in the Parliament. The article is headed “Consolation” and reads as follows: -
Eighteen members of Federal Parliament who missed out on the Parliamentary Coronation contingent will get a consolation prize of a trip to the tropics at public expense this winter.
Then follows a list of Labour nominees for these trips, !but no list of Liberal and Australian Country party nominees. In addition, I think the article is false, from our point of view, because I doubt whether any one of those who have been, nominated for these so-called trips to the tropics at public. expense was a contender for the Coronation contingent. That is definitely so in my case and also in the ease of Senator Cole. Moreover, these trips were inaugurated last year by the Minister for Territories (Mr. Hasluck) before there was any thought of a coronation. It seems to me that this article is just a cheap sneer at the members of this Parliament. An article also appeared in the Melbourne newspapers of last evening, when similar reflections were cast upon the members of the Parliament and an attempt made tq give the impression that these trips will be more or less joy rides .at the expense of the taxpayers. I have no doubt that Senator Henty particularly will agree that a trip to the Northern Territory has a very wearing-down effect on honorable senators, indeed, that is one of the reasons why I am hoping to make the trip. I do not think that such a trip could possibly bc regarded as a fah’ exchange for a chance to go to the Coronation.
Those of us who arc making these trips are doing so because we are interested in the problems associated with the areas to be visited.’ I happen to bo the secretary of our party committee which deals with the Northern Territory and matters affecting the whole of the northern part of Australia. I hope that the newspapers concerned will correct the impression that has been given by their erroneous And partial reporting. I have no doubt that most honorable senators will look forward to a rest after the Senate election is over. Instead, some of them will visit the territories of the Commonwealth in order to broaden their knowledge of those areas. After all, they are .a vital part of the Commonwealth, and the members of this Parliament cannot do their job properly if they have not some knowledge of them. I regret that the newspapers have seen fit to speak so slightingly and incorrectly on this matter and I trust that they will rectify their error as soon as possible.
– I wish to add something that Senator Tangney has forgotten to say. Prior to last yeal-, trips to the Territory of Papua and New Guinea were undertaken every two years. They have since been cut down to visits by very small contingents, the places in which are voted for. Money is thereby saved in comparison with the previous procedure.
Question resolved in the affirmative.
The following papers were presented’: -
Australian Imperial Force Canteens Fund Act - Thirty-second Annual Report by the Trustees, for years 1951-52.
Defence (Transitional Provisions) Act - National Security (Industrial Property) Regulations - Order - Inventions and designs-
Public Service Act - Appointment - Department of the Interior - H. K. Arnold.
Wool Products Bounty Act - Third Annual Report on operations of Act, for year 1952.
Senate adjourned at 11.48 p.m.
Cite as: Australia, Senate, Debates, 19 March 1953, viewed 22 October 2017, <http://historichansard.net/senate/1953/19530319_senate_20_221/>.