23rd Parliament · 1st Session
The PRESIDENT (Senator the Hon. Sir Alister McMullin) took the chair at 3 p.m., and read prayers.
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Assent reported.
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– My question, which is directed to the Minister for National Development, relates to the subsidy paid to the gold-mining industry under the terms of the Gold-mining Industry Assistance Act which, I understand, expires on 30th June next. Can the Minister inform me whether the Government at present is considering renewal of the subsidy? Has the Government yet received any representations from the chambers of mines in the various States regarding this subsidy?
– My recollection is that the Gold-mining Industry Assistance Act does expire on 30th June next, and that correspondence has been addressed to the Prime Minister and the Treasurer - copies of which have been forwarded to me also - requesting variations in the form of the subsidy but, in particular, that the subsidy be continued. I should imagine that those representations would be considered and dealt with when the Budget is being prepared.
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– Is the Minister for Civil Aviation aware that two air service operators have failed to include Rockhampton in their special tourist flights because the airport at that city is incapable of handling modern jet airliners?
– I am aware that Rockhampton airport, in its present condition, is not able to handle jet airliners, but that is true of many airports in Australia, including some at capital cities which are now being upgraded to the point where they will be able to handle such aircraft. I have no knowledge of the other aspect of the honorable senator’s question. As I understand it, the two major operators excluded Rockhampton from their flights because of the condition of the airport. However, I shall have a look at the matter more closely and let the honorable senator have some further information.
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– I direct my question to the Minister for Customs and Excise. During the course of the Budget debate last year I invited the Minister to consider the provision of a supermarket type of baggage trolley, similar to those now in use at the New York International Airport, for the use of passengers obliged to pass through customs and other departmental checkpoints at Australia’s international airports. Has the Minister given any consideration to this matter?
– I am sorry that I did not let the honorable senator have the information before this. I referred his suggestion to the departmental committee which inquires into the general arrangements for handling cargo and baggage at airports. The committee has decided to order half a dozen of these trolleys and1 to give them a trial. Personally, I think they will be a great success and will provide a solution to the problem of people landing at airports with a number of small parcels. The provision of these trolleys will help to expedite the passage of luggage through airports. I am sorry that I did not let the honorable member know previously that his suggestion is being tried out at present.
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– My question ib directed to the Minister representing the Minister for External Affairs. Will the Minister make a statement on the attitude of the Australian Government to the latest Asiatic advance of aggressive communism, into Tibet? Will the Government indicate disapproval of the brutal suppression of liberty in Tibet by adopting such measures as the dismissal of the red Chinese trade delegation now in Australia and/or the refusal of vises or passports for the interchange of visits between Australia and red China?
– Of course the Government disapproves very strongly indeed of what can be described in simple terms as the brutality of the present armed aggression in Tibet. In fairness, I think the honorable senator must excuse me from making any statement on Government policy in reply to a question without notice. I remind the honorable senator that although the recent events in Tibet have been given a great deal of publicity, they are a part of something that has been occurring over a considerable period of time. The matter was first brought before the United Nations in 1950, when that body refused to intervene, thinking at that stage that a peaceful solution might be found. The recent increased activity in Tibet is, I am sure, causing concern not only to Australia, but also to many nations in the Afro-Asian bloc, which must be watching this development of communistic aggression with a good deal of anxiety.
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– My question is directed to the Minister representing the Minister for Territories. This morning’s Adelaide “ Advertiser “ contains an advertisement inserted by the Taxpayers Association of New Guinea to the following effect: -
New Guinea appeals to the people of Australia. The Minister for Territories has announced that he intends to change the pattern of our taxation system.
He refused to permit a prior investigation by an independent Commission.
We feel that to tamper with the present system without at least holding such an inquiry will have a devastating effect on the development of this Territory - and the Territory is vital to Australia.
Can the Minister give the Senate any information as to the proposed changes in taxation in New Guinea?
– I am afraid I cannot give to the honorable senator straight away the information that he desires. I shall bring his question to the notice of the Minister concerned and obtain a reply. I suggest that the honorable senator should place his question on the notice-paper.
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– Can the Minister representing the Postmaster-General inform the Senate when it is anticipated that the technical work will be completed to enable interstate telephone calls between Melbourne and Sydney to be dialled in the same way as are local calls? I am prompted to put this question to him because of reports of increasing delays in trunk calls between those capital cities during business hours. Pending the introduction of automatic dialling, will the Minister have inquiries made to ascertain whether the present facilities permit an improvement of the existing manual system?
– I understand that work is proceeding on the interstate dialling system, but I cannot give the honorable senator the exact time or date when it is likely to be completed. If he places his question on the notice-paper, I shall bring it before the PostmasterGeneral.
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– Will the Minister for Repatriation take steps to see that in actual practice the onus of proof in regard to applications to the Repatriation Commission and the appeal tribunals rests with the Repatriation Department instead of on the applicant as is at present the case?
– The honorable senator’s statement about the onus of proof resting on the applicant is quite wrong. 1 am quite satisfied that mat onus, as is prescribed in the act, is discharged by the Repatriation Commission, the Repatriation boards and the appeal tribunals. Perhaps the honorable senator is not aware that this question came before the returned soldiers’ league in Brisbane some two or three years ago and that representatives of all States except New South Wales were quite satisfied that the onus of proof was being discharged as laid down in the act.
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– I invite the attention of the Minister for Shipping and Transport to the section relating to goods traffic on page 11 of the Report on Commonwealth Railways Operations for the year 1957-1958, in which the Commonwealth Railways Commissioner states -
There was again a falling off in the tonnage railed to the Defence establishments at Woomera and Maralinga….. As has been pointed out in reports for some years a great proportion of the goods and material required at Woomera is carried by road notwithstanding the availability of the railway and the quotation of specially low freight rates.
I ask the Minister: Is it a fact that practically the whole of the goods and material required at Woomera is used by the Commonwealth Supply and Works departments or by canteens and stores run under the direction of these departments or the service departments? Is it also a fact that the unnecessary hauling of departmental traffic over the roads in the north of South Australia, a considerable portion of which is unsealed, creates great hardship to the residents of those areas as well as great expense to the South Australian Government, which is responsible for the construction and maintenance of such roads? Will the Minister confer with his recently appointed colleagues, the Minister for Supply and the Minister for Works, with a view to ensuring that the Trans-Australian Railway, with its up-to-date freight handling methods, will get its fair share of the traffic available?
– The carriage of goods to Woomera has been for some time a point at issue between the Commonwealth Railways Commissioner and the various departments concerned. It is a fact, as Senator Laught has suggested, that Commonwealth departments, such as the service departments and the Supply and Works departments, require most of the material that is transported to Woomera. I have had frequent discussions with the other Ministers concerned, and I am sure that a large part of the material that goes to Woomera is necessarily transported by road because of security reasons, the nature of the goods, their size and the like. It also is a fact that where vehicles are found to be only partially loaded with goods of this type, the vehicles so used are filled with goods of a different kind altogether. My investigations lead me to the conclusion that it is not completely correct to say that all such goods are transported by road, to the detriment of the railway.
Some little time ago it was found that, for the purpose of carrying out extensions at Woomera, it would be necessary to transport a quantity of cement over the next few years. Because the carriage by train of cement in bags was not considered a satisfactory procedure, cement was emptied from bags into bins and transported by rail, so that the railways would have the benefit of the carriage in that particular case. There is therefore, one can say, a degree of co-operation between the various departments, but I do not doubt that there will always be differences of opinion in marginal cases as to what should be transported by rail and what by road.
Senator Laught mentioned the great expense to which the South Australian Government was being put by virtue of the carriage of goods over South Australian roads by heavy vehicles which did damage. Under section 12 of the act, for some years past the Commonwealth has made a grant to South Australia. Last year, it was £24,000, but only £17,000 was spent. We had some reason to inquire why that was so. This year, a further £15,000 has been made available, so that, with last year’s carry-over, the total amount available is £22,000.
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– I direct a question to the Minister representing the Minister for Social Services. What are the conditions governing the payment of social service benefits to unnaturalized migrants? In the event of the death of an unnaturalized migrant who has been receiving social service benefits, such as the sickness benefit, does his widow become eligible for a widow’s pension? Is there any liaison between the Department of Immigration and the Department of Social Services in order that needy cases such as the case I have mentioned may be investigated?
– I think that individual cases of this kind are far better taken to the Minister concerned so that an answer can be obtained directly from him. If the honorable senator places her question on the notice-paper, I shall obtain an answer for her. It is impossible to give immediate answers to questions involving individual cases.
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– I should like to ask the Minister for Repatriation whether he can give me any indication when a reply will be forthcoming to a question that I asked him on 10th March last relating to the dismissal of ex-servicemen from the Repatriation Department in Hobart.
– The honorable senator’s question referred, I think, to the dismissal of two members of the staff of the Repatriation Department in Hobart. I point out to Senator O’Byrne that the Public Service Board, which is the body that recruits and dismisses staff, is under the jurisdiction of the Prime Minister, to whom the question was referred. A reply has not yet been received from the board. I assure the honorable senator that I shall look into the matter to see whether the reply can be expedited.
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asked the Minister for Customs and Excise, upon notice -
In view of the repeated statements made in Victorian wool-growing areas in recent weeks to the effect that large quantities of synthetic fabrics have been imported freely into Australia from the United States of America, while that country maintains barriers against the importation of products of Australia’s wool industry, will the Minister, if necessary after consultation with the Minister for Trade, issue a statement indicating the truth or otherwise of these reports?
– 1 consulted with the Minister for Trade, who has now informed me as follows: -
It is unfortunately true that the United States of America does impose a substantial tariff on imported wool. The honorable senator will no doubt bc aware that the imposition and level of the tariff are matters which have caused the Government some considerable concern in the past, and over which strong representations have been made to the United States Government. The United States does not, however, impose import licensing restrictions on the import of wool.
Imports of synthetic fabrics from the United States are subject to the same rates of customs duty as are applicable to imports from any country to which Australia extends “ most favoured nation “ treatment.
It is not true, however, that imports of synthetic fabrics from the United States have been freely imported into Australia in recent years. Statistics of such imports indicate that compared with imports of such goods from all sources, imports from the United States are quite insignificant.
Far from being imported freely, imports of synthetic fabrics from dollar area sources, including the United States, are quite severely restricted under the import licensing system, and licences are normally confined to special types of fabrics which are of an essential nature and for which suitably equivalent goods are not available from local or non-dollar sources on acceptable commercial terms.
Australian import licensing controls are imposed for balance of payments reasons only. Special restrictions on imports of synthetic fabrics from- the United States have been imposed as part of this policy and not as a measure, of retaliation against the United States.
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asked the Minister representing the Minister for Trade, upon notice -
– The Minister for Trade has supplied the following answers: -
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asked the Minister representing the Minister for Health, upon notice -
– The Minister for Health has now supplied the following answers: -
The studies made by the British Ministry of Health make it unnecessary for Australia to send a panel of experts to Europe, but if the claims made for the drug arc substantiated in the future, there is no doubt that it will become available in Australia.
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asked the Minister representing the Minister for Labour and National Service, upon notice -
– The Minister for Labour and National Service has supplied the. following answers: -
– Perhaps I should answer the last part of that question. The answer is, “ No “.
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asked the Minister representing the Minister for the Interior, upon, notice -
– The
Minister for the Interior has furnished the following replies: -
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asked the Minister representing the Postmaster-General, upon notice -
– The
Postmaster-General has supplied the following information: -
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asked the Minister representing the Minister for Labour and National Service, upon notice -
Under what terms, if any, has Commonwealth Hostels Limited taken over control of Hotel Kurrajong from the Department of Interior?
– The Minister for Labour and National Service has supplied the following answer: -
The Government decided last year that the administration of all the hotels and hostels in Canberra then operated by the Department of the Interior should as from 1st January last be transferred to the Department of Labour and National Service upon the basis that the latter department would arrange for Commonwealth Hostels Limited to operate the hotels and hostels on that department’s behalf. The attention of the honorable senator is also invited to the answer given to questions asked upon notice by Senator Brown on the same subject.
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asked the Minister representing the Minister for Health, upon notice -
– The Minister for Health has now furnished the following replies: -
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asked the Minister for National Development, upon notice -
– The answers to the honorable senator’s questions are as follows: -
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asked the Minister representing the Minister for Supply, upon notice -
– The Minister for Supply has furnished the following answers: -
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– On 12th March, Senator Scott asked a question, without notice, as to “ whether, within the last twelve months, there has been any increase of freight rates between Australia and Europe, and if there has been, to what extent “.
The Minister for Trade has now advised as follows: -
The following percentage increases have occurred in freight rates from Australia to the
United Kingdom/Continent in the last twelve months. The date on which the increase became effective is also shown.
Chilled beef - 31 per ce:u. 1st November, 1958.
Frozen beef - 23 per cent. 1st November, 1958.
Frozen lamb - 2 per cent. 1st November, 1958. Frozen mutton - 7 per cent. 1st November, 1958.
Fresh fruit - 8 per cent. 1st February, 1959. Freight rates on other commodities exported to the United Kingdom/Continent have not been altered.
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– On 19th February, Senator Sandford asked me, in my capacity as Minister representing the Minister for Trade, how many new licences have been issued for the importation of goods from Japan since the signing of the Japanese Trade Agreement and the persons to whom these new licences have been issued. I undertook to make inquiries into the matter and let the honorable senator know the result.
The Minister for Trade has now advised as follows: -
Statistics of the number, as distinct from the value, of licences issued for imports from Japan are not recorded for the reason that they would be of very little practical use. Details of the values of licences issued for imports from Japan are, however, recorded, and could be obtained for the honorable senator. As to the request for details of the individuals and firms to whom licences have been issued, this information is confidential and it has been a longstanding practice not to disclose it.
The honorable senator will no doubt recall that the Australia/Japan agreement on commerce signed in 1957 abolished discriminatory import licensing treatment previously practised by Australia in respect of some Japanese goods. For import licensing purposes Japan is now treated in the same way as all other non-dollar countries, the importer deciding himself whether or not he should import from Japan.
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Motion (by Senator McKenna) - by leave - agreed to -
That Senator Brown be granted leave of absence for one month on account of ill health.
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– I lay on the table the following paper: -
Members of Parliament - Salaries and Allowances - Report of Committee of Inquiry (1959.)
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Paltridge) read a first time.
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– 1 move -
That the bill be now read a second time.
The Reserve Bank Bill is the first of four major and ten minor bills embodying the Government’s proposals for a comprehensive revision of Australia’s banking structure for the purpose of achieving an objective that is vitally important to the national well-being. The objective to which I refer is the establishment of a banking system that will be freed from earlier sources of friction and that will function with full efficiency and harmony.
Apart from some small changes which I shall be mentioning later, the proposals embodied in the bills are the same as those in the bills that were twice rejected by the Senate in the last Parliament. Most honorable senators will need little reminding of the unhappy circumstances surrounding the rejection of the bills on those occasions. On the first occasion the Opposition was able to frustrate any discussion at all of the bills by taking quite extraordinary measures to prevent their being read even a first time, while on the second occasion the Senate was denied the opportunity of examining the bills in detail because of the Opposition’s refusal to allow them to go beyond the second-reading stage. However, those circumstances now belong to the past, and the bills are being introduced on this occasion under happier auspices. The confidence of the people in the Government was amply demonstrated by the return of the Government at the recent election, with a majority in the Senate as well as a record majority in the other chamber. Prior to the election, the Government made clear its determination to proceed with its banking legislation proposals if returned to office, and the proposals will assuredly be passed by the Senate on this occasion. 1 do not propose to reiterate the reasons for the Government’s conviction that the banking system should be reconstructed. These were fully explained by my colleague, Senator Spooner, in his second-reading speeches when introducing the Government’s proposals on 20th March, 1958. These speeches are reported in pages 272 to 293 of “ Hansard “ for the 1958 session of the last Parliament, and I commend them to honorable senators for careful study.
Before proceeding to an explanation of the provisions of the Reserve Bank Bill, I should like to mention that I am arranging for three statements relating to the legislation as a whole to be circulated for the assistance of honorable senators. The first of these statements sets out the precise nature of the changes in the fourteen bills compared with the bills that were rejected by the Senate in the last Parliament. The second statement contains a summarized comparison between the provisions in the bills and the provisions in the existing Commonwealth Bank Act 1945-1953 and the Banking Act 1945-1953, while the third contains a brief summary of Commonwealth hanking legislation dating from the establishment of the Commonwealth Bank in 1911.
The following is a general description, in very summarized form, of the main proposals embodied in the Government’s banking legislation proposals: -
The Reserve Bank Bill deals with the first of these main purposes, namely, the establishment of the Reserve Bank of Australia as the central bank for the Australian monetary and banking system and as an institution that will not be directly associated with the conduct of retail banking business.
Under the bill, the body corporate now known ,as the Commonwealth Bank of Australia is continued in existence as the Reserve Bank of Australia. The Reserve Bank will have wide banking powers of a general character such as the Commonwealth Bank now has, but will be precluded from carrying on business otherwise than as a central bank. Like the Commonwealth Bank, it will control the note issue and will act as banker to the Commonwealth insofar as the Commonwealth requires it to do so.
The framework of central bank controls that will be available to the Reserve Bank for the regulation of the banking system at large is provided for in the Banking Bill, which I shall be introducing shortly as a replacement for the present Banking Act. Except for the substitution of a system of statutory reserve deposits for the present special accounts system, the Reserve Bank’s powers in relation to the banking system will be essentially the same as those now exercised by the Commonwealth Bank.
The Reserve Bank will take with it the Rural Credits Department of the Commonwealth Bank. The function of that department is the making of advances to marketing bodies to assist the marketing of primary produce or the processing or manufacture of primary produce, and its attachment to the central bank is necessary because the department requires very large amounts of central bank accommodation to meet its seasonal requirements for finance. The bill also provides for the capital of the department to be increased by £2,000,000 from central bank reserves, bringing it to a total of £4,714,000.
