20th Parliament · 1st Session
Mb. Speaker (Hon. Archie Cameron) took’ the chair at 2.30 p.m., and read prayers.
page 704
– I desire to inform the House that His Excellency M. Jean Letourneau. French Minister of State in Charge of Relations with the Associated States of Indo-China, is within the precincts of the chamber. With the concurrence of honorable members I shall invite him to take a seat on the floor of the House beside the Speaker’s chair.
Honorable MEMBERS - Hear, hear!
His Excellency M. Jean Letourneau. thereupon entered the chamber, and was seated accordingly.
page 704
– I desire to ask the Prime Minister a series of questions. Is it a fact that a member of the royal commission on television is managing director of the Brisbane Courier-Mail, Which operates Queensland commercial broadcasting stations on behalf of the Murdoch estate, and that that gentleman is also the managing director of the Brisbane Broadcasting Company Limited? Is it a fact that another member of the royal com-‘ mission-
– I rise to order. Recently, Mr. Speaker, you ruled that it was npt permissible for an honorable member to begin a question with the words, “ Is it a fact “.
– That is a general rule which should be observed. I think that the honorable member for East Sydney was attempting to open up a very serious matter, which could be dealt with in a better way than by his asking a question without notice. However, he may proceed.
– Is it a fact that another member of the royal commission-
– Order ! Again the honorable member has started by using the phrase, “ Is it a fact as a prelude to the giving of information. The position is somewhat similar to the position that arises when a man is asked to answer by “Yes” or “No”, the question, “Have you ceased beating your wife ? “
– I am not sure whether it is a fact, Mr. Speaker. Therefore, I ask the Prime Minister is it a fact that another member of the royal commission is a director of Country Broadcasting Services Limited, which controls two country commercial broadcasting stations ? Is a third member of the royal commission on television the auditor for The News Limited, Adelaide, which is controlled by the Murdoch’ estate, .and which has interests in two commercial broadcasting stations? Is it also a fact that the major network of commercial broadcasting stations, in which the Murdoch estate has a controlling interest-
-Order! The honorable member for East Sydney has already asked four separate questions.
– They are all related to the one matter, Mr. Speaker. Is it a fact that that group of commercial broadcasting stations agreed to provide the right honorable gentleman with a free weekly broadcast just prior to the announcement of the personnel of the royal commission on television? Will the Prime Minister bring to the notice of the Australian Broadcasting Control Board the provisions of the Broadcasting Act which stipulate that equal facilities shall be provided for the broadcasting of the views of all political parties, with the object of having an equal period of free broadcasting time made available to the Leader of the Opposition?
– I do not know what the final purpose of the honorable gentleman’s questions is supposed to be. Am I supposed to ask broadcasting stations to provide free broadcasting time, or is the honorable member genuinely concerned about the establishment of the royal commission to inquire into television? To begin at the end and work back, I am making some broadcasts-
– They suit us.
– The honorable gentleman has disguised his pleasure extremely well on other occasions. I am not an expert, but I understand that my broadcasts are transmitted from 40 stations. I shall be very happy to have the nam.es of those stations tabled in the House for public information. It may be that one of those stations belongs to what the honorable member for East Sydney has called the Murdoch estate. I have no knowledge that that is so. It is true that one member of the royal commission on television is the managing editor of the Brisbane Courier-Mail, a man who has taken a great deal of interest in television, a man of ability, and a man who, in the judgment of the Cabinet, can bring a well-informed mind to the problems to be investigated. I have not thought to inquire into the private affairs of other members of the commission, or even of that member. It is a grave mistake to assume that individuals . are appointed to a royal commission as the representatives of special interests, and it is offensive to them to be told that they represent such interests. The members of this royal commission have been chosen as a panel of persons possessing different experiences who, in combination, are likely to give us a balanced view on the very important matters into which the commission will inquire.
– What about a representative of the churches?
– May I retort by asking the honorable, member, “ Which church ? “ He knows as well as anybody else in this House knows that nobody can say, “ There is ‘ A ‘. He will represent the churches of this country”, because “ A “ may be admirably satisfactory to some people but completely unsatisfactory to others. The honorable member for Melbourne is just as. familiar as I am with this kind of problem. It is not appropriate to appoint to a royal commission of this kind somebody who will regard himself as the spokesman of a particular point of view. Bather is it appropriate to appoint persons who will regard themselves as the recipients of all points of view. That is what the Government has done.
page 705
– In view of the death of the Soviet dictator, and its possible implications, will the Minister for External Affairs afford the House an early opportunity to debate foreign policy and to express its support for those, either within or without the borders of the Union of Socialist Soviet Republics, who are endeavouring to free themselves from the tyranny of the Soviet system?
– I shall certainly discuss the honorable member’s proposal with the Prime Minister, and, if necessary, with the Cabinet. I appreciate the honorable member’s motive in raising this important matter.
Br. DONALD CAMERON.- I ask the Minister for External Affairs whether he will define the attitude that Australia has adopted towards the return of the Krupp fortune to its former owner? Was the return of this property a matter entirely beyond the control of the Australian Government ?
– The decision in respect of Mr. Krupp’s fortune was made first, I understand, by an American court, and Australia had no status in respect of the hearing or the judgment. Also, as I understand it, the great armaments empire that was built up by Krupp has been broken up, and I am given to understand that the return of his fortune to him at the instance of the American court does not mean that he will again be in charge of the vast armaments organization with which his f family has been traditionally associated.
page 706
– The question that I direct to the Prime Minister is one of very great importance to mine workers, their dependants and the community generally in the western coalfields of New South Wales. Is the right honorable gentleman aware that serious hardships will be suffered by many people unless action is taken to withdraw notices of dismissal that have been served on approximately 300 employees of western coal mines? If so, what action does he propose to take ? Is he prepared to confer with the Government of the State of New South Wales with the object of reaching a solution of the present problem of coal production and consumption? Will he give consideration to the payment of a special subsidy to reduce the burden of rail freights on western coal and thus enable it to compete with other fields and build up export trade ?
– The honorable member’s question, at first blush, seems to relate entirely to the business and responsibilities of the New South Wales Government. To the extent to which it relates to the affairs of the Joint Coal Board I shall confer with the Minister for National Development with a view to supplying the honorable member with information about it.
– I address a question on a very serious matter to the Prime Minister. Has the right honorable gentleman given consideration to the disposal of the huge stocks of coal that have accumulated in the Newcastle end of my electorate, round Cardiff ? This coal, which blackens the landscape, is an eyesore.
-Order ! What is the question ?
– Spontaneous . combustion of the coal may bring fire and ruin to the countryside. Will the Prime Minis ter give serious consideration to its export overseas? Surely, markets can be found for it. Some time ago, the Government pleaded with the miners to produce more coal. They have now produced more coal than the Government can handle.
– Order! The honorable member may not debate the question.
– The problem of markets for coal is constantly exercising the mind of the Minister for National Development and of other cabinet colleagues. I agree with the honorable member that there are substantial stocks of coal at grass. There was a time, not long ago, when there were no stocks of coal and factories that were dependent on coal, and through coal for power, were on short time, and many people, particularly in New South Wales, were on short work. I regard with the greatest possible satisfaction the fact that those days have gone.
– Cut out the propaganda and answer the question !
– Fancy the honorable member for East Sydney talking about cutting out the propaganda!
page 706
– Will the Prime Minister state whether it is a fact that the airlines of Australia are considering a proposal to introduce second-class travel facilities? Is it a fact that it has been proposed that aeroplanes carrying secondclass passengers shall carry a greater number of passengers than first-class aeroplanes? Will the Prime Minister assure the House that the system which has unfortunately operated in the past on railways in Australia will not be introduced into the airlines? In other words, will he assure us that in Australia, which should be a one class country, the old system of second-class travel will not be perpetuated? Will the Prime Minister
– Order ! The honorable member is proceeding to ask his fifth question.
– I am glad to have the assurance of the honorable member that there should be only one class of travel facilities in Australia. From speeches made by honorable members opposite about myself, I had gained the impression that there should be at least one second-class passenger. I accept with great goodwill the assurance of the honorable member. Unfortunately, the Minister for Civil Aviation is absent on account of illness, but I shall convey the honorable member’s question to him.
page 707
– In view of the fact that the price of superphosphate has increased considerably since the subsidy was withdrawn in June, 1950, and is now so high that some farmers hesitate to use it, will the Minister for Commerce and Agriculture investigate the possibility of re-introducing that subsidy?
– The honorable member’s question concerns a matter of policy to which I cannot give a reply; but I can inform him that I have been examining the possibility of reducing the cost of cornsacks for superphosphate which would have a very very important bearing on the cost of that commodity.
page 707
– I wish to ask the Minister for Social Services a question concerning applications to the War Service Homes Division for a loan in order to erect a garage on the applicant’s property. Are such applicants granted assistance only if they prove that they own a motor car? If that is so, will the Minister reconsider this position with a view to assisting ex-servicemen to build garages in anticipation of owning a car some day so that they will not be forced to house such equipment as lawnmowers and push-bicycles in a shed?
– I shall consider the honorable gentleman’s proposal, although it has been considered already on a number of occasions. The reason for the maintenance of the present policy is that the funds available have to be made to go as far as possible. It would seem to be rather illogical to allow one man to have money for the purpose of building a garage for a car that he does not yet own, whilst another man might have to wait for funds to build a home.
– I preface a question to the Minister for Social Services by saying that I understand that his department will take over, for an exserviceman, an existing house to the value of £3,500 and will advance £2,000 towards its purchase. I also understand that if the value of the house exceeds £3,500 the department will not make any advance at all. Will the Minister inform me whether that is correct and, if it is, whether he will consider adjusting such an anomalous position?
– The facts are as the honorable member has stated them. The maximum amount of loan is £2,000 if the property is not valued in excess of £3,500. The Government has made record sums available for the purchase of war service homes - this year £28,000,000 has been provided for that purpose - but applications are coming in at the rate of 2,000 a month and it is impossible to deal with all of them. It is, therefore, considered that the need is greatest in respect of those ex-servicemen who require to purchase properties valued at £3,500 or less. It is believed that persons who are able to finance the purchase of houses of a greater value than that are much better off than those who cannot do so. However, the proposal of the honorable member will be considered.
– I direct a question to the Minister representing the Minister for the Interior. Is the Minister in a position to give an answer regarding an investigation that was made into the high rate of rentals that are charged for Commonwealth cottages at Dapto, Unanderra and Bulli?
– I have told the honorable member that when the investigation into the matter is completed, I shall be able to give him an answer. As soon as I have the information, I shall give him a reply.
– 1 should like the Minister to hurry.
page 707
– I direct the attention of the Minister for External Affairs to a statement that has emanated from the New Guinea branch of the Returned Servicemen’s. League, which suggests that Australia might withdraw from the United Nations on the ground that the organization should spend more time trying to prevent wars and less time on inspections of the trust territories. I understand that a United Nations inspection team is due to arrive in the territory. Will the Minister comment on the view expressed by the New Guinea branch of the Returned Servicemen’s League, and also on the pending visit of the mission from the United Nations?
– I saw the reference in question. I believe that the New Guinea branch of the Returned Servicemen’s League is probably under a misapprehension regarding the functions of the visiting United Nations mission. The United Nations is not a supergovernment. It has no powers of inspection or report in relation to our trust territory in New Guinea, but I believe that it is all to the good for a selection of individuals representing the United Nations to see for themselves the work that we are doing in New Guinea, of which we are rather proud. I am sure that the Minister for Territories is rightly proud of that work. We have nothing to hide in New Guinea. I think we might very well welcome the visit that is to be made by the United Nation’s inspection team. I can answer very simply in the negative any suggestion that Australia might propose to resign from the United Nations. I believe I am right in saying that the Government has considerable confidence in the usefulness of that organization as an instrument which is designed to calm the world. We have no intention, that I have ever heard of, to leave it. On the other hand, I believe that we shall do everything possible to strengthen it.
page 708
– Will the Minister for Commerce and Agriculture consider seeking an arrangement with the New South Wales Government so that the benefits and services provided by or through the New South Wales Department of Agriculture may be made available to dairy-farmers in the Australian Capital Territory? Would the provision of such services come within the scope of the Commonwealth research grant for the dairying industry?
– I shall be very glad to take note of the honorable member’s question and ascertain whether there is scope for proposing to the New South Wales Government that it make its extension services, which are now heavily subsidized by the Commonwealth, available to dairy-farmers of the Australian Capital Territory. However, there is nothing that the New South Wales Government could do that would be of more aid to the dairy-farmers of Australia than would be the carrying out of the undertaking it entered into to legislate so as to put the Commonwealth in a position to determine the ex-factory price of butter and cheese for the duration of the stabilization plan for the dairying industry - an undertaking that the New South Wales Government has dishonoured.
page 708
– Now that the Minister for Health has announced his incentive basis medical scheme, which provides for remuneration of surgeons and chemists according to the nature and number of operations for the removal of human organs, or the drugs prescribed, as the case may be, will the Minister say whether the scheme also envisages incentive remuneration or bonus payments for physicians, dieticians, and other drugless healers, according to the results achieved by their methods of treatment?
– All those who administer this scheme will be registered medical practitioners.
page 708
– In the absence of the Postmaster-General, I wish to ask the Prime Minister a question without notice.
– Order ! If it is a matter connected with the PostmasterGeneral it must be perfectly obvious that the Prime Minister can no more answer it than he could the earlier question relating to civil aviation.
– May I ask a question of the Minister who represents the PostmasterGeneral in the House?
– Order ! The PostmasterGeneral is not here, and I suggest that the question be placed on notice.
Mi-. DAVIES- I ask the Prime Minister whether there is some one here representing the Postmaster-General.
– No, there is not.
page 709
– Can the Prime Minister state whether it is correct that the islands section of the Commonwealth line of ships has been sold without calling tenders ? Will the right honorable gentleman also inform the House of the price received for the ships and the name of the company to which they were sold?
– Order ! That is a question which does not come within the scope of the Prime Minister’s Department or, I think, of any department represented by a Minister in this House.
– I think that the question asked by the honorable member, although it contains a good deal of apparent misinformation, refers to the recent sale of certain small vessels engaged in the coastal trade in Papua, formerly owned by the Commonwealth, to Steamships Trading Company. I shall have inquiries made to see whether it is possible to give the honorable member details of the sale.
page 709
– Can the Minister for Health inform me whether the Australian Government makes any direct grant to cancer institutes, or similar institutions,, in the various States ? If so, can the right honorable gentleman advise the House of the amount of such grants or the nature of assistance given? Does the Commonwealth Department of Health promote or conduct direct research into matters, associated with the disease of cancer? If no grant to the States is made, or no direct research conducted by the Commonwealth, will the Minister give consideration to both of these propositions ?
– Approximately fifteen or twenty years ago the Australian, government of the day established a radium bank to be made available for the purposes to which the honorable member has referred. At the present time, the research work of the Commonwealth is set in motion and directed by the National Health and Medical Research Council, which consists of representatives of the Commonwealth, and States. I shall bring to the notice of the council the matters raised by the honorable member.
page 709
– I direct a question to the Treasurer dealing with the recent publication, under his authority, of a booklet entitled Income Tax for Farmers and Graziers. Chapter 10 of that publication, which was no doubt issued under his authority and with the approval of the Minister for Commerce and Agriculture, contains elaborate praise of provisional tax and self-assessment. Do the contents of that chapter still represent the Treasurer’s own views ?
– The Leader of the Opposition should know that that question concerns a matter of policy.
page 709
– My question is directed to the Prime Minister. Is it the intention of the Government to hold a referendum, at the same time as the next Senate election, to deal with the matter of dead-locks in the Senate?
– No.
page 709
– I ask the Minister for Labour and National Service whether it is a fact that since, this Government amended the Conciliation and Arbitration Act and gave real purpose to the use of the secret ballot in the election of officers of industrial unions, great progress has been made in ridding the unions of Communists? For the benefit of the House, will the Minister prepare a statement which will show the effect of this legislation?
– I do not believe that there can be any doubt that a very remarkable success has attached to the amendment, that this Government introduced into our conciliation and arbitration legislation, to enable members of trade unions to have an honestly conducted ballot under the auspices of the Commonwealth Court of Conciliation and Arbitration.
– They had that right under the Chifley legislation.
– They did not have that right under the legislation of the Chifley Labour government because, according to that legislation, action to obtain a secret ballot could be taken only by an industrial organization, as such, and in fact, because many unions were at that time under the control of Communists, no such action was taken. It was not until this Government gave the power to a minority of the members of a union, indeed, as small a minority as 10 per cent, of the members, to call for the taking of a secret ballot that the provision began to work. Since July, 1951, when this Government’s amendments- to the industrial legislation took effect, 36 applications have been made by trade union members for secret ballots to be conducted. The courts have granted 25 of those applications. It is a matter of common knowledge and a fact that all honorable members of the House, I am sure, will applaud, that this action is undoubtedly assisting the rank and file unionist to rid himself of Communist influence and check the growth of communism in trade unions. We have not yet perceived the full effect of the legislation because some industrial unions hold their elections of officers bi-annually, and even tri-annually, and consequently all unions have not yet had an opportunity to put the legislation into effect. However, the legislation has undoubtedly served a very useful purpose already, and we believe that its usefulness will continue. I shall ascertain whether a more detailed statement about this matter can be provided for the information of all honorable members.
page 710
– Would it be possible for the Minister for the Army to arrange for the recording of the hours of training of national service trainees other than those that have been served in national service training camps? The Minister may recall that at one time such a record was kept for trainees in the
Citizen Military Forces in a book which they carried with them. Is the Minister prepared to revive such a system so that they will have a record of training hours outside their service in camp?
– In effect, that is done now. Every trainee receives a card which indicates to him the parades that he will be required to attend for the remaining portion of each year. If any variation of the practice that would be of value to trainees is possible, I shall give it consideration with a view to having it adopted.
– On the 19th February, I wrote to the Minister for the Army with regard to a young man named K. M. King who was in training at Ingleburn and who met with a serious accident. I have not had a reply as I believe that the Minister has been busy in Queensland. I ask him now, will he furnish me with a reply as soon as possible?
– It is my practice to reply to every honorable member as soon as possible. In accordance with that practice, the honorable member for Lang will get an answer in due course.
page 710
– Is the Minister for Social Services aware that his department is rejecting claims by victims of poliomyelitis for the invalid pension on the basis that they are not permanently incapacitated? In view of the years of suffering to which such persons are subject, during which many of them are totally and permanently incapacitated, will the Minister instruct his department to adopt a more sympathetic attitude towards sufferers from poliomyelitis and thus give to them the advantage of the more valuable form of social service, that is, an invalid pension instead of sickness benefits? Will he also make available to sufferers from poliomyelitis free attention by doctors and chemists and hospital treatment ?
– The law is quite specific as to the definition of a patient who is entitled to an invalid pension. Such a person must be 85 per cent, incapacitated. The degree of incapacitation is a matter for medical decision and cannot be determined by departmental officers. As to instructing my department to take a more sympathetic view towards persons suffering from poliomyelitis, that has already been done.
– Will the Minister for Social Services recommend to Cabinet a substantial increase of unemployment and sickness benefits in view of the enormously increased cost of living since the payments were last determined?
– The Minister for Social Services may reply to the question, which relates to a matter of policy.
– I do not wish to express any opinions regarding policy in reply to the honorable member for East Sydney, but I remind him that unemployment and sickness benefits were doubled in the last budget.
page 711
– Will the .Minister for .Supply have compiled an inventory of goods now remaining from those that were seized at the home of the former Japanese representative in Australia? Will he have it compared with an inventory which must have been made at the time of seizure of those goods, and then state what has happened to the goods concerned ?
– I shall give consideration to the matter and furnish a reply to the honorable member if I can.
page 711
– In view of the fact that fears have been expressed that the advent of Japanese pearlers into waters in the north of Australia may prejudice the Australian pearling industry, is the Minister for Commerce and Agriculture able to assure the House that in any negotiations that take place on the subject the interests of the Australian pearling industry will be fully safeguarded ?
– The honorable member and the country may rest assured that the interests of the Australian pearling industry and of Australia itself will be the paramount consideration in the negotiations.
page 711
– Is the Minister for Social Services able to advise the House of the number of persons who are in receipt of the unemployment benefit at this date?
– The question is one for the notice-paper, I should think.
– The number of persons receiving the unemployment benefit at present is 36,624. The number has dropped by 6,000 in the last three weeks.
– Will the Minister for Labour and National Service state the number of persons who are officially registered for employment at the various employment offices? Will he also state the number of persons who have been disqualified for registration because of the means test and for other reasons?
– I think that the honorable member is confusing two classifications of persons. There is a classification of persons in receipt of the unemployment benefit. The Minister for Social Services has given the figures relating to the number of persons in that category. There is another classification of applicants who have registered with the department and seek work.
– Or unemployed, to be precise.
– Not necessarily. The classification includes some persons who realize that the particular job on which they are employed is coming to an end. They register for employment in the hope, which is usually realized, that when their job has come to an end, they will be able to take up another position which the department is able to recommend. I am unable to cite the number of such persons offhand. The customary monthly survey made . by my department will be coming to hand in about a week’s time. When it is received the fullest information will be given.
– Will the Minister for Social Services state the number of persons who were in receipt of the unemployment benefit at this time last year?
– The answer to the honorable member’s question is “ No “.
page 712
– I ask the Minister for
Health whether payment of tuberculosis allowance to a number of persons has recently been terminated? If so, can he state the number of persons so affected and the reasons for the termination of the payment ?
