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Wednesday, 8 August 1906
Page: 2496


Mr KING O'MALLEY (Darwin) . - I wish to congratulate the Treasurer upon his second Budget speech in this

Parliament, and upon his thirteenth financial statement in Australia. It is quite true that there is very little room for the Commonwealth Treasurer to display any genius as a financier. He is hedged, hobbled, and bound by the Constitution, including the Braddon blot. He may handle and examine three-fourths of the Customs and Excise revenue of the Commonwealth, but he must not touch it. Whilst he maytalk much about it he can do very little with it. Under sections 87 and 89 of the Constitution the unexpended balances must be handed back to the States every month, so that the Commonwealth Treasurer has no power to be generous. He cannot dangle before the electors