The provisions in the bill relating to the Reserve Bank Board are similar to those in the present Commonwealth Bank Act governing the constitution of the Commonwealth Bank Board. The Reserve Bank Board will comprise the Governor and Deputy Governor of the bank, the Secretary to the Treasury, and seven other members appointed by the Governor-General. These seven other members must be persons who are not associated with any other bank, and at least five of them must be persons who are not officers of the Reserve Bank or of the Commonwealth Public Service. The Governor and the Deputy Governor will continue to be chairman and deputy chairman respectively of the board. Under the Banking (Transitional Provisions) Bill, which I shall be introducing later, the Governor and the Deputy Governor of the Commonwealth Bank and the members of the Commonwealth Bank Board who are in office when this legislation comes into operation will continue to hold corresponding offices with the Reserve Bank.
The board will determine the policy of the Reserve Bank and ensure that effect is given to that policy. It will have the duty, as the Commonwealth Bank now has. of ensuring, within the limit of its powers, that the monetary and banking policy of the bank is directed to the greatest advantage of the people of Australia, and that the powers of the bank are used to promote the stability of the currency, the maintenance of full employment and the economic prosperity and welfare of the people of Australia. There are also provisions, similar to those in the present act, which will require the board to keep the Government informed regarding the monetary and banking policy of the bank and which, in the event of a difference of opinion between the board and the Government on that policy, will give the Government, subject to the observance of certain procedures, including the tabling of explanatory documents in both Houses of the Parliament, an ultimate power to determine the policy of the bank.
The bill provides for the constitution of a staff service for the Reserve Bank. Provision for the allocation of officers of the existing Commonwealth Bank Service to the Reserve Bank Service is contained in the Banking (Transitional Provisions) Bill which I shall be introducing later.
At least to begin with, the bank will have fairly wide and flexible powers of staff recruitment and management. This is considered to be desirable because the Reserve Bank will be a highly specialized institution and it will need, particularly in some of its sections, staff of exceptionally high calibre and standards of training. Moreover, it will not have at its disposal the large staff service that is now available to the Commonwealth Bank. The bill contains provision, however, for the later promulgation of regulations on staffing matters in case experience shows the promulgation of more detailed provisions to be necessary or desirable.
As an essential part of the separation of the central banking and non-central banking activities of the present Commonwealth group of banks, there is a provision in the bill that the head office of the Reserve Bank, which is to be in Sydney, shall not, after a reasonable period of time, be in the same building as the head office of the Commonwealth Banking Corporation or any other bank.
The bill also provides for certain changes of detail as compared with the existing Commonwealth Bank Act, but none of these involves major questions of policy and they are clearly indicated in one of the statements I have circulated.
Under the provisions in the bill, and those in the Banking Bill, the Reserve Bank will be fully equipped to succeed the Commonwealth Bank as Australia’s central bank. Its legal powers for regulation of the banking system will be unimpaired; more importantly than that, its status as leader of the banking system will be enhanced by the fact that it will no longer be directly associated with the conduct of retail banking business in competition with the private banks. I commend the Reserve Bank Bill to the Senate in the knowledge that its provisions, together with the measures I shall introduce shortly, will confer on Australia’s central bank greater scope and opportunities for the fulfilment of its vitally important role in the efficient functioning of the national economy.
Debate (on motion by Senator McKenna) adjourned.
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– I move -
That the bill be now read a second time.
This bill is the second of the four main measures that constitute the Government’s banking legislation proposals. The basic purpose of the bill is to provide for the reconstitution of the non-central banking components of the present Commonwealth Bank group under a new corporation, to be called the Commonwealth Banking Corporation, which will function as an entirely separate organization from the Reserve Bank.
The Commonwealth Banking Corporation, under its own separate board, will be the controlling body for three banks - the Commonwealth Trading Bank, the Commonwealth Savings Bank and the Commonwealth Development Bank, the lastmentioned of which is to be formed as an amalgamation, with some increase in resources and some change in responsibilities, of the present Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank. The bill contains provisions, to which I shall refer again later, for ensuring that each of the three banks will have appropriate statutory functions and responsibilities of its own and that the separate identity of each will be preserved within the general framework of the corporation.
The board of the corporation will be empowered to determine the policies of each of the three banks and to control their affairs, and the corporation will have responsibility for providing the staff to conduct the business of the three banks. The board will have a statutory obligation to ensure, within the limits of its powers, that the policy of the corporation and the banking policies of all three banks are, in the words used in the bill, “ directed to the greatest advantage of the people of Australia and have due regard to the stability and balanced development of the Australian economy “. Consistent with the provisions of the present Commonwealth Bank Act and the Reserve Bank Bill, the board of the corporation will be required to keep the Government informed of the policies of the institutions under its control, and there are provisions whereby, in the event of a difference of opinion between the Government and the board as to whether any such policy is directed to the objectives laid down, the Government will, subject to the tabling of explanatory documents in both Houses of the Parliament and the observance of certain other procedures, have an ultimate power of direction over the board in regard to the policies of the corporation and its three affiliated banks.
I would stress, however, that as the bill is worded it will not be possible for the policies of the corporation and the three banks to be inconsistent under any circumstances with the provisions of the proposed banking Act, which will provide for regulation of the banking system at large.
Before describing the provisions relating to the administration of the corporation and its affiliated banks, I should like first to say Something about the principle on which they are based. The principle in question, to which 1 have already alluded in my reference to the preservation of the separate identity of each of the banks, concerns the great importance that the Government attaches to ensuring that each of the three banks, which will be important institutions in their own right, will rank equally with each other in the Commonwealth Banking Corporation framework and that the interests of one will not be given preference over, or be over-shadowed by, the interests of the others. It has been suggested in some quarters that the administration provisions are unduly and unnecessarily complex. The Government does not agree with that viewpoint; the provisions are the result of the most careful consideration of the best and most effective means of achieving the fundamentally important purpose I have outlined.
The board of the corporation is to comprise eleven members. The managing director and deputy managing director of the corporation and the Secretary to the Treasury will be ex officio members, and the other eight members, of whom one will be chairman and another deputy chairman of the board, will be persons who are not officers of the Commonwealth Public Service or directors, officers or employees of a bank, including the Reserve Bank and the Corporation and its three constituent banks.
There will also be an executive committee of the board for each of the three separate banks. These executive committees will be appointed by the Treasurer after consultation with the board, and will be charged with taking such action as is necessary to ensure that effect is given by the respective banks to the policies laid down for those banks and to any directions given by the board in relation to their affairs. These committees are being established for two main reasons. First, as a considerable amount of detailed business will have to be done in connexion with each bank and this business will vary a great deal as between banks, there is an obvious advantage in having for each a separate executive group of the board that will be capable of giving its affairs the necessary time and attention. Secondly, the executive committee device will further contribute to the achievement of the fundamental objective I have already stressed. I might mention specially in this connexion the provision that the chairman of the board will not be a member of any of the executive committees, although he will have the right to attend any meetings of the committees.
Under the board, the corporation will be managed by a managing director and a deputy managing director, both of whom will be appointed by the Governor-General and will be ex officio members of the board. The managing director will also be a member of each executive committee and the deputy managing director will be eligible for membership of the committees. Each of the three banks will have its own general manager, who will be appointed by the Governor-General on the recommendation of the corporation board. Under the managing director of the corporation, the general managers will manage their respective banks in accordance with the policy laid down for those banks and with any directions of the board or of the executive committees.
I now come to the provisions of the bill that relate to the three individual banks. The Commonwealth Trading Bank will be maintained in its present form, lt will carry on general banking business and will continue to have the duty of developing and expanding its business. As in the present act, there is a provision that the Commonwealth Trading Bank shall not refuse to conduct banking business by reason only of the fact that to conduct that business would have the effect of taking business away from another bank.
Tn order to provide for certain transitional costs, particularly those arising from the fact that the head office of the present Commonwealth Bank group is owned by the central bank, the Commonwealth Trading Bank is to be supplied from central bank reserves with additional capital of £2,000,000. On the basis of its reserve fund as at 30th June, 1958, the Trading Bank will then, have total capital and reserves of almost £10,500,000 apart from the amounts that have been set aside over the years as provisions for contingencies.
The Trading Bank should, therefore, commence its career under the Commonwealth Banking Corporation with adequate capital funds. 1 wish to stress in this connexion that the Government considers that the Trading Bank should not be at a capital disadvantage as compared with other trading banks. The position of the Trading Bank in this respect will be closely watched, and action, will be taken to make a further increase in its capital in the future if experience shows this to be necessary.
In accordance with the principle that the Commonwealth Trading Bank should be on an equal footing with its competitors, the Trading Bank will, under a bill I shall later be introducing for an amendment to the Income Tax Assessment Act, be made liable to Commonwealth income tax. In addition, the bill now before the Senate leaves scope for the Trading Bank to be made liable, equally with the private trading banks, to Territory of Papua and New Guinea income tax if such a tax is imposed. I am not, of course, suggesting that such a tax necessarily will be imposed; that matter is still under consideration. In other respects, also, the Commonwealth Trading Bank will, by virtue of the provisions in the proposed new Banking Act, be subject to the same provisions as the private trading banks.
The Commonwealth Savings Bank is also to continue in its present form. It will, however, have the explicit statutory duty of encouraging savings and promoting the interests of its depositors. As at present, the profits of the Commonwealth Savings Bank will be exempt from income tax and, after the making of payments to certain States under amalgamation agreements with those States, will be divided each year equally between the bank’s reserve fund and the Commonwealth.
Provision is made in the bill, as in the present Commonwealth Bank Act, for the investment of the funds of the Commonwealth Savings Bank in ways which are traditional for savings banks. This provision is to be supplemented by regulations to be made under the Banking Act, of which I shall speak further when discussing the Banking Bill, that will apply equally to the Commonwealth Savings Bank and to private savings banks. The Commonwealth Savings Bank will be also subject to the same central banking controls under the Banking Act as are the private savings banks.
With regard to housing loans, the bill contains provisions for the making of loans to individuals on credit foncier terms and to building societies by the Commonwealth Savings Bank as well as by the Commonwealth Trading Bank. In the present Commonwealth Bank Act, the provisions in question apply only to the Commonwealth Trading Bank and not to the Commonwealth Savings Bank.
As I have indicated, the Commonwealth Development Bank will be formed basically as an amalgamation of the present Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank, and it will operate in the same field as those two departments, namely, the provision of assistance to primary producers and to industrial undertakings, particularly small undertakings.
The functions and responsibilities of the Development Bank as laid down in the bill are, however, defined with greater precision and will be different in some important respects from those of the two existing departments. First and foremost, the function of the Development Bank will be to provide finance to primary producers and to industrial undertakings in. cases where, in its opinion, provision of the finance is desirable and the finance would not otherwise be available on reasonable and suitable terms and conditions. In other words, the Development Bank’s role will be to supplement, but not to replace, the sources of finance available to primary producers and industrial undertakings through ordinary commercial lending institutions. Secondly, and as an important corollary of the function I have just described, thu Development Bank will be required, when determining whether or not to make a loan, to have regard primarily to the prospects of the borrower’s operations being successful rather than to the amount of security the borrower can provide in support of the loan. Thirdly, the Development Bank will be prohibited from providing finance for the purchase of goods otherwise than for use in the course of the borrower’s business, and all of its resources will thereby be devoted to productive purposes.
The Development Bank will have powers and resources necessary for the performance of its important functions. Under the bill, however, the Development Bank will be able to use its powers and resources only for the purpose of the functions 1 have described.
The capital funds of the Development Bank on its establishment will consist of the capital and reserves of the Mortgage Bank and Industrial Finance Departments - amounting to almost £15,000,000 on the basis of 30th June, 1958, figures - plus an additional £5,000,000 capital to be provided from the reserves of the central bank. These funds, together with the borrowing powers that the bank will have and the provision, to which I shall refer later, for retention of its profits, should ensure that the Development Bank will have adequate resources for the discharge of its important responsibilities. The Government will, however, watch the position closely from the viewpoint of the possible need for a further increase in the bank’s capital later in the light of the bank’s operating experience.
The Development Bank will have power to accept deposits from the public. It is not anticipated, however, that the bank will either attract deposits from the public on any significant scale or seek to rely on such deposits as a major source of funds. In respect of such deposits as are placed with it. the Development Bank will not, under the Banking Bill, be required to lodge statutory reserve deposits with the Reserve Bank. The reasons for this are that the Development Bank will be a special institution quite unlike the trading banks, and that, since the level of its deposits will not be affected to anything like the same extent by the influences which cause the trading banks’ deposits to rise and fall, the Development Bank’s business could be inconvenienced without warrant if, for instance, it were required to participate in a call to reserve deposits brought about through an increase in trading bank deposits in which it did not participate.
Tn other respects the Development Bank will be subject to the same basic centra! banking controls as the trading banks. I shall indicate the controls in question when introducing the Banking Bill.
Like any other bank, the Development Bank will have fairly wide borrowing powers. lt will, however, require the Treasurer’s consent to any borrowings in excess of £2,000,000 from the Reserve Bank and to any borrowings from overseas With regard to the making of loans by the Reserve Bank to the Development Bank, it is to be remembered that under the Reserve Bank Bill the Reserve Bank will be able to make loans to the Development Bank, or to any other bank, only for centra’ banking purposes. In other words, the Reserve Bank will only be able to make such loans if they are needed for the purpose of supporting a bank’s liquidity position. This, of course, is the traditional central banking function of acting as lender of last resort to the banking system. It has always been the intention that the Development Bank would, like other banks, be abi; to call on. the Reserve Bank only if the need arose for its liquidity to be supported, and the Government is satisfied that the provisions in the legislation relating to such borrowings go no further than to give effect to this intention.
In relation to borrowings by the Development Bank from the Treasurer, the Treasurer’s power to make loans to or deposits with the Development Bank will be subject to the appropriation of moneys by the Parliament for the purpose. The Treasurer will not otherwise have power to make moneys available to the bank.
As is at present the case with the Mortgage Bank and Industrial Finance Departments, all of the Development Bank’s profits will be paid to the bank’s reserve fund and will thus go to augmenting the bank’s resources.
There has been included in clause 83 of the bill a provision to the effect that, if they so desire, the trading banks will be appointed as agents of the Development Bank for the receipt and transmission of applications for assistance. This provision should ensure the continuance of present arrangements under which the trading banks commonly refer to the Mortgage Bank and Industrial Finance Departments applications which are not suitable for trading bank loans but which the trading banks feel would be considered by those two departments. In addition, the provision will serve to ensure that the Development Bank will not discriminate between the trading banks in the choice of its agents.
The remaining important part of the bill now before the Senate is that dealing with the Commonwealth Banking Corporation Service. The provisions in question are in practically identical terms to those in the present Commonwealth Bank Act relating to the Commonwealth Bank Service, and so do not call for special comment. The allocation of officers to the new service is dealt with in the Banking (Transitional Provisions) Bill which I shall be explaining shortly.
In the confident belief that the measure will prove to be a landmark in the development of the Commonwealth’s banking institutions, I commend the Commonwealth Banks Bill to the Senate.
Debate (on motion by Senator McKenna) adjourned.
page 557
– I move -
That the bill be now read a second time.
This bill is designed to replace the Banking Act 1945-1953, which is the act regulating generally the conduct of banking business in Australia and making provision for the various controls that are available to the central bank for regulation of the banking system at large.
The bill makes two main changes in the existing framework of these controls. First and foremost, it replaces the special accounts provisions of the present act with a system of statutory reserve deposits. Secondly, it recasts the relevant parts of the act so as to make adequate provision for the regulation of savings bank business, as required by the emergence in recentyears of private savings banks. The bill also makes various adjustments necessitated by the establishment of the Commonwealth Development Bank as part of the banking system, and it effects a few relatively minor amendments of a technical character.
The provisions for a system of statutory reserve deposits are contained in clauses 17 to 31 of the bill and may be summarized as follows: -
These provisions will give the Reserve Bank ample powers of regulation of bank credit, while meeting the objections that have been made to the present special accounts system, namely, that it is unnecessarily complex and is capable of being used in an arbitrary and discriminatory manner.
The main restriction on the exercise of the Reserve Bank’s statutory reserve deposit powers will be the requirement to give 45 days’ notice of a determination of a statutory reserve deposit ratio in excess of 25 per cent. This will afford the trading banks reasonable protection against any sudden or arbitrary action that could conceivably be taken to disrupt their affairs and to attack them unfairly. The figure of 25 per cent, is clearly an adequate one for central banking purposes, as at no time since the special accounts system was revised in 1953 has the amount in special accounts exceeded 25 per cent, of the banks’ deposits. Moreover, as the Commonwealth Bank has in fact been operating the special accounts system in such a manner that each major trading bank has the same percentage of its deposits on deposit in special accounts, the express uniformity provision in the bill will present no difficulty so far as the effective use of the Reserve Bank’s powers is concerned.
I should also mention at this stage that the trading banks have agreed to continue to observe the liquidity convention which is now in operation by arrangement between themselves and the Commonwealth Bank, or such other liquidity convention as may be agreed on in future. The observance of an agreed liquidity convention, the essence of which is that the trading banks will not allow the liquid assets in their own hands to fall below an agreed level, is of the greatest importance in that it enables central bank credit policy, whether implemented through special accounts, reserve deposits or otherwise, to be planned with greater certainty of its effect on the level of bank credit in the economy. 1 come now to the new provisions in the bill relating to savings banks. The conditions under which the private savings banks operate, and, in particular, the ways in which they may invest their depositors’ funds, are laid down in the authorities that have been granted to them to conduct banking business. The Commonwealth Savings Bank, while not at present subject to the same detailed conditions as the private savings banks, has, in practice, observed the same conditions. In clauses 37 and 38 of the bill there is a requirement for certain matters in relation to savings banks to be prescribed by regulations which must apply equally to both the Commonwealth Savings Bank and the private savings banks. It is proposed that the regulations will embody the conditions now attached to the authorities of the private savings banks. In addition, the bill requires the regulations to provide that a savings bank may not maintain deposits with or otherwise make moneys available to trading banks to an amount exceeding £2,000,000 plus 2i per cent, of the savings bank’s depositors’ balances. This provision, which will also apply uniformly to the Commonwealth Savings Bank and the private savings banks, will ensure that an undue proportion of savings bank funds is not channelled into ordinary commercial banking uses.