– It is true that payment of tuberculosis allowance to a number of persons has been terminated. Such action has been taken under a measure that was passed during the regime of the Government of which the honorable member was a supporter. Payment of tuberculosis allowance is terminated in respect of persons who are recovering and are no longer infectious. If the honorable member regards that as a matter for regret, it is not so regarded by the persons affected.
– In view of the fact that some thousands of persons arc now recovering from the scourge of tuberculosis will the Minister for Health humanize the regulations under which tuberculosis allowance is paid in order that those who have a negative sputum test may continue to receive the full rate of pension until their health has been completely restored and they are enabled once again to engage in useful work?
– When the Labour Government was in office, persons within the category to which the honorable member has referred received only the invalid pension, but since the present Government assumed office they receive a special tuberculosis allowance if they are infectious. That improvement was effected in July, 1950, seven months after the Chifley Government went out of office. With respect to the honorable member’s suggestion that regulations governing such payment should be humanized, every possible care is taken in order to ensure that persons who are declared to be no longer infectious shall be thoroughly examined and if there is the slightest chance that they may retrogress they shall be eligible to receive the allowance.
page 712
Assent to the following bills reported : -
Fisheries Bill 1953.
Pearl Fisheries Bill 1953.
War Pensions Appropriation Bill 1953.
page 712
Debate resumed from the 6th March (vide page 702), on motion by Mr. Menzies -
That the bill be now read a second time.
– At the outset, it is just as well to be clear about the purposes for which this measure has been introduced. In general terms, it has two objectives. First, it is a part of the struggle which has been going on for a considerable time, particularly since 1947, for the preservation of the private banking system in Australia. Is the banking system to be nationalized, or is the private banking system to continue? Members of the Labour party have recently been endeavouring to create the impression that the nationalization of banking as a political issue, is now dead. Undoubtedly, that is not so. No person should be misled by the protestations of the Opposition on that score, or regard them as anything but an attempt to create a front for the approaching Senate elections.
The recent statements of members of the Labour party that the socialization of banking, as a policy, is now dead will not convince anybody. In fact, the honorable member for East Sydney (Mr. Ward) made the position plain to the House a few days ago when he stated that the nationalization of banking was still a plank of the Labour party’s platform. He emphasized that the Labour party had retained that plank, and meant to give effect to it. In those circumstances, it is futile for Opposition members to say to the people, “ The nationalization of banking is not an issue at the forthcoming Senate elections “. It is an issue not only at the forthcoming Senate elections, but at every general election in future. If the nationalization of banking is not an issue, why has the Labour party retained it as a prominent plank of its platform? I emphasize that the nationalization of banking is a separate plank of its platform, and is not related to the general socialization objective. The nationalization of banking is a declared specific objective of the Labour party. The utterances of Opposition members have failed to convince any one that it is not an objective of the party, and, indeed, all our experience supports the contrary view.
AVe should be well advised to remind ourselves that in 1947, the Chifley Labour Government made a direct attempt to nationalize the banking system, and that its effort was frustrated only with great difficulty. But that attempt was only a part of the pattern of general socialization. Shortly after the banking legislation of 1947 was declared unconstitutional, the country became engaged in a struggle to prevent the nationalization of medicine, which was only narrowly averted. At the same time, the nationalization of airlines became an imminent danger. All those attempts were parts of a general programme, designed to achieve the socialization of all the major undertakings and enterprises in the country. The opposition to this bill is also a part of that programme.
Every one believes that in the modern State, a strong and efficient central bank is necessary. I summarize the functions of a central bank as follows: - (1) to control the total supply of money; (2) to exercise control over interest rates; (3) to regulate the note issue; (4) in special circumstances, to direct finance into special channels of trade and commerce; (5) to control foreign exchange; (6) to act as a banker for the Commonwealth Government; and (7) in general terms, to control the creditbase in the country. We believe that the central bank, in exercising those functions, must use proper techniques, and we also consider that central banking, by itself, is not a panacea for economic ills. Central banking is not the sole method of controlling such movements as inflation or deflation. It is a most important factor in controlling them, but it is not the only factor, nor perhaps is it even the principal factor. As was aptly pointed out by the Minister for Air (Mr. McMahon) in this debate last week, other important factors are operating, which are not functions of the central bank, but such things as the total volume of production, and the enormous influence of the arbitration machinery and the control that it exerts over wages and hours on the cost of production. Then there is the powerful influence of overseas trade. I am sure that I do not need to remind honorable members of the enormous influence on the Australian economy that the price of wool has exerted during the last two or three years. There is, too, the influence of external loans, and Australia has gained important benefits and advantages as a result of the overseas borrowings of this Government. None the less, the central bank has an important effect, in conjunction with these other factors. In addition, the Government exercises further control by means of taxation and the control of capital issues. I have not made a comprehensive review of the weapons that a Government can use to control the economy. I have merely summarized them in order to make it plain to honorable members that although we believe that there is a necessity for a strong central bank, that of itself is not the whole story. Under the existing legislation we believe that the central bank possesses powers especially in relation to special accounts that go far beyond its requirements.
As I have already pointed out, the first purpose of the bill before the House is to prevent the socialization of banking. Its second purpose is to place a ceiling on special accounts, in order to prevent a future socialist government from destroying the private banks. While supporters of the Government believe that the special accounts system is necessary, we do not believe that it should be so uncontrolled and so limitless, as it is at present, that it could be employed to put out of business all or any of the private banks.
– Has it ever been used in that way?
– No. The previous Labour Government was so completely occupied trying to destroy the private banks by direct legislation that it did not have time to try any other method. We on this side of the House believe in a free banking system, and we believe that the provisions of the bill will remove the enormous threat that now hangs over the trading banks.
Several honorable members have referred to the people’s bank. I point out that it is relatively easy to whip up sentiment by the use of such vague phrases as “ the people’s bank “ and “ the people’s assets “. In point of fact, such phrases have no real meaning, because the Commonwealth Bank is not alone in being the people’s bank. No less than £1,300,000,000 of the people’s savings are invested in and controlled by the private banks, which in fact are owned by shareholders. Therefore it is just as appropriate to call the private banks the people’s banks. I remind honorable members also that the people’s savings in the Commonwealth Savings Bank aggregate about £900,000,000. It is time that honorable members opposite ceased their propaganda about the people’s bank. All of the banks belong to the people, as do all of the assets of this country. Supporters of the Government believe in free enterprise. The private banks have made a very great contribution to the economy of this country. Were it not for their activities in the past, neither the great pastoral industry nor the great secondary industries of this country would have expanded so greatly. People throughout Australia entrust their capital to the trading banks. Large companies, large men and little men, pastoralists, industrialists, professional men and all kinds of workers in Australia have faith in the private banking system.
– Particularly the small businessmen.
– Yes, as I am reminded by the honorable member for Bennelong (Mr. Cramer) the private banks have greatly assisted many small businessmen in the community. Take, for example, the position in any country town. As I have already mentioned, this measure is designed primarily to protect those banks. In this connexion we join issue openly with members of the Labour party. The bill will prevent banking nationalization by the employment of a back-door method in connexion with the special deposits. The bill is designed, not only to remove’ the power of the central bank to destroy the private banks by calling up their liabilities, but also to ensure that the Commonwealth Trading Bank shall function in fair competition with the private banks. Honorable members on this side of the House have stated many times that the Government believes in fair competition. The bill will not in any way injure the Commonwealth Trading Bank. It is designed merely to place the Commonwealth Trading Bank by law on the same footing as the private trading banks, so that it will compete with them not on what, might be described as “ a most-favoured nation “ basis, but on the basis of fairness and equality.
I shall not deal with all the provisions of the bill, which have been explained adequately by the Prime Minister (Mr. Menzies). One of its main purposes is to place a ceiling on special deposits which, at October last, amounted to £545,000,000. It is obvious that, had the whole, or even a large proportion of that amount been called up, the private banking system of this country would have been destroyed. T am posing not a theoretical possibility, but a definite possibility under a socialist, government. In simple terms, the bill will place a limit on special deposits. It will apply not only to the private banks but also to the Commonwealth Trading Bank so that there shall be no means of discrimination by which a socialist government in the future may finally destroy private banking. I was amazed by the naivete of the argument used by the Leader of the Opposition, who declared that the bill had been designed to “disadvantage, prejudice and weaken “ the Commonwealth Trading Bank. I shall be even more astonished if anybody can produce evidence to support that argument. However, the fact that the right honorable gentleman holds that opinion indicates his belief that, under present conditions, the General Banking Division of the Commonwealth Bank, which will be established as the new Commonwealth Trading Bank, occupies a privileged and special position to the disadvantage of the Trading Banks. Obviously, this legislation has been designed to prevent it from retaining that position.
To sum up, then, the bill embodies three main provisions. First, it will preserve the essential functions of the the central bank, which I have already discussed. Secondly, and perhaps most important, it will safeguard the private hanks. Thirdly, it will establish a condition of fair competition between the Commonwealth Trading Bank and the private banks. The Government clearly has a mandate for these three proposals, whereas the former Labour Government had no authority to enact its legislation for the nationalization of banking, which was sprung on the people by surprise. The three proposals that I have specified were submitted to the people during the general election campaigns of 1949 and 1951, and on each occasion the people endorsed them by an overwhelming majority. Therefore, there can be no doubt of the validity of the Government’s mandate for this bill. Tn conclusion, I return to the point from which I started. This legislation represents one more phase in the struggle between free enterprise and those who favour the nationalization of hanking. We, on this side of the House, believe in free enterprise. We stand for freedom and oppose socialism. No protestations by members of the Opposition can convince anybody that anything other than the nationalization of banking in Australia is at the core of their objection to this measure. The leopard has not changed its spots.
– The honorable member for Oxley (Dr. Donald Cameron) said that this hill represented a phase in the struggle between those who favour socialized banking and those who support the private banking system in Austalia. The measure has nothing whatever to do with the nationalization of banking. Its purpose is to remove the curbs that the former Labour Government was obliged to place on the activities of private banks in Australia. This Government has a false impression of the purpose of money in the community and, consequently, of the functions that banks should exercise in distributing funds to different members and sections of the community. The Labour party has always believed, to state our view rather slickly, that money should be the servant of the community and not a determinant of the welfare of the community. We should have a monetary and banking system that will ensure that everything that can be done for the good of the community shall be placed first. That is why the former Labour Government imposed regulations to control the activities of banks in Australia. For the purpose of illustrating Labour’s point of view, I shall examine the anatomy of banking in Australia to-day. There are, broadly, three kinds of banking operations in Australia. We have what are called the savings banks, which hold savings amounting to about £1,000,000,000. That money has been deposited by the people with the Commonwealth Savings Bank and the various State savings banks. The latest annual report covering the activities of the Commonwealth Savings Bank shows that there are about 6,000,000 individual accounts in the various savings banks of Australia. This figure indicates that the average level of deposits is not very high. If the total were divided equally between depositors, the amount in each account would be about £160. In fact, statutory limits are placed upon the amount that one individual may lodge with a savings bank. The Commonwealth Savings Bank had a total of about £600,000,000 in depositors’ accounts at the 30th June, 1952. Most of that money had been invested by the bank in various forms of government security. In other words, a savings bank is virtually an instrument for the mobilization of the small savings of individuals.
The next, and perhaps the most significant, feature of banking in Australia, is the trading bank system. We should examine very closely the functions that the trading banks ostensibly perform in order to ascertain whether they determine economic policy or are merely the sympathetic regulators, as it were, of the activity of banking. A trading bank is, primarily, a place where certain people lodge surplus money. The bank lends these deposits to other people at a higher rate of interest than it pays to the depositors. However, there is another aspect of trading bank activity. The banks engage in the buying and selling of certain securities. “When conditions are favorable, they are willing to invest such money as they have at their command by granting overdrafts, but, at other times, when conditions are not to their liking, they prefer to hold some of their assets for the time being in the form of government securities, treasury-bills or similar investments. This is not essentially a function of banking, and it has the effect frequently of indirectly and unfairly regulating the economic health of the community. Because of that sort of activity by the trading banks, it was found necessary to establish a third kind of bank, of which there is only one in Australia - the central bank. The Commonwealth Bank, which is the central bank, lays down a policy by which the activities of the various trading banks are regulated. But that in itself is not sufficient to regulate banking in Australia because of certain inherent difficulties in our economy. It has been found necessary to regulate the whole machinery of banking by means of legislation of which the banking legislation of 1945 was the culmination. The bill before the House will do a great deal to destroy the safeguards that have been provided for the control of .banking policy in Australia as I shall show in the time remaining to ‘.me.
In order to make certain matters clear we should examine what might be called the anatomy or structure of the private banking system in Australia. Statistics on this subject may be taken from a number o’f sources but I. have taken some from the latest issue of the Statistical Bulletin of the Commonwealth Bank which provides a picture of the whole of the private banking system in Australia. The Statistical Bulletin reveals that ‘during December, .1952, the total deposits in the seven major private trading banks amounted to £1,147,00Q,000. Because banks are not very different from other commercial concerns the liabilities on one side of their balance-sheet must be matched with assets on the other. It has been mainly on the subject of assets that this debate has centered. The value of the ‘banks’ assets such as coin, bullion, and notes with the Commonwealth Bank totalled £7’8,700,.0.0Q. That is what might be called their till money. It is ^virtually only the small change of the banking system. The next asset listed, which has fluctuated considerably, is treasury-bills. In December, 1952, their value was £136,800,000. The next item- amounts held in special accounts with the Commonwealth Bank- totalled £156,500,000. Government and municipal securities totalled £7.9,300,000. The principal other assets of the Banks - advances to individual customers - amounted to £637,700,000.-
It is desirable to examine closely what the banks are in the habit of describing as liquid assets - coin, treasury-bills, special accounts, and government and municipal securities. These are the assets about which the Government has suggested that the banks are very frightened. These assets all depend for their worth on the economic health of the community as a whole. They represent only some kind of authority issued by the Government. The one pound note would have no value if it could be printed by any individual instead of being issued by the Note Issue Department of the Commonwealth Bank. The treasury-bill is simply an acknowledgment of an obligation by the Government to the banking system. It would have no worth without the Government’s acknowledgment. The special accounts about which honorable members opposite are so frightened are only slightly different in degree from treasury-bills. They represent assets that have been put into a special drawer, so to speak, and locked up for the time being. Again the other securities, government and municipal, would be worthless pieces of paper if it were not known that -the Government would honour them. Yet the private banking system has quibbled about the variety of governmental assets which it is to hold, whether it is to be allowed to hold one kind as against .another, only different in degree.
This is the kernel of this bill. Opposition members contend that the private banking system should not have any power to determine economic policy. The private banking system should simply provide facilities :for people to deposit their money and for other people to borrow money for a consideration. It is when the banks hold and dispose of governmental securities that they intrude into the economic structure of the country and determine economic policy, not necessarily from the point of view of the community, but from the point of view of their own profit. The honorable member for Oxley (Dr. Donald Cameron) and the Minister for the Navy (Mr. McMahon) suggested that it was hypocrisy to refer to the Commonwealth Bank as. the people’s bank and to the private banks in another way. There is an essential difference between the Commonwealth Bank and the private banks. The general public are the shareholders in the Com.monwealth Bank. The Commonwealth Bank supports our whole economic life, not as a bastion in the interests of profits, but, in theory at any rate, as the guardian of the economic life of the community. The private banks are private banks because they are beholden, in the last analysis, to the shareholders who contributed their original share capital, and a very insignificant amount of that share capital is in relation to the total assets or liabilities of the private trading banks.
As long as the private banks are only takers in “ and “ shellers out “ of money it does not matter a great deal whether they are privately or publicly owned. In many ways the difference is only one of degree. If the private banks are given additional power by this legislation so to determine the manner in which they shall hold the different kinds of government securities, they will have a power which is not their right and which can only be exercised to the detriment of the community because it will have been removed from the place where it should properly be .exercised. That is the issue that faces us. The point at issue is not the nationalization of banking; it is whether the Government can justify the changes that it has proposed- in this legislation.
I ‘want to point out what is involved in some of these changes. As the Leader of the. Opposition (Di Evatt) mentioned in the course of his speech, a great deal of damage has already been done to the banking system in Australia because of the- lax way in which the Commonwealth Bank Board has performed its functions during the. last twelve months. The
Leader of the Opposition cited figures, which were then the latest available, showing that between June, 1952, andDecember, 1952, the holding of treasurybills by the private trading banks had risen from £35,700,000 to £136,700,000. Since he made that speech new figures have been issued by the CommonwealthStatistician which show that at the end of January the holding of treasurybillshad risen by a further £21,100,000. It had risen from £136,700,000 to £157,800,000. The holding of government securities at December, 1952, which was £79,200,000, has since risen to £88,700,000. In other words, he said that at that date there had been a disposition of assets from the central bank to the private trading banks to the tune of £100,000,000 in treasUry-bills, and £20,000,000 in government securities, a figure which has risen by another £30,000,000 in the last month.
It is easy to see how that is reflected on the reverse side of the picture, which is represented by the holdings of the central bank which is, as it were, the trustee of the public property. These holdings of government and other securities between January, 1952, and January, 1953, contrary to the movement of the holdings held by the private banks, which have risen, have fallen from £615,900,000 to £418,800,000. That represents a decline of almost £200,000,000 of the value of publicly-owned property held by the central bank. That amount was transferred into the hands of the private trading banks, ostensibly becauseit was necessary to release their holdings under the special accounts provision. The, Government, which has been responsiblefor lowering the level of the special, accounts deposits from £570,000,000 to £150,000,0.00 in about twelve months, now talks about a “gigantic uncalled liability “. As the Leader of the Opposition, rightly pointed out, if that gigantic liability exists - and we query it3 existence - it exists because the Government caused it. The Government allowed Australia’s London funds, which are also theoretically held- by the central bank for the general welfare of the community, to drop from1 a. record level ito an insignificant amount.
It seems that, here again, a very subtle change is taking place in the determination of economic policy in Australia because, prior to the 1945 legislation and the war-time legislation, each private bank in effect had to look after its own London funds. However, because of the necessity to mobilize foreign currency during and after the war, the Commonwealth Bank now has the power, as any central bank should have, to mobilize the nation’s foreign exchange and buy from the various private trading banks the amounts of foreign exchange that they may hold from time to time. The trading banks seem to have noted a subtle distinction here. Whereas before they had to be careful of the level of their London funds in their own interests, they are now inclined to take the view that, because the Commonwealth Bank has control of the nation’s London funds, they can get what foreign exchange they want at any time they might want it. It seems that there was some form of collusion between the Government and the bankers, because, when the Government encouraged imports on the ground that it would thereby help to abate the effects of inflation, it apparently took the view that if the banks wanted to buy foreign exchange the special accounts deposits could be released to the corresponding amount, because the London funds fell by about the same amount as the special deposits fell. A study of the changes that have occurred in the distribution of the assets of the private trading banks shows that although the special accounts deposits held by the Commonwealth Bank fell by £400,000,000, the trading banks’ disposable assets have increased by £200,000,000 in the process. In fact, they have increased by approximately £250,000,000. That means that that amount of money can be held by the private trading banks, if ‘it suits them, and profit earned from it, or it can be sold and used for promoting a policy of expansion and for increasing advances, thereby again earning profits for the private banks.
There has occurred over the past twelve months a very serious distribution of initiatory power from the public sys- tem of banking, in which the central bank determined, or was supposed to determine, what steps should be taken in the interests of the people as a whole, into the sectional hands of the private trading banks. That is a change which, once having occurred, is difficult to reverse. The Government has suggested that if the Labour party took office to-morrow it would call up ‘the £550,000,000 of uncalled liability overnight. As the Leader of the Opposition demonstrated by quoting a well-documented statement about the operation of the special account provision when it was under Labour administration from 1945 to 1949, the system was exercised flexibly by the central bank for the benefit of the community as a whole. No charge can bo levelled at the Labour Government that it was a reckless guardian of the banking system. The private trading banks cannot claim that the greater exercise of power that they now have is likely to be used by them in the interests of the people as a whole. A study of their history would dispose of such a claim. Bather might such power be used in a short-sighted way simply on the criterion of private profit. When the Government was asked, in relation to the Commonwealth Bank Bill, why it was making a change in the relationship between the trading banks and the Commonwealth Bank, it had such a weak cause that it had to fall back on nebulous phrases like “ unfair competition “ and “ equality of sacrifice “. The same charges as were levelled against the Government in connexion with that bill can be levelled against it in relation to the changes that will be produced by this legislation. We ask why it is necessary to give private trading banks the right to acquire treasury-bills and government securities which are, in the last analysis, public securities. If they are to be held by banks, not for banking purposes, but simply for the purpose of making profit, why it is necessary to bring that power back after it has been inoperative for ten years? Is there any one reason that can be advanced to show that the change is necessary? When we examine the nature of the power that can be placed in the hands of private banks as a result of this change we can only assume that the banks are to be given that power as some sort of pay-off from the Government. When we look at the other important mutilation of the central bank system proposed in the measure, this so-called formula relating to special accounts, we must ask why it is necessary to change the system that has operated from 1941 up to date and which, it is claimed, has become unmanageable, though only because of the Government’s own mismanagement. That formula was exercised flexibly in the past. Why should it be replaced by a rigid formula ? The Leader of the Opposition cited figures to show that in some years the central bank had called up 45 per cent, of the amount which, theoretically, could have been called up. That implies that, in some years and in some circumstances, it may be necessary to accumulate residues on which the Government may draw if an inflationary condition develops. After all, economic trends become evident over a long period, not just in one or two years. Although the present formula has been exercised fairly from year to year this Government is giving away the power which it confers. The Government proposes to replace a formula, which has proved its value in the past, with one of exceeding rigidity.