In order to make entirely sure that the Reserve Bank is kept fully aware of the investment policies of both the Commonwealth Savings Bank and the private savings banks, there is a further provision requiring the various savings banks to keep the Reserve Bank informed of their policies in relation to loans and investments including, in particular, their policies in relation to loans for housing purposes.
The other important provisions in the bill, as compared with the provisions in the existing Banking Act, relate to the position of the new Commonwealth Development Bank in the banking structure. The Development Bank will be subject to the provisions in the bill dealing with protection of depositors, mobilization of foreign currency, advance policy, interest rate policy, the furnishing and publication of statistics, inspections by the AuditorGeneral and the supply of information to the Reserve Bank. The Development Bank will not, for reasons that I have already explained in connexion with, the Commonwealth Banks Bill, be subject to the reserve deposits provisions, and it will not be classed as a trading bank for the purpose of the £2,000,000 plus 2i per cent, formula to which 1 referred earlier.
The provisions in the bill will constitute the fundamental laws for the regulation of the Australian banking system as a whole. The Government is entirely confident that the measures embodied in the bill are based on thoroughly sound principles and will ensure the functioning of the banking system in the best interests of the nation. I have pleasure in commending the bill to the Senate.
Debate (on motion by Senator McKenna) adjourned.
page 559
– I move -
That the bill be now read a second time.
This bill, as its title implies, deals with those matters for which it is necessary to provide in order to effect a smooth transfer from the present to the new banking structure. It therefore contains provisions that are related to each of the three main bills I have already introduced.
Apart possibly from the provisions for the allocation of present Commonwealth Bank officers to the two new staff services, the provisions in the bill are of a machinery and technical nature and do not involve issues of principle.
The bill firstly contains provisions for ensuring that the Reserve Bank of Australia will carry on as central bank in succession to the Commonwealth Bank of Australia, and that this change-over will not cause any interruption to the performance of central bank functions. The present Commonwealth Bank Board will continue in office as the Reserve Bank Board, and the Governor and Deputy Governor of the Commonwealth Bank will continue in office in similar capacities with the Reserve Bank. The Note Issue and Rural Credits Departments of the Commonwealth Bank will also carry on as the Note Issue and Rural Credits Departments of the Reserve Bank.
With regard to the establishment of the reserve deposits system, it is of course important to make certain that the establishment of this system to replace the special accounts system will not involve any gap or period of uncertainty in the administration of the central bank’s credit policy. It is therefore provided in the bill that the Commonwealth Bank may, on giving appropriate notice, determine a statutory reserve deposit ratio that will come into force on the commencing date of the new system. On that day, the moneys held by the Commonwealth Bank in special accounts will necessarily be repayable to the banks concerned but, in view of the prior determination by the Commonwealth Bank, an appropriate amount will simultaneously fall due for lodgment in the statutory reserve deposit accounts held with the Reserve Bank. The provisions in the Banking Bill relating to statutory reserve deposits will thereafter apply.
The bill also provides that the Banking (Foreign Exchange) Regulations that have been made under the Banking Act 1945- 1953 may be continued in force, following an appropriate declaration by the GovernorGeneral, and that directions previously given by the Commonwealth Bank concerning the sale and purchase of gold will continue to have legal effect.
With regard to the establishment of the Commonwealth Development Bank, it is provided in the bill that the assets and liabilities of the Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank will be transferred to the Development Bank as from the date when that bank is established.
As compared with the bill as it stood when last before the Senate, the bill contains some new provisions relating to preparatory arrangements for the coming into operation of the Commonwealth Banks Bill. The provisions in question deal with the making of appointments and the meeting of the preliminary expenses of the Commonwealth Banking Corporation.
A great deal will have to be done after the passing of the legislation by Parliament before the new banking structure can be brought into effect, and consequently it will be some months after the passage of the legislation before it will be proclaimed to come into operation. The provisions in the bill relating to preparatory arrangements are designed to facilitate the execution of the preliminary planning work to be done in this interim period.
Firstly, the provisions will enable the making of appointments, after the Commonwealth Banks Bill is passed but before it is proclaimed, to the top management positions with the Commonwealth Banking Corporation and its three banks - namely, members of the Commonwealth Banking Corporation Board and the three executive committees of the board for the Commonwealth Trading Bank, the Commonwealth Savings Bank and the Commonwealth Development Bank, the Managing Director and the Deputy Managing Director of the Corporation, and the general managers of each of the three banks.
The appointments will not become effective until the legislation is proclaimed, but the appointees will meanwhile be required to take such action as is appropriate to facilitate the coming into operation of the legislation. This action will include planning on such things as staffing and accommodation, arrangements for the commencement of business by the Commonwealth Development Bank, and the integration of the three banks in the Commonwealth Banking Corporation framework. Great care will, of course, have to be given to the planning of such matters if the new structure is to get off to a smooth start immediately upon proclamation of the legislation.
The provisions relating to preparatory arrangements also provide for the meeting of the preliminary expenses of the Commonwealth Banking Corporation, including the remuneration of the persons to be appointed to tine positions I have indicated. These expenses will be paid by the Commonwealth Bank in the first instance, but will be reimbursed to the Reserve Bank later by the Commonwealth Banking Corporation.
I come now to the staff provisions ot the bill. Under these provisions the officers of the present Commonwealth Bank Service will become officers either of the Reserve Bank Service or of the Commonwealth Banking Corporation Service. They will be allocated between the two new services by agreement between the Governor of the Reserve Bank and the Managing Director of the Commonwealth Banking Corporation. In this allocation every effort will be made to meet the wishes of individual officers, having regard to the esential requirements of both services. The bill also contains specific provisions to ensure that officers will not suffer any reduction in remuneration when they are allocated to the two new services, and that their accrued rights to superannuation, recreation leave, long service leave and sick leave will be preserved.
There is a further provision in the bill designed to meet the possibility that, after the coming into operation of the new banking structure, some subsequent transfers of officers between the two services might prove to be desirable. During a period of three months after the proclamation of the legalisation, officers will be permitted to apply for transfer from one service to the other if they so desire, and the rights of any officers so transferred will be fully preserved.
This completes the explanation of the four main bills. It will be apparent that the Government has given very full thought indeed to the many issues involved in the reconstruction of the banking system. The structure that has emerged is designed to meet the needs of our times and to ensure the fully effective and harmonious operation of the system, and the Government firmly believes that the measures I have introduced will operate to achieve those very important objectives.
I commend the Banking (Transitional Provisions) Bill to the Senate as an integral part of the Government’s banking legislation proposals.
Debate (on motion by Senator McKenna) adjourned.
page 560
[4.451 - I move -
That the bill be now read a second time.
The reconstruction of the banking system will necessitate consequential amendments to a number of other acts of Parliament. The acts in question, ten in all, do not themselves deal with banking as such, but they contain certain banking references that will be affected by the new banking legislation.
The establishment of the Reserve Bank of Australia as the central bank in place of the Commonwealth Bank of Australia means that a number of references in other acts to the Commonwealth Bank will have to be amended so as to make them references to the Reserve Bank. There is, therefore, a provision in the Reserve Bank Bill that, except in specified cases where it would be inappropriate, all references to the Commonwealth Bank in laws of the Commonwealth or of a Territory of the Commonwealth in force immediately before the commencement of the banking legislation are to be read as references to the Reserve Bank. The ten acts that are to be specially amended are those requiring consequential amendment in ways other than the reading of references to the Commonwealth Bank as references to the Reserve Bank.
In view of the lapse of time and the passage of other legislation affecting the principal acts concerned since the bills to effect these amendments were before the last Parliament, and for other technical reasons, the long titles and a few sections of some of the amending bills have had to be altered. The alterations in question are indicated in one of the statements I have circulated and do not have any policy content. In addition, it has been necessary to provide, in an entirely new bill, for certain consequential amendments to the Christmas Island Act 1958, which became law after the banking legislation was before the last Parliament. As an offset to this additional bill, however, it is no longer necessary for an amendment to bc made to the GoldMining Industry Assistance Act 1954-1957 because the operation of that act in its present form will have expired before the new banking legislation comes into operation.
All the minor amending bills, with the exception of certain provisions in the Crimes Bill that are unconnected with banking, are to come into operation on the same day as the Reserve Bank Act, that is, the day on which the revised banking legislation in general comes into operation.
The bill now before the Senate relates to the first of the ten acts that have to be specially amended, and its purpose is to make an appropriate amendment to the Audit Act 1901-1957. Under section 70b of the Audit Act 1901-1957 the Treasurer has power to guarantee repayment to the Commonwealth Bank of Australia or to the Commonwealth Trading Bank of Australia of loans made for the purposes of the Commonwealth by either of those banks. By the amendment now proposed, the Treasurer will be empowered to guarantee repayment of such loans to the Reserve Bank, the Commonwealth Trading Bank or the Commonwealth Development Bank. The addition of the Development Bank does not affect the present position, as loans made by the existing Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank for Commonwealth purposes may be guaranteed by the Treasurer, and under the new banking legislation the Development Bank will be taking over the business of those two departments. I commend the bill to the Senate.
Debate (on motion by Senator McKenna) adjourned.
page 561
– I move -
That the bill be now read a second time.
The purpose of this bill is to amend section 19 of the Christmas Island Act 1958 so that its operation will not be affected by the replacement of the Commonwealth Bank Act 1945-1953 and the Banking Act 1945-1953 by the Reserve Bank Act 1959 and the Banking Act 1959 respectively.
Because it was considered desirable to interfere as little as possible with ordinary business transactions on Christmas Island when that island passed to the Commonwealth, provision was made in the Christmas Island Act 1958 whereby the Singapore currency which had formerly been legal tender on the island might circulate side by side with Australian currency. The bill before the Senate has the effect merely of making the necessary adjustments to the citations of acts and regulations in the principal act.
Debate (on motion by Senator McKenna) adjourned.
page 562
– 1 move -
That the bill be now read a second time.
As the Commonwealth Bank has always operated its own scheme of long service leave benefits for its officers and employees, the latter were excluded from the operation of the Commonwealth Employees’ Furlough Act when it was enacted in 1943.
The bill now before the Senate continues the present position in relation to officers and employees of the Reserve Bank and the Commonwealth Banking Corporation, which will also operate their own long service leave schemes.
Debate (on motion by Senator McKenna) adjourned.
page 562
– I move -
That the bill be now read a second time.
The purpose of this bill is to make minor amendments to the provisions of the Crimes Act 1914-1955, which is the act relating to offences against the Commonwealth. The Crimes Act at present defines “ Commonwealth officer “ to include any person in the service of any public authority under the Commonwealth, and specifically to include an officer of the Commonwealth Bank. It also defines “ public authority under the Commonwealth “ to mean any authority or body constituted by or under any act, and specifically to include the Commonwealth Bank.
It is, of course, intended that officers of the two new staff services for the Reserve Bank and the Commonwealth Banking Corporation will continue to be Commonwealth officers for the purposes of the Crimes Act, and that the authorities constituted under the new legislation will continue to be public authorities under the Commonwealth for the purposes of the act.
The appropriate amendment to the Crimes Act is to omit from the act the references to the Commonwealth Bank in the definitions of “ Commonwealth officer “ and “ public authority under the Commonwealth “, and this is what the bill proposes. It is not necessary to substitute for them references to the Reserve Bank and the Commonwealth Banking Corporation and its three affiliated banks because all of these institutions will unquestionably be authorities constituted under an act and as such will automatically be covered, together with the officers employed by them, by the definitions in the Crimes Act without express mention of them in that act.
The opportunity is also being taken to amend section 2 of the Crimes Act so as to include references to section numbers in the explanation of the division of the act into parts. This amendment is purely machinery in nature and gives effect to standard’ procedure that has been followed in other acts. As the amendment is unconnected with the banking legislation and it is desired to bring it into force as soon as possible, the bill provides that it will come into operation on receiving the Royal Assent. The amendment in the bill affecting Commonwealth Bank officers will, of course, come into force on the day that the Reserve Bank Act comes into force.
Debate (on motion by Senator McKenna) adjourned.
page 562
– I move -
That the bill be now read a second time.
The chief purpose of this bill is to give effect to the intention, that I explained when introducing the Commonwealth Banks Bill, of making the Commonwealth Trading Bank liable to income tax from the beginning of the financial year in which the new banking structure comes into operation. The bill provides that, as from that time, the Commonwealth Trading Bank will pay income tax at the rates applicable to a public company, that is, on the basis of the rates for the current financial year, at 6s. 6d. in the £1 on the first £5,000 of taxable income and 7s. 6d. in the £1 on the balance.
A basic purpose of the new banking legislation is to ensure that the Commonwealth Trading Bank takes its place in the competitive trading bank system on an equal footing with the private trading banks. Since the private trading hanks are liable to income tax as public companies, it follows that the Commonwealth Trading Bank should also be so liable.
The liability of the Commonwealth Trading Bank to income tax will not affect the bank’s obligation to pay one-half of its net profits - which in future will be after tax - to the Commonwealth. These payments by the bank to the Commonwealth can, of course, be likened to the dividend payments that companies make to their shareholders.
I might mention that the principle involved has already been approved by Parliament in the case of the Australian National Airlines Commission and the Australian Coastal Shipping Commission, both of which are required by act of Parliament to pay income tax on the same basis as their private enterprise competitors as well as to pay a share of their profits to the Commonwealth.
As I indicated in my speech on the Commonwealth Banks Bill, it is not proposed to make either the Commonwealth Savings Bank or the Commonwealth Development Bank liable to income tax, and accordingly the provisions in the bill now before the Senate do not affect either of those banks.
After careful deliberation, the Government has decided that it would not be appropriate to subject the Savings Bank to income tax in addition to requiring it to pay one-half of its net profits to the Commonwealth. The Savings Bank is a very special kind of national institution in that it is the depository of the savings of millions of people, and it is being given a statutory duty to encourage saving and to promote the interests of its depositors. The Government believes that it would be inconsistent with the conception of the Savings Bank in the new banking structure to make it liable to income tax. It has moreover to be remembered that, under the .terms of agree- ments with the States of New South Wales,
Queensland and Tasmania, the Savings Bank is required to pay to the States concerned one-half of the profits it earns on its business in those States, and the Savings Bank would be placed in an unduly onerous position if it had to pay income tax in addition to the payments it is required to make to the States and to the Commonwealth.
The Government has also decided that it would not be appropriate to require the Commonwealth Development Bank to pay income tax. As we have seen, the Development Bank will have special functions and responsibilities for the achievement of national objectives, and the bank will retain all of its profits for the purpose of strengthening its capital structure. Retention by the Development Bank of all of its profits will continue the position that has hitherto obtained in the case of the Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank.
Finally, I should perhaps mention that clause 4 of the bill proposes a minor amendment to section 23c of the Income Tax and Social Services Contribution Assessment Act. This section relates to the exemption from tax of certain income derived by a company from the sale of gold, and the amendment that is proposed is of technical significance only.
Debate (on motion by Senator McKenna) adjourned.
page 563
– I move -
That the bill be now read a second time.
This bill is designed to amend section 6 (1) of the National Debt Sinking Fund Act 1923-1950 by substituting the Governor of the Reserve Bank for the Governor of the Commonwealth Bank as a member of the National Debt Commission. This amendment is, of course, a purely consequential one.
Debate (on motion by Senator McKenna) adjourned.
page 564
.- I move-
That the bill be now read a second time.
Under the Northern Territory (Lessees’ Loans Guarantee) Act 1954, the Treasurer is empowered to guarantee repayment of a portion of a loan made by a bank to the holder of a pastoral homestead lease or an agricultural lease in the Northern Territory for the purpose of financing the improvement of his leasehold property. The banks at present specified under the scheme are the Commonwealth Bank, the Commonwealth Trading Bank and the private trading and savings banks.
The proposed amendment removes the Commonwealth Bank and adds the Commonwealth Development Bank and the Commonwealth Savings Bank to the specified banks. The Reserve Bank is excluded because it will function only as a central bank and will not be making loans of the type in question. The Development Bank is added because it will be the successor of the Mortgage Bank Department of the Commonwealth Bank, and the making of loans by it to Northern Territory leaseholders in appropriate cases will be entirely consistent with its functions. The Commonwealth Savings Bank is being included in order to place it in the same position as private savings banks, which are already eligible banks for the purposes of the scheme. Again, no issues of substance arise in the proposals in the bill.
Debate (on motion by Senator McKenna) adjourned.
page 564
– I move -
That the bill be now read a second time.
The purpose of this bill is to make two routine amendments to the Officers’ Rights Declaration Act 1928-1953, which is the act that preserves the existing and accruing rights of officers of the Commonwealth Public Service who are appointed to positions with statutory authorities of the Commonwealth. The first of the proposed amendments is to delete from the act a reference to Commonwealth public servants who became officers of the Commonwealth Bank prior to 1928. There are no longer any officers of the Commonwealth Bank in this category, and consequently there is no need to retain the reference to them.
The second of the proposed amendments is to delete from the act a reference to persons employed under the Commonwealth Bank Act 1911-1927. Thereare provisions in both the Reserve Bank Bill 1959 and the Commonwealth Banks Bill 1959 whereby the existing and accruing rights of ex-Public Service employees of the Reserve Bank and the Commonwealth Banking Corporation will be preserved, and it is not necessary to make express provision for these employees in the Officers’ Rights Declaration Act. The two proposed amendments have no policy significance and I recommend their adoption.
Debate (on motion by Senator McKenna) adjourned.
page 564
– I move -
That the bill be now read a second time.
The purpose of this bill is to make a machinery amendment in section 98 of the Re-establishment and Employment Act 1945-1958. The Re-establishment and Employment Act is the act that relates to the re-establishment in civil life of members of the forces. Division 3 of Part VI. of the act provides for the making of reestablishment loans to discharged members of the forces, and section 98 provides that agreements may be made with specified authorities for the performance by the latter of functions under Division 3.
The specified authorities referred to in the present section 98 include the Commonwealth Bank and the Commonwealth Trading Bank. The effect of the proposals in the bill is to delete the Commonwealth
Bank as a specified authority and to substitute for it the Commonwealth Development Bank. The existing reference to the Commonwealth Bank contemplated the performance by the Mortgage Bank and Industrial Finance Departments of the Commonwealth Bank of functions in relation to the making of re-establishment loans, and since the Commonwealth Development Bank is to take over these departments it is appropriate that the reference in section 98 to the Commonwealth Bank be changed to a reference to the Commonwealth Development Bank. The amendment is, of course, a purely routine consequence of the proposed establishment of the Commonwealth Development Bank, and has no other significance.
Debate (on motion by Senator McKenna) adjourned.
page 565
– I move -
That the bill be now read a second time.
The effect of this bill will be to exempt the Reserve Bank from the payment of sales tax on goods used or produced by it, provided they are not for sale by the bank otherwise than to the Commonwealth. The Commonwealth Banking Corporation and its three affiliated banks will, however, be subject to sales tax.
Under the present Sales Tax (Exemptions and Classifications) Act, goods produced by the Commonwealth Bank are exempt from sales tax, but goods purchased for the use of the institutions in the Commonwealth Bank group are subject to sales tax. As the normal principle is that a statutory authority which does not conduct a business undertaking in the sense of producing goods or services for sale is not required to pay sales tax, and the Reserve Bank will be in this category, these provisions require amendment in the sense I have indicated. The practical significance of the proposals is small.
Debate (on motion by Senator McKenna) adjourned.
page 565
Senator Paltridge. - Yes.
The ACTING DEPUTY PRESIDENT (Senator Anderson). - There being no objection, that procedure will be adopted.
page 565
Debate resumed (vide page 553).
– The four bills now under consideration - the Reserve Bank Bill 1959, the Commonwealth Banks Bill 1959, the Banking Bill 1959, and the Banking (Transitional Provisions) Bill 1959 - were before the Senate on two previous occasions, as has been indicated by the Minister for Shipping and Transport (Senator Paltridge). Those occasions were in the latter part of 1957, when the bills were rejected, and in the early portion of 1958 when, after being taken to the secondreading stage, they were again rejected. I recall that on that occasion Senator Spooner, who was then the Minister representing the Treasurer in this place and who has been succeeded in that capacity by Senator Paltridge, promised the Opposition that we would be debating these measures again.
– He always keeps his promise.
– There was something minatory, I thought, about his tone when he made the promise, but I agree that his promise has been kept. It may be that on behalf of the Opposition I shall make a promise, too, before I conclude my speech. It is true that the Prime Minister (Mr. Menzies) in his policy speech put to the people of Australia that, in the event of the Government being returned to office, these measures would be reintroduced. The Government was returned to office and Senator Spooner’s promise has proved to be a completely prophetic utterance.
– Pathetic.
– I am prepared to say that, too, but the word I used was “ prophetic “. The promise would not have proved to be a completely prophetic utterance but for the support that was accorded to the Government parties by the Queensland Labour party and the Australian Democratic Labour party. Those parties directed their second preference votes to the Government parties and not to the Australian Labour party. In the view that I put to the Senate, the Q.L.P. and D.L.P. achieved this very queer result: So far from acting as an effective force in this Parliament, particularly in the Senate, they have now emasculated themselves. They no longer will be a power in the Parliament, and certainly not in the Senate. That is one result they have achieved by the advice they offered to the people of Australia.
– It was the same as the advice offered in Queensland in the case of Senator Byrne.
– I mentioned that.
– But your party gave its second preferences to the Liberal party in Queensland. Why do you object to such an allocation in our case?
– That may well be, but I am simply putting it to the Senate that the result of the election depended upon the preferences broadly extended by those two parties.
– We would sooner give away the bank than the country.
– The honorable senator may put forward any viewpoint he wishes. I merely record the fact that not only did those parties deprive themselves of any further power in this chamber but also they helped to return a Government which was pledged to implement these very four bills to which they were violently opposed in November, 1957, and March, 1958.
– We had to make a decision between the country and the banking bills.
– I repeat that those parties helped to return the Government with pre-knowledge of the fact that it would implement these particular measures. They also sent back the Government to continue its refusal to give relief to the war and civilian pensioners of Australia. Logically, having taken that course, these two parties should vote for the bills on this occasion - not that it makes any difference what they do to-day.
– It does not make any difference what you chaps do, either!
– It makes no difference at all; I concede that. Nothing that I can say and no numbers that I can muster on this side of the chamber to-day will be able to stop the passage of this legislation, which we think is iniquitous. I repeat that it makes no difference what anybody on this side of the chamber does now. I shall have that fact in mind as I address myself to these four bills. I agree that the passage of them is completely assured.
On 25th March of last year, I, on behalf of the Opposition, put in broad terms all the thoughts that members of the Opposition had in expressing their disapproval of these four measures. I have no desire to repeat all that, but I do wish to say that I confirm with emphasis all that I put to the Senate on that occasion. I do not subtract one word from what I uttered then. I propose, however, to traverse some of the matters that were then at issue and which still remain at issue. The measures now before us differ in several particulars from the 1958 bills. But most of the alterations are purely consequential upon the lapse of time and have regard to certain formalities. There have been three changes of real substance. I do not propose to address myself to them at this stage, but I expect that reference will be made to them in the course of what I have to put before the Senate.
The Opposition regards the bills as being dangerous and sinister. I point out to honorable senators that by rejecting them on two occasions, in 1957 and in 1958, we gave the Government the right to seek and to obtain a dissolution of both Houses of the Parliament. In other words, whatever electoral risks were involved in that second rejection were taken coldly and deliberately by the Opposition. That fact must be recognized. It leads to the point, also, that the Government was not prepared to make banking an issue before the people or to focus attention upon it. The Government did not take the opportunity that was given to it. But let no honorable senator, by interjection or otherwise, question the sincerity of the feeling of opposition to these measures on the part of the Labour party, having regard to the fact that it was prepared to take the risk of a double dissolution.
I referred a while ago to the fact that we regard these bills as sinister. Let me take the Senate back to 1949, when all the financial and physical resources of the private trading banks were marshalled and thrown into the scale in order to defeat the Australian Labour Party. They financed all kinds of mushroom bodies that had never been heard of before and have never been heard of since to engage in the work of propaganda that they undertook, bodies such as sane democracy leagues and others of that type, with high-sounding titles. I certainly concede that they played a major part in bringing about the defeat of the Chifley Labour Government. It is true that the private trading banks financed the then Opposition parties, which were very largely those that now constitute the Government parties, in .their election campaigns. That cannot be controverted. In fact, not only is it not denied, but one of the Government supporters in another place quite recently frankly admitted that he had had considerable assistance in his electorate from that source and said that he welcomed it and appreciated it.
We see, then, that the appointment of the Menzies Government by the people of Australia in 1949 was, to a very great extent, induced by the propaganda, the finances and the help of the private trading banks.
– Against nationalization.
– Against the nationalization proposal, if the honorable senator wishes to have it that way, although that is hardly a fair comment because the possibility that the private trading banks of Australia could be nationalized had been very effectively negatived a considerable time before. The High Court, and later the Privy Council, had declared that under our Constitution as it stood, it was not possible to nationalize the private trading banks.
– Except by backdoor methods.
– Again, I do not agree, for the reason that the courts have held again and again that they would not permit to be done by indirect action what they had forbidden to be done directly. Therefore, I should say that the possibility of nationalizing the banks was effectively killed when the Privy Council finally, after the High Court decision, determined that it could not be done.
– Is not that one of your political objectives now?
– In the party, of course. The nationalization of banking is unquestionably an Australian Labour party objective. That is not denied. What I am arguing at the moment, and what we of the Labour party face, is that it is not possible of achievement under the Constitution as it stands. That is the proposition I put, and I am led into a dissertation on this matter by Senator Henty’s interjection that the issue in 1949 was bank nationalization.
– Of course it was!
– I say that matters arising out of the attempt by Labour to nationalize the banks certainly were in issue, but the issue was not, as Senator Henty’s interjection suggested, whether the banks were or were not to be nationalized. That issue was dead in 1949 and in fact it has remained dead ever since.
– How can it be dead if it is a part of your policy?
– I merely put this simple proposition to the honorable senator: That you can have an ideal and you can have an objective, but if the Constitution will not permit you to achieve that objective you have to concentrate your efforts on alteration of the Constitution.
– But did not the Privy Council itself say that the court might so change that the decision in another period of time could be different?
– I remember the honorable senator being very aghast at the scorn that I poured on that particular decision in this chamber, when the theme that I developed was that the court had attempted to prove that black would be white. Having denied the possibility of nationalization under the Constitution as it then stood, it made the most extraordinary statement that I have ever known a court to make when it said that, having regard to future social, economic and other considerations, it might be possible to prohibit private trading banking for the reason that that might be the only way iri which banking could be regulated.
– But that defeats the honorable senator’s contention that nationalization of banking has ceased to be a political issue.
– I have confessed and admitted that the Chifley Government’s attitude in 1947 was under consideration in 1949. Not only did the Government parties of to-day help to make that an issue, but the private trading banks devoted all their vast resources of men and money to bringing about the result they desired. The Labour party does not run away from the viewpoint that it believes that the nationalization of banking is good; but it does face the factual position that nationalization cannot be achieved while the Constitution remains as it is.
– But if Labour were elected it would try to introduce legislation that would come within the Constitution.
– I think that the honorable senator misunderstands me. I am pointing out to the Senate that under the Constitution as it now stands it is not possible to nationalize the banks. We accept that view.
– As I understand it, what the High Court has said is that that particular legislation is not constitutional, but supporters of your party say, “ Well, there might be other legislation that would be constitutional. Give us a chance and we will give such legislation a try.”
– If in due course, when we are a government, the honorable senator will suggest to me an approach to the matter that we overlooked in our 1945 legislation I shall be most grateful to him, because I point out that every possible approach to the matter was made in the bill. The form of the actual taking over of the banks physically and the acquisition of their shares, and every other possible type of approach that might have supported the legality of the legislation was tested at the time. No detail was overlooked. We say that we exhausted every possibility within the ingenuity of the minds that were addressed to the task of achieving the result that was desired. Item after item of that approach was negatived by the High Court. The Privy Council addressed itself really to a consideration of only one matter, the effect of section 92.
Let me come back again, after that interesting diversion into which I was led, to the position in 1949. We had then one Commonwealth Bank. It certainly had a lot of departments. There were, for instance, its central banking division, its general banking division, its rural credits, mortgage bank and industrial finance sections, the Savings Bank and the Note Issue Department. Not only were those sections operating as one bank under one management and with one staff, but the bank was managed, in all its details, by a staff and an executive that gave their full time to that great national task. There were no part-time members of boards. There were no people who had interests to serve other than those of the bank. I point out that, right from 1945, when the Labour party legislation instructed the Commonwealth Bank to drop its earlier policy and to go out competitively for business, the Commonwealth Bank has been a very successful institution in each of those phases. There was one staff which was interchangeable between all the different branches. That is to be negatived. T do not think anybody will deny what I say when I indicate that I regard the Commonwealth Bank as having been uniformly successful from the day the Labour government said to it. in effect, “ Go out for business and do not refuse it merely because your acceptance of it will take business from another bank “. That was the beginning of the great development of the Commonwealth Bank.
Step by step, the very successful position that was operating in 1949 has been demolished since this Government came to office. I go back to March, 1950, when this Government, almost immediately after its election, brought in a bill to displace that high executive that had produced such excellent results and put it under a Commonwealth Bank Board of private interests that had been imported into this national institution. That, I say, was an insult to every one of the bank’s officers - the Governor, the Deputy Governor and the executive members of their staff who had done such a magnificent job. At that stage, what could have been the purpose? Was it to correct some defect in the management that the board was brought in? Of course, it was not! It was to enable interests of diverse kinds, interests either opposed to the bank or certainly not connected with it, to have a say in the matter of policy.
– Have you any proof of that assertion?
– I should like Senator Vincent to explain, when he stands up, why a bank board was superimposed upon executive officers who had conducted the bank and whose ability was unquestioned.
– Do you take the view that a board of directors renders assistance to its managers?
– It does. This is an entirely different position in the national institution. The importation of private controls and interests into this national institution is, in the view the Opposition takes, completely wrong. After all is said and done, in what particular had the bank at that stage in March, 1950. failed in its statutory duty, written into the act by the Parliament? The executive officers of the bank were carrying out the policy direction to the greatest advantage of the people of Australia? That was their charter. They were to direct the activities of the bank to the maintenance of the stability of the currency, to the maintenance of full employment and to the economic prosperity and welfare of the people of Australia. I say to the honorable senator that at that time the currency was stable. It has never been anything like as stable since 1949. There was full employment in 1949. The objectives of the bank had been achieved. There has not been stability of the currency or full employment - and there certainly is not to-day - since the Commonwealth Bank Board of vested private interests was put in charge of this great national institution.
– Do you say that the board is responsible?
– The board, being the main body in control, must accept a degree of responsibility; it must accept primary responsibility. I will go so far as to say that. At all events, Labour showed its sincerity again. It twice rejected that particular proposal in this chamber - Labour at the time had a majority - and risked a double dissolution. This was given. And I am prepared to say there were quite a number of excellent Australian Labour party senators at that stage who thereupon lost their seats and have not regained them.
– That goes into the humorous part of “ Hansard “. We will have cartoons in “ Hansard “ soon.
– There was a great deal of sacrifice and sincerity on the part of the A.L.P. in that matter.
– You did not get the double dissolution. The Government did.
– I recall that. The honorable senator knows that the Government could not have had a double dissolution unless the Opposition took the risk of twice rejecting the one major-
– How much risk do you think there was?
– Senator McKenna advised that we could not get a double dissolution.
– The Minister is postulating propositions that are utter guesswork and about which he in fact knows nothing.
– Why are you emphasizing that occasion? When you oppose a bill, you risk your seat on all occasions.
– It is one matter for senators with long terms to run to risk a double dissolution and quite another matter to oppose a bill in passing and face the issue in due course before the electors when it is merged with other matters years later.
– If it is put up again, are you going to funk the issue?
– We would only be following you.
– That is very true. As I have said, the appointment of the Commonwealth Bank Board was the first step taken to demolish the great structure of the bank. There was a series of steps and there was a rest. The General Banking Division, which had progressed quite well even under the board in the intervening years, was separated entirely from the Commonwealth Bank and constituted a new corporation. We said then, “ Here is the first step in getting this ready for sale, parcelling it up “. What was the purpose of doing that?
– You are not really serious, are you?
– I do not want to argue the matter at present, but before I sit down I shall certainly put the matter very directly to the honorable senator himself. I merely give him warning at this stage. I shall ask him to stand up and reconcile his denial of any intention to dispose of the activities of the Commonwealt’ Bank with what he said when the Fishing Industry Bill was before this Senate in 1956, when he laid down the broad principle that governments should not engage in activities of trade or commerce unless nobody else would give the lead. His second proposition was that when private enterprise was ready to take over, government should’ get out and private enterprise should move in. They were the two principles that he affirmed. Let us apply them to banking - general banking.
– Do you apply them to the Post Office, too?
– To general banking, because there is a High Court decision, I point out to the honorable senator, which says that banking is trade and commerce. One party had to say it in the Banking case in order to attract section 92 to it. Now, if the honorable senator is drawing a distinction between services and trade, he has to accept banking as trade and commerce, as it unquestionably is. The honorable senator has either to repudiate the principles he put to the Senate in 1956 or acknowledge the legitimacy of the fears that the Opposition expresses about the pattern of development to-day in this legislation. One or the other! Well, I did after all embark upon the particular issue, and I leave it at that stage now. I do expect I shall advert to it again before 1 conclude.
We watched this partial demolition of the Commonwealth Bank under this Government in 1953 by the two amendments to the Banking Act. The Government repealed section 28 of the 1945 act, which forbade private banks to invest in government, securities or in shares listed on the Stock Exchange without first obtaining the consent of the Treasurer. That section was repealed absolutely. The Government’s action opened the door to the private trading banks to enter the hire-purchase field.
– What is the provision to which you refer?
– Section 28 of the 1945 act. It was repealed by the Banking Act of your Government in 1953.
– Would you be good enough to remind me of the provisions of that section.
– Yes. I have announced them but, in short, they stipulated that no private trading bank could invest its moneys in Government securities, or the securities of Government instrumentalities, or in any shares listed on the Stock Exchange, without the consent of the Treasurer of the day. That section was a bar to the activities of the private trading banks. Its repeal allowed the private trading banks to enter openly the field of hire purchase and buy into hire-purchase companies already established or, as happened in the case of one bank, to form its own corporation.
The other thing that the Government did was to open the door to amalgamation between the banks by repealing a particular provision which I shall describe more exactly before I conclude. Under the provision banks could not amalgamate without the Treasurer’s approval, and the Treasurer, in turn, was not free to move without first obtaining the recommendation of the central bank. The requirement that the central bank’s recommendation be obtained was eliminated by this Government in the Banking Bill in 1953. The decision was thereafter left entirely to the Treasurer. If ever there was a matter upon which the central bank should have had a say it was this question of whether banks should amalgamate, but this Government pushed the central bank out of the picture. 1 am now developing the theme that since 1949 the very successful and symmetrical structure of the then Commonwealth Bank has been whittled down. I have carried the history of the matter up to 1953. The fourth step was, of course, the licensing by the Treasurer of savings banks operated by the private banking institutions. Those institutions entered a field traditionally and properly reserved for nationally or governmentally controlled bodies.
– Why does the honorable senator say that?
– I know that there are exceptions, but the Minister for Shipping and Transport (Senator Paltridge) this afternoon referred to savings bank activity as a great national institution. It ought certainly to be national in character by reason of the nature of the transactions involved, and by reason of its defined purpose which, even under this Government, is to make the great bulk of savings available for government securities, semi-governmental securities, and housing. Such money is traditionally directed to serving public purposes. It is right and proper that government savings banks should be the repositories of the savings of the smaller people in the community. These savings aggregate and can then be directed to national and developmental purposes. I do not think it right that a. government should permit the private trading banks to enter that field.