A great many supposedly expert authorities on central banking in other parts of the world have been quoted in the House recently. I point out to honorable members that the economic circumstances of Australia are different from those of other countries, such as Great Britain-
– No, they are not.
– I suppose that the honorable member for McMillan (Mr. Brown) considers that he is a supreme authority on banking.
– In what way do our economic circumstances differ from those of Canada?
– I am simply trying to point out that, as far as central banking is concerned, there are no rigid techniques. There may be certain fundamental assumptions, but other than that, banking policy must be worked out by each country according to its circumstances. During the years of World War II., which were the most critical in our history, and also during the period of post-war reconstruction, Australia evolved a banking policy which enabled it to emerge from the war in a healthier economic state than any other country of the world. Now, after a few years of Liberal party government, inflation has got out of hand. In Australia more than it has in any other country. We find that full employment, which was accepted as a basic consideration by the previous Labour Government, has been destroyed. Apparently, the Government gains a little comfort from the fact that the number of registered unemployed, which recently was approximately 36,000 has declined by a few hundred.
– Order! The honorable member’s time has expired.
.- The honorable member for Melbourne Ports (Mr. Crean) has endeavoured to show, by a technical approach to the subject, that the proposed amendments of the 1945 Banking Act will destroy the safeguards established under the Commonwealth Bank Act. I suggest that the whole substance of his speech represented an endeavour to cloak some of the very great dangers which this bill will overcome. Both this measure and that recently discussed in the House will strengthen the banking legislation of the country in such a way that all banking institutions will be placed on a more equitable trading basis and come within the framework of the present banking legislation. I submit that when this bill is passed, it will be much more difficult for a socialist government to carry out its policy of ‘ nationalization and control of private trading banks. Admittedly, of course, this legislation will merely make that purpose more difficult of achievement, because, as all honorable members are aware, there are two ways in which nationalization of banking may take place. First, it may be done by administrative action, by means of which a slow but strong squeeze is applied .to trading banks so that ultimately it becomes impossible for them to trade profitably.
– Has that ever been carried but?
– I shall explain that matter to the honorable member for Ballarat (Mr. Joshua) in a few moments. The second method is by means of legislation. We all know that at the present time the banking legislation contains very great dangers which might permit the squeeze which the honorable member for Ballarat says has never been tried in the past.
The legislative method of nationalization, which is a much more effective, exacting and precise way, has already been tried out in Australia. I refer to the definite attempt by the Government led by Mr. J. B. Chifley. I have no doubt that nationalization will again be tried if the Opposition is ever returned to power. Nothing has been said during this debate to indicate that the policy of the Australian Labour party in this respect is other than that printed and prescribed by the party. However, the banking policy of the Opposition has become a little obscure because of the attitude of the Leader of the Opposition (Dr. Evatt) throughout the whole of this debate; he has endeavoured to brush off any discussion which might indicate that the subject of nationalization is a live one as far as his party is concerned. He endeavoured at all times to give the impression that it is a dead subject.
– A dead horse !
– I am grateful for the remark of the honorable member for Watson (Mr. Curtin), because I wish to show that the subject is not a “dead horse”. In 1947,’ Mr. Chifley stated, when introducing the Banking Bill of that year, that its purpose was to empower the Commonwealth Bank to take over the banking business being conducted in Australia by private trading banks. On that occasion, the late right honorable gentleman said -
The Labour party lias maintained for many years that, since the influence of money is so great, the entire monetary and banking system should be controlled by public authorities responsible .through the Government and Parliament to the nation. On this principle the Labour party has held farther that since’ private banks are conducted primarily for profit . . their business should be transferred to public ownership.
The honorable member for Melbourne Ports has endeavoured to show, by means of technicalities, that there is no desire in the minds of the members of the Australian Labour party to carry out that objective. However, from 1947, when Mr. Chifley made the speech to which I have referred, to the present time, nothing has happened to show that the ideas of the Australian Labour party on this subject have changed one iota. In fact, executive members of the party have reiterated their intention to take over the banks when the party is returned to power.
The attitude of the Leader of the Opposition during the recent debates in the House has been, “Do not show your hand “. He has adopted that attitude in an attempt to divert public attention from the real policy of his party in regard to banking. Yet only a week ago, I am informed, the honorable member for Melbourne (Mr. Calwell) said, at a meeting of caucus, “Let us be honest with the people and say to them that we believe in nationalization of banking institutions “. We should congratulate the honorable member, because he at least wishes to be honest about the matter. He has repeated many times, both in this House and on public platforms outside, his attitude towards taking over private enterprise and privately owned institutions. Yesterday, the honorable member for Melbourne (Mr. Calwell), while speaking at a Labour Day picnic gathering in Melbourne, said -
If we get nine years of Labour government in the federal (parliament we can change the whole face of Australia.
Later, during the same address, he said that there would be certain difficulties about remaining in power for so long, except by means of the distribution of the electorates. His actual words were -
I will have to suggest to the Leader of the Opposition that we make a trip (o Queensland and find out from the Premier, Mr. Gair, bow Labour has kept in power there for well over twenty years.
I suggest that every honorable member of this chamber knows how Labour has remained in office in Queensland for so long - it has been done by a certain amount of gerrymandering. Honorable members will perceive in those words of the honorable member for Melbourne the full intentions of the Labour party. The honorable member for Fawkner (Mr. W. M. Bourke) introduced the honorable member for Melbourne to the meeting as “ the future Treasurer of Australia “. Consequently, honorable members will perceive that “the so-called future Treasurer of this country believes that if he and his party should ever assume office in this country, they will change the whole face of Australia. I suggest that the easiest way in which that may be done is through the banking institutions of this country. It would be very easy for a Federal Treasurer to change the whole face of Australia by giving directions to the Commonwealth Bank about how it is to treat its competitors. Then, as the honorable member for Melbourne said, if the Labour party were long enough in office it could carry through its programme. The honorable member indicated that it would remain in office long enough to carry out its policy even if it had to gerrymander, and alter the electoral boundaries. If the Labour party were in office for nine years, as the honorable member for Melbourne desires, it could do all that this Government, by legislation, is endeavouring to make difficult.
Now let us consider the most important part of the present measure, that is, the part of the bill that relates to special deposits. I suggest that power over special deposits is the key to the problem of changing the face of Australia. Moreover, by using this key the whole of our systems and’ institutions can be changed quite simply and easily. It may be interesting for honorable members to be reminded how the special deposits were initiated so that the whole matter can be put into proper perspective, and to show how the special deposits accounts may be ‘ used to the advantage of the Commonwealth Bank and to the disadvantage of its trading, competitors. It is quite true, as the Prime Minister (Mr. Menzies) said, that in 1943. the government of the day passed national security regulations to regulate war-time banking.. The regulations affected the surplus investable funds of the associated banks. Those funds had previously been deposited, voluntarily or under a gentleman’s agree ment, with the central bank. When a Labour government assumed office in 1941 it changed that system and introduced national security regulations which gave the Commonwealth Bank control over the surplus investable funds of the Associated Banks. In 1945 the Labour Government realized, apparently for the first time, that banking was in such a state that the private banking institutions in Australia could be controlled. It also realized that the time was coming when the national security regulations would be no longer valid, and it therefore passed the 1945 Banking Act. By that legislation the Commonwealth Bank was completely re-organized, the special accounts procedure be;ng only one of the innovations. The Commonwealth Bank endeavoured to use the Banking Act of 1945 to force all governmental and semigovernmental institutions to deal only with the Commonwealth Bank. Honorable members will remember how the Melbourne City Council challenged that direction, and how the High Court upheld the corporation’s appeal. Then we arrive at the stage of the statements of intention made by the Labour Prime Minister in 1947. Past Labour governments have sought to prevent trading banks from doing business with governmental and semi-governmental institutions, but a very dangerous section remains in . the 1945 Banking Act, which provides that certain sums of money must be paid by the trading”’ banks into special accounts in the Commonwealth Bank. The amount of money to be paid into those accounts was fixed at the amount of special deposits with the Commonwealth Bank in July, 1945, plus certain additions. It has been explained that the special accounts contain not only the amount of money deposited with the Commonwealth Bank by the trading banks in July, 1945, but also sums representing 100 per cent., tie total increase of assets of private hanks after July, 1945.
It has been said by the honorable member for Ballarat (Mr. Joshua) and other honorable members opposite, time and time again, that the liabilities of the trading banks to the Commonwealth Bank have not been called up. I suggest that the fact they have not been called up in the past is no guarantee that they will not be called up in the future. We knownothing of what will happen in the future, and we have seen enough of the actions, and heard enough of the statements, of the honorable member for Melbourne to know quite clearly what he would do if Labour should be returned to office. We must take every precaution within our power to ensure that we make the nationalization of banking a difficult matter for any socialistic government that may come to power. The most important aspect of this bill is that it will cancel the enormous legal liabilities laid down in the 1945 Banking Act, and will allow the trading hanks to make a fresh start. Their liabilities will be cancelled from October last year, and an adjusted ceiling will be put on any new liabilities. The Government has inserted these provisions so that they will apply not only to the private trading banks but also to the Commonwealth Trading Bank. The provision will apply with the force of law when the measure has been passed by both Houses of the Parliament. In the past provision has been made for special accounts to apply only to the private banks but not to their competitor, the Commonwealth Bank. The Government believes that this is most unjust, and so that provision is to apply now to the Commonwealth Trading Bank and to all other trading banks. In fact, steps are being taken to institute an equitable system which will cover all the banking institutions of Australia.
From this brief summary of those three points, I believe it is apparent that the banking legislation that is now in existence needs substantial amendments such as those that have been outlined in this bill. When these bills are passed, the special deposits will be brought into line with current banking practice, and the new legislation will remove undesirable features from the central hank’s point of view. It will make ample provision for the Commonwealth Bank to control the investment of expanding resources and will prevent the use of them for inflationary investment. At the same time, it will remove the liability of the trading banks to provide excessive and impossible amounts.
It is important to observe that the cancellation of the uncalled liability will do much to restore confidence in the special accounts system and will also strengthen the hand of the Commonwealth Bank in that at least it will no longer he regarded a-s a potential instrument of destruction by the banking world. The Commonwealth Bank staff will approve of the proposals which will place them on a better basis. The requirement that the Commonwealth Trading Bank shall also conform to the rules and regulations of the special account fund is a further step towards strengthening the control of the Commonwealth Bank over all significant sections of the economy and is a recognition of the fact that the Commonwealth Trading Bank is, in fact, a bank to be considered. I think it is fair to point out that this legislation does not place minimum limits on the deposits of the trading banks. That could mean that one bank could have less of its deposits called up than the others, and that bank could be the Commonwealth Trading Bank. It may be wise to have some elasticity in regard to this matter in view of the fact that some banks are rather low in liquid funds at some periods of the year for different and longer periods than are others.
The legislation that is before the House will not actually tie down the Commonwealth Bank to such an extent that it will be’ in a strait-jacket. It has been given a certain amount of elasticity in its workings and we must rely to some extent upon the Commonwealth Bank Board to see that that elasticity is used for the purpose for which it was intended. The measure places the onus of dealing fairly on the Commonwealth Bank Board. This provision, which could be used in a wrong manner, relates to ‘the furnishing of detailed statistics by the various trading banks to the Commonwealth Bank. The real protection of this information would require the complete separation of the Commonwealth Trading Department from the Commonwealth Bank. No provision is made for that separation. It has been done only on the executive level and not on the policymaking level. The Government has realized that from the point of view of the Commonwealth, it is desirable that officers should be easily interchangeable between the various institutions. It is left to the integrity of the Governor to ensure that the officers who collect the confidential information from the other banks to-day are not to-morrow in an administrative position in a competitive trading section of the Commonwealth Bank. Honorable member on the Opposition side might take some comfort from the matter to which I shall finally draw attention. I must say that this point does not entirely please me. That is that the Commonwealth Trading Bank still has the advantage of being freed from the obligation to pay taxes. I believe that on that matter, the Government has been extremely lenient.
The Government’s desire has been to enact certain legislation to protect the private trading bank structure in Australia but it has done nothing that will handicap the Commonwealth Bank in its central banking functions. It has thus permitted elasticity to the Commonwealth Bank in all its actions even to the extent of placing considerable confidence in the Commonwealth Bank to carry out its functions in a fair and equitable manner. The legislation that has been introduced, both now and in the earlier amendments of banking law, by this Government has the virtue of indicating clearly to the Commonwealth Bank that it should deal fairly with its competitors. The responsibility for this is placed upon the shoulders of a board rather than on those of the Governor. When so much depends upon the integrity of those concerned, this is a most advisable and substantial achievement.
This legislation also provides the opportunity for further experiments and may open the way for complete separation of the Commonwealth Bank, the Commonwealth Trading Bank and the Commonwealth Savings Bank at some future time if it is thought desirable. The two bills that have come before us represent a further step in the evolution of the banking system of Australia. In all our .considerations, it is important to remember that the system is in a state of evolution and that, in fact, banking and currency matters which have been subject to vast changes during the past few decades may well be subject to further considerable changes in the not so far distant future. The advent of managed currencies has brought with it the occasion for new technique and, in particular, the necessity for strong and well managed central banking. I believe that in these two bills some real progress has been made towards freeing the trading banks of irksome restrictions that arose from the 1945 legislation. If they were allowed to remain, they would completely smash the private banking system of Australia under a socialist government. The only regrettable thing about this amending legislation is that, after it has been placed on the statute-book, it may be amended at a future date by a socialist government just as easily as it was drafted by this Government. However, the possibility of the legislation being so amended will depend very largely upon the good sense of the people of Australia. They should make doubly sure that the socialists, who are in Opposition to-day, are never again allowed to take over the reins of government and give effect to the threat uttered only yesterday by the honorable member for Melbourne, who is the Deputy Leader of the Opposition, that once they get back into power they will change the face of Australia.
.- Any legislation that affects banking matters must always be given very earnest and serious consideration, by not only the members of this House, but also the people of Australia. For that reason I approach the consideration of the bill now before us, as’ I did to the one that was passed by the House last week, with a good deal of interest and I subject it to a great deal of critical examination. Bad as was the bill that was passed last week, this bill is regarded by the Opposition as being even worse than the Commonwealth Bank Bill because it seeks to make many sweeping amendments of the vital principles that were embodied in the 1945 banking legislation. In order that these sweeping amendments may be better understood, I shall deal particularly with two revolutionary changes which this bill proposes to make to the Banking Act 1945. The first relates to special accounts.
In brief, the measure proposes that instead of 100 per cent, of the deposits being the maximum amount which may be called up by the central bank - I stress the word “maximum” - for the base period a maximum of £220,000,000 has been fixed. For the first year thereafter the maximum liability of the trading banks in respect of special accounts is to be fixed at 75 per cent, of increased deposits and for following years the most extraordinary provision has been made that the maximum amount that may be called up by the central bank is 10 per cent, of the increased deposits for each year. The Commonwealth Trading Bank is to have its base deposit fixed at £15,750,000. That briefly is what is proposed in regard to special accounts.
The second revolutionary proposal is one that has not been mentioned by honorable members opposite during this debate. Indeed, it was almost slurred over by the Prime Minister (Mr. Menzies) in his second-reading speech. I refer to the total repeal of section 28 of the Banking Act 1945 the provisions of which are very important from the stand-point of the Australian people, particularly when we remember that the Commonwealth guarantees the deposits of the whole of the trading banks. Section 28 reads as follows : -
A bank specified in Part I. of the First Schedule–
That is, the private trading banks- shall not, except with the consent in writing of the Commonwealth Bank, purchase or subscribe to -
It is proposed that those three prohibitions, which have operated since 1945, shall be wiped out. This bill consolidates and finalizes what has been done in the Commonwealth Bank Bill which provides for the establishment of the Commonwealth Trading Bank as a separate unit under a separate governor. A good deal has been said by honorable mem-r bers opposite in an attempt to justify that change, but they have completely failed to recognize that there is a very big difference between the trading banks, which are entirely separate and distinct one from the other, with separate incorporations, separate shareholders and separate boards of directors- -each a complete autonomous unit and each following its own policy and subject only to the limits of its policy - and the Commonwealth Bank. The private banks are subject to the provisions of the Banking Act, which lays down certain broad principles relating to the control of their funds so that, as individual units, they will not be able to cause financial upsets in Australia. The Commonwealth Bank, which is now to be known as the Commonwealth Trading Bank, is in an entirely different position. It is a part of the central bank and is subject to the control of the officers of the central bank and to the policy laid down by them. There was not the same necessity for rigid control of a bank which is controlled by the central bank as there is for private banks each of which follows policies of its own and is concerned solely with its own affairs. In future the Commonwealth Trading Bank is to be a separate entity with its own general manager, and because there is a possibility that disputes will arise between the central bank and the Commonwealth Trading Bank, we have made provision for their settlement. Such disputes could not possibly have arisen in the past.
When we were dealing with very big principles such as those that are contained in this bill, one would expect that the debate would have been commenced on a high plane, because there is nothing as sensitive as the financial structure of the community, and nothing can cause disaster more quickly than the wrong application of financial policy. Had the debate been kept on a high plane we could have examined the bill dispassionately and asked ourselves if the proposals contained in it were necessary. We should have investigated the whole matter from the stand-point of what is best for the community. Unfortunately, from the commencement of the consideration of the bill the debate has been on a political plane. Every attempt has been made by honorable members opposite to besmirch the Opposition and to charge it with low or, perhaps, ulterior motives. As a consequence, the vital principles of the bill have been almost completely overlooked by honorable members opposite. The honorable member for Isaacs (Mr. Haworth), at the beginning and at the end of his speech, charged the Opposition with ulterior motives because of its criticisms of the bill. One can understand his doing so because the Prime Minister himself adopted a similar attitude. Before the right honorable gentleman even attempted to explain the measure he said -
In .the hands of a Government bent upon dominating the central bank for its own political ends, these excessive powers would be a potent weapon for attacking the independent existence of the banks themselves. Therefore, great political issues are involved in these matters.
Thus, from the start, the attitude of the Government has been not that this is a matter of a sound national economic structure, but a matter of political issues. Dealing with the activities of the central bank, the Prime Minister said -
I want to say at once, because it is as well that, as far as possible, we should fight this matter out on clear ground, that in my opinion there is no cause for believing 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.
That commendation applies equally to the Labour Government’s administration of the 1945 legislation until 1949 as it does to this Government’s administration of it since it assumed office in the latter year. I say with the greatest possible emphasis that the Commonwealth Bank has endeanvoured to apply the principles embodied in the Banking Act. It is noteworthy that this Government should pay tribute to that institution for the manner in which it has carried out its responsibilities. Having regard to that fact, the .suggestion made by Government supporters that the Chifley Administration .did not administer the 1945 legislation with justice to the private banking institutions or -in the interests of our economic welfare is completely groundless. If honorable members apposite are .suspicious of .Labour in respect .of its financial policy, members .of the Opposition have every reason to be suspicious of the purpose for which this measure has been introduced, particularly insofar as it will affect the preservation of the community’s assets. We are justified in suspecting that the Government is more concerned with advancing the interest of a banking monopoly and of big business than it is with the preservation of the assets of the people.
Much has been said about the special accounts. I emphasize that the Labour Government did not insist upon the private banks lodging with the central bank 100 per cent, of their increases of deposits. Labour did not seek in any way to embarrass the private financial institutions in its exercise of the power for which the 1945 legislation made provision. It refrained from doing so, because no central bank and no government would seek to cause a crisis in the banking industry. I readily admit that nothing could be more calculated to destroy a government than a deliberate act on its part to cause such a crisis. Everybody knows that it would thereby place, not only the banks, but also itself in serious difficulty and, as a consequence, the people as a whole would suffer. Experience in the past has shown that such a crisis would disrupt the whole economic life of the community. No government that desired to survive or to see the nation progress would take any .action that would tend to cause a crisis in banking. Therefore, it is nonsensical for Government supporters to suggest that a future Labour government would take action of that kind. Up to the present, Government supporters have not made a case to justify the alteration of the existing system proposed to be .effected under this measure. Those honorable members cannot point to any event that has -occurred during the last few years that would support their contention in that respect. On the contrary, the central bank and the private trading banks have been able to carry <on -their operations -satisfactorily. The central bank has invariably permitted the -private trading banks to withdraw the amounts which they sought, and no harm has been done to the banting life of the community. Therefore, I cannot comprehend why, after a period of seven years since the establishment, of the present system, during which time no difficulty whatever has arisen in the relationship between the private trading banks and the central bank, the Government should now propose to make revolutionary changes of the kind that are embodied in this measure. During that period we have not experienced all the economic vicissitudes that can befall a community. It is true that prices have risen rapidly and that the present Government has not used its power to prevent prices from rising. For instance, during the last three years, costs have risen by approximately 60 per cent. I assume that Government supporters, who promised the people that they would put value back into the £1, realized what that promise involved. Therefore, the Government should have utilized to the full the resources at its disposal that would have enabled it to honour that promise.
The special accounts were established primarily for the purpose of preventing secondary inflation. However, the new formula, for which this measure makes provision in respect of the special accounts, will be bound to encourage secondary inflation during the next two, or three, years. Under the measure, the private banks will be obliged, during the next twelve months, to lodge in the special accounts 75 per cent, of increases of deposits. In view of the fact that the Government believes that that provision can be implemented for a period of twelve months without danger to the community, I should like its supporters to explain why it now proposes that after the lapse of that period the proportion of increases of deposits, which the private banks shall be obliged to lodge in the special accounts, should be reduced to 10 per cent. The private banks are to be permitted to retain 90 per cent, of increases of deposits for use in their ordinary trading activities. As we have not yet had an opportunity to judge accurately the effectiveness of the 1945 legislation during a period when prices rise or fall rapidly, no one can say whether that legislation is actually unsatisfactory or incapable of enabling the central bank to deal with grave economicproblems that may arise from time to time. Consequently, the Government is unwise in proposing to make these changes; in the existing system. In fact, it is running from one extreme to the other. Whereas under the 1945 act the private trading banks can be obliged to lodge 100 per cent, of increases of their deposits with the central bank - although, as I have said, they have never been obliged to do so to that degree - it is now proposed to reduce that percentage to 10 per cent. Such a provision must inevitably adversely affect our economy.
Perhaps, one reason why the Government now proposes to reduce the maximum lodgment to 10 per cent, of increases of deposits is in order to enable the private banks to take full advantage of opportunities for investment, and, indeed, speculation, in Commonwealth and State bonds, loans for local government authorities or securities that are listed on the stock exchange. The granting of such powers to the private banks is fraught with great danger to Australia. The trading banks may become active competitors with the people in the purchase of Commonwealth bonds and municipal bonds, and may also become competitors in the purchase of stock exchange securities. Those powers were taken from the private banks in 1945 for excellent reasons. Many honorable members will recall the inflationary effects that resulted from the financing of war loans in World War I. During that period, the private hanks not only purchased war bonds, but also granted financial accommodation to private individuals who desired to purchase them. Indeed, the private banks in those days were prepared to advance up to 90 per cent, of the cost of the bonds. That policy increased the inflationary pressures. Subsequently, the Banking Act 1945 debarred the trading banks from dealing in that kind of security.
The present Government, under .the bill now before the House, proposes to reduce the special account liabilities of the private banks after 1954 to 10 per cent, of their increased deposits. The alteration, together with the additional power to purchase securities will materially increase secondary inflation. I warn the House that the proposals of the Government can have a disastrous effect. If the export prices of wool, wheat and butter were to fall suddenly and the private banks found themselves short of funds, their immediate reaction would be to unload those securities upon the market. Consequently, our prospects of obtaining loan money for developmental works would be completely destroyed, and interest rates would rise. I foresee that, in periods of financial and economic stress, the powers that may be exercised by the private banks in these matters can become dangerous to the welfare of the people of Australia. The Government is unwise to permit the trading banks to engage, in this kind of investment.
One thing is certain. Cheap money is essential to national development, the expansion of private enterprise, and the maintenance of a condition of full employment. The pursuance of any policy that can destroy the availability of cheap money is bound to have grave repercussions on our economic life that, will be full of peril to the people. The Government should not permit a condition of affairs in which the private banks could unload bonds upon the market, sell shares on the stock exchange, and indeed, do everything they could to depreciate the price of securities in order to obtain ready money with which to save themselves. I emphasize that these proposals may have a disastrous effect on every phase of our public life. This policy will make it difficult for enterprises to be carried on, and for governments to secure the money that they require for public works. The policy will also force an increase in interest rates, and produce unemployment. Yet the possible effect of this great power, which can be used for evil, was dismissed by the Prime Minister in his second-reading speech in the following words: -
When there is a provision in Section 2S of the Principal Act which prevents the Banks from purchasing Government stocks or securities listed on the stock exchanges and so on without the approval of the Commonwealth Bank. The power to control investments by the Banks was first taken during the war. It may very well have been necessary at the time but we do not think it is any longer justified because we believe, in the matter of investment, co-operation between the Central Bank and Trading Banks to be a very much better method of achieving the less restricted objectives that are now existing than the rather stern necessities that were in existence during the war.
The description of this sweeping and revolutionary change was accomplished by the Prime Minister in those few lines. He did not say one word to prove the need for the change. He did not indicate why the change should be made. However, the valuable safeguard in the Banking Act 1945 is to be removed, and a new power is to be placed in the hands of the trading banks that may be used for good or ill. In certain circumstances, that power is bound to be used for ill. Yet the community is none the wiser about the reason for the change. I certainly do not regard the brief explanation given by the Prime Minister as a complete justification for this startling proposal. When I find that such changes are proposed, and no substantial reason is advanced for them, I naturally become suspicious of the whole bill, and say to myself, “Up to the present time the Banking Act 1945 has worked well. It has enabled full control to be exercised over banking activities. It has been used for the purpose of preventing secondary inflation. As far as I am able to see, the act is giving satisfaction to the banking world. Yet, we are asked to agree to changes which cannot be justified on any grounds “. I submit that the proposed alterations, together with the amendment to repeal the section of the act that makes provision for a maximum interest rate, are not in the best interests of the people. I go further than that, and say that they are positively dangerous to the Australian community. This change seems to envisage a period in which interest rates will constantly rise; and to the extent that interest rates constantly rise, our development will be retarded and hampered, and the prospects of the maintenance of full employment will be minimized.
We have encountered in our economic life during the last eighteen months a good deal of difficulty which could have been overcome if the Government’s financial policy had been more positive and substantial. Now this legislation has been introduced on the ground that the Labour party cannot be trusted. Everybody knows, and the honorable member for Isaacs admitted that legislation introduced by one government can be altered by a succeeding government. We then have the position in which the banking legislation of this country and the Commonwealth Bank are being used as political footballs in order to give expression to party hostilities. I believe that this is a bad bill, and that it will do the people of Australia no good. It will damage the financial institutions of this country, to the detriment of our future development.
– I am most conscious of the personal challenge that has been directed at me by the honorable member for Melbourne (Mr. Calwell) to repeat the facts of the banking issues as I see them, and as I expressed them in a newspaper article that was published about sis months ago. I accept the honorable member’s challenge, and I hasten to make my position clear. My present views on the basic issues are the same as when that article was published. I am convinced that no banking system can function in a free enterprise economy unless it is soundly based on a foundation of integrity, co-operation, and confidence. The experiences of recent years have shown that central banking functions are vital to the Australian economy and that they have been responsible to a significant degree for Australia’s post-war economic stability. However, it should not be forgotten that the post-war period presented Australia with commercial opportunities in the widest possible application, unparalleled in the history of this country. As the public trading banks, whose tens of thousands of shareholders are engaged in every walk of life in Australia, hold the deposits of hundreds of thousands of people, they perform many services that are vital to our economic structure. The very fact that the public trading banks exist at all is proof positive that they enjoy public support and confidence.
My basic premise is that it should be the aim of the Australian Government to encourage an efficient banking system, regulated by a strong central bank, which integrates all the trading banks in such a manner as to ensure their co-operation and confidence in the system. It is on that premise that I approach a consideration of the issues that flow from the existing banking .legislation and the measure before the House. I ask honorable members to appreciate and assess my opinions against that background. I emphasize that the three vital components of the efficient banking system that it should be the aim of the Australian Government to encourage, are integrity, cooperation, and confidence. I shall use them as a yardstick to demonstrate the value of this legislation. The powers contained in the Chifley Government’s banking legislation of 1945 have been canvassed again and again in this House. It is sufficient for me to say that, profound and far reaching as they were, in the first place they provided a clear pattern of procedure that could be adopted by hostile governments in order to effect the economic strangulation of the public trading banks. In the second place, they provided for the imposition of vicious and unjust penalties on officers of the public trading banks guilty of offences under the act. The trading banks were most unhappy at being forced into this position, and they did not remain in doubt for long about the real intention of Mr. Chifley and his colleagues on their future in the Australian economy.
By the Banking Act 1947, Labour began the process of fulfilling, by constitutional means, its basic plan to nationalize banking. No Australian should ever forget that that basic plank in the platform of the Australian Labour party must be fulfilled before socialism can be properly established in this country. Integrity, co-operation in the real sense, and confidence, vanished overnight and the trading banks were forced to fight the legislation even to the extent of appealing to the Privy Council, which decided that certain vital provisions of the Banking Act 1947 were ultra vires the Australian Constitution.
I shall now refer to the statement of the leader of the Opposition (Dr. Evatt) that banking nationalization is a dead horse, and that, constitutionally, - it has been destroyed.
– It is as dead as the dodo.
– I am thankful to the honorable member for Hume (Mr. Fuller) for his interjection, because the Banking Act 1947 was introduced as a result of the 1945 banking legislation being challenged on .a minor premise. I remind honorable members that minor issues in legislation can be altered by legal means.
Although the Labour party now has a new leader - the present Leader of the Opposition - its platform remains the same as formerly. Every member of the Australian Labour party is pledged, to support the nationalization of banking. I defy any honorable member to refute my contention that, at some stage, every bona fide member of the Australian Labour party, has pledged himself, in writing, to the nationalization of banking. Recently, an attempt has been made by some insincere and politically conscious members of the Labour party to gloss over these notorious facts, but the old revolutionary spirit is still active in the hearts of the more robust members of the party. Both the honorable member for East Sydney (Ward) and the honorable member for Melbourne have recently indicated beyond all doubt to this House that their objective is the nationalization of banking.
Turning to the bill before the House, in fairness we should consider whether the result of the application to it of the test of integrity, co-operation and confidence would prove that it will contribute to the establishment of an efficient banking system in this country. In order to make this test really informative, I shall analyse the provisions of the 1945 act, and explain its evils. The Leader of the Opposition has stated that that legislation has never been attacked. I do not believe that statement to be true, and I shall now proceed to attack it myself. I shall then explain how the bill before the House will rectify the evils inherent in the 1945 legislation. The Chifley Banking Act of 1945 was the nucleus of Labour’s plan for the post-war socialization of banking. That act and the Commonwealth Bank Act of the same year were passed before the cessation of hostilities in World War II., but they were not proclaimed until immediately” after V J Day, which was the 15th August, 1945. That the Labour socialists intended these two measures to be the weapons with which they would strangle free enterprise was made plain to everybody when the High Court held to be invalid that so-called minor section of the Banking Act which provided that certain banks should not conduct certain business. The Chifley Government immediately showed itself in its true colours. In the grand manner, and with a complete disregard of every moral principle, the socialist leaders announced their nationalization proposals. These are the notorious facts, and the Leader of the Opposition need not waste his breath in telling the people of his temporary and lately acquired views on banking. If the 1945 banking legislation of the Chifley Government was not intended to be a means of eliminating the public trading banks, why, after only one minor section had been successfully challenged by the Melbourne City Council, did the Labour Government enact legislation for the absolute nationalization of banking? The Opposition has stated that the Government has no mandate for the bill that is now before the House, even though the general election campaigns of 1949 and 1951 were fought principally on the issue of banking. Yet in 1947 the Labour Government refused point-blank to take up our challenge to submit to a referendum the proposals that it had embodied in a measure which would have cost the taxpayers £100,000,000 cash in one swoop and, without popular authority, would have transformed Australia into a socialist state.
The bill does not apply to the Rural Bank -of New South Wales, which last year handled sums that amounted to about £50,000,000. This is a fact which is worthy of note. That great institution will be completely outside the zone of the vast and intricate plan that the Government has prepared to provide for the complete and sensible control of the nation’s credit mechanism. The chairman of the Rural Bank of New South, Wales recently remarked, when reviewing the bank’s record, that it had foreclosed on 2,000 mortgages in 1931. Members of the Opposition often criticize the so-called private banks for their treatment of the poor farmers. Yet here is a government bank which enforced 2,000 foreclosures in one year during the depression ! That is a fact worthy of their consideration. Can they produce factual information to support their proposals for the curbing of the public trading banks, which, according to them, rob the poor people in times of depression? I remind them that the Rural Bank of New South Wales is owned, controlled and directed by a State government. This bill will not affect the existing provisions for the licensing of banks in Australia. Under its terms, it will not be necessary to submit an explanation to a bank if its licence is withdrawn. The Executive Council will have power to withdraw a licence, whereupon the bank concerned will be unable to continue its functions.
– Has that ever been done ?
– No, but the power to withdraw licences must command respect. It is in the best interests of the country that this power should be retained for the protection of depositors.
Let us consider another safeguard for which this bill provides. Clause 5 provides that section 13 (2.) of the Banking Act shall be omitted and that a new provision shall be inserted to provide that the Commonwealth Bank may take over control of a trading bank if it is of opinion, after receiving a report from the Auditor-General, that the bank is likely to become unable to meet its obligations or is about to suspend payment. The Chifley Government’s legislation of 1945 provided that a trading bank could be taken over if, in the sole opinion of the Commonwealth Bank, it was unable to meet its obligations. The new provision will give protection to the trading banks. Actions of the AuditorGeneral have been criticized in this Parliament, but we know from experience, when a Labour Government has been in power, that it is eminently desirable that the Auditor-General should be allowed to investigate public expenditure and the administration of public funds and to criticize the procedures adopted.
Can anybody reasonably object to the fairness of the safeguard for which this bill provides ? The Labour party objects to” the whole bill. Therefore, it must object to this provision. Apparently honorable members opposite consider that the Governor of the Commonwealth Bank should have the absolute right to determine whether a bank is liable to become insolvent without first having received a certificate to that effect from the Auditor-General. Do they believe that he should be omnipotent? They would admit, if they were unprejudiced, that this bill will improve the provisions of the 1945 legislation. Should not the Governor of the Commonwealth Bank be relieved of all responsibility for deciding whether or not a trading bank is solvent? It is highly desirable that he alone should not bear such responsibility. Therefore, the Government has decided that he shall have the assistance of the Auditor-General, for whom everybody in Australia has the utmost respect. The decision is greatly to the credit of the Government.
Only one bank has become insolvent in Australia during .the last 60 years. That was the Government Savings Bank of New South Wales; which crashed during the regime of a Labour government. Mr. Lang was the Premier of New South Wales at the time. Although the insolvency occurred during a period of depression, it was precipitated by the political interference of the State Government at that time.
The Chifley Government’s legislation of 1945 provided that a bank must at all times hold in Australia assets of a value not less than its deposit liabilities in Australia. This provision will be amended by the bill now before the House so that it will apply only to foreign banks. The section was impractical and ignored the seasonal nature of the banking accommodation required in Australia. There are times during the export season when a large volume of bank funds is employed to finance export bills with the result that the internal assets of the banks are temporarily less than their deposit liabilities. At such times, the trading banks, under the terms of the 1945 legislation, would be singularly vulnerable to action by a central bank that lacked integrity. I do not suggest for a moment that the Commonwealth Bank lacks integrity, but I wish to demonstrate how the trading banks could be unfairly controlled. I agree with the honorable member for ‘Bendigo that the fact that this bill will allow the central bank to continue unchanged, with a Governor in control and with substantially the same powers as it has commanded up to the present, indicates that the Government has faith in its integrity. Therefore, honorable members opposite should accept the Government’s proposals at their true value, as I do. They are beyond all doubt. Yet the Labour party blandly objects to the entire bill. The proposed amendment of the provision that the banks shall hold assets to cover their liabilities is unspectacular but is typical of the sound common sense and business acumen of the Government and its supporters. The facts are clear. Had the banks been forced to adhere strictly to the terms of the ChifleyEvatt provision, they would not have been able to finance our export trade to the same extent as they have done. They have run risks but if they had not ignored that provision, to some degree at least, they would have found themselves in trouble.
Proposed new section 22 (p) of the measure now before us relates to the information to be provided by the Commonwealth Bank. This new section will provide the opportunity for the trading banks to exchange views on financial trends with the central bank. Previously, no information was given to the trading banks prior to advice concerning amounts required to be deposited in the special accounts. Under this measure, the central bank will be required to furnish information to the trading banks at six monthly periods. Obviously, if a trading bank cannot agree with the central bank, it will discuss the situation with that bank. Gradually an efficient banking system will result in which there will be mutual goodwill and confidence.
In recent times in this chamber there has been a considerable amount of debate about the onus of proof and the freedom of the individual. I shall illustrate the degree to which the Labour party believes in these important principles. Section 57 of the Banking Act, which is to be repealed, reads as follows : -
Where any offence against this Act or the regulations has been committed by any body corporate, the chief executive officer in Australia of the body corporate shall be liable to the penalty provided in respect of that offence, but nothing in this section shall affect the liability of the body corporate.
That is an instance of the operation of a terror scheme. Section 59 of the act, which is also to be repealed, reads -
The production of any certificate purporting to have been given by the Governor or Department Governor of the Commonwealth Bank certifying to any matter relating to the failure of any person to comply with any of the provisions of this Act or the regulations shall in all courts be prima facie evidence that those matters are as so certified.
In that section the onus of proof was placed completely and absolutely on an individual. A bald statement by the Governor of the Commonwealth Bank was to be accepted by the Court as prima facie evidence. That provision represented a sinister attack on the rights of the individual. If the board of directors of the Bank of New South “Wales issued certain instructions to their general manager, and he gave effect to those instructions, should he be personally liable for his actions as the servant of the board? The whole concept is monstrous. If honorable members opposite ever understood what it meant they should be severely criticized for supporting it.
I could speak at some length of the good aspects of the bill before the House. My support for it is complete, because it proceeds logically in the best interests of the community. “We know that the complete ownership and control of the exchange mechanism and of all credit is vital to any government that wishes to establish a socialist economy. But. those people who are pledged to that principle have not the moral courage to admit that fact. Numerous honorable members, including the Leader of the Opposition, have endeavoured to persuade the Australian public that they are not real socialists. They have asked the people not to believe the Prime Minister (Mr. Menzies), who has said that the Opposition is holding a gun at their heads. The Opposition say that it is not loaded. The facts are evident from the ruthless fashion in which the Labour Government gave effect to its policy in 1947 when an attempt was made to establish a government planned and directed economy. On the other hand, there are Opposition members who could be described as more robust mentally if not physically, because they honestly proclaim their beliefs. The honorable member for Melbourne (Mr. Calwell), who is always honest, forthright and direct, 3aid that he still supported the Banking Act of 1947 and believed that its fulfilment would lead to the achievement of the “aims of the Labour party. Yet the honorable member for Melbourne Ports (Mr. Crean) and the honorable member for Bendigo (Mr. Clarey), who always speak so moderately and learnedly, have never explained their fundamental beliefs, in this House. But the statements of these honorable members can be found in the press reports of the triennial conferences of the Labour party during the last twenty years. At those conferences those honorable members have made their position clear.
Because a change of Government must result in another movement towards socialism, it is vital that our banking system should be a clear one. Simplicity leads to ease of understanding. All sorts of trickery and double dealing can take place underneath a cloud of confusion. I hope that I shall live to see the achievement of a sensible and rational financial system. As people develop their minds and begin to question the soundness of the economy they will demand to know exactly what every government institution is doing, whence it derives its powers of expenditure, how much it expends and whether its expenditure is sound. When that day comes and we have a highly intelligent community, the myth of planned economies and socialism will vanish.
.- This bill interlocks with the Commonwealth Bank Bill, which the House passed last week. It is designed to repeal certain provisions and to amend other provisions of the Banking Act 1945, which was passed during the term of office of the Chifley Government. The purpose of that legislation was the protection of the nation against the inflation that endangered it in the immediate post-war period. It was introduced as the result of the Labour party’s previous experience during the Scullin Government’s term of office, when the Country was in a sore financial plight because private banking institutions had cornered the market on government stocks and bonds. The late Mr. W. M. Hughes, who, at the time of his death recently, was the right honorable member for Bradfield in this chamber, increased interest rates to 6 per cent, when he was in office. The ordinary citizen was at that time unable to buy a bond, because all the available bonds were snapped up by the banking institutions, which subscribed as much as £6,000,000 or even £10,000,000 in one loan. That shows what they will do to pick the eyes out of the best security investments in Australia.
The Chifley Government’s banking legislation was designed to prevent inflation, and made it mandatory for private banking institutions to open special accounts with the Commonwealth Bank, in which they had to lodge 100 per cent, of the increase of their deposits that had occurred since July, 1945. It is now proposed to reduce the liability of the private banks so that they will have to deposit only 10 per cent., instead of 100 per cent., of the increased deposits. The remaining 90 per cent, will be at the disposal of the banks for use as they please, and we shall find them once again cornering the market for Government securities and engaging in other investment operations in which previously they have not been permitted to engage without special authorization. Freedom ! They say, “Let us have freedom”. Freedom of competition ! A combination of all the private banking institutions will by virtue of the power conferred by this legislation attempt to smash the people’s bank. The Commonwealth Bank, which was established by the Fisher Labour Government in 1911, has rendered yeoman service to this country in two world .wars and during an economic depression. It is tragic that a proposal should now be made to put the private banks in a position to cripple the Commonwealth Bank,, as they will certainly do if the present
Government is allowed by the people to remain in office for much longer. I do not think the people will have much more of this Government, because the electors realize that Australia is a country worth fighting for and protecting. But that may not be the case if Australia is to be controlled and robbed by the private banking institutions, as it was until 1912. The Commonwealth Year-Book for 1932 shows that there was at that time a total of £59,454,413 in circulation in paper, notes, gold and coins. The same Year-Book shows that the aggregate deposits in the Commonwealth Bank, private trading banks and the Commonwealth and State Savings Banks totalled £540,072,000 or £480,617,587 more currency than was in circulation. Since the Commonwealth Bank alone has the right to create legal tender in the form of currency, then the other banks had obviously, at that time, created almost £481,000,000 worth of credit. How is such a credit created ? “We know that it is done with the deposits that people lodge in the banks, which the banks lend out at interest. Some people borrow money from the banks and leave the deeds of their property as security. I myself did that, and I have not yet paid off the principal. I borrowed the money from the Commonwealth Bank. Such advances are credit that is created, in effect, by the bank that makes the loan. All banks do it, although the Commonwealth Bank is supposed to have the sole right to issue legal tender. Before the Commonwealth Bank was in existence I remember that, on a visit to New South Wales from Queensland, where I worked, I received only 19s. 6d. for each Queensland £1 note that I cashed in New South Wales, because the banks in those days issued their own currency, and the New South Wales exchange rate on Queensland £1 notes was 6d. The Government wishes to see a return to that position, and will encourage the banks in that respect.