At the moment I am developing the theme that one sees a general cutting down of the symmetrical and successful structure of the Commonwealth Bank as it was in 1949. Now. in 1959, we have come to the fifth step. We have had a series of bills to implement the Government’s purpose in this matter. The Commonwealth Bank of Australia is to disappear. In its place there is to be the Reserve Bank of Australia, confined to central bank activity only. However, while that very principle is affirmed by the Government it still retains for itself the Rural Credits Department. It still operates the Note Issue Department. It still is, of course, to remain the banker to the Commonwealth, if the Commonwealth so requires.
Two of the wings that were formerly under the Commonwealth Bank of Australia - the Mortgage Bank Department and the Industrial Finance Department - are being lifted bodily - with their capital, their liabilities and their assets, and are being translated into a new corporation. Certainly, they are to be given further capital and their way is, to a degree, to be eased. But where was the need for this? I concede that some improvements are to be made, though minor ones, in the case of the Mortgage Bank Department, particularly. I refer to the matter of capital and the removal of obstacles. That could all have been done within the present structure of the bank by simple amendment - without lifting the two divisions away from the Commonwealth Bank and placing them under another corporation called the Commonwealth Banking Corporation, with all the complex structure to which I shall refer later in the course of my remarks.
The Mortgage Bank Department was set up by the Curtin Government in 1943. It is not a development of this Government. The Industrial Finance Department was set up by the Curtin Government in 1945. They represent very wise action which is now being applauded. Whatever the Government wanted to do to those two departments could well have been done within the 1949 structure of the bank. Merely a few minor changes would have been needed. Now we are to have the Commonwealth Banking Corporation, covering the Commonwealth Development Bank, the Commonwealth Savings Bank and the Commonwealth Trading Bank, the latter a body that was severed from the bank itself in 1953.
Into this new corporation, again pursuant to the policy of this Government, more private interests are to be imported. Private individuals are to govern t!:e bank. The course now adopted by the Government is more in favour of private interests than was the course which the Government took in 1951. Whereas the Governor and the Deputy Governor of the Commonwealth Bank were chairman and deputy chairman of the old board now the managing director of this new corporation and his deputy are not to be chairman and deputy chairman respectively. An outsider - a man who has had nothing to do with this great series of banks - is to be brought in. The legislation makes it compulsory that such an outsider shall be the chairman of the three banks, and that a great majority of the board shall consist of people who are not in the bank at all and are not members of the Public Service.
– Does that not prove how successful was the 1950 legislation?
– It does not. It merely proves how efficient are the executive officers. It raises the question as to how much more successful the bank might have been had it been left alone. It does not prove any success on the part of the board.
– The honorable senator apparently now admits that the bank has been very successful indeed as a result of the re-arrangement?
– It has been very successful, but not as a result of the rearrangement. The honorable senator must not put that admission into my mouth. I am affirming the first proposition, but not the second.
– You are making me sell the whaling industry, or something of the sort.
– Which, you did. You spoke in favour of the bill to dispose of the assets of the whaling commission.
– That is nothing to be proud of.
– It certainly is not.
Sitting suspended from 5.45 to 8 p.m.
– I think that prior to the suspension of the sitting, somebody queried by interjection, the accuracy of the proposition I had put in connexion with section 28 of the Banking Act 1945, which I claimed was repealed in 1953. Section 28 was the one that forebad the banks to invest in securities of the Commonwealth, those of any local governing body of Aus tralia or securities listed on a stock exchange in Australia. A penalty of £1,000 was to be imposed for breach of that section.
I make it quite clear that that prohibition related to all funds at the disposal of a bank, not merely to deposit moneys. Let me read the section to the Senate. It says -
A bank specified in Part I. of the First Schedule shall not, except with (he consent in writing of the Commonwealth Bank, purchase or subscribe to -
Then follows a list of securities, including securities listed on a stock-exchange in Australia. I put on record the fact that the section was repealed completely by section 10 of the 1953 act.
– Did it include Government securities?
– Plainly. A bank was not to purchase or subscribe to -
There is a complete prohibition. I think that was queried during the earlier part of my talk. This Government completely repealed that provision and thereby opened the door to the banks to enter the hire purchase field and the field of private investment.
– Do you suggest they could not enter the field of hire purchase under some other right or privilege?
– They certainly could not do what they have done - purchase large and substantial interests in existing hire purchase companies.
– They could create their own, though, provided the shares were not listed on the stock exchange.
– That is perfectly true, and also provided it was within the scope of their memorandum. I venture to say that their charters, in almost every case, were well settled long before hire purchase became a regular feature of our activities.
– I take it you are well aware that at that stage the Commonwealth Bank was investing very heavily in hire purchase.
– In 1953 it was, and one of our complaints against this Government is that, whilst the Government allowed the private banks into that field in the most unlimited way by the repeal of this section, it completely limited the activities of the Commonwealth Bank, as a matter of policy, by confining that bank to a figure of about £15,000,000 a year. I think the great disservice this Government rendered to the economy was depriving the economy of a vast instrument for conditioning this new field and not sending the Commonwealth Bank into that field to compete actively against the hire purchase companies and in that way condition the terms of hire purchase agreements. What the Government has done by restricting the activities of the Commonwealth Bank and by opening the door to the private banks is to put this great new area of credit - more than £300,000,000 at the present moment - beyond the economic control of the Government of this country, at the federal level at least.
It may well be that under another head of the Constitution - one that has never been explored, one that gives power over foreign financial and trade corporations formed within Australia - this Government might itself do something in that field. But the Government has never made one move to interest itself in it, and, in restricting the activities of the Commonwealth Bank in the hire-purchase field, the Government has in fact tied its hands behind its back in relation to that great area. If the Commonwealth Bank went actively into the field of hire purchase, then in that one way, and through that one institution, the whole field of the terms and conditions applying to hire-purchase business could be regulated by the conduct of that institution. So the Government has denied itself even the opportunity to be active in that field of great importance and great necessity which impacts so very closely upon the lives of so many families in this country.
– But could you produce any reliable opinion that would warrant setting a course in that field before in view of Moorehead’s case?
– That case had exceedingly limited effect. The implications of that case have never been explored at all. That case revolved upon the one point - whether the Commonwealth power was confined to companies already formed and whether it could extend to the formation of a company. The compass was very narrow. But it is a head of power that certainly ought to be explored by the Commonwealth Government. It is a head which will be amplified and explored by the court, and I venture to say that when it is, it will be found to have some real content. It cannot be quite meaningless. When all is said and done, a provision in the Constitution in respect of trading and financial corporations already formed in Australia must have some large content of power, but this Government has by-passed it completely.
I indicated the very simple structure of the Commonwealth Bank in 1949. I was dealing with the complexity of it, as proposed by the bill. A board consisting largely of private individuals is to be in charge of the Reserve Bank. There is to be another importation of private individuals into the Commonwealth Banking Corporation. Underneath them there are to be three banks, each with a director, and above those directors will be a managing director and a deputy director. Then an executive committee is to be interposed between the main board and the managers of the three separate banks. It will be a most top heavy superstructure that must make life very complicated for everybody in the bank. It certainly will not make for better government; on the contrary, it will make for far more complex government.
– Why?
– On the mere face of it, that is clear. The whole thing must be slowed down under the proposal. Instead of a simple arrangement of having a governor who is able to control the whole thing and to announce policy decisions, with an executive that has no duty other than to the bank and which has complete freedom to implement its decisions, it is now proposed to import private interests, to divide control amongst sub-committees with a managing director and a deputy director who, in turn with some executive committees, are to be on top of a large mass. What is the virtue in it? Where is the need for it? If there was something wrong with the present management of the banks, I might see some virtue in the plan. But it is not for me to make firm propositions; it is for the Government to justify its legislation and to say what was wrong with the management of the Commonwealth Bank which made necessary the importation of private interests.
I have been enjoying my discussion with the honorable senators who have been interjecting, but my time is limited and I want to make one or two points before I conclude, as time will compel me to do very shortly. So at this stage I must intimate that interjections are a little disorderly.
Where was the demand for the proposed changes to the Commonwealth Bank? There is certainly no demand from the people of Australia for them. The Commonwealth Bank itself has made no request for easier machinery. The demand comes - - this is not denied - from the private banks themselves. Does any honorable senator believe the private banks are acting in their own interests or in the interests of the Commonwealth Bank, when they give the false reason for the need for this legislation that they fear the actions of a future Labour government under the existing legislation? How completely stupid that reason is! Each act that is passed by any Parliament may be repealed. Legislation passed by this Government could be repealed by any Labour government that has a majority in both Houses, so the reason given by the private banks is shown to be completely false. No suggestion has been made that the central bank has been dealing unfairly with the private banks. In fact, the Treasurer of the day, Sir Arthur Fadden, had this to say when introducing this legislation on 24th October, 1957 -
The private banks have made it plain that they do not criticize the way in which the central bank has used the powers and functions it has under the present legislation.
– Under the present Government.
– Sir Arthur Fadden said, “ under the present legislation “. He went on to say -
On the contrary, they have been at pains to commend the competence, integrity and impartiality of the central bank.
There we have Sir Arthur Fadden in effect putting a case against the legislation although he purports to be supporting it. He continued -
Although they-
That is, the private banks - emphasize that they have no criticism of the manner in which the central bank has exercised its power in the past, they are most concerned about the scope which they see in the provisions for unfair attack upon them.
– Under a different government.
– The honorable senator must be fair. Sir Arthur Fadden did not say that, and the honorable senator should not interject in that way. The claim made by the Government is false. Obviously there is no foundation in reason or in experience for this Government to have taken this action at the behest of the private banks. What do the facts show? When one studies the Commonwealth Bank reports and the statements made by the Governor of the Commonwealth Bank over the years, one finds the central banking division leaning far more heavily against its own trading bank division than against the private trading hanks. That fact is established in the reports. The best opinion that is available, and the only opinion that is published, is that the bank should remain as it is, a central hank with a surrounding family of banks as we now know them. The Royal Commission an Monetary and Banking Systems in 1937 commended the then existing system as the most appropriate for Australia.
– Does the honorable senator not think that conditions have changed a little since 1937?
– I shall bring the Senate more up to date. On 16th March, 1950, the then Treasurer, Sir Arthur Fadden, said this -
The Government is convinced that the primary responsibility of the Commonwealth Bank is its responsibility as a central bank for the continued health and progress of the banking system as a whole. Part of the strength-
I emphasize the word “ strength “ - of the Commonwealth Bank as a central bank is, however, derived from the direct contact with the financial and industrial system which it maintains through its trading sections.
Let me now give the Senate a more uptodate picture. In 1953 the Prime Minister (Mr. Menzies) brought the findings of the royal commission right up to the minute when he said -
We believe also - and there is great argument about this, there being some who do not agree with it - that the Commonwealth Bank’s general trading activities form a useful section of the commercial banking system and that those activities should be developed in fair competition and not extinguished. We believe that they have great merit, because they act as a source of information to the central bank. They enable the central bank to have an instrument by which it may give leadership in banking policy. It has a great number of advantages that I need not discuss at this stage.
The Governor of the Commonwealth Bank is reported in the English, Scottish and Australian Bank Research Lecture, 1954, in these terms -
It is important to realize that, by the direct influence which the Commonwealth Bank exercises over the family of banks of which it is the head, it is able, within the limits imposed by their commercial (and, in the case of the Commonwealth Trading Bank, competitive) character, to influence their policy so that they contribute directly to the achievement of the objectives of central bank policy - (a) the stability of the currency, (b) the maintenance of full employment. There can be little doubt that this direct link gives to the Commonwealth Bank a source of strength which can bc of particular value in times when the economy is threatened with declining activity and employment.
Dr. Coombs again brought the findings of the royal commission in 1937 up to date in the thinking of the government’s own leaders and senior officers. Is that not the situation to-day?
– No.
– Does the honorable senator suggest that we do not have unemployment and declining activity? If he does, he does not know what is going on about him. There we have the Governor of the Commonwealth Bank, a man of undoubted administrative experience, who would not make such a public pronouncement if he were not supported by the Commonwealth Bank Board. Can honorable senators opposite show me one word to indicate that Dr. Coombs has changed his mind1 since 1954? Can honorable senators opposite show me one word of support for this legislation by the Commonwealth Bank Board which was appointed by the Government? Will anybody have the frankness to tell the nation Dr. Coombs’s opinion to-day?
– ls Dr. Coombs’s opinion a controlling opinion?
– It is of the utmost value as the opinion of the man in charge of this great family of banks, a man appointed by a Labour government and whose appointment was confirmed by the present Government. He is the man who was described by the Chief Director of the International Bank as the best central banker in the world. Therefore, when ! quote Dr. Coombs I am quoting a man approved by Labour, approved by this Government and recognized by world authorities as the best central banker in the world. Dr. Coombs’s opinion certainly is entitled to great consideration and the people should1 be informed of his present views. What is the view of the Commonwealth Bank Board appointed by this Government?
– What was the view of the board before Labour attempted to nationalize the banks?
– That is completely irrelevant. The honorable senator is aware of the Government’s weakness in failing to tell the Parliament or the people the opinion of the Commonwealth Bank Board. The implication is clear. The Government knows that the opinion of the board is opposed to its own opinion. Quite clearly, this legislation is not in the interests of the Commonwealth Bank and is directed towards weakening the bank, not strengthening it. That is our fear and our belief. The course of events that I have detailed indicates how deliberately the Government has acted towards the destruction of the Commonwealth Bank. Now we see the final blow about to be delivered1 in the statement made by Senator Spooner in his capacity as the Minister representing the Treasurer in this chamber that governments ought to get out when private interests are ready to take over. What private bank would not be ready to-day to take over the Commonwealth Trading Bank and the Commonwealth Savings Bank? Let the Government repudiate Senator Spooner’s statement or stand convicted of the fact that at the first opportunity it will dispose of these great national institutions.
– Senator Spooner did not say that about banking.
– He enunciated the principle during the debate on the fishing legislation. If the honorable senator has any doubt about it I shall read Senator Spooner’s statement.
– I have heard it before. lt deals with fishing.
– The honorable senator is quite wrong. Senator Spooner mentioned it in connexion with fishing, but also as Government policy. So that no doubt will exist, I shall read his remarks: -
It is a matter of common sense for us to get private capital at work in as many directions in Australia as possible, in order to release public funds for use in directions which are beyond the scope of private enterprise.
In the case of the whaling station, why should the Government continue to have capital invested in it when private enterprise is willing to go in and do the job?
– What on earth has that to do with banking?
– That is the explanation of what goes on by reason of this mutilation and dismemberment of the Commonwealth Bank.
– I just make one interjection. It is arrant nonsense to relate what I said about the whaling industry to the Commonwealth Bank. It is complete and arrant nonsense.
– The remarks were not confined to whaling; they were given a general application. If the honorable senator wants to repudiate what he said on that occasion, I invite him to stand up and say so during the course of this debate. It will give some little consolation to the Opposition if he is prepared to do that. If he is not prepared to do that, let him get up and state the Government’s outlook in this matter.
– The Government’s policy in relation to the Commonwealth Bank has been stated ad nauseam. For you to stand up and say that the Government is going to sell the Commonwealth Bank is the silliest thing I have ever heard.
– I would be very happy to hear you stand up and repudiate the principles you enunciated in 1956. When we look at the conduct of the Government, we see that the principles that Senator Spooner enunciated have been continually carried out, first with Commonwealth Oil
Refineries Limited and then with Amalgamated Wireless (Australasia) Limited. Trans-Australian Airlines is in the field, too. 1 mention also the whaling industry and the Commonwealth Engineering Company. In one thing after another the Government’s policy has been confirmed. One sees it confirmed virtually year after year by this Government, yet the honorable senator tells us that our fears are groundless in relation to the Commonwealth Bank. We see the goose being got ready to be plucked every time the Government passes legislation. It is moving the Commonwealth Bank into position for the final coup de grace. It is all very well for the honorable senator to say, “ Nonsense “. That is not an argument; that is merely abuse. It is up to the honorable senator to face what he said in 1956. If he made a mistake, let him repudiate what he said. Let us hear from him now.
What answer do we receive when we quote what has been said by the Treasurer and the Prime Minister in confirmation of the view that we are asserting and the view that Dr. Coombs has asserted? We got from Senator Paltridge the remark, “ We live and learn “. What we want to know is: What has the Government learnt and from whom has it learnt it? What factors have changed the position since Sir Arthur Fadden spoke?
The PRESIDENT (Senator the Hon. Sir Alister McMuIlin). - Order! The honorable senator’s time has expired.
– This question of banking, which is now before the Senate for the third time, is a question on which I think most honorable senators have said everything that it is possible to say during the course of our debates. I can quite understand that the Leader of the Opposition (Senator McKenna), in opening the debate for the Opposition on this occasion, was very hard-pressed indeed to find a case to put up against the legislation. Honorable senators on the Government side, who have fought for this legislation for nearly nine years, acclaim this as a great day. The passage of the legislation will be for us the end of a long road. We have never been afraid to get up on public platforms and state what we stand for as far as banking is concerned. At the last general election, we said frankly and openly to the whole populace of Australia that we would re-submit this banking legislation if we were returned, but I never heard one Labour member say from a public platform that Labour would nationalize our banking system if it possibly could. That, of course, is what the Labour party believes in, but the members of the party never said a word about that during the whole of the election campaign. I repeat that we acclaim this legislation as something for which we have been working over a number of years.
At this stage I should like to thank the Minister who represents the Treasurer in this chamber for the explanation of the legislation which he gave to us in his secondreading speech. He gave us perhaps a clearer picture of the legislation than I had been able to get before. I thank the Minister for the great trouble to which he went in preparing the explanation.