My object in this debate is to direct attention to the dangers inherent in this measure. From time to time attempts have been made to compel governments to assume full sovereignty over insurance and the control of purchasing- power which, all other contentions notwith standing, is the life-blood of every economic structure. Without exception the present Government refuses to face the facts, yet I believe that an awakened conscience will some day compel it to act. I hope that that day is not far distant, because this measure is a retrograde step. Australia has advanced under its present banking system. The Commonwealth Bank financed the nation in two wars, and prevented it from having to pay a huge rate of interest for its financial accommodation. The following words of William Jennings Bryan may be repeated here with profit: -
The money power preys upon the nation in time of peace, and conspires against it in time of war. It is more despotic than monarchy, more insolent than autocracy, and more selfish than bureaucracy. It denounces as public enemies all who question its methods or throw light upon its crimes. It can only be overthrown by the awakened conscience of ‘the nation.
The late Myer Anselm Rothschild is reported to have said, “Let me control the credit of a nation and I care not who makes its laws “. That is perfectly true. If a person possesses sufficient financial resources, he may dictate to governments. The private control of credit has brought ruin and disaster wherever it has been permitted to operate. Because this proposed legislation will permit still further private control of credit, the Opposition is attempting to relate again the story of the ‘nineties. At that time my own parents lost £150 in the Lambton Bank, or Creer’s Bank, as it was known. I was -then a small child, the youngest of twelve, but I know that £150 in 1893 was a large sum of money. My parents never received back one penny of that sum.
An impartial analysis should force honorable gentlemen to the conclusion that there is imminent danger of inflation in the proposed interference by the Government with the special deposit accounts system which was established to obviate the threat of inflation, following World War II. Yet this Government is asking us to amend the Banking Act, the purpose of which is to avert inflation, in order to allow private banking institutions to operate in their own way.
– That is unfair.
– It is most fair. The parrot-cry “ private enterprise “ is too often heard. Private enterprise is conducted for profit, or dividends, whereas the Commonwealth Bank is operated for the common weal of the people. If democratic Australia is to save itself it must accept and overcome the challenge of the rooney monopolists. Light must be thrown into the dark places of their intrigue and robbery.
– That is unworthy of the honorable member.
– I disagree with the measure. I have had nothing from the private banks, but I have had assistance from the Commonwealth Bank. The circumstances in which we exist today remove banking policy from the field of party politics. I concede that many honorable members opposite would love to see this measure discussed in a nonparty atmosphere. Indeed, the honorable member for Macarthur (Mr. Jeff Bate) circulated a proposed amendment of the Commonwealth Bank Bill 1953- but was afraid tr> continue with it.
-Order! The honorable gentleman should have dealt with that matter when the bill to which he has referred was before the House.
– I shall say no more about it. Despite the vastness of our territory, we are actually a small beleaguered white garrison on the edge of the teeming millions of Asia, a fact which means that we must either populate and progress or perish. Despite this obvious truth, the economic and financial policies that have been imposed upon us by antiLabour governments have reduced us to such a powerless position that unless we radically alter our methods, within ten years we shall be unable to feed ourselves. In such circumstances, the important question is not whether private enterprise or socialism should prevail, but whether we are to survive.
It seems, to me that the greatest mistake that Australia made in the past was to adopt the doctrine that what is sound economic policy for the Old World must also be sound economic policy for us. Europe is over- populated, and its industries are fully developed. The fallacy of the doctrine I have just mentioned is apparent when it is appreciated that the Old World has long since reached the zenith of its production. It cannot even support itself but must rely for its food on the under-developed portions of the earth, such as Australia. The immutable laws of private enterprise or capitalism make it imperative for profits to accrue from the production and export of manufactured goods. In that way the purchase of essential foods for Europe is made possible. Under the economic doctrines of the London School of Economics, which many Australians seem to have swallowed with such gusto, our position is reversed. Whereas manufacturers in the Old World must borrow money with which to erect factories in which to make goods for export, so that food may be bought, we are told that we must export food so that we may be able to buy ploughs with which to produce more wheat, and so on.
Bank credit was considered by Sir Otto Niemeyer in the hungry ‘thirties, when he came to this country. At that time a so-called Premiers plan had been evolved. It provided for reduction of all social services, including pensions. Lord Bruce, then Mr. Stanley Melbourne Bruce, was Prime Minister.
Government Supporters. - He was not!
– I do not mean that he was Prime Minister when the Premiers plan was introduced. If honorable mem-‘ bers .opposite had better manners they would listen to what I have to say. If Mr. Speaker was as tough on you as he is on me he would shut you up.
– Order ! The honorable member will address the Chair.
– The interjections of honorable members now force me to say that Mr. Stanley Melbourne Bruce allowed himself to be defeated in his own electorate by Mr. Holloway because he clearly foresaw that a terrible depression was looming. Mr. Bruce practically put the Scullin Government into office, and that Government was then forced, very much agains) its grain, to take certain action in order to save this country from bankruptcy. I have always been sorry for Mr. Scullin because he had to adopt the Premiers plan. In that period of our history the shrewdness and the cunning of Mr. Bruce was outstanding.
Under the grace of God, and by the courage of our forbears, we have become the possessors of a great heritage. Are we now to be told that we can use and develop that heritage only so long as it will return dividends to the private banks? Yet that, in essence, is what the present financial system demands. And this, despite the fact that a royal commission has declared that our own financial institution, the Commonwealth Bank, can provide all thefinance required for the opening up of new lands and the erection of new factories, “ debt and interest free “. That finding ought to be branded in letters of fire on the minds of every member of the Parliament, for upon its implementation the fate of every Australian citizen hangs. We either move onward as free men, walking upright in the sight of God and in fellowship with each other, or we become the debt slaves of a man-made system which brings affluence and luxury to the few at the expense of the energy and toil of the many.
Beyond all the facts I here present there is still one more most disturbing aspect of our present financial system. It has been established beyond the shadow of a doubt that 80 per cent. of the purchasing power in existence consists of money loaned to the public by the private banks, and that it has no relationship whatever to the goods and services available for exchange. As the late Mr. Chifley pointed out in his minority report as a member of the Royal Commission on Monetary and Banking Systems, the boards of directors responsible for creating this money have one object, and one object only, in view - the return of dividends to their shareholders. Yet the effective exchange of all goods and services is also entirely dependent upon the existence of this loaned money. Such power in the hands of these directors gives them virtual control over the life and death of every citizen, for having the power to create and distribute this medium of exchange, they also hold the power to withdraw it. That power was exercised in the days of the great depression, when the private banks of America withdrew 2,300,000,000 dollars in one day in September, 1929. This proposed legislation will not only confirm this power over life and death but will extend it, for it will say to the trading banks, “ Whilst we extend your power to pump money into the community by means of loans and advances, we, as the people’s government, have divested ourselves of all power to prevent you from taking it out by the process of calling up those loans and advances “. Such a betrayal of trust compels one to repeat with fervour the immortal lines of Whittier -
Now, when our land to ruin’s brink is verging,
In God’s Namelet us speak while there is time;
Now, when the padlocks for our lips are forging,
Silence is Crime.
For the Government silence is certainly a crime, but there is a padlock on the lips of every honorable member who supports the Government. Many people believe that the banks lend out their deposits. They do not. The banks create new money whenever they make Joans. They issue cheque books, and the credit allowed in the account upon which the cheque book is issued is new money. At the end of 1949 the deposits in the special accounts of the trading banks with the central bank amounted to 41.6 per cent. of the total deposits in the trading banks. At the same time their advances, which were merely pen and ink entries in books, had increased to £403,000,000 - an increase of 65 per cent. in currency which had been loaned out by medium of the cheque system. Long ago we prevented private banks from issuing their own notes, but we do worse to-day for we allow them to make their own credit. By the overdraft system and the use of cheque forms the banks are still practically creating their own notes. The honorable member for St. George (Mr. Graham) has repeated in parrot fashion the statement made by other honorable members on the Government side that the Labour party believes in the nationalization of banking. We on this side of the House are not outlaws. We believe in the law of the land. The High Court has, in effect, laid down that the nationalization of hanking is illegal. However, speaking solely for myself and not for the Labour party, I say that as long as I remain inside the party I shall always advocate the nationalization of banking. I suggest that the nationalization of banking is just as necessary as was the nationalization of postal services.
– Order ! The honorable member’s time has expired.
Sitting suspended from 6 to 8 p.m.
– The arguments raised by the Opposition on this measure are specious in the extreme. One could go further and say that they are so unintelligible that they hardly merit any reply or criticism. If the utterances of honorable members on the opposite side are any criterion, the Opposition’s ignorance of matters relating to banking policy can only be described as pitiful. The truth is that, as in the case of the Commonwealth Bank bill, the Opposition speakers have done their best to throw up a smokescreen. Apparently they have an acute dislike to talking about their views on the nationalization of banking, and so they have talked about practically everything but the issue that is before the House. Indeed, they have even tried to pretend that they are not longer interested in the bank nationalization issue. If they really believe that our banking system should be maintained in its present form, why do they not come out in the open and say so? All honorable members know the answer. The Opposition, knowing full well that any step towards the socialization of banking in Australia would be anathema to the great majority of the Australian people, has chosen to bide its time. In the meantime, Opposition members are adopting whatever subterfuges they can to evade the question and to camouflage their aims.
The only issue in the bill that is before the House is simply whether the Commonwealth Bank should have powers in excess of the legitimate needs of proper central banking controls. Those who answer that question in the affirmative can have an eye only to the destruction of the competitive banking system in Australia. “We on this side of the House have made our position clear time and time again in unequivocal terms, but we are waiting in vain for a clear statement from the Opposition as to where it stands on this matter. The Opposition has failed to declare whether it desires or is pledged to the competitive banking system, or whether it is pledged to carry out its objective to nationalize banking, which would mean the nationalization of all that we have. The Leader of the Opposition (Dr. Evatt) would have honorable members believe that the proposed amendments to the special account provisions of the 1945 banking legislation will seriously weaken the central bank’s powers to control inflation-
– So they will.
– That is sheer nonsense, as a few facts and figures will readily show.
Opposition members interjecting,
– Order ! If honorable members are not prepared to maintain order in the chamber to-night they will maintain it outside.
– The truth is that if the special account provisions in the bill had been included in the 1945 legislation, the central bank would have had power to make all the calls to special accounts which were actually made since the passing of that legislation, while still leaving an ample reserve power. The figures tell their own story. In September, 1948, which roughly marks the beginning of the period when bank deposits started to increase rapidly, the special account balances of the major private trading banks stood at £267,000,000. If the formula in the bill had been included in the 1945 act, the actual amount the Commonwealth Bank could then have required the banks to hold in their special accounts would have been £308,000,000, or £41,000,000 more than the actual balances. In September, 1949, under the new formula, the banks could have been required to hold a maximum amount of £385,000,000 in their special accounts. The actual balances amounted to £307,000,000, a difference of £78,000,000. In September, 1950, 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.
Special account balances rose to a record amount of £583,000,000 in May, 1951. Yet the new formula would have produced a maximum callable amount of £765,000,000 at that date. In other words, even when special accounts were at their highest level, there would still have been a reserve power to call up a further £182,000,000. Special account balances were £521,000,000 in September, 1951. The operation of the new formula would have permitted the calling up of £164,000,000 over and above this figure. In the following month - October, 1951 - the provision in the new formula for the automatic adjustment of the uncalled liability once a year to 10 per cent, of deposits would have come into effect. This would have reduced the reserve from £164,000,000 to £119,000,000. The reserve power as modified in this manner would have been quite ample for’ the legitimate purposes of credit control. By the end of September, 1952, the special account balances of the major private banks had fallen to £183,000.,Q00. At this date the maximum amount which, under the new formula, the central bank could have required the private banks to hold in special account would have been £542,000,000 or no less than £359,000,000 more than the amounts actually held. The provision for adjustment of the uncalled liability to 10 per cent, of deposits would have come into operation in the following month of October, 1952, when the uncalled liability would have been reduced from the unduly high figure of £359,000,000 to the more reasonable figure of £106,000,000. Once again, the adjusted figure, when taken in conjunction with the power to call up 75 per cent, of any subsequent increase in deposits, would have constituted an ample reserve. At the same time, the banks would have been given a due measure of. relief from the enormous uncalled liability which had accumulated and was hanging over their heads. The figures I have cited show how fantastic are the claims that the central bank is being left with inadequate powers. The fact is that the central bank will still have ample power for the legitimate purposes - -I emphasize the word “legitimate “ - of credit control. All that is being done under the bill is to remove the ridiculously high reserve powers that the operation of the 1945 act has produced. In other words, the bill removes the weapon of socialization that has threatened the trading banks. The protestations of Opposition members on this point can only leave the feeling that they want to preserve these ridiculously high reserve powers for their own sinister pig.poses. As the Prime Minister pointed out in his second-reading speech, the private banks could virtually be put out of existence to-morrow if the central bank decided to exercise to the full its powers under the 1945 act - in other words, if it called up the uncalled liability of the trading banks. That is the position which is being remedied by th,e bill now before the House. That is .the basic reason for its introduction. Its sole purpose is to protect the competitive trading bank system of Australia from thd onslaught, hidden or otherwise, of socialization.
The Leader of the Opposition implied that the special accounts system is the creation of his party and that we are attempting to destroy his party’s pride and joy. He apparently needs to be reminded of a little history. The special account system was instituted in 1941, during my previous term of office as Treasurer, as a voluntary war-time arrangement with the private banks. The Labour party’s subsequent banking legislation, which initially took the form of regulations under the National Security Act, merely gave statutory form to the arrangements made before the Labour party assumed office towards the end qf 1941. I emphasize that we believe, as much as does the Opposition, that the special account system, is, under Australian conditions, the best means of controlling the volume of credit released through the banking system. We want to see the system preserved; but we want to remove the possibility that, under the administration of a government with socialistic aims, it could be used as a weapon for unfair attack on the private banks.
The Leader of the Opposition made some curious observations about the administration of special accounts. He seemed to think that the Government blames the provisions of the 1945 act for the economic problems of recent years, whereas, he said, the real trouble has resulted from the administration of special accounts. That is a classic example of the lengths to which the Opposition is prepared to go in an endeavour to sidestep the issue by specious and nonsensical argument. I .inform the Leader of the Opposition and his colleagues that there need not have been one iota of difference in the administration of special accounts if the provisions in this bill had been written into the 1945 legislation. The right honorable gentleman also referred to the big fall in special account balances between May, 1951, and October, 1952. He implied that these releases were made for some hidden motive of help to the private banks, and he went on to say that the problem of the bank’s huge uncalled liability to make deposits to special account was brought about by the releases which were made in that period. That is yet another example of specious and ill-informed argument. Even when special accounts were at their peak of £583,000,000 in May, 1951, the uncalled liability of the banks to make further deposits in special account was still of huge proportions. At that date the banks could have been required, under the provisions of the 1945 act, to hold no less than £906,000,000 in special account, or £323,000,000 more than the record level of special account balances. This is a striking illustration of the fact that the 1945 legislation has operated to give the central hank powers over the trading banks that are far in excess of the legitimate requirements of credit control, and has thereby constituted a weapon readily at the hands of those who desire to nationalize the trading banks of Australia.
As for the imputation that there was some hidden motive behind the releases that were made between May, 1951, and October, 1952, the simple fact is that, due to the substantial fall in our overseas funds position in that period, the liquidity of the banking system declined sharply, and it was necessary to make releases in order to preserve the ability of the banks to make loans to their customers. If the releases had not been made, a chaotic situation would assuredly have developed. Thanks to the wise administration of credit controls by the central bank, we emerged from that period with the stability of our economy unimpaired.
This afternoon the honorable member foi* Bendigo (Mr. Clarey) made some observations in regard to special accounts which need to be answered. The honorable member said that the central bank’s power to make calls to special accounts after the first twelve months would be dramatically reduced to 10 per cent, of the increase in the banks’ deposits. That is quite wrong. It is obvious that the honorable member has completely misunderstood the new provisions relating to special accounts. After the first twelve months - that is, after September, 1953 - the maximum amount which the central bank may require a bank to hold in its special account at the end of any month during subsequent years shall be as follows : -
the amount actually held in special account on the preceding 30th September,
plus or minus 75 per cent, of the increase or decrease in the level of the bank’s deposits since the beginning of the period.
The honorable member for Bendigo interpreted the new provisions to mean that the central bank may make additional calls only equivalent to 10 per cent, of an increase in deposits, instead of the 75 per cent, as actually provided in the bill. The difference of 65 per cent, is rather significant. So much for special accounts.
The Opposition has not made one valid point of criticism. Opposition speakers have claimed that the new special account provisions will unduly weaken the operation of vital safeguards against inflation, but they have backed their argument only by vague generalities. I think that I have amply demonstrated the spuriousness of their claims. The only conclusion that can he drawn from their arguments is that they consider that the central bank should be left with power to strangle the private banks. Their real motive is thus revealed. They should have declared unequivocably where they stand on the basic issue in the measure before the House. The issue is simply whether the private banking system should be protected by the removal of the unnecessary reserve power to call up to special account possessed by the central bank, or whether power should . continuously reside in the central bank, as it does under the provisions of the 1945 act, to place the banks in serious jeopardy and make them completely dependent upon the whims of government policy.
The Leader of the Opposition made some startling comments about the central bank’s control of interest rates and of the advance policy of the private trading banks. He suggested that the bill, in some way which he did not explain, would take away the central bank’s control of those matters. That suggestion is absurd. The provisions of the 1945 act relating to the control by the central bank of the policy to be followed by all banks in making advances are not now being altered in any way except to require the proposed Commonwealth Trading Bank to follow the policy that the central bank lays down. In other words, the Commonwealth Trading Bank will be required to comply with the law which the private trading banks are obliged to observe. The Leader of the Opposition, apparently, is singularly uninformed about that matter. The relaxation that was made in the central bank’s advance policy some time ago has been represented as a form of preferential treatment to the private trading banks. . Such a contention is absurd. The Opposition does not seem to be able to sort out its own thoughts with respect to credit control. With one voice honorable members opposite talk of the need to make more credit available but with another voice they conjure up a terrifying picture of the need for further measures to control inflation. Clearly, the Opposition does not know its own mind on this subject. Advance policy was relaxed because the more stringent controls had served their purpose. It was evident that with the declining liquidity of the banking system, which was brought about by the drain on our overseas funds, there arose a need to increase the ability of the banks to finance their advance business. This was done in two ways; first, by making releases from the special accounts; and secondly, by easing the purposes for which banks could provide loans to their customers. If such measures had not been taken we should have invited a serious recession in the Australian economy. As it was, we were able not only to weather the storm but also to emerge from it with an economy which, basically, was more stable.
Just as the advance policy provisions contained in the 1945 act are not being altered, except to require the proposed Commonwealth Trading Bank as well as the private trading banks to observe any advance policy laid down by the central bank, this measure does not affect the central bank’s position with respect to the control of interest rates. It simply provides that the Commonwealth Trading Bank as well as the private trading banks shall observe regulations that are made by the central bank with respect to interest rates. The power to make such regulations remains undisturbed. Members of the Opposition have stated that control of interest rates has been abandoned. That statement is incorrect. The control of interest rates was previously exercised by orders made under National Security Regulations. When those regulations lapsed they were not replaced by permanent legislation because complete agreement was reached between the central bank and the private trading banks regarding rates of interest to be charged on banking transactions. In view of that voluntary understanding, it was considered to be unnecessary to bring down formal regulations. However, the power to make such regulations remains and it will be exercised if any of the banks fails to observe the wishes of the central bank in respect of interest rates.
I repeat that members of the Opposition have not advanced one valid argument against the proposals contained in the bill. They have once again revealed their desire to destroy the competitive banking system that now exists in this country. They have persistently run away from the question of whether they believe in the preservation of our banking system on- the basis of fair competition. Once that principle is accepted, no reasonable objection can possibly be raised to the reforms which it is proposed to make under this measure. The sole purpose of the bill is to remove .the central bank’s excess powers which clearly go far beyond those that it needs in order to exercise proper central bank control. The Opposition’s failure to address itself to that simple issue speaks for itself. That failure certainly reinforces the belief that, given the opportunity, the Opposition would not hesitate to use the administrative weapon to injure the private banks) which are their pet hate, and, ultimately, force them out of business. The Government has answered that threat by introducing this measure, which will make it impossible for the private banks to be subjected to malicious attack without the people of Australia knowing all about it.
– I am deeply conscious of the honour the electors of Flinders have bestowed upon me by choosing me as their representative in the Parliament. I propose to do all in my power to prove worthy of that honour. In my endeavour to represent all the electors of Flinders, regardless of their party political affiliations, I shall be doing no more than emulating the example set by my predecessor.
The issue in the measure now before the House is not precisely that which the Treasurer (Sir Arthur Fadden) stated. The real issue is whether or not the central bank is to’ possess adequate power to perform in the future central bank functions which it has already been obliged to relinquish by administrative action. The main purpose of this measure is simply to give legal sanction to certain administrative acts of the present Government during the last three years. Generally, the Australian people now accept the fact that credit and monetary controls are vital to our economic existence and to the welfare of the people and that such matters are finally the responsibility of the Government and of the Parliament. The Australian Labour party recognizes that governments have a special duty to level out the economic inequalities of inflation and deflation. Accordingly, a Labour government made provision in the 1945 act for adequate powers to control both those features. It is significant that one of the earliest acts of this Government, in accordance with its banking policy, served, first, to accentuate inflation and, secondly, to bring about a position in which our banking system is no longer adequately clothed with power to prevent deflation, which may easily occur in the future. It is well to examine the nature of the powers of the central bank. Under the 1945 act the central bank has only powers of restraint in order to prevent undue inflation or undue deflation. The central bank does not possess positive power to control the private banks for the purpose of ensuring full employment by having them made advances or refrain from calling up existing advances in a time of deflation. When history is written, the private banks may well realize that their best interests, as well as those of the people, would have been served by the retention and not by the weakening of necessary central bank powers. The Prime Minister (Mr. Menzies), when introducing the Commonwealth Bank Bill, stated, in effect, that the function of the Commonwealth Bank, in its- general trading division, was merely to compete with the private trading banks. But above all, we have emphasized the fact that the one positive power which previously existed was that the General Banking Division operated, not detached from, hut intimately connected with, and part of, the central banking function.
The report of the Royal Commission on Monetary and Banking Systemsacknowledged the responsibility of government for monetary policy. That responsibility, in the present stage of the economic cycle, Government supporters prefer to ignore in this debate. The Government has relinquished, by administrative action, control over the interest rate. The Treasurer has just referred to that matter. We all know that in the past, high interest rates have been associated with an increasing level of Unemployment. We also know that under the policy of this Government, interest rates have risen, and unemployment has increased. Now the Government has chosen to give away, not by legislative action, but by administrative action, control over interest rates. Significantly, too, before the Flinders by-election, this Government saw fit to relinquish administrative control of advance policy. That referred, not only to the amount of advances that private banks should make, consistent with a full level of employment, but also the direction of investments, whether by essential or non-essential industries. I make no reference at the moment to the independent bank board.
As the result of administrative action, and two specific aspects to which I shall refer later, the central banking power has been vitally weakened, and has, in fact,, been passed to the private banks “to exercise as they see fit. No obligation exists with them for public welfare, or maintenance of full employment. They exercise no responsibility in those matters. So, the first respect in which the central banking power is weakened is by the adoption of the new formula for the special account system. It is well known that, basically, the private banks make money available, or retract their advances, in relation to the amount of liquid reserves that they hold. In other words, if they hold adequate liquid reserves, they are able to increase advances. If they find that their liquid reserves are receding, it is their practice to reduce the amount of credit available. It is on the basis of those specific features that central bank control must be operated so as to eliminate the excesses of the trade cycle which this country has experienced in the past, and which threaten us again.
This Government, during its first eighteen months’ administration, increased the uncalled liability in respect of the special accounts by £200,000,000. The Treasurer has referred to an amount of £323,000,000 uncalled in May, 1951. But let us not forget that £200,000,000 of that uncalled liability arose during the administration of the present Government. The position simply was that from 1945, the Chifley Labour Government recognized that Australia was in a state of development and not of inflation. That Government administered the Bank ing Act 1945 in a way calculated to make available to the community and business firms an amount of credit adequate for a developing economy, but not sufficient to force along inflation. At the end of 1949, the present Government came into office, and, during the first eighteen months of its administration, increased the uncalled liability by £200,000,000. It failed to call up that amount. Let us not forget also that during the first eighteen months of its administration, there was a new surge of inflationary pressure, much of which was fed by none other than the amount of £200,000,000 which had not been called up by this Government to the special accounts.
Let me carry the matter a little farther. The Government adopted a special policy of encouraging imports - one of the mistaken notions that have cost this country so dearly. The theory was that if sufficient imports could be introduced into Australia, the Government would be able to carry out its pre-election promise in 1949 to put value back into the £1. Imports were encouraged; the private banks were encouraged to finance imports ; and the central bank was instructed to release sufficient of that special account reserve to make this new policy possible. In the next eighteen months, no less than £412,000,000 was removed from the special account and made available to the private trading banks. The Treasurer will do well to remember that when he talks of the high level of uncalled liability, the Government of which he is a member contributed to that position, and, indeed, really made it, first by increasing the amount by £200,000,000 in eighteen months, and then releasing £412,000,000 from the special accounts. That responsibility lies definitely on the shoulders of the Government itself.
Bank nationalization has certainly been the subject of decisions by the High Court of Australia and the Privy Council. A government now has no power, by administrative action, to overcome the illegalities which were found by those two courts. Therefore, any statement to the contrary, even if made in the course of a reckless tirade, such as the one we have just heard, is no more than a beating of the air.
There is another aspect that we should bear in mind. The nation is experiencing inflationary conditions. The new level set for the special accounts is only 75 per cent, of the level that was determined in 1945. Yet we are to face possibly a further spurt of inflation with such a low starting base. Of course, the Government may argue that, under the formula, as deposits increase, the central bank is competent to call more money into the special accounts. But we should remember that there is no certainty in the future, judging by the movement of deposits during the last six months, that deposits will increase at all. If deposits do not increase, we cannot establish in the special accounts a reserve to counteract dangerous deflation. Plainly, one of the main features of the administration of the Chifley Government is needed now. I shall refer to it briefly. The capacity of the private banks to create credit was limited to the degree that their excess reserves were taken into the special accounts, with the result that inflation was reduced and a buffer was established to prevent dangerous deflation. In other words, at a time when banks would normally feel inclined to call up advances, the central bank, having an adequate reserve, would be able to release money in order that the liquidity of the assets of the private banks might be retained and advances would not be called in. In a time of deflation, when private banks call in advances, increasing numbers of people lose their employment.’ In that way, unemployment grows in snowball fashion. It has done so in the past, and threatens to do so again. Unfortunately, the safe reserve against deflation, which is now threatening has been removed, and the central bank has lost most of its essential powers to meet any dangerous deflation.
A further provision has been included in the bill. If I remember rightly, it was not mentioned by the Treasurer, but it was referred to, in passing only, by the Prime Minister (Mr. Menzies) in his second-reading speech. I refer to the repeal of section 28 of the principal act, which dealt with the investments of private banks. That section appears’ full of technicalities.
The effect of its provisions was that the central bank, by exercising control over the investment policy of the private banks, could supplement the credit policy that was applied through the special accounts system. To avoid the technicalities, it could be said that, if in a time of inflation the private banks choose to buy securities on the open market, they take pieces of paper from the people who previously held the securities, and give to them money - or purchasing power - in return. Therefore, in a time of inflation, by buying in securities the private banks could aggravate inflation, which the special accounts provisions were intended to control. It is significant that the control over the investment policy of the private banks, which has been exercised under the 1945 . act, will be removed by an apparently innocuous amendment. Let us say that in the future the private banks, which now hold treasury-bills and other profitmaking securities, instead of adequate special account reserves could, at a time of deflation or at a time of inflation, counter the action taken by the central bank to correct the excess of that trade cycle. It is most significant that that power is to be deleted from the act and no longer, however it may try, will a central bank in this nation be able to employ one of the most potent weapons against the trade cycle, a weapon which is used particularly in the United States of America. The issue is whether or not we are giving to our central bank adequate power to operate, on behalf of the nation, a credit policy designed to prevent the excesses of inflation and the dangers of deflation. Clearly, the Government’s answer to this question is. “ No “.
It is very important, as I said earlier, that we should consider legislation in the light of its economic background. The Government has chosen not to do so. Although Australia may have a rosy future,, let us not think that the problems of the future will not be very difficult problems. “We can see in our economy elements both of inflation and deflation, and Australia is in the process of choosing which way it will go in the future. Let us remember that although our economy could experience a further hurst of inflation, the central bank will not have adequate power to call sufficient extra liquid reserves into the special accounts in order to check the excesses of the trade cycle, because the new formula is based not on increase of assets but on increase of deposits, which easily could be reduced.
During the last three years Australia has experienced a 52 per cent, increase of prices. This may or may not appear significant. But let us not forget that we are compelled, by the very nature of our economy, to compete in markets overseas. In addition to pricing itself out of overseas markets, Australia is finding it very difficult to compete in its home market. Our prices have increased twice as much as have the prices in the United Kingdom and New Zealand; three and a half times as much as prices in Canada; and five times as much as prices in the United States of America. Yet, this Government has seen fit to claim that it has controlled inflation. If inflation has exhausted itself, it has done so only because the Government, by its banking policy and other policies, has given full play to the riot of inflation. Trends of deflation are evident in the economy. The Commonwealth Statistician indicates, month by month, in his Bulletin of Employment Statistics, the number of persons who are employed in this country. Within a period of thirteen months the number of persons employed in Australia decreased by 110,000. That figure did not take into account immigrant workers who have come to this country, or the number of young people who have come newly onto the employment market. It is very significant that we can only sell our goods in two markets, that is the home market and the overseas market. The market most important to Australia’s employment situation is the home market, over which we can exercise some effective control. We must sustain that market by ensuring a condition of full employment and adequate incomes. Unemployment depresses our home market. If we fail to sustain the home market at an effective level of purchasing power, this nation could be plunged into a deflationary period, which is already threatening. As I have said, the significant part of this legislation is that part which technically recognizes the depletion of those central bank special account reserves, which were intended to prevent dangerous deflation. The money which could have been placed in the special accounts was first used by this Government to spur along inflation. By releasing an amount of £412,000,000 from the special reserve, pursuant to the Government’s import policy, we lost the main counter or buffer between the people of Australia and a dangerous deflation. Let us not forget that the first effect of that policy was the loss of employment by thousands of Australian workers. The Government admitted, by its subsequent severe import restrictions, that its import policy was all wrong, that is, that its policy to release £412,000,000 from special accounts was wrong.
Australia is at the parting of the economic ways. We must decide now whether or not a new spurt of inflation shall be allowed to continue. This legislation will take away the power of the central bank to prevent it. We must decide, too, whether or not special accounts reserves shall be used as a buffer against dangerous deflation. That buffer has been taken away by the administrative action of the Government, which will be. given legal recognition by the enactment of this measure. The central bank powers that are essential to the levelling of the excesses of the economic cycle have been deliberately smashed by administrative action, which will be confirmed by the bill. Whereas previously the voice of the people was heard through a banking policy exercised on their behalf by a necessarily powerful central bank, the voice of the people is no longer heard.
.- I am sure that the honorable member for Flinders (Mr. Ewert), like a seasick passenger, will feel much better now that he has delivered his maiden speech in this Parliament. I am reminded of the former honorable member for Flinders, the late Mr. Rupert Ryan. His successor will be fortunate indeed if he becomes as rich in friends on both sides of the House as was the late Mr. Ryan. In accordance with the practice of this House I do not wish to criticize the maiden speech’ of the honorable member, but I am obliged to point out that he strayed slightly from the path of fact. The honorable member will be well advised to take a close interest in the discussions at the next meeting of the Australian Loan Council. He has said that high interest rates and unemployment occur at the same time. It will be interesting to see whether the Australian Loan Council, at which five State Labour treasurers will be able to out-vote one State Liberal treasurer and the Commonwealth Government, will alter interest rates. The honorable member also said that the decisions of the High Court and the Privy Council on the Chifley Government’s banking legislation had made it impossible for any government to nationalize banking in Australia by administrative act. The honorable gentleman was under a misapprehension. The Privy Council ruling made it impossible for any government to nationalize banking by act of parliament. “What Australia has to fear is that a socialist government in the future will endeavour by administrative act, not by act of parliament, to nationalize the trading banks. The honorable member’s speech was well received by the Opposition, and no doubt it gave expression to the views of his colleagues on the subject of banking.
The whole controversy in relation to the Australian banking system shows how difficult it is for a community to rid itself of the creeping paralysis of socialism once that disease has attacked it. We in Australia are not the only people who have experienced this difficulty. The Churchill Government in Great Britain, for instance, is having trouble in restoring energy, drive and efficiency to industries which were placed under government control and ownership by the former Labour Government of that country. We must be thankful that this bill will weaken substantially the stranglehold of the Chifley special accounts system, which gave to the Commonwealth Bank the power to squeeze the trading banks out of business at any time. The new special accounts system for which this bill provides will allow the bank to retain sweeping powers which could be misused under a socialist administration. However, some of the peril that has threatened our private banking system will be removed, and this, notwithstanding the clamour of the Opposition, will represent a great gain for the people of Australia. The bill will insert in our banking legislation the only proviso that will afford the nongovernment banks any substantial relief from the oppressive provisions of the Labour Government’s acts of 1945. Although the relief will be substantial, it will be only partial. In effect, the bill will wipe out the huge uncalled liability that now hangs over the heads of the private banks, but, from now on, fresh liabilities will continue to accrue as deposits increase. Briefly, the Commonwealth Bank will be empowered to call up 75 per cent, of all increases of deposits.
No banking system can function properly under such a load, and it is obvious that, even under the provisions of this legislation, the private banks will bc compelled to continue to rely on sympathetic administration of the law by the Commonwealth Bank Board. In these circumstances, it is amusing to hear honorable members opposite talking about an attack by the Government upon the so-called people’s bank. The Commonwealth Bank will remain in full control of our banking system and can, in certain circumstances, have the trading banks at its mercy. Honorable members opposite have no justification for opposing the bill if the Leader of the Opposition (Dr. Evatt) has sincerely stated the policy of the Labour party on the issue of bank nationalization. It is obvious, therefore, from their loud howls of protest, that they are still intent on the nationalization of the trading banks as soon as they regain power. No other interpretation can be placed on their attitude towards this bill and the related measure which the House has already passed. For once in his career, the honorable member for East Sydney (Mr. Ward) has attained notable distinction, because he has emerged as one honest man in the Labour party who is blunt enough to state his intentions. The honorable gentleman has admitted that he subscribes to the nationalization of the trading banks. The honorable member for Hunter (Mr. James) this afternoon ranged himself alongside. the honorable member for East Sydney and stated without equivocation that he, too, was pledged to the nationalization of the trading banks. Thus, the threat of nationalization still persists.
It is a disturbing fact that the bill will not affect some of the vital features of the banking system that influence the confidence of the business community. Tears arise instinctively because there cannot be any sense of real financial security while the Commonwealth Bank Board, as it is now constituted, holds such wide discretionary powers as it will continue to hold after this bill becomes law. The trading banks will be obliged to depend still on the sympathetic exercise of the board’s powers. Having regard to this fact, and to the structure of the board, we have reason for anxiety. Dr. Coombs and his associate from the Commonwealth Bank are the only members of the board who have had any training in the business of banking. Therefore, it is natural that they should dominate the board on highly technical issues which must arise from time to time in the process of controlling and directing a central banking system. Because of this, I believe that the Commonwealth Bank Board cannot hold the scales impartially between the interests of the Commonwealth Bank and those of the trading banks. I have maintained consistently that there should be separate boards for the central bank and for the new Commonwealth Trading Bank. Nevertheless, I consider that it was unfortunate that the honorable member for Macarthur (Mr. Jeff Bate) last week drafted and circulated a proposed amendment, which he later withdrew. The adoption of the amendment would have served only to perpetuate certain dangerous features of our banking system. Such an amendment, apart from considerations of party loyalty, could not command support because it could not achieve its objective. I think that the amendment was prepared without a great deal of thought for the practical side of the banking situation. In its essence, it proposed .to leave the present board in charge of the central .bank. To my mind, this proposal would leave the situation practically as bad as ever and perpetuate a nuisance. It is necessary to have not only a separate board but also a separate governor for the central bank and the, Commonwealth Trading Bank and it is essential that the governors and the members of the boards should be qualified in banking and men who would guarantee impartiality. The Commonwealth Bank Board, as at present, constituted, represents principally the government banks and departments, a fact which has not always made for impartiality in the commercial life of this country. The crux of the situation is that under this bill the Governor of the Commonwealth Bank, by far the most powerful man in Australia’s financial structure, will be left as the governor of the central bank. He will be the controller of the destinies of his competitors, the private trading banks. It must not be forgotten that this man was appointed by a socialist government as a part of its campaign to make banking a government monopoly.
In order further to illustrate the weakness of the present position I invite attention to the fact that it is specially provided in this legislation that information supplied to the central bank will not be revealed to the Commonwealth Trading Bank. In other words, Dr. Coombs, as the governor of the central bank, is not to inform himself, as controller of the Commonwealth Trading Bank, of figures that he will receive from his competitors, the private trading banks. Surely the provisions of this clause add a somewhat Gilbertian touch to the situation. Or are Dr. Coombs and the members of his board to assume the role of the wise monkeys and neither hear nor see any information concerning the trading banks’ activities .except insofar as it affects the future or powers of the central hhnk? It is expecting too much of human nature to expect a person not to tell himself something of his competitor’s business, particularly if the competitor is doing better than that person. Such a business as banking can be conducted only in an atmosphere of strict secrecy. The bill does not provide for that atmosphere. Banking can be conducted only in an atmosphere of confidence and trust and it is obvious that in order to preserve the secrecy which the Government recognizes is necessary, two institutions of the Commonwealth banking system must have separate governors.
The fact that the hill makes provision for the interchange of officers destroys any hope of secrecy. I do not wish to be unduly critical but I say that if Dr. Coombs were the archangel Gabriel himself he would still find is impossible to administer efficiently the dual positions of Governor of the central bank and Governor of the Commonwealth Trading Bank. The Government, in this bill, has attempted to make the Governor into a split personality. This can only have the usual result. The person who develops a split personality has to decide eventually which master he will serve, and Dr. Coombs will have to decide whether to serve the Commonwealth Trading Bank or the central banking system. Under the bill, the same board will be left in charge of the Commonwealth Trading Bank and the central bank. As Opposition members have revealed in the course of their remarks on this bill, the Labour party considers that political representatives should be appointed to the board. We should take a realistic view of Labour’s intentions in regard to this legislation. There is no doubt in my mind that if the socialists are returned to office either they will repeal this legislation entirely and place the whole of the affairs of the Commonwealth Bank and the banking system under the control of a socialist dictator; or they will arrange a majority loading of socialists on the Commonwealth Bank Board. Such a board would be called upon to arbitrate between the private banks and the government banks. If the board is politically loaded there can be no doubt of the action that will follow its deliberations.
I now wish to suggest an amendment which might be made to this bill. I believe that it is time that the central bank in Australia had some means of guiding the course of the money market as central banks guide the money market in most other coutnries. The obvious indicator of interest rates in Australia would be the rate of interest charged by the central bank on moneys made available to the trading banks. I think that the banks should announce this rate publicly from time to time, giving proper information to every one concerning any variation of the rate. This rate, if it is properly calculated in order to accord with conditions of the time, would, I think, serve as a guide for commercial transactions generally and enable the central bank to influence the money market without using the drastic powers of compulsion that are favoured by the socialistic type of administration, lt should be an invariable rule that the rate charged to all Australian banks by the central bank should be the same. It would be immoral, for instance, to charge a lower rate to the Commonwealth Trading Bank than to private banks. The bill provides in proposed new section 22a that the Commonwealth Bank shall pay interest at halfyearly intervals to a bank on the daily balance of that bank’s special account at a rate to be determined from time to time by the Commonwealth Bank with the approval of the Treasurer. But there is no provision with regard to moneys which the Commonwealth Bank may make available to the trading banks in certain circumstances. Obviously, under the pressure of a socialist Treasurer, aided by a socialist-minded Governor of the ‘Commonwealth Bank, it could be arranged that the private trading banks would pay a high rate of interest which would ruin them while money could be made available to the Commonwealth Trading Bank, under some pretext, at a very low rate of interest. I hope, therefore, that the Government will agree to the incorporation of a clause which will provide for the publication of the interest rate charged by the central bank and which will also guard against discrimination in this matter between one bank and another.
Unlike honorable members of the Opposition I am endeavouring to make an objective approach to this bill. It has been my lifelong impression and line of argument since I became a member of this House that the banking system should work on a voluntary basis. In other words, if a degree of mutual trust and confidence can be established between the central bank and the private trading banks, the central bank would be able to induce the trading banks voluntarily to adopt policies which, the central bank might deem best in the interests of the community. Compulsion should be exercised only as a reserve power. The leadership in ensuring cooperation should be in the hands of the central bank itself. In other words, it could be achieved in an atmosphere of round-table conferences without the whip being flourished and without the private banks being told that they must do certain things in accordance with the law. It seems extraordinary to me that, since I have been a member of this Parliament, the idea of voluntary co-operation, not only in respect of banking, but in respect of other matters also, has not been fully exploited. I believe that if a basis of mutual trust and confidence could be established it would be to the betterment of our trading conditions and to the general harmony of our banking activities throughout Australia. There should be no question of the Commonwealth Bank using compulsion on the trading banks. I suggest that it might be in the interests of the Government to instruct the central bank to do its best to introduce a spirit of goodwill and co-operation between it and other banks, and that some system should be devised, such as is used in the Bank of England, where the cash deposits ratios are varied to ensure a more satisfactory system of banking.