I desire to deal now, while they are fresh in my mind, with one or two points made by the Leader of the Opposition. He asked what was wrong with the Commonwealth Bank as it stood. I think that question highlights the great division between the two sides. The Opposition visualizes the Commonwealth Bank as the only bank in Australia - a monopoly bank controlled by one man, the Governor. The Opposition puts, up the proposition, of course, that there should be one man, or one bank, in control of the whole financial system of Australia.
– One country and one destiny.
– It would be a pretty poor destiny if the honorable senator had anything to do with it. That is the great division between the two parties. The Government believes in a Commonwealth Bank, with a trading section in competition with the private banks. The Government believes in competition. I agree with the Leader of the Opposition when he says that Dr. Coombs is the best, or at any rate one of the best, central bankers in the world. The point is that he should be in the central bank. That is what was wrong with the Commonwealth Bank. It had grown to such an extent that no man living could adequately carry out the duties of the governor of the central bank and the head of the trading bank and of all the other sections that went with it. The Commonwealth Bank had grown to such an extent that it was not possible for one man to control all parts of it. As a central banker, as the head of the central bank, Dr. Coombs will be a great figure in Australia. He will be of great use to the Australian nation.
I do not believe that we would have experienced the difficulties of 1951 and 1954 if we had had a proper central hank, completely divorced from any trading bank and able to control the banking system. I point out to the Senate that in 1951 we had the greatest flood of imports that we had ever seen. How were those imports financed? They were financed almost entirely by the bank overdrafts allowed to the importers by the various banks. The total of bank advances and the total value of the imports almost coincide. Lack of control by the central bank at that time was the cause of the recession of 1951. If this great central banker had been in his proper place, in control of a central bank, and thus in control of all the banks, instead of being in charge of a hank which had a trading section, things would have been different. He may have said to the private banks, “You must not do this”, but their reply was, “We are not going to lose a customer, not on your life! If we give away a customer we know that the Commonwealth Trading Rank will take him.” We had all the trading banks looking at one another like Kilkenny cats, instead of being controlled by a proper central banker who had the confidence of all sections of the banking community, both private and public. One of the great things that this legislation will do is to remedy that position.
That is the answer to Senator McKenna’s query about what was wrong with the central bank. The thinking of members of the Labour party has not advanced beyond the royal commission of 1936, which is only about a quarter of a century ago! From that time onwards their thinking about banking has atrophied. The Labour party has failed to realize that the Commonwealth Bank has grown out of sight. Honorable senators opposite do not realize that the bank has grown beyond the control of a single man.
– Your colleagues ran away from their responsibilities in financing the war.
– Do not talk a lot of nonsense! Your banking experience belonged to a generation when people exchanged a couple of pounds of goanna meat for a ‘possum skin. That is all you know about banking.
Now I want to answer the other question that Senator McKenna quite rightly posed, and which I think was quite interesting. He asked, “ How is the central bank to be the Reserve Bank? How is it to have its listening posts? “ One of the great fears - I think it was quite justified - was that, as far as the private banks were concerned, some of those listening posts were in very awkward places. I think the term “ listening posts “ is apt. But there will still be a trading bank and, above all, there will be an influx of outside interests. Those who will now come into the new banking organization will be people with the widest experience in all sorts of industry. I believe that will be the great safeguard. Previously, one man was in control. Only the other day I was reading an annual Teport of a very big financial institution, in which the chairman of the organization concerned said -
The root of the trouble undoubtedly lies in the anomalous position to which both Mr. Menzies and Sir Arthur Fadden offered such pointed objection in Parliament in 1945, namely, that, under Labour legislation, the Governor of the Central Bank was also Governor of a Commonwealth Trading Bank competing with the private trading banks and head of a half a dozen other departments whose functions have no relationship to central banking.
– Who was the authority?
– I will give you the name of the authority. He is one of the most able financial men in Australia. I was quoting from the annual report of the Jason Investment Company. The chairman, Mr. Staniforth Ricketson, knows a darned sight more about finance than ever you are likely to know. I think his statement very aptly puts the position.
I was interested to note that the Leader of the Opposition also referred to the fact that within the last two or three years other banking legislation has been introduced. The Minister for Shipping and Transport has supplied us with a statement showing the history of banking since 1911. One would think that no one ever touched the Commonwealth Bank from its formation in 1911 until the Chifley Government did so, followed by this Government between 1951 and 1953. If honorable senators look through the history of the bank that has been supplied by the Minister they will note that every Commonwealth Government that has been in office since the establishment of the bank has introduced legislation affecting it .
I remind honorable senators opposite that it was they who started to monkey about with the Commonwealth Bank. Let them not make any mistake about it. It was Labour’s nationalization legislation which first brought the monkey business to the forefront. What Labour really is opposed to to-night is that the legislation now before us means that they cannot do anything with the Commonwealth Bank unless they introduce legislation to the Parliament, where the people will see it. That is what honorable senators opposite do not like. They do not like the fact that this legislation will be placed on the statute book, that anyone who wants to monkey around with the nationalization of banking, whether it be through the back door or the front door, will have to bring his proposals to the Parliament, and that the Opposition of the day will be able to let the people see what is being done.
On the last occasion on which I spoke on this subject I spent a little time in referring to the development of the Commonwealth Bank. I was interested to hear the Leader of the Opposition to-day refer to the “ sinister demolition “ that has been going on since this Government assumed office, lt is interesting to look at the facts of that demolition; they are worth reading about. When I last spoke on this subject, I showed that following this Government’s legislation in 1953 the Commonwealth Bank had increased the number of its branches from 445 to 525. In other words, 80 new branches had been established in that time. I am pleased to be able to inform honorable senators opposite that the “ destruction “ has continued and that in 1957-58 another 46 branches and another 591 agencies were opened. So the pathway of destruction is still apparent! I also directed the attention of the Senate to the profits that had been made by the Commonwealth Bank under our “ sinister demolition *’. That is a lovely phrase; I must remember it. The profits of the bank rose to £9,000,000 in 1953, to £10,000,000 in 1954, and to £11,000,000 in 1955. In 1956, under this process of “ sinister demolition “, its profits rose to £15,000,000 and in 1958 it made a record profit of £23,000,000.
– It is going to the pack!
– There is no question about the fact that, under our legislation, the bank is going to the pack! It is a rather profitable sort of national racket, is it not? Every time we have introduced banking legislation, there has been the parrot cry that we are out to destroy the Commonwealth Bank. But the bank has gone on from strength to strength and now it has more branches, more agencies and greater profits than ever before. And for good measure, it is not without interest to note that last year its reserves rose from £18,000,000 to £24,000,000. That is the bank which our legislation seeks to destroy!
The other point I want to refer to is the parrot cry that we have introduced this legislation at the behest of the private banks. I wish to point out a few things that the legislation seeks to do. Any one who listens to what I have to say will be convinced that the private banks have not been behind this move. This legislation will result in an additional £2,000,000 of capital being provided for the Rural Credits Department of the Reserve Bank and an additional £2.000,000 for the Commonwealth Trading Bank. Nobody can argue that the provision of more money will not bring more customers. The more money you have to lend the more customers you get and the more competition is created. The capital which is provided for the Savings Bank allows it to make housing loans to individuals on credit foncier terms. Some of the enormous cash holdings of the bank may be used in that way. This legislation provides for an additional £5,000,000 of capital to be made available for the new Commonwealth Development Bank. I noted that the Leader of the Opposition did not have much to say about the Development Bank. I shall be generous and say that perhaps shortage of time was responsible and that no doubt he would nave tried to criticize the proposal had he had time to do so.
I believe that the Development Bank will fill a long-felt want in our community. I do not for one moment suggest, nor do I think that any honorable senator would, that this new bank will enable everybody in the country with know-how, good character and a suitable proposition, to obtain the necessary money to undertake the projects that he has in mind. Of course, it would not be possible for that to be done immediately, but this bank will give such an opportunity to a great number of people. It will enable people of good character and with the necessary know-how, but no security, to clear land, for instance, to improve their businesses, to commence small factories, or to start out in business. In fairness, I think it can be said that the manager of the bank will have rather a difficult task. In business, if you could pick only the good propositions and not pick any bad ones you would be a pretty smart man. In fact, you would be almost worthy of a place in the Senate. The administration of this bank is not going to be an easy task.
I wish to refer to one or two other points with which Senator McKenna dealt, particularly his remarks regarding hire purchase and the incursion of the banks into this field. Personally, I think that it is a very good thing that the banking system of Australia has entered the hire-purchase field because I think that it will bring into hire purchase the integrity of our banking system, which is of a very high standard. It will introduce the fresh air which is needed in hire purchase, and I think that the action of the banks in this respect will be of benefit to those who buy goods on terms. At the end of 1958, the total amount that had been invested by the banks in hire purchase was only £12,040,000. Of the total advances for all purposes of £840,000,000, the banks had advanced only £10,000,000 for hire purchase.
– What is that supposed to prove?
– It proves that the private trading banks and their depositors’ funds are not nearly so involved in hire purchase as the Leader of the Opposition tried to make out.
– Their depositors’ funds are not involved at all.
– That is quite .right.
– That does not prove anything.
– The honorable senator may think that it does not prove anything, but 1 think it does. The extent of the intrusion of the banks into the hirepurchase field has been greatly overstated. After all, we must not forget that it was the Commonwealth Bank which, in 1945, first entered the hire-purchase field. It was the 1945 Commonwealth Bank Act which allowed1 the Commonwealth Bank to do so. There must be competition, and if one bank embarks on that type of business naturally the other banks will follow.
Senator McKenna referred to the position of the savings banks. To my way of thinking it is most desirable to allow the private banks to have savings bank facilities. I see no advantage at all in allowing a monopoly savings bank to operate. We in Tasmania have had two small savings banks for many years. They are the oldest savings banks in the southern hemisphere and they are still going strong. They have been of the greatest assistance to local government bodies and to housing in Tasmania. In addition, they have promoted thrift, starting with the school children and teaching them to save. So, J think that it is all to the good that the private banks have gone into the savings bank business, thereby increasing their services to the public and providing competition, which is the basis of our beliefs in regard to banking.
The position is, quite clearly, that the great gulf that has divided the Government parties and the Opposition on banking legislation over the years still exists. We, of course, believe in free and open competition for the banking system. We believe in a man having the right to go to another bank if he cannot obtain the accommodation he requires from the bank with which he does his banking business. He should have the right to try other banks if he wishes to do so.
– Has the honorable senator tried any others?
– Yes . I point out that bank managers are good judges and I would not advise the honorable senator to try to obtain an overdraft. The Labour party believes in having one monopoly bank. If it were in office and found a way to do so, it would try to nationalize the banks to-morrow. That is the great gulf that divides us. This legislation provides for all that we have acclaimed to the people in the last nine years, and we are fortified by the big majority by which the people returned this Government at the last general election in the knowledge that we would again submit the banking legislation to the Parliament. 1 am glad that the legislation has been introduced. I strongly support it, and I believe that the setting up of a central bank will be of tremendous value to the banking institutions of Australia.
.- It is many a long day since we have heard such a weak argument advanced in support of legislation as that which has been placed before us by the Minister for Customs and Excise (Senator Henty). There was really nothing in his remarks for me to answer. He commenced his speech by saying that, from the Government’s point of view, this is a great day. As the Government is assured of the passage of this legislation, I suppose it is a great day for honorable senators opposite, because, when it becomes law, they will be enabled to discharge some of their obligations to the private banks.
Senator Henty referred to the increased profits that have been made by the Commonwealth Bank over the last few years, but he omitted to say that every bank and other business and every person in the community now have more money than they formerly had. The honorable senator also omitted to mention the fact that we have experienced inflation since 1949.
The Minister said that the Labour party is in favour of one bank - a monopoly. That is to-day’s funny story, because at the present time the private banking system in this country is itself a monopoly. Until a few years ago, there were 23 private banks in Australia; to-day there are only seven. Yet supporters of the Government talk about the necessity for competition! I point out that there is no competition between the private banks to-day. Has any honorable senator ever heard of bankers’ basement bargains or summer sales or winter sales?
The policy of the Australian banking system is decided by the Associated Banks.
As I have said, there is no competition whatever between the private banks. This is the third occasion in a little more than twelve months on which legislation to reform the Commonwealth Bank has come before this chamber.
– Third time lucky.
– This legislation has been referred to as the fourteen bills. I suggest that it should be called the fourteen pills being administered to this Government by the private banks. By this legislation the Government is discharging a little further its obligations to the private banks. The Leader of the Opposition (Senator McKenna) has stated quite clearly and distinctly the methods by which this Government was returned to office so that it could put through this legislation. Immediately after the result of the general election of last year was announced, big headlines appeared in the daily press concerning banking. In the Melbourne “ Herald “, of 16th December, there was a headline, “ Bank Bill is the Government’s First Job On 17th December, the Melbourne “ Sun-News Pictorial “ carried a big headline reading “ Government Brings up the Bank Bill “. The article read, in part -
The banking reform bills will be studied by Federal Cabinet in Canberra to-morrow.
The Melbourne “ Age “ stated, on 17th December, only a few days after the result of the election had been declared, that the new banking bills may be stronger.
The important point to remember is that the legislation now before this chamber is only the first step in a major onslaught by the private banks against the Commonwealth Bank. The banking reform legislation was twice rejected by the Senate during the last Parliament, and we all know the depths to which the Government went in its endeavours to get the legislation passed on those occasions. Prior to the election of last November, the Opposition was able to prevent, temporarily, the enactment of the legislation.
Despite the fact that Senator Henty denied that this legislation has been dictated by the private banks, almost everybody knows that since Labour’s banking legislation of 1945 the private banks have been endeavouring to undermine the efficiency of the Commonwealth Bank. They have been niggling slowly and, from the lessons they learned in years gone by they have been prepared to hasten slowly. They do not intend to fall into the error of coming out into the open as they did in the ‘thirties.
The point I make is that banking policy to-day is basically the same as it has been over the years, and basically also, the private financial oligarchy of this country is the same as it ever was, and it will remain so. We all know from bitter experience how ruthless the banks have been in the past. Private banks can prosper only by the indebtedness of the people. If the people are not in debt, a money monopoly cannot prosper. It has been stated that debt holds the world in economic chains. Most countries are in the grip of the internal enemy - debt. It is reported that the national debt of America was equal to £3 per head of its population in 1914 and that, by 1945 it was £620 per head. It seems that if we do not put an end to the debt-money system, it will put an end to us, for it is a fundamental cause of wars and depressions, and it is man’s greatest slave driver and greatest enemy to his economic security. I shall quote a typical case to show the extent to which the banking institutions have a grip on the people.
The City of Sheffield in England, which is noted for its steel, had a population in 1941 of 496,700. The rateable value of land was £3,523,125 and the municipal debt stood at £31,132,481. Rates were levied at 18s. 9id. in the £1, and the rates collected totalled £3,002,396. The interest payment on the municipal debt was £1,000,192. It will be seen that almost one-third of the rates collected in Sheffield is paid away in interest on the municipal debt.
The same thing applies in other instances. For example, in the period of thirteen years between 1920 and 1933 the people of Great Britain, under the present system of finance which is backed by the Australian Government, paid no less a sum than £8,300,000,000 in interest and debt redemption. At the end of that period they were £300,000,000 deper in debt than when they started. That is the system of finance that the supporters of the Government are endeavouring to bolster at the present time. The people should not be under any misapprehension in this matter.
If the private banks get control of the money system of this country - that is what they are after, and the Government is determined to see that they get it - they will again resort to the ruthless methods that they applied in years gone by. Many of us can recall the things that happened in the ‘thirties. I should like to emphasize what I said before, that the basic policy of private finance is the same to-day as it was then, and if the necessity again arose, similar conditions would be imposed by the private financiers. I should like to read to the Senate a passage from a report by the Bank of New South Wales in 1932. The report stated, in part -
Ft is evident that no proposal for further borrowing will be approved unless it is accompanied by definite indications that the Governments are doing all things necessary to reduce their expenditures in keeping with the condition of the time. This would involve a reduction in their establishments, with consequent additions to unemployment, but the problem of resultant unemployment is secondary, and should not deter governments from taking any action towards balancing their budgets.
J should like honorable senators to dwell on the significance of that statement. Similar conditions could again obtain if the private banks regained control of the financial system.
Tn 1934, the World Committee of Relief indicated that people had been kept in want, and foodstuffs had been destroyed, in order to keep up prices. The committee said that in that year 2,400,000 humans had died of starvation and 1,200,000 humans had committed suicide. At the same time large quantities of food were destroyed - 1,000,000 freight car-loads of grain, 267,000 freight car-loads of coffee, 560,000 cwt. of sugar, 50,000 cwt. of rice, 50,000 cwt. of meat, and 150,000 milch cows. The production of 151,000,000 lb. of tea, and 9,500,000 acres of cotton, was restricted.
Also, 6,000,000 sucking pigs and 100,000 sows were ordered to be destroyed. Huge quantities of wheat were used as fuel for engines, but refused for consumption by human beings.
In August, 1939, in New South Wales - we are coming closer now to the present - the relief scale was 8s. 6d. a week for single men, 15s. 6d. a week for a married man, 20s. 6d. for a married man, wife and child, and 21s. 6d. for a married man, wife and two children. The basic wage was £4 2s. a week. If that was the least that a man, wife and child could live on how could they possibly live on 20s. 6d. a week? There is an old saying, “ Alas that gold should be so dear and flesh and blood so cheap.” Unfortunately we have seen the truth of that down through the years under private banking.
– Did we have the Commonwealth Bank then?
– Yes, but it was controlled by a friend of the honorable senator, the bedstead manufacturer, Sir Robert Gibson. He was asked if he could make available £20,000,000 to feed the starving people. He said to the Prime Minister of the government of the day - which was in office but not really in government, “ You ask me to inflate the currency by issuing another £20,000,000 in notes. My answer is that I bloody well won’t.”
Government supporters are to-day trying to place the Commonwealth Bank in the position it was in then - under the complete domination of the private trading banks. The private banking system is not, of course, peculiar to Australia. It prevails throughout the world. No less an authority than William Jennings Bryan, the famous American lawyer and statesman had this to say about money power -
The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes.