I turn now to the Opposition’s attitude to this bill. However the Opposition may try to cloak its arguments, there emerges the fact that socialization is still the major plank of the Labour party’s platform. Despite the strenuous attempts now being made by the Leader of the Opposition. (Dr. Evatt) to pass as a converted moderate, the people will not be deceived by this masquerade. At heart the right honorable gentleman is a socialist, and he is leading a band of avowed socialists. Let it not be forgotten that the right honorable gentleman strained every legal nerve in his body to have the private banks nationalized bv legal process. His efforts were defeated by the Privy Council. In his bid to convince the people that he is a moderate he could not be worse served than he is by the socialistic members of his own party. The honorable member for East
Sydney (Mr. Ward) apparently clings to the .Labour party’s platform of bank nationalization. The ardent socialists opposite cannot extricate themselves from that position even if they wished to do so. The Leader of the Opposition pursues a very forlorn hope if he aspires to present his band of merry socialists as supporters of the free enterprise system. The weight of evidence is against them. I shall cite as a part of that evidence an interjection made by the honorable member for Hindmarsh (Mr. Clyde Cameron) while I was speaking on the Oil Agreement Bill in this chamber on the 14tb October last. I referred to members of the Labour party who were in Opposition at the time of the formation of Commonwealth Oil Refineries Limited in 1920, and said, in the course of my remarks -
At least members of the Labour party in those days were more honest on the subject of socialization than are members of the same party to-day. They were socialists and were not ashamed of the fact.
The honorable member for Hindmarsh interjected -
We are socialists and we are not afraid to say so.
Opposition SUPPORTERS - Hear, hear!
– I am glad to have confirmation from the other side of the chamber of my statement that honorable members opposite are socialists. Even if there are some honorable members opposite who do not wish to have the bank* nationalized, such a process, once started, goes on automatically unless there be in office a government determined to arrest it. The people of Australia are at present fortunate in having in office a government that believes in the free enterprise system and is determined’ not to see it go.
– You are gone.
– I do not know whether I am gone politically, but I know some honorable members who are. gone mentally. The fate of the private banks is not the only issue at stake. The whole future of Australia would be imperilled in the event of a socialist government gaining office, and I believe that, that is the reason why the people are not willing to elect such a government .to office. I accept this bill, and the Commonwealth
Bank Bill as instalments for the future. I believe that they will remove some of the anomalies that have existed in the past.
.- There is one word, and one word only, in which the Government seems to place its faith. That word is “nationalization”. The Government parties look to it to win the Senate election for them. I have in my hand an extract from the Melbourne Age of Thursday, the 24th November, 1949, at which time a general election campaign was in full swing. The Melbourne Age report is headed -
page 748
Liberals will Chub Exploiters.
The report reads -
Adelaide, Wednesday. - The Liberal Party will unhesitatingly nationalise any public utility not operating for the benefit of the people.
The Leader of the Federal Opposition (Mr. Menzies) gave this undertaking to a meeting of 2,000 people at Norwood Town Hall tonight.
Mr. Menzies said the Prime Minister (Mr. Chifley) had stated that the question of socialisation was not dead as an election issue.
However, some person had apparently “ shrugged his shoulders “ because Mr. Chifley had then qualified his statement by saying the Labour Party believed in socialisation only for those utilities acting against the interest of the people.
He himself agreed with this form of nationalisation. “ We stand for freedom and not for exploitation,” Mr. Menzies added. “ If you can show us some public utility which is operating to the detriment of the people, then I, as Leader of the non-Socialist parties, would nationalise it tomorrow.”
There is no difference between what the present Prime Minister advocated then and what the Labour party advocates.
I consider that this legislation is the last desperate throw of the most discredited government ever to hold power in this country. This calamitous Government has no mandate for this legislation. It has been censured from one end of Australia to the other. In fact, it knows that it has failed to take a trick. If I am right, then every honorable member opposite has the political death rattle in hia throat. The Government will be thrown out of office immediately the people of Australia are given an opportunity to pass judgment on it. I am in full and complete accord with a statement that was issued by the Leader of the Opposition (Dr. Evatt) on the 19th February last, when he told the people that he opposed the bill now before us. He said -
Stripped of superfluous words and obvious trappings this legislation of the MenziesFadden coalition has two main purposes: first, to divide, undermine and gradually weaken and subvert the Commonwealth Bank which has been so extremely successful as an instrument of the people; and secondly, to break down wantonly the existing system of special deposits which’ was instituted by the Curtin and Chifley Governments to prevent, in the war and immediate postwar years, which it did successfully, rising prices and inflation of the currency which have recently caused such hardship ami suffering.
The legislation which is now to be amended was approved by the people in 1946. The Australian Labour party had a mandate for that legislation. Certainly, the calamitous Menzies Government has no mandate to attack the charter of the Commonwealth Bank or its historic name. It has no mandate to undermine the goodwill of the central bank, the trading bank or the savings bank. The object of this Government is not to ensure fair competition between the private banks and the Commonwealth Bank but to provide excessive and unfair profits for the private banks at the expense of the Commonwealth Bank and its depositors, who comprise a majority of the people.
I believe that the people of Australia are opposed to banking monopoly. In fact, in 1949 they returned a verdict against nationalization of the private banks. As a member of the Australian Labour party, I accept that decision. However, the people have also given a verdict in favour of the retention and expansion of the Commonwealth Bank, which is their own property. The present Government is attempting to destroy the Commonwealth Bank, which has been the great financial bastion of the people, both in war and in peace. Money is the greatest moral and social problem which mankind has ever had to consider. It is the root cause of all evil. It affects the lives, fortunes and happiness of every human being in society, and of generations yet unborn. All other problems sink into insignificance compared with it.
Money is the lifeblo’od of trade and commerce. Unless there is an ample supply with which to meet the growing demands of trade, enterprise will he checked, trade depressed, and the public unable to secure and enjoy the abundance of the necessaries and good things of life which inventors and scientists have provided. The power of money touches almost every human act and affects almost every human emotion. It is the key to almost everything we do. What is almost as important, it is also the key to everything we want to do. Properly used, it is a power for untold good. It was properly used by the Chifley Government. I know that Australians have not forgotten the suffering and unemployment which prevailed during the depression years, when the bankers declared that money was not available for necessary public works or for the building of home’s. The struggling farmers could not sell their produce to the hungry people because of the alleged shortage of money. Home-buyers lost their homes because repayment of advances was demanded before the purchasers were able to pay the last instalment. The businesses of small traders were closed down because of the withdrawals of overdrafts. In Australia alone, 600,000 men - our own flesh and blood- walked the streets in search of work. More than 500,000 mcn, women and children learned the dreadful lesson of the dole.
Let us ask ourselves who should govern - the people or the private banks, with their policy of dividends first and “ hang the consequences “. I know that many supporters of the Government object to a strait-jacket being put on the banking system. I believe that the Australian Government should accept full responsibility and control of the monetary policy, in the interests of the people. I can remember, as though it Were only yesterday, the last speech made by the late John Curtin before the 1943 general election, when he said -
Sever again will it be said that money can be found for war and not for peace. I pledge my Government that it will find all the money that is necessary to maintain full employment.
That pledge was not just an ordinary election promise-, it was a challenge to his masters, the banks. It was precisely what the electorate wanted. It was a re-assurance against the fears held by so ‘many that depression would return. The Commonwealth iBank Act was passed in fulfilment of that pledge.
When the Chifley Government introduced the 1945 banking legislation I declared that the bill was amongst the most important that the Parliament had ever been called upon to consider. I then said that I desired the electors of Hume, and the people of Australia generally, to know where I stood on the subject of banking reform. I said that I was convinced beyond a shadow of doubt that the people welcomed the legislation. I believe that they still want that legislation to-day and do not want this discredited Government to tamper with it. At that time I also referred to the report of a conference of the Victorian Wheat and Wool Growers Association, held in March, 1945, in order to prove that the Australian Labour party was not alone in its support of the 1945 banking legislation. The people whom the present Government claims to represent stood foursquare behind that legislation which was introduced by a Labour government. The report stated -
Delegates to the Victorian Wheat and Wool growers’ Conference decided unanimously to support the Federal Government’s proposals to establish the Commonwealth Bank on its charter and to abolish the bank board as a necessary measure of post-war rehabilitation. It further urged that a representative of the rural industries should toe appointed to the proposed Commonwealth Bank Advisory Council. More than 200 delegates voiced their approval of the 1945 bank bills in their speeches or by applause.
That was the first public opinion in relation to that legislation expressed in Australia by an organized body of primary producers. I remember clearly how many supporters of the present Government went into their dugouts when the Victorian farmers had spoken. The report continued - “ Control of banking is necessary in the post-war period “, declared Mr. F. W. Mitchell of Lalbert.
Mr. Mitchell said that unless the Commonwealth Bank had continuity of financial policy it could not run the country. If credit were cut off, depression would follow. The national credit of Australia must be used for the benefit of the people. If the financial policy were not stabilized, then prices of primary products could not be stabilized. Mr. A. C. Everett said that he wanted to remind the wheat-growers that when they were offered a stabilized price in 1930 the Commonwealth Bank refused the then government the money to pay the growers and the result was that wheat was sold at ls. 6d. a bushel. No stabilization plan was safe, and no government could live up to its promises unless it controlled the banking system. When the war was over, said Mr. Everett, the trading banks would follow the policy of deflation to use up their excess deposits which then amounted to £500,000,000. He added-
Bankers are dealers in debt. No uncontrolled banking system is going to pay good prices for commodities so that we farmers can pay off our debts. If we are to have stabilization we must have a stabilized bank.
After World War I. it was said that nothing was too good for the soldier and Mr. Everett said, “ nothing was what he got “. That was due to depression caused by an unstable financial position.
Despite the gloomy predictions of those who opposed the establishment of the Commonwealth Bank, this bank has served Australia in a capacity that no private bank could or would have done. A former Governor of the Commonwealth Bank, Sir Denison Miller, in a speech at a public function in 1922, said that during the 1914-18 war, loans which totalled £250,000,000 were floated in Australia. He pointed out that the private banks then charged £2.7 per £100 as flotation charges, but the Commonwealth Bank did the work for 5s. 9d. per £100 and thus saved Australia £5,170,000. It will also be remembered that during World War I. the primary producers of Australia went far towards keeping the allied armies in the field. The fact that the primary industries of Australia were able to continue functioning was due to the arrangements made by the Commonwealth Bank for financing them during the war. The total amount paid to the primary producers during that period was more than £437,000,000. .
When the late Mr. William Morris Hughes purchased fifteen ships overseas because of the ruinous freight rates then being charged by shipping companies, the Commonwealth Bank immediately made £3,500,000, available in London to pay for the vessels. The few illustrations that I have given touch only the fringe of the achievements of the Commonwealth Bank in the interests of the nation, and they show clearly the absurdity of the criticism of those who opposed its establshment. With Labour out of office it was not long before the anti-Labour forces introduced legislation that drastically curtailed the activities of this great institution. An anti-Labour government prevented the Commonwealth Bank from carrying on general business, and in 1924 the BrucePage Government gagged a bill through the Parliament to make the Commonwealth Bank a bank for bankers. That was what the bankers and and the financial interests desired, and what they demanded from the then government. On this matter the Melbourne Sun of 13th October, 1924 reported -
The Bruce-Page Government took the bold step of converting the Commonwealth Bank into a Bank for the Bankers.
And it remained as such until Labour again assumed office. Now we have the same discredited Parliament-
– Order ! The honorable member must not refer to the Parliament as “ discredited “.
– The same discredited anti-Labour forces are again set upon curbing or destroying the people’s bank. Australia, in common with other countries throughout the world, has suffered acute depression which has brought about untold suffering, misery and bankruptcy. What causes depressions? Cannot they be prevented? Why should the people live in fear of their recurrence? These are questions that concern everybody - men, women, children, manufacturers, primary producers, businessmen and others. Prosperous periods differ in no way from depressed ones so far as natural forces are concerned, but no matter how well supplied a nation may be with materials and labour, it cannot make use of them without money. The Labour party has long known that as long as the trading banks control money they control the economic life of the country. This is also recognized by many statesmen, economists and financiers throughout the world. If the last depression has shown one thing more clearly than anything else, it is that economic prosperity and social security depend more on monetary policy than on any other single factor. There is no argument as to the correctness of this statement, because the depression proved it. In 1929, 1930 and 1931 the banks contracted the credit of the country by calling in overdrafts. That policy of deflation did more to accentuate the depressed condition of the country than anything else could have done. During the depression there were 600,000 men out of work. Counting their wives and children, there were approximately 1,000,000 people living on the dole.
The Scullin Government put forward a proposition to place 50,000 men in employment on full-time public works financed by new money. That would have created demands for food, clothing and furniture and thus would have given employment to thousands of others, but the reply of the banks was, “ No money “. It will also be remembered that when it was proposed to issue £18,000,000 to relieve the unemployed and give some assistance to wheat farmers, the proposal was met with cries of “ ruin “, “ inflation “ and statements that Australia would go bankrupt if the proposal was agreed to. The Senate, in which there was then an anti-Labour majority, threw out the legislation designed to implement the proposal. I think, from memory, that the anti-Labour forces had a majority of 33 to 3 in that chamber. Had that proposal been agreed to, thousands of people would have been profitably employed and we could have helped our wheat-farmers by giving them a fair price for their product. The Labour party was prevented from doing that because it did not have control over banking. In September, 1931, the then Australian Labour government called a Premiers conference to give special consideration to unemployment. A committee was set up that consisted of Mr. H. “W. Gepp and Mr. J. Gunn, representing the Department of Development, Professor Brigden, Professor Giblin and Professor Hytten as economists, and Mr. E. J. Mulvaney and Mr. J. F. Murphy, of the Commerce Department. The committee submitted a list of works of permanent value, including the building of workmen’s homes, afforestation, road construction, opening up new land for occupation and serving also to feed the railways, the clearing of Crown lands, water supply and sewerage for several country towns and outer suburbs, water conservation for stock and irrigation purposes, dams and bores on stock routes, wheat bulk handling and harbour installations. The committee, in its report, advised - in this emergency, the banking resources of the country must be used to the limit.
I believe that the great Snowy Mountains scheme should have been put into operation then so that it would have been an accomplished fact by now. The banks, however, took a different view and the comprehensive plan of public works could not be started because money was not available. Meanwhile thousands of workers and their families were living on sustenance. Had. the housing scheme that was then outlined been put into operation, it would have absorbed great numbers of carpenters, bricklayers, plumbers, plasterers and labourers and would have provided work for timber workers, brickmakers, and many others, who are engaged in the supply of materials. In addition to absorbing large numbers of the unemployed, that programme would now be proving a great blessing to the many homeless people in Australia.
On numerous occasions, the Commonwealth Bank Board at that time refused to accede ‘ to the request of the Australian Loan Council to provide the necessary money for the States. Although there were thousands of people out of work the Government had not the power to force the Commonwealth Bank to make the necessary money available. Thus it will be seen that for years past, the power of the private banks, coupled with the conservative attitude of the Commonwealth Bank Board, prevented money from being found for essential public works which would have ameliorated the unemployed position of that day. Sir Herbert Holden, one of the most eminent hankers in Great Britain, in a lecture to students at Oxford, said -
What brought about the depression? Everybody knows that the depression was caused by the bankers the world over in following up their time old policy of calling up overdrafts and advances.
Lord D’Aliernon, British financier, statesman and diplomat, speaking on the economic crisis in 1931, said -
What has really occurred is a hold-up in currency. ‘
The most significant statement relating to the power of those who control money came from Mr. McKenna, ex-Chancellor of the British Exchequer and chairman of the Midland Bank, who said -
They who control the credit of the nation direct the policy of Governments and hold in the hollow of their hands the destiny of the people.
There is no doubt as to the truth of that statement as has been proved over and over again, especially in the years of depression. No wonder this Government has been discredited and censured from one end of Australia to the other at every State election and every by-election ! No wonder honorable members here talk of redistribution !
– Order ! The honorable member might begin to deal with the bill.
– The people of Australia are only awaiting their chance. At the first opportunity they will annihilate this Government.
– The measure that is before the House, the Banking Bill 1953, might easily have been attached to the Commonwealth Bank Bill. A great many people who listen to the debates in the Parliament have said that they cannot see much difference between the two measures. In any case, banking appears to be an abstruse subject and they are not clear about what is being done.’ I believe that the two bills could easily have been amalgamated in one bank bill. There is no need for a bank bill and a banking bill.
This measure relates to two important matters. One is the amendment of the special accounts legislation to bring it into line with banking policy and to make an attempt to prevent the nationalization of the banks. The other part of the amending bill that is before the House is designed to bring up to date the statistics required by the central bank from the trading banks, and of course, from the new Commonwealth Trading Bank itself. The 1945 legislation provides that the central bank may call up a very large amount of money from the trading banks, but not from the trading- section of the Commonwealth Bank called the General Banking Division. But because of current difficulties and economic conditions, there is an uncalled liability of about £500,000,000. That means that under the Banking Act 1945, the central bank, the Governor, and the board could call up all the new assets accruing to the banks after the beginning of the 1945 legislation. They must be lodged in the central bank. As I have said, the Uncalled liability at present would represent over £500,000,000, and if the central bank so desired or a Labour government was returned to office, that money could be called up at once. The banks could thus be made bankrupt or their power.? could be seriously disturbed, and that would be the beginning of the nationalization of the banks. The banks could be strangled or crushed.
The special accounts or special deposits account systems, which is one of the most important weapons in the regulation of national credit, met its first big crisis in the last few years. During the 1950-51 boom, special accounts .were raised to about £580,000,000 in May, 1951. The spare cash or the regulated funds of the trading banks were pushed into the central bank and were supposed to be frozen there. Karl Marx, whose teachings have been listened to with respect, particularly on the Opposition side at times, stated in one of his manifestos that the trade cycle of boom and depression would one day ruin the capitalistic democracies. He was confident that one of the great depressions would throw capitalist democracies into revolution and would usher in the great day of the Red revolution in what we now know as the free world. The special accounts system is aimed at flattening out booms and depressions. It skims off surplus money when there is too much and releases it when there is not enough. Those operations are of the greatest importance. The special accounts system, under the administration of the Governor of the Commonwealth Bank . and, eventually, under the Commonwealth Bank Board, has worked exceedingly well. There may be some grounds for criticism of it, but on the whole the system as it is operated in Australia and, I suppose, in other countries that have adopted the reserve bank system, has had beneficial results. When too much money is available the surplus is skimmed off and placed in special accounts in the central bank. We are no.t sure exactly what is done with the proceeds of the special accounts. Some may be left in London and some may be utilized to discount treasury-bills. At all events, as the central bank pays only 12s. 6d. per cent, interest on special account balances it has probably made a very good profit out of the system. After we had passed through a period of great economic difficulty the proceeds of the special accounts were fed back to the banks and utilized with signal success. During July, August and September last, when the greatest releases from special account were being made, if a Labour government had been in office it would have undoubtedly used the period to support its argument that the private banks should be nationalized.
The use of the special account system enabled the Commonwealth Bank to push money out very rapidly into channels of economic activity and thus the country was saved from a very serious depression. Obviously, we could not expect the banks to continue to shoulder their uncalled liability to make deposits to special account. This amending legislation seeks to give a legislative sanction to the practice that has been adopted by the central bank in the administration of the special accounts system. It is a most complicated measure. I do not know enough, about it to say whether or not it could have been better drafted. Those who study it have the greatest difficulty in understanding it.
– I agree with the honorable member.
– In general, the uncalled liability of the banks will still remain. At present the frozen special deposits in the central bank amount to £226,000,000. We have extricated ourselves from the difficult economic position that existed last year when, on the 15th October, special accounts amounted to a total of only £156,000,000. An amount of £70,000,000 has since been added to special accounts. If this legislation under which 75 per cent, of all new deposits are taken into special accounts were brought into force to-day the deposits of the private banks would be £30,000,000 short of the amount which they would be required to pay to special account. During the period from October last, to the present time bank deposits have increased by £130,000,000 making a total of £100,000,000 due to be called up. Thus, they would have an uncalled liability of £30,000,000. At the end of the current banking year - that is, on the 30th September - the provisions of this legislation will change the method of computing the amounts which the trading banks are required to deposit to special account. After the 30th September the maximum amount which the central bank may require a bank to hold in its special account at the end of any month during subsequent years will be the amount actually held in special account on the preceding 30th September, plus the bank’s uncalled liability on the preceding 30th September, or 10 per cent, of the level of its deposits in the previous August, whichever is the less, plus or minus 75 per cent, of excess or reduced deposits as the case may be.
This is a most complicated bill, but I believe that its provisions will be found to be workable. It will bring the system of special accounts into the realm of possibility instead of leaving an enormous uncalled liability to jeopardize the existence of the private banks in the event of the accession to office of a government hostile to their interests. The most important question that is exercising the minds of the people, and of bankers in particular, is whether a future Labour government will attempt to nationalize the private banks. The Leader of the Opposition, speaking on behalf of his party, has said that no further attempt will be made to nationalize the banks. Many people are drawing such comfort as they can from that statement. People in the cities are saying, “ Bank nationalization is a dead letter “ ; hut the honorable member for East Sydney (Mr. Ward), who is grinning at the table-
– Order!
– If I were the director of a private bank, I should look upon the honorable member with horror, believing that he was about to swallow the private banks. He has definitely stated that a Labour government will nationalize the private banks. The honorable member for Melbourne (Mr. Calwell), who is Deputy Leader of the Opposition, and who so often expresses himself on these matters with refreshing and frank honesty, has been ominously silent on the point. When this matter is discussed by the Labour party-
– What is wrong with holding a referendum of the people on the matter?