Senator Henty complained of the Commonwealth Bank’s attitude in 1951, but it is strange to recall that in 1953 the present Prime Minister (Mr. Menzies) said: -
If the amendments proposed in this bill-
That is, the bill of 1953- are considered . . . they will, we believe, place beyond doubt the continued operation of the Australian banking system in open and fair competition within the framework of central bank policy . . .
Why has there been a change of front? The Prime Minister said at that time that the proposed legislation would be adequate to ensure fair competition within the framework of the existing banking system.
asked whether the Commonwealth Bank was in existence in the thirties. I might remind him that Sir Robert Gibson was actually called to the bar of the Senate in connexion with a banking bill brought down by the then Treasurer, Mr. Theodore. The bill passed through the House of Representatives and, because of the urgency of the situation, seemed likely to pass through the Senate also, but the ultra-conservative element in the Senate summoned Sir Robert Gibson to the bar of the House. They asked him point blank if there was any alternative to the bill, other than default. He replied, “ There is an alternative “. Of course, his alternative was the reduction of salaries, wages and social services. Senator Sir Walter Cooper was here then and, in fact, voted with the ultra-conservative element in this chamber.
Having heard what Sir Robert Gibson had to say, the Senate threw the bill out. At the time, Senator Daly said to Sir Robert Gibson, “ You might have let the child live “; but Sir Robert answered, “ It is not my child “, and departed. That was an example of the actions of the Commonwealth Bank of that time, operating under the domination of the private banks. Honorable senators should not forget that there have been previous attempts to cripple the Commonwealth Bank.
On 25th November, 1938, the Honorable R. G. Casey, who was then Federal Treasurer, brought before Parliament a bill further to amend the Commonwealth Bank Act. It represented the final stage in a fifteen-year plan to deprive the people of Australia of the power to control the money supply of their own country. The private banks are quite prepared to hasten slowly: they are in no hurry. Part Vic of the Commonwealth Bank Act of 1938 provided for the establishment of a mortgage bank department with a capital of £28,000,000, of which £4,000,000 was to come from the profits of the note issue, and from various other departments of the bank, and £24,000,000 was to be raised by the issue of debentures and inscribed stock secured upon the general assets of the bank. From the inception of the bank, its profits had returned to the people in one form or another as their absolute property, but the proposed legislation would have handed most of those profits to private bond holders in the form of interest on the debentures and inscribed stock which were to be issued. What was infinitely worse, the majority of the securities might well be held by international financial institutions which would be, in fact, the real owners of the bank. Honorable senators will see that previous efforts have been made in the past to destroy the Commonwealth Bank. 1 suggest that the legislation before us is but another attempt by the private banks to gain control of the Commonwealth Bank, indeed, of the whole banking system of this country. We all know how the banks have acted in every crisis that has confronted us. We know that in 1893 thousands of people were ruined by the Bank of England. We know that in 1914, the Bank of England, which is not a national institution but a private bank, experienced a run. That is the bank which William Paterson was given a charter to establish in 1694 in return for a loan of £1,250,000 to the sovereign of that time. Being unable to withstand the run in 1914, the bank appealed to the government for help. The government then declared a bank holiday for three days and during that time the bank was relieved of any obligation to pay out any moneys. In the interim, the famous - or infamous, whichever way you look at it - John Bradburys were printed. These were lent to the government at the prevailing rate of interest.
– That certainly was monkeying around.
– It was really monkeying around with finance. I come now to 1914 in Australia.
– When are we coming to the banking bills?
– What I am saying is connected with the banking bills, and I am sorry the Minister does not like it I frankly admit that what I am saying has been said many times, but these things should be emphasized as often as possible because the private financial system all over the world to-day is the same as before.
In 1914, three years after the Commonwealth Bank was established by a Labour government, that institution proved to be the bulwark of Australia’s financial system in a crisis. When the bank was founded in 1911 by a Labour government, there was a great outcry by financial experts at the time. They described the bank as being conceived in idiocy and doomed to failure, but, three years after that prediction, the bank proved to be the sheet anchor of Australia’s financial system.
During World War II., because of the powers they obtained under wartime conditions, the Curtin and Chifley Labour Governments were able, through the Commonwealth Bank, to keep Australia’s economy more stable than that of any other country. What is being said about the Government’s proposals now has been said many times over the past twelve months. The fact that this is the third time within a little more than twelve months that we have had banking legislation before us is a clear indication that the present Government is determined to do the bidding of the private banks. The Government is now starting to make the pay-off for the financial and physical assistance rendered to anti-Labour parties during the 1949 election campaign. And I emphasize that this is only the start of the pay-off! It is unfortunate, but the fact remains that logic is of no avail when a party has the numbers; and in this instance, as the Government has the numbers, the legislation will be passed. But I predict that within a very short time after it becomes law the private banks will be asking for something more and once again this Government will bend the knee and obey the dictates of its masters.
I emphasize that we are faced with a definite threat of losing control of what was intended to be an institution to be used for the benefit of the people. The Labour party is proud of the fact that a Labour government founded the Commonwealth Bank. Our slogan always has been and always will be, “ Hands off the Commonwealth Bank “. Government speakers have suggested from time to time that the Labour party intends, when it again attains office, to nationalize the banks. If I had my way, I would nationalize them to-morrow because I believe that the monetary system of the country is so vital to the country’s welfare that it should not be controlled by private hands for private profit. The monetary system is as essential in a modern community as the food we eat, and to argue that it should be in private hands for private profit is to argue against true principles. As our Leader, Senator McKenna, has said, we know that before the private banks can be nationalized an amendment of the Constitution will be necessary.
– But you would alter the Constitution?
– Yes; but we would do so in a democratic way. We would first seek the consent of the people, for we know that the Constitution can be amended only at the will of a majority of the electors in a majority of the States.
– You have no hope.
– If the people wanted the private banks to be nationalized, and if they were agreeable to an amendment of the Constitution for that purpose, would the honorable senator deny them the democratic right to say so? The people should be given the opportunity to say, by way of referendum, whether the banking system of the country should be nationalized.
– With respect, I ask whether that was put to the electors by the Labour party during the last election campaign?
– With respect, did the honorable senator attend any of the Labour party’s meetings?
– Yes.
– Then the honorable senator must be deaf if he did not hear the Labour party speakers putting that to the electors. It was put to the people at every political meeting we held.
– That you would nationalize the banks?
– Yes. That is well known. It is part of our policy. We do not run away from our policy. It is well known that we believe the banks should be nationalized but only after the consent of the people has been obtained in a democratic way. I have already pointed out what has happened in the past, and I warn the Senate that similar things will happen again if the private banks gain control of the banking system of this country. And the present Government is committed to giving them control of it! If this legislation is passed-
– It will not be if we have any say in it.
– That is so, but, unfortunately, although we have certain numbers, we have not enough. Undoubtedly, this legislation will be passed because the Government has the numbers. But the people will live to rue the day it was passed, especially if the present Government remains in office much longer, for the whole banking structure of Australia will be handed over to the complete control of the private banks, as we saw happen under anti-Labour governments in the past. As the Leader of the Opposition has said, this Government has left a trail of ruin behind it since 1949. It has acted like the enemy who pursues a scorched earth policy. This Government has been following a scorched earth policy ever since 1949, as is evidenced by its activities in connexion with the very profitable Commonwealth whaling station, the Glen Davis shale oil undertaking, Amalgamated Wireless (Australasia) Limited, and Commonwealth Oil Refineries Limited and by the present attempt to cripple Trans-Australia Airlines at the behest of the private airlines. Now we have an attempt to hand over, lock, stock and barrel, to the private financial institutions of Australia, the financial system of this country. If it is handed over, the people will certainly be detrimentally affected.
– I must confess that I had some difficulty in following Senator Sandford through the years from 1694 to 1893, then to 1911 and 1914, and his arguments dealing with sucking pigs, sows and wheat. Probably the most important words he uttered are contained in the phrase, “ I would nationalize the banks to-morrow”. In order to give honorable senators a more recent historical reference, I shall go back to 16th August, 1947, that very critical day on which the then Prime Minister, Mr. Chifley, made a press statement in the following terms: -
Cabinet to-day authorized the AttorneyGeneral, Dr. Evatt, and myself, to prepare legislation for submission to the Federal Parliamentary Labour Party for the nationalization of banking, other than State banks, with proper protection for shareholders, depositors, borrowers and the staff of the private banks.
Those 44 words are really the genesis of the legislation now before us. Those 44 words, probably the most calamitous 44 words ever expressed by a Prime Minister, have had, and will continue to have, an overwhelming and dominating influence on the minds of the Australian electors. For all time the intent of the Labour party was made clear. That intent fell into the pattern of the aims and objects of the Australian Labour party. I remind honorable senators that the statement to which I have referred was not made by a leader of an opposition. It was made by the Prime Minister of Australia, a Prime Minister at the peak of his electoral poularity and at a time when his party had a majority in both Houses. That statement brought home to the people of Australia a fact that we, at that time in opposition, were trying to impress upon them, that the Labour party was bent on the implementation of socialism.
In 1945 the Labour Government passed legislation which put into permanent form the restrictive banking policy that had been pursued during the war years. At that time, as we were engaged in a struggle for life, we were quite prepared to accept such a policy, but in 1945 at the conclusion of the war the Labour party, as I have said, put the war-time restrictive policy into permanent form. The Commonwealth Bank was placed under the direct control of the government of the day and was given the green light to go ahead into real competition with the private banks. At the same time, a definite move was made by the Labour Government to curtail the activities of the private banks. The 1945 legislation failed to smash the private banks which continued to make progress despite the restrictive measures imposed on them, despite the difficulties confronting them, despite the deliberate barriers placed before them, despite even the special instruction contained in section 48 of the legislation that local government authorities were to take their business from the trading banks and place it with the Commonwealth Bank. Despite those difficulties the private banking institutions, with the goodwill of the Australian people, were able to carry on and so assist the economy of Australia.
However, the Labour party became impatient and anxious. The controls imposed by the 1945 legislation were not sufficient and did not operate quickly enough for the Labour Government which was comprised of socialists on the march. lt knew that banking was the fundamental and basic difference in political thinking between socialism, on the one hand, and a free enterprise party on the other. Control Of money and banking is the keynote of socialism, and the Labour Government was prepared to go full speed ahead.
Senator Hannan has reminded me that Lenin, probably while he was in the transitional stage from a democrat to a communist, said that the first thing one must do to allow socialism to operate was to control the banks. The Labour Government, having failed to kill the private trading banks by slow strangulation, then introduced its policy of nationalization to do the job. Mr. Chifley and his Cabinet knew that a nationalized banking system would confer upon the controlling authority the power to supervise in detail almost every aspect of the nation’s economic life, and would place the whole nation and the processes of our economic life at the mercy of the political bosses of the day who would then control Australia completely. It was then that the proposal to nationalize banking was introduced in 1947.
Ironically, the 44 words uttered by Mr. Chifley were ^sponsible for deposing his party from power. I venture to say they will keep the Labour party out of office probably for the next 100 years because Senator Sandford, if we accept him as an authority, has said that the Labour party intends by constitutional means, if possible, or by any other means, to nationalize banking. The people of Australia know that a vote for the Labour party is a vote for nationalization, and a vote for nationalization is a vote for socialism. The Menzies Government has been in power for ten years and now has probably the greatest majority ever recorded in the House of Representatives. If the policy of the Labour party is kept before the people of Australia, this Government’s majority will continue indefinitely. History records that the High Court of Australia threw out the 1947 banking acts on legal grounds associated with section 92 of our Constitution, but no doubt exists in the mind1 of any fairminded person that the 1949 general election was fought, and won, on the basis of the Labour party’s 1947 nationalization attempt. Everybody in Australia who had any regard for a free-enterprise Australia voted to put the socialists out.
– How much money did the banks contribute to your party?
– How much somebody may have paid to this or that has no relation whatever to the principle I am enunciating. The plain fact of the matter is that we are a free people. If a person - it does not matter who he is - does not believe in something that the Government has advocated or has tried to introduce, he is at liberty to raise his voice against it and to go from door to door, if he wishes, to advocate some other policy. I would be interested to learn that the Labour party, with all its socialism, has now reached the stage where it is prepared to deny that right to a citizen. I ask honorable senators opposite categorically. Do they say that an Australian citizen should not have the right to advocate a policy or a platform which is within the framework of the Constitution? Honorable senators opposite might wish to say so, but they have not got what it takes to face up to the position. The electors, at last alerted to the intentions or the Labour party and awakened to the dangers that confronted Australia, threw the Labour Government out in 1949, and ten years afterwards the Menzies Government is still in power, with what is probably one of the biggest majorities ever held by .1 government in this Parliament.
The banking system reflects the economic pulse of the nation. Australia has made mighty strides during the last ten years, and the banking system has been strengthened along with the progress we have made. These fourteen measures now before the Senate are the culmination of the Government’s intention to remove for all time the folly of 1947, and at the same time to fit the banking system to the present-day need’s of the Australian economy. The Government wisely has proceeded slowly.
– Who wrote your speech?
– Even if somebody wrote a speech for the honorable senator who has interjected, he would not be able to read it. Each step has been taken without putting this instrument of the Australian economy out of balance. Banking needs steadiness and this Government has given it steadiness. Banking needs confidence and this Government has given it confidence. The Government took the steps to meet the position over the years, but has not disturbed the confidence which is an essential ingredient of the banking system.
We should have the history of the banking legislation in mind when we are thinking of this problem. It is proper that I should recall that in 1951 the Menzies Government repealed the 1947 nationali- zation act and restored the Commonwealth Bank Board. In 1953 a part separation of the Commonwealth Bank was made. A separate legal entity, the Commonwealth Trading Bank, was established, but that was done in an atmosphere of steadiness and of confidence. We now come to the culmination of the policy of the Government. It intends to remove for all time the risk of nationalization being brought in by the back door. I remember a statement made, I think, by Mr. Ward. He said that once Labour scrambled the eggs, nobody could unscramble them. I have been reading the debates that took place on these bills in another place. Right through those debates, members of the Opposition quite openly said, as did Senator Sandford to-night, that if they had their way they would nationalize the banks. What we have done is to so frame these fourteen bills that our banking system will be stable and worthy of the present economic situation in Australia and the colossal development that is taking place, and at the same time to alert the people of Australia so that if at any time an attempt is made to nationalize the banking system, they will be aware of it.
– What if the people wanted to nationalize it? Would you still deny them that right?
– No . The simple position is that if a government had a majority in both houses, and had the constitutional power, it could do so. The point of the exercise is, quite clearly, that the people have a right to know what is being done. That is inherent in this particular legislation. I said that in 1953 there was a part separation only, but the legislation before us to-night, of course, will give complete separation and a proper central bank. The primary objects of the legislation can be put under three headings, instead of, perhaps, fourteen. The first objective is to separate the central bank from the Commonwealth Bank’s trading functions by establishing a bank to be known as the Reserve Bank of Australia. The second is to create the Commonwealth Banking Corporation, which will control the operations of the other departments of the Commonwealth Bank, apart from the central bank, and the third is to create a new Development Bank to assist primary and secondary industry.
Let us have a look for a moment at the proposed separate central bank - the Reserve Bank of Australia. Clause 26 puts the matter clearly and in very simple form. During debates in this chamber some honorable senators have criticized the language of certain legislation, but I think that clause 26 of the Reserve Bank Bill is couched in very simple language. It reads -
The Reserve Bank -
is the central bank of Australia:
shall carry on business as a central bank; and
subject to this Act and to the Banking
Act of 1959, shall not carry on business otherwise than as a central bank.
Even to a layman, that is a fairly simple presentation of the functions of the central bank. I say that with all respect to some of our legal friends who sit near me. The central bank is to become a real reserve bank - a banker’s bank. We on the Government side say that as such will strengthen the banking system.
Let us look now at the reserve deposits which are to take the place of special accounts. I remind the Senate that the new formula for reserve deposits was put to the Government by the great mass of the banking community of Australia in the form of a point of view. In the ultimate the new system will put far more power into the hands of the central bank than it ever had before. Under the new set-up, the controversial special accounts system will be replaced by a system of reserve deposits. On brief notice, the Reserve Bank, that is the central bank, will be able to require a trading bank to maintain in reserve deposit accounts an amount not exceeding 25 per cent, of its Australian deposits. The Reserve Bank will have the power to raise the limit above 25 per cent. - the legislation does not fix any ceiling limit; it could go up to 100 per cent, if necessary - after the giving of 45 days’ notice.
Under the special accounts system, if I understand it clearly, 75 per cent, of additional new deposits over and above those of the base year are taken by the central bank and virtually frozen, and the banking authority concerned receives threequarters of 1 per cent, by way of interest. So, if you look at it in the ultimate, the new reserve deposits system will place far more power into the hands of the central bank than does the special accounts system. The reserve deposit system will apply to all the banks, including the Commonwealth Trading Bank. If the central bank says, “ We want to raise the limit over and above 25 per cent.”, that will apply to the whole of the banking structure of the Commonwealth. That, of course, is the safety valve for private banking system.
I now wish to advert to the references by Senator McKenna and Senator Sandford to the demolition of the Commonwealth Bank by this Government. The whole burden of their argument was that this series of bills, indeed the whole banking policy of this Government since it assumed office in 1949, is part of a studied plan, a deliberate plan, to destroy the Commonwealth Bank. The Minister for Customs and Excise (Senator Henty) cited certain figures, and I wish to refer to more in order to prove how shallow and stupid has been the argument advanced by the Opposition. In 1950, the Commonwealth Bank had 423 branches. In 1958, that is eight years later, it had 649 branches, an increase of 226. Even Senator Sandford, with his fertile imagination, would have great difficulty, I submit, in suggesting that an increase of such magnitude represented the attitude of a government that deliberately set out to destroy the Commonwealth Bank.
– He is not serious.
– If he is not serious, I do not know what his attitude is.
At least, he advanced that argument. And that was the argument advanced by the Leader of the Opposition, too. I wrote down Senator McKenna’s words as he uttered them; he spoke about the demolition of the Commonwealth Bank by this Government. Well, it is a new form of demolition. Perhaps we should refer the matter to the Commonwealth Experimental Building Station to ascertain how an increase of the bank’s branches from 423 to 649 in a period of eight years could be described as being a demolition.
– Up to date, we have been spared that bit about the sale of the people’s assets.
– Perhaps that is due to-morrow, when the proceedings are being broadcast. I have been waiting for it, but it has not come yet. No doubt we shall hear about it in due course. In 1950, the Commonwealth Savings Bank had 4,642 branches and agencies, whereas today it has 6,844, an increase of 2,202 in eight years - an extraordinary form of demolition? Such utterances can be attributed only to the confused thinking of the Labour party for such a long time - thinking which has taken it back to 1600 or something like that.
The business transactions of the trading section of the Commonwealth Bank, in 1950, were represented by deposits totalling £84,000,000. To-day, those deposits total £272,000,000. In 1950, trading advances by the Commonwealth Bank totalled £62,500,000; to-day they total £ 1 1 8,000,000. That is demolition!
– That is inflation.
– You cannot have it both ways. Which way do you want it?
– Whichever way you like.
– He is the famous man who has it both ways. Now let us compare the growth of the activities of the Commonwealth Bank since 1915 with that of the major trading banks. That is not a bad way in which to look at the position, is it? . In 1950, the Commonwealth Bank had 7.7 per cent, of the total deposits; today, it has 13.6 per cent. So this Government, which has been blackguarded from one election to another across the face of
Australia as being a government set on destroying the people’s bank, has done such a good job that it has enabled the deposits of the Commonwealth bank to double and has allowed the number of agencies to grow.
– And, strange to say, the electors seem to like it.
– The electors like it, because basically they believe in free enterprise. They will not have a bar of socialism. They recognize the fact that where you have keen competition you get the best service for the Australian community.
I do not want to go much beyond the point that I have reached. The fourteen bills now before the Senate can be said to be the culmination of the Government’s policy to give Australia a stable banking system - a banking system that not only will have a central bank separate from normal trading bank functions, but also can be used for the adjustment of the Australian economy. I remind the Senate that the expansion which has taken place in Australia is probably unparallelled in any other part of the world. At the same time, we will have a banking system which will protect the people of Australia from the threat of socialism which could, in certain circumstances, be introduced by back-door methods against the will of the people.
As 1 said at the outset, the act of the Labour Government in 1947 in seeking to nationalize the banks had the result of bringing the Menzies Government to office. The people of Australia made a good decision, one that they have never regretted. Their decision has given Australia great prosperity and great prestige in the free world. These bills will give us a banking system which will be the admiration of the free world and will ensure the economic future of Australia.
– In rising to participate in this debate, Mr. President, may I say that I consider this legislation to be the most important that the Senate has discussed for a long time. The Government’s banking legislation was first submitted to the Parliament in October, 1957, and was subsequently defeated in the Senate. It was introduced again in March, 1958, when it met with a similar fate. To-night, we are called upon once again to consider it.
As I have said, this legislation is of vital importance because of its far-reaching effect on the future role of the Commonwealth Bank of Australia. That institution, established in 1911, is held in the highest regard by the people of this country. It has a great and proud record, not only because of the assistance that it has rendered to all governments, irrespective of their political beliefs, but also because of the assistance that it rendered to Australia during two great wars, when the private banking institutions found the position beyond them. The Commonwealth Bank was called upon to finance our primary and secondary industries and our great public works. On both occasions, the bank found millions of pounds for a purpose that was not constructive but destructive. I say that if the bank could do that under those circumstances it could certainly do so to-day, when every £1 worth of credit that it was asked to provide would be backed by our primary and secondary industries and our great public undertakings. The Commonwealth Bank certainly has a great record.
I cannot understand why any one with the interests of this country at heart would want to alter the general set-up of the Commonwealth Bank to-day. That is beyond my comprehension. Yet, to-night we are discussing legislation that is revolutionary in character because of its farreaching effects on the future of the bank. As a matter of fact, every aspect of the bank as we know it to-day will be affected by this legislation. Apparently, the Government is submitting these proposals, not because the bank has failed to function in the past as it was originally intended to function, but because of pressure that has been brought to bear on the Government by the private banking institutions. There certainly has been no agitation for any change or alteration in the composition of the bank from the people of Australia, or from the 500,000 people who have sufficient faith in the bank to bank with it.
The only agitation has come from the private banking interests which have worked, in season and out of season, to influence the Government to introduce such legislation. They say that they want a strong central bank and a strong reserve bank. Just imagine these people doing anything at all that would strengthen the Commonwealth Bank! The private banks exist for one purpose, which is to make profits. The higher the profits they make the more successful they are considered to be by the people who invest with them. The making of profits is fundamental to a private banking system. There is nothing wrong with that, provided that we can find some way in which to control interest rates, because interest rates are important to the future progress of this country and are reflected in many ways in our economy. The balance of payments problem, the recent fall in our export income, and the provision of finance for hospitals, roads and many other essential projects, are all concerned with the question of interest rates, because people who have money to invest prefer to invest it with banks that are engaged in the hire-purchase business rather than with a bank that supports the activities that I have mentioned.
I may say that the Australian Labour party is not opposed to hire purchase. As a matter of fact, as a part of our policy presented during the recent general election campaign, we made it clear that if a Labour government were elected we would enter the field of hire purchase through the Commonwealth Bank. The Commonwealth Bank was the first bank in this country to go into the hire-purchase field. However, its activities have been restricted by this Government. The Industrial Finance Department of the Commonwealth Bank was permitted to continue its hire-purchase activities in accordance with the funds available at that particular time which amounted, I think the Leader of the Opposition said to-night, to £15,000,000. In the following year, the amount was down to £14,200,000 - a fall of £800,000 over the twelve months’ trading. In the following year the amount available dropped to £13,800,000. In every subsequent year the amount that the department could lend for hire purchase was more or less limited. In February, 1956, the department was prohibited from financing the retail sale of passenger cars, although at that time two-thirds of the hire-purchase business throughout the Commonwealth was directed to that purpose. Yet the Commonwealth Bank was restricted in its hirepurchase activities by this Government.
While all this was going on the private banking institutions were bending over backwards to get into the game. How successful they have been was shown by the figures that were cited by the Leader of the Opposition to-night. The amount now outstanding on hire purchase throughout the Commonwealth is approximately £300,000,000. It should not be forgotten that the banks are the major shareholders in the hire-purchase companies in this country.
– Is the honorable senator sure of his facts?
– Yes. I repeat, that the private banks are the major shareholders in the hire-purchase companies in this country. There are very few banks in Australia that are not interested in hire purchase. I point out that hire-purchase trading throughout the Commonwealth has trebled during the last five years. During that period, it has increased by £250,000,000. That sum is greater than all the overdrafts granted by all the banks throughout Australia during the same period. This is certainly some problem. It is a problem that should claim the immediate attention of this Government. By working in co-operation with the States, the Government should ensure that only fair and reasonable rates of interest are demanded of people who use the hire-purchase facilities. That is the story in relation to hire purchase in Australia.
I may say, Mr. President, that the Australian Country party was not very keen on this legislation when it was first mooted. In order to get that party on side, some one in the Government conceived the bright idea of including in the legislation provision for the establishment of a development bank the purpose of which would be to assist small farmers and other primary producers and small business undertakings. By making that provision, the Government has pulled the Australian Country party into line. However, the people responsible for this legislation, the private banking institutions, were not too pleased with the proposal to establish a development bank within the framework of the Commonwealth Bank, and they kicked over the traces. To placate them, a new clause was inserted to provide that the private banks would act as agents for the Development Bank. Just how far the Development Bank will go in achieving the purpose for which it is being established remains to be seen. As I understand the position, an amount of £20,000,000 is being made available for the establishment of the Development Bank, but £15,000,000 is already out. Consequently, only £5,000,000 will be available for people who will seek financial accommodation from the Development Bank. If further capital is required, it may be obtained only by means of parliamentary appropriation, but if the hostility of the private banks which are responsible for this legislation is a reliable guide. I do not think that the Government will be very keen to make further appropriations for this purpose.
As I have said, the decision to include provision for the establishment of a development bank was camouflaged in order to fool and delude the members of the Australian Country party, and so divert their attention from the real issue involved in this legislation, that is, to torpedo and sink the Commonwealth Bank of Australia.
When this legislation was first contemplated, the Government engaged in the persistent dissemination of propaganda to obscure its real purpose. This legislation is a calculated and deliberate attempt to strengthen the private banking interests at the expense of the Commonwealth Bank of Australia and, at the same time, to undermine further the 1945 Chifley banking legislation, which is sacrosanct to members of the Labour movement. That legislation contains principles that are wrapped up in provisions like this - lt shall be the duty of the Commonwealth Bank, within the limits of its powers, to pursue a monetary and banking policy directed to the greatest advantage of the people of Australia, and to exercise its powers under this Act. . . in such a manner as, in the opinion of the Bank, will best contribute to -
But since this Government came into power our currency has been anything but stable. Inflation has more or less run riot. During the past ten years the currency has been inflated by about 7£ per cent. The main tenance of full employment went by the board when the Chifley Labour Government was defeated. The matter of economic prosperity and welfare of the people of Australia is in the limbo of the forgotten past, as far as this Government is concerned.
In 1953, the powers of the Commonwealth Bank were restricted in order to protect the investments of private banks. Prior to that year, the Commonwealth Bank formulated national monetary policy and acted as a central bank in the truest sense of the term. At no time did it, acting as a central bank, discriminate between the private banks and the Commonwealth Bank of Australia. The 1953 banking legislation, which was referred to by Senator Anderson, went part of the way towards separating the Commonwealth Trading Bank from the central bank, but now, for some reason known only to itself, the Government contends that complete separation is essential, lt has given no intelligent or logical reason for the change.
Recently, the Governor of the Commonwealth Bank, Dr. Coombs, stated that the link between the Commonwealth Trading Bank and the central bank could be of particular value during periods when the economy was threatened by diminishing employment. To the 82,000 people who are unemployed to-day, and to those who are likely to become unemployed, the reasons advanced by Dr. Coombs for the retention of the link will appear much more important than those advanced by this Government for severing the link. This legislation is all just so much camouflage to strengthen the private banking institutions at the expense of the Commonwealth Bank.
We all can remember the policy adopted by these people during the last depression. That policy intensified the effects of the depression by denuding home markets of purchasing power. A similar policy seriously embarrassed the Scullin Labour Government when it required £11,000,000 to get unemployed people back into employment. A similar policy was responsible for the 10 per cent, wage cuts and the scaling down of age and invalid pensions. Again, the private banks were responsible for thousands of reputable business firms becoming insolvent. Their policies were the greatest factor in producing the disastrous wave of unemployment which swept across Australia. 1 well recall the queues of unemployed at that time, because I myself was unemployed. I had to balance the family budget on approximately 12s. Id. a week - 9s. 8d. for my wife and myself and 2s. 5d. for my daughter. No provision was made for rent. It was pathetic and heart-rending to see furniture stacked in the streets outside homes from which families had been evicted. Every Friday night I addressed meetings in the market at Port Adelaide - large and sympathetic meetings, because most of the people attending were unemployed, as I was. For the reasons that I have mentioned, any attempt to alter, break down or destroy the safeguards embraced in the Chifley legislation of 1945 will be strenuously opposed by the Opposition.
In conclusion, 1 should like to refer to what Senator Henty and Senator Anderson had to say about the nationalization of banking. The legislation before us is nothing more or less than nationalization of banking in the interests of the private banks of Australia. In 1850 there were some 70 private banks in this country. To-day there are about nine, and in the foreseeable future that number will doubtless be reduced to one or two. When Labour obtains power to nationalize the banks in the interests of the people - instead of in the interests of the private banks - it will find the taking over of one or two banks much easier than the task of taking over some 70 banks. To those who feel frustrated as a result of this legislation I say, “ Do not worry. The sun will shine to-morrow and the skies will still be blue; this Government and the private banks will have their troubles just the same as me and you.”
.- I feel that it is a privilege to be part of a Parliament that has the opportunity to consider a proposal such as has been expressed in these measures, which represent the culmination of a great movement in the political history of this country. Banking has assumed public importance since the early days to which Senator Nicholls referred. Banking was important during the ‘thirties, and it was hot politics at the beginning of the war, because of the rather limited conception then existing of the proper regulation of banking. Labour, because of its experience in the war in making the Commonwealth Bank an instrument for giving effect to party policy, brought the question of banking to the forefront of party politics. In 1945, Labour passed a measure which was arbitrary in the extreme. It curtailed the power of the trading banks and subjected them to the dictates of the Commonwealth Bank. It deprived the Commonwealth Bank of its board and gave complete power to the Treasurer’s nominee. The measure aroused great resentment - such resentment that Mr. Menzies, the then Leader of the Opposition, announced that if his party came to power the measure would be repealed.
Labour was not satisfied with that. It sought, as a first step towards monopolizing the banking system, to make the municipalities conduct their banking business with the Commonwealth Bank. That attempt was defeated in the High Court at the instance of the Melbourne City Council. Labour’s immediate reaction was to deliver the celebrated 44-word announcement to which Senator Anderson has referred. I will never forget the Saturday evening in 1947 when we heard on the news that Mr. Chifley, by way of making one of his dreams come true, and fortified by the collective support of his Cabinet, had come down the corridor and blandly announced to the press of Australia, without explanation or reason, that Labour proposed to nationalize the banking system. That, I believe, engendered in every liberal man and woman in the country a vigorous spirit of resentment. From that moment there developed in the hearts and minds of men throughout this country a voluntary movement and determination to resist arbitrary government as so expressed, and to defend those institutions which they regarded, not as profiteers at the expense of the people, but as the proper custodians of their surplus cash and as their proper advisers in transactions involving the exchange of their money. A genuine people’s opinion developed, and the determination that was implanted in the electors by that arbitrary, unexplained, autocratic pronouncement of Mr. Chifley has been purposefully expressed from that time until now in the principles and ideals of those who speak in support of this measure. Therefore, if these bills become law while we are yet members of the Parliament, those of us who speak in support of them will have the satisfaction of knowing that we are giving expression to the purposes of the people we represent.
This is not a question of the government of the day having a preconceived idea as to the necessity for these measures. These bills are the natural result of a widely spread conviction among the people of Australia who are purposeful and determined to earn their existence by independent work. 1 admire the candour of the Minister for National Development (Senator Spooner) when introducing the banking measures in 1958. He spoke, among other things, of the nationalization measures of 1947. It is true that in 1951 another measure was submitted which went to the extent merely of constituting a banking board, the purpose of which was not to oppose the Commonwealth Bank but to assist its officers who had the great responsibility of managing the enormous wealth that is controlled by the bank. Then, in 1953, the Government went a step further and modified some of the harshness and unfairness of the special accounts system. As Senator McKenna stated to-night, both the present Prime Minister (Mr. Menzies) and the then Treasurer (Sir Arthur Fadden) went on record at that time as saying that they accepted the viewpoint which had been expressed in the report of the Royal Commission on Monetary and Banking Systems in 1936 that in some respects it gave strength to the Commonwealth Bank, as a reserve bank, to have its trading arm in contact with the day-to-day transactions of industrial business. But, Mr. President, it is a tribute to the resolution of the liberal men and women who constitute the real strength of the party represented here that those two steps were regarded by them as insufficient. In March, 1958, Senator Spooner said -
By degrees, we have come round to the belief that only by completely separating the Central Bank from the rest of the Commonwealth Bank group will the source of friction be eliminated and the way opened for a lasting settlement of the issue.
Those who deny to the Liberal party a true spirit of democracy can be reminded that the Heidelberg branch of the party, on 29th February, 1956, had the honour to put down this resolution -
That the Federal Government shouldconsider legislation to -
Separate completely the Central Bank from the Commonwealth Bank by -
establishing the Central Bank as a separate entity,
the use of a new name with no reference to the Commonwealth Bank,
housing the new bank in buildings entirely separate from the Commonwealth Bank and the Commonwealth Trading Bank,
Prohibiting the transfer of staff from the new Central Bank to the Commonwealth Trading Bank. ii. to amend the system of Central bank control of credit by -
abolishing the present special accounts system,
substituting a system of special accounts based on a percentage of deposits.
Ensure the Commonwealth Trading Bank is controlled to the same extent as the joint stock banks.
Prohibit the Commonwealth Trading Bank carrying out any functions of a Central Bank.
I desire to give credit to the thoughtfulness of that Liberal party branch which, still considering the matter thoughtfully in February, 1956, put the matter before the Victorian Council; and anybody who has had the opportunity to consider the most thoughtful paper that was prepared by members of that council, not without the assistance of one of our erstwhile colleagues, former Senator Cormack, will see therein the development of opinion.
Then we remind ourselves of the various State council resolutions, and the resolution of the federal council of the party. Finally, in 1958, the Government decided to solve this issue and bring it to culmination in a fair and impartial system of banking. The Government introduced this series of bills, designed to create a separate and independent central bank which, being based on a principle of equity, will instill confidence and so be effective. The proposals will not weaken the central bank; on the contrary, they will strengthen the central bank by giving to it the confidence of every section of the trading people. And no greater strength could be added to a central bank!
The second purpose of the bills is to enable the central bank to impose its control upon every unit of the banking system without discrimination - to impose its control uniformly upon every unit, whether it be a government unit or a private trading unit. That sense of equity adds to the whole banking system a confidence and spirit of fairness that will give true effect to the real purposes of the central bank. So, on this occasion, I regard it as highly satisfactory to know that these principles are being expressed in law.
Debate interrupted.
page 594
The PRESIDENT (Senator the Hon. Sir Alister McMullin). - Order! In conformity with the sessional order relating to the adjournment of the Senate, I formally put the question -
That the Senate do now adjourn.
Question resolved in the affirmative.
Senate adjourned at 10.30 p.m.
Cite as: Australia, Senate, Debates, 7 April 1959, viewed 22 October 2017, <http://historichansard.net/senate/1959/19590407_senate_23_s14/>.