– Should we experience a temporary recession, as we did in August, the proposal to nationalize the private banks will undoubtedly again be canvassed in the Labour party. The Leader of the Opposition (Dr. Evatt), who drafted Labour’s bank nationalization legislation, with its most dreadful threats of what would be done with the private banks, will probably say, “I promised that there would be no nationalization “ ; but the honorable member for East Sydney will undoubtedly make a slashing attack on the banks. I can almost hear him in action. His speech will undoubtedly be in line with that made by the honorable member for Hume (Mr. Fuller) when he attacked the power of money. Members of the Opposition appear to labour under the delusion that the amount of deposits shown in a bank’s balance-sheet is actually held in cash by that bank. They forget that the item represents a liability which the bank must meet. Deposits reflect the business of a lank, and, as we know, members of the Australian Labour party are prepared to attack any institution which has been able, by the exercise of foresight and prudence, to build up a business. Honorable members opposite desire to crush every successful private business. Consequently, nationalization is still a live issue in the Australian Labour party. At some future caucus meeting of the party, the honorable member for East Sydney will make an attack of the kind for which he is famous upon the private trading banks; and the party, running true to form, and in accordance with the plank of its platform of socialization of industry, production, distribution and exchange, will take the first opportunity presented to it to make another attempt to nationalize those institutions.
A future Labour government could, in effect, nationalize the private trading banks in one of several ways. By reducing the uncalled liabilities in special accounts from £500,000,000 to £30,000,000, this measure will prevent such a government from achieving that result in the quickest possible manner. However, whilst the object of the bill is to reform the system of making lodgments in the special accounts, I regret that it does not make provision for uniform treatment of all the trading banks. At present, all banks are required to lodge a certain percentage of increases of their deposits, but whilst this measure embodies a new and more flexible formula for that purpose, it does not make provision for a penal rate in respect of any bank) which may gain an advantageous position compared with that of other banks by withdrawing a greater amount from special accounts or by failing to lodge in the special accounts an amount equal in percentage to that lodged by its competitors. A bank which follows that course should be obliged to pay a penal rate in respect of amounts that it withdraws from the special accounts.
– Such a penalty would not have the effect that the honorable member suggests.
– I accept the statement of the Minister for the Navy (Mr. McMahon) on that point. However, the point that I am endeavouring to make is of particular significance having regard to the possibility that a future
Labour government may endeavour to nationalize the private banks. It is clear that, notwithstanding the passage of this measure, the central bank may continue to operate in respect to its own trading bank’s advantage. The proposed Commonwealth Trading Bank will have every opportunity to gain an advantageous position in relation to the private banks. For instance, it could gain an advantageous position by being allowed to withdraw from special accounts amounts much larger than those which are released to the private banks. It will be useful to have a glance at the history of the special accounts. In 1940, the private banks voluntarily agreed to deposit in the special accounts a certain proportion of their funds in order to help in the fight against war-caused inflation. I believe such an arrangement should be backed by statute in order to prevent any one bank from gaining an unfair advantage over its competitors. If the majority of the private banks decided that they would not overlend and would carefully limit advances, one of the other banks, in the absence of a statutory provision prohibiting it from taking such action, could lend to an unrestricted degree and thus place itself in an advantageous position. [Quorum formed.’] The proposed Commonwealth Trading Bank, as I have said, could shelter under such a policy at the expense of the other trading banks. For that reason any bank that followed such a course should be obliged to pay a penalty rate in respect of abnormal withdrawals from special accounts.
– I rise to order, Mr. Deputy Speaker. Would you tell me how many honorable members constitute a quorum?
- (Mr. Adermann) . - Forty-one.
– I point out, Mr. Deputy Speaker, that there are not 41 honorable members present at the moment.
– There were more than that number present when I called upon the honorable member for Macarthur to resume his speech.
– The honorable member for Hindmarsh (Mr. Clyde
Cameron) is a member of a party which is pledged to socialize industry, production, distribution and exchange. I take this opportunity to re-state the fears of the Australian people of the danger of nationalization by a future Labour government. Once a monopoly in banking, particularly a government monopoly, were established, freedom of enterprise would be doomed. A customer expects to receive advice and assistance from his bank manager. If there were only a government-controlled bank, the customer would get, not banker’s advice, but banker’s instructions. The banker would tell him what he had to do. The customer, if he did not take the banker’s instructions, would not be granted financial assistance. He could take it or leave it. Members of the Labour party favour that kind of system, and a customer would be obliged to get in touch with a politician or a Labour Minister before he could obtain any financial accommodation from the bank. The moment banking becomes a government monopoly, a customer receives not banker’s advice but banker’s orders.
I mention, in passing, that the High Court of Australia, in a judgment given to-day, has upheld an appeal by the New South Wales Government in a matter involving the resumption of land. The High Court has ruled, in effect, that th, State Government is not bound, as is the Commonwealth, by the Constitution to resume land on just terms. In other words, the New South Wales Government may resume land, and conscript services without compensation. That situation is as close to slavery as we can get without actually being serfs. If banking were a government-controlled monopoly, all freedom and enterprise would disappear. People like the honorable member for East Sydney and his colleagues could decide whether a customer should receive financial assistance from the institution. A customer who did not have the goodwill of those honorable gentlemen would get “ knocked back “, and he would not be able to obtain financial accommodation elsewhere. When banking is nationalized, personal freedom and private enterprise die. . The nationalization of banking would introduce complete ministerial direction over the personal lives of individuals. The only restriction on ministerial direction would be the number of hours that a Minister could work each day.
Government supporters believe that the nationalization of banking would lead to inefficiency in the banking business. During this debate, the Commonwealth Bank has been lauded by Opposition members, and I agree that the institution has made a special contribution to national progress and development that the other banks could not make. One reason why the Commonwealth Bank has been able to render such excellent service is that the officers who constituted its staff at its inception were drawn from the private banking system. Another reason is that the Commonwealth Bank has been obliged at all times to compete with the private banks, and, therefore, has had to be efficient. We believe that competitive private banking has been the basis of the great vigour and enterprise that have been shown in Australia. Farms, improvements, machinery, stock, fencing, and a host of other things associated with the great primary industries have bee financed by the Commonwealth Bank and the private banks. I do not think that any class of people impresses us more than the great majority of bank managers in country districts. They are wise, experienced, well-trained men who have rendered excellent service to this country. Some of us who were privileged to see many of them a few years ago when there was a great outcry in opposition to the proposal to the Chifley Labour Government to nationalize banking are well aware of the great contribution that those men have made to Australia.
I remind the House that section 48 of the Banking Act 1945 provided that no State instrumentality or local governing body could conduct its banking business with a private bank unless it had the authority of the Treasurer to do so. The Melbourne City Council challenged the validity of that section, and the High Court of Australia upheld the appeal.
– Order ! The honorable member has exhausted his time.
.- The honorable member for- Macarthur (Mr. Jeff Bate) has expressed a couple of views with which I am in complete agreement. He has implied that there is no need for the Commonwealth Bank Bill 1953, and I am in accord with that opinion. His subsequent words appear to support my view that there is also no need for the Banking Bill 1953 because he has said that the special account system has operated satisfactorily. Consequently, the honorable member has made it clear that the Labour party has been correct from the beginning of this debate. I claim that the Banking Bill 1953 is unnecessary, because the procedures contained in the Banking Act 1945 have worked reasonably well. I do not believe that those procedures provide sufficient power in a time when the banking structure might be under strain. My own feeling about the matter is that the central bank has insufficient authority to meet an economic crisis. However, the bill now before the House does not strengthen the power of the central bank, or provide proper machinery to enable an economic crisis to be met. Indeed, this legislation weakens the power of the central bank.
Honorable, members have the right to expect that the Government will support its legislation with reasons, and state specifically whether it will benefit the people. No Government supporter has even ventured” to claim that the Commonwealth Bank Bill 1953 or the Banking Bill 1953 will strengthen in any way the central banking system, or safeguard, the future of the Australian people. Yet surely those two tests should be applied to any plan submitted by the Government to this Parliament. No honorable member opposite has dared to say that the two bills will strengthen the position of the central bank or safeguard the welfare of the Australian people. Indeed, the House has been told that this legislation is deliberately designed to safeguard comparatively few people, some of whom are not residents of Australia. Therefore, the two bills are quite unnecessary on any test that can be applied to them, and, to a large degree, they are dangerous. The Prime Minister (Mr. Menzies), and all his supporters who have spoken on these two bills, have either stated or implied that they have been introduced in order to protect perhaps 40,000 persons who are the shareholders of the private banks. In my opinion, the bills will not even do that ; but at least no other claim has been made in favour of them.
The honorable member for Macarthur has said that some members of the Labour party claim that the nationalization of nanking is no longer a political issue but that my friend and colleague, the honorable member for East Sydney (Mr. Ward), has made it plain that such an objective is still the policy of the Australian Labour party. As a matter of fact, the statement of the honorable member for East Sydney on this subject was correctly reported in the Australian press that I read. In the Parliament, however, his remarks were viciously distorted. I was present when the honorable member stated that the platform of the Australian Labour party provides for the nationalization of banking, as well as for many other things, but that that would be sought only if a mandate had been received from, the people of this country. Clearly, the honorable member implied, as all of Labour’s policy implies, that if we are prejudiced in our efforts to safeguard the welfare of this country we shall unhesitatingly seek the approval of the people to put our policy into effect. If, at some future time, the banks of Australia either individually or in consort, endeavour to hold up the Government to ransom, as they did in earlier days, with the dire consequences of which we are all familiar, the Australian Labour party will certainly seek the consent of the people to do their will. I am sure that, at the present moment, the people would prefer any alternative government, no matter what its policy or lack of policy, to the present ill-starred coalition Government. Clearly, the people reject the policy of the present Government, and they do not approve of the measure that is now before the House. In recent weeks Liberal members of this Parliament and also of the State parliaments, have taken part in State election campaigns. But in Queensland and Western Australia the anti-Labour parties have been rejected, notwithstanding the bank ing legislation that was recently passed by this House.
I shall now address myself to some of the problems with which Australia is at present confronted, and also to problems that may arise in the future. I shall discuss, too, the banking machinery that has existed throughout the years, and the means that should be adopted to develop a sound banking structure in this country. As the honorable member for Hume (Mr. Fuller) has stated, ever since the dawn of the industrial era there have been boom and slump periods. The booms have increased in their intensity and the slumps have deepened. The periods between booms and slumps have increased as the industrial cycle has progressed. That has been evident not only in Australia but also in other countries. Liberal and conservative governments both in Great Britain and in the United States of America have endeavoured to grapple with the problem, but so far no banking machinery has been devised to cope adequately with the boom and slump cycle of a nation’s economy. It has been generally accepted that an essential ingredient of a banking system is a strong central bank, and that such a bank should be a government institution, with the necessary power to enforce its will upon the private trading banks. That principle has not yet been fully developed in any country. In the United States of America, which has a very elaborate financial structure, there is a federal reserve bank, a federal deposit insurance corporation, and a reconstruction finance corporation. Although the laws that govern them seek to grapple with booms and slumps, except for the reconstruction finance corporation, they have been unable to do so adequately. In Great Britain two large financial corporations have been established, but they have not yet been able to devise a system to avert the full effects of a slump. I contend that that can be achieved only by a central bank which is a powerful government institution.
In addition to its negative power, the central bank should have th« positive power possessed by the trading banks. The mechanism of central banking provides for open market operations. Money is made available to the banking system by purchase of securities, thus increasing cash supplies. These constitute the basis of their leading functions. As the honorable member for Flinders (Mr. Ewert) stated in his excellent speech to-night that is the way that the banks throughout the world function. They work on the basis of a cash reserve which includes, not only cash in hand, but also short-term securities which can be realized either at maturity or by prior sale. Finally, a central bank should have additional liquid resources, such as were provided for by the special accounts procedure that was brought into operation by the Banking Act 19-15. The basis of liquid reserves is cash plus shortterm bills, treasury-bills, or special deposits. As has been pointed out, by this means in some instances the trading banks are able to advance credit of an amount equal to ten times the amount of their liquid reserves. As I have said before, there is no power to dictate the lending policies of the private banks when the money is available for them. It might be said that the profit motive would force them to do so, but that has not been borne out by events down the years. If we are going to counter depressions we must have a general banking section oi the Commonwealth Bank, which can provide a positive means to resolve these situations. That cannot be done by ordinary banking methods. It can only be done by a general banking department of the Commonwealth Bank. This legislation will weaken the Commonwealth Bank by taking away from it a considerable degree of its trading activities. Formerly the Commonwealth Bank could call upon all the resources of the bank, including the Note Issue Department, in an emergency, but the new Commonwealth Trading Bank will now be required to stand upon its own feet and function within the limits of its own capital and the deposits that it can attract.
By implication, the Government has admitted that this measure is designed to protect the private banks of Australia. It makes no attempt to protect Australia’s credit structure or its economy, or to develop the central bank. Therefore, the bill will weaken the system devised by the Labour Government at a time when there may be a serious need for the sort of control that a central bank should be able to exercise. I have before me a commentary upon the Banking Act 1945 written by J. S. G. Wilson, Reader in Economics at the University of London, and edited by R. S. Sayers, the Sir Ernest Cassel Professor of Economics at the University of London. The author, after having discussed the whole banking system of Australia, concluded with these words -
Without the operation of credit control, the situation must have been much worse. Nevertheless, Australian experience has served to underline the limitation of credit policy in an open economy and must qualify considerably the faith placed in the 1945 legislation.
That publication, which appeared only last year, was written as a text book on banking and economics. It points out the severe limitations of the 1945 Banking Act as a means of strengthening the Australian central bank. Yet this Government proposes to weaken the structure of that bank and to limit, instead of to increase, its power.
– And it has no mandate to do so.
– The Labour party is willing to give the Government an early opportunity to apply to the people for a mandate at a general election.
The Prime Minister has said that the Commonwealth Bank has used its powers properly. Therefore, the reason for the introduction of this bill is difficult to find. It seems to be clear that the private banks have applied to the Government for the enactment of a measure which will not strengthen the central bank, or increase the power of the private banks to advance money by way of overdraft, but which will enable the private banks to invest their money in interest-bearing securities in order to make greater profits. As the honorable member for Flinders ably pointed out, the banks use a cash base for their operations and, on that base, they expand their deposits virtually at will. They have only a rule of thumb method of placing a limit upon such expansion. Herein is one of the serious weaknesses of the Australian banking system. In times of boom, the private banks allow their cash ratio to fall. In other words, they hold less than is normal as a security against the deposits lodged with them. In times of depression or near-depression, however, they increase the ratio of cash to deposits because there is a greater likelihood of a call by depositors, and thereby, of course, they perform a function which produces an effect completely the reverse of that which they should try to produce. Obviously, in times of boom the banks ought to limit the overdrafts that they issue and the general investments that they undertake. Nevertheless, unless they are restrained, they pursue an opposite course of a’ction. .Similarly, it is in the public interest that, in time of depression or near-depression, of unemployed resources and of developing crises, the banks ought to expand their overdrafts and take risks with the cash that they have in their possession. The honorable member for Flinders also pointed out clearly that it is in the interests of the banks that they should do so because, if they call in overdrafts when economic conditions are tightening, they merely accentuate the slump that is developing and hasten the final collapse. But that is not the policy that the private banks pursue at such times, and they cannot pursue it unless the Commonwealth Bank, clothed with full power, stands behind them a.nd they are willing to accept its advice and guidance.
Unfortunately, the private banks have consistently resented the leadership and control of the Commonwealth Bank. The decision of the High Court in declaring invalid section 48 of the Banking Act caused the Labour Government at that time less concern about its powers in the event of a future crisis than did the knowledge that the private banks were unwilling to accept, the guidance of the central bank. Section 48 was included in the Banking Act upon the recommendation of the Commonwealth Bank Board of 1935-37. The suggestion was made by the board in response to a questionnaire that was submitted to it by the Royal Commission on Monetary and Banking Systems. The board stated clearly that a central .bank could not function effectively unless it, had the broader base that the control of governmental accounts entailed and unless it could counteract the expansion and contraction which large payments in and out by State governments and local governing authorities could cause. Although that section was rejected by the High Court, the justices, particularly Mr. Justice Owen Dixon, pointed out that the machinery that the section had been designed to establish was vital to central banking functions and was accepted in central banking law throughout the world. Mr. Justice Owen Dixon commented that the written Constitution of Australia did not permit of the enforcement of a law which applied differently to government and local government authorities and to the general public.
On these facts, it is clearly established that the procedure for which section 48 of the Banking Act provided is requisite for an efficient central banking system. It was advocated by a Commonwealth Bank board that was appointed by a nonLabour government. Its use was supported in a legal judgment given by the present Chief Justice of the High Court, who said that it was essential to the functions of a central bank. Yet it is resisted by the private .banks of Australia., notwithstanding the fact that the strength of the Commonwealth Bank, as a bank of last resort, is ultimately the only base upon which private banks can rest. They have opposed the Labour party’s proposal consistently and have used all the legal aid that they have been able to hire in order to force its rejection. This has not been the only indication over the years that the private banks will not accept the judgment, leadership and control of the Commonwealth Bank, organized as a central bank. In these circumstances, it is essential that the Commonwealth Bank be extended, strengthened and given the power to force its will upon the private banks. However, this legislation will not strengthen the Commonwealth Bank. It has been designed definitely and deliberately to weaken the central bank structure.
The Leader of the Opposition has pointed out that the private hanks wanted the Commonwealth Bank to release their special deposits so that they could use the funds to earn additional income instead of leaving them immobilized in the
Common-wealth. Bank, liquid though they were, to earn interest at a relatively low rate. The argument of the Leader of the Opposition has been abundantly proved by an item published in the financial columns of the Adelaide Advertiser this morning. That article points out that most of the total amount of ?134,000,000 released from special accounts in the last year has been re-invested in treasury-bills and government securities. This fact indicates that the private banks did not require the cash for their ordinary shortterm operations and that the Government had no need to arrange for the money to be returned to them. The funds were re-invested almost exclusively in shortterm and long-term government securities. I assume, because even the private banks should have some wisdom, that the longterm securities had only a short time to run. We see clearly, therefore, that the private banks have forced the Government, not to secure some safeguard against nationalization, because no safeguard is possible if the people decide to have it, but to provide them with a means of increasing their profits by investing the funds in better interest-bearing securities.
The Government’s major argument was put forward by the Prime Minister (Mr. Menzies). He said that he had learned from conversations with private bankers and the employees of private banks that this power was regarded as a sword over the heads of the private trading banks. Instead of a sword it has been an umbrella over the heads of private bankers for the purpose of protecting them in inclement weather. The money has been held for them by a government bank and its return to them has been guaranteed. For every ?100 that the banks place in the special deposits account they will recover ?100, but if they had invested that money in Commonwealth bonds about twelve years ago they would not receive a ?100 now for every ?100 invested. They would only receive about ?86. For those government bonds nearing maturity they would receive about ?96. From that example it will be realized that this provision has been a real boon to the private banks. In the event of depression the special deposits could be the means of enabling the private trading banks to keep their doors open. The argument that the special deposits have prevented the banks from increasing their overdrafts because their money has been immobilized is a fallacy. The Commonwealth Bank can only hold these special deposits temporarily because if depositors should demand a return of their deposits no bank or government could refuse to pay them the money that they have at their credit. The special deposits have acted as an effective form of guarantee that the banks will be able to have money to pay to the depositors when those depositors want it.
During World War I., whilst a nonLabour government was in office, the Commonwealth Bank offered to lend the private banks a considerable sum of money in order to allow them to increase overdrafts. The banks increased their overdrafts very substantially on the basis of that loan offer although they never took a penny of it. They did not need to take it’. They only required to know that if an emergency arose they could have access to that money. There are real weaknesses in the Australian banking system. The worst weakness is the unwillingness of the private banks to accept the advice or direction of the central bank.
Mr. Bryson interjecting,
-(Hon. Archie Cameron) . - Order ! The honorable member for Wills made a remark which he must withdraw.
– My time has nearly expired, Mr. Speaker.
– I cannot help it. The honorable member for Wills (Mr. Bryson) is out of order and must withdraw his remark.
– I withdraw the remark.
– The second major weakness is that deposits are repayable on demand but-
-Order ! The honorable gentleman’s time has expired.
.- Mr.
Speaker-
Motion. (by Mr.Beale) put -
Thatthequestionbenowput.
The House divided. (Mr. Speaker - Hon. Archie Cameron.)
AYES: 56
NOES: 45
Majority . . . . 11
AYES
NOES
Question bo resolved in the affirmative.
Question put -
That the bill be now read a second time.
The House divided. (Mb. Speaker - Hon.archiecameron.)
AYES: 56
NOES: 46
Majority . . . . 10
AYES
NOES
Question so resolved in the affirmative.
Bill read a second time, and committed pro forma; progress reported.
Message recommending appropriation reported.
In committee (Consideration of GovernorGeneral’s message) :
Motion (by Mr. Menkes) agreed to -
That it is expedient that an appropriation of revenue be made for the purposes of a bill for an act to amend the Banking Act 1945,
Resolution reported and adopted.
page 761
The following papers were presented: -
Defence Forces Retirement Benefits Act -
Fourth Report of the Defence Forces Retirement Benefits Board, for year 1951-52.
Lands Acquisition Act - Land, &c., acquired for Postal purposes - Timboon, Victoria.
Public’ Service Act - Appointments - Department -
Social Services-G. D. Banfield, N. G. Stewart.
Works-r. Atkins, J. E. L. Bailey, R. S. Berglund, S. M. Burke, K. D. L. Clement, A. H. Cornish, A. S. Gow, H. P. Hine, B. E. Lumb, D. W. Moffat, L. F. Ryan, D. W. Sullivan, R. S. Wardrobe, J. C. Webb.
Public Service Arbitration Act - Determination - 1953 - No. 7 - Electrical Trades Union of Australia.
House adjourned at 10.58 p.m.
page 762
The following answers to questions were circulated: -
Electral.
Communism.
Cite as: Australia, House of Representatives, Debates, 10 March 1953, viewed 22 October 2017, <http://historichansard.net/hofreps/1953/19530310_reps_20_221/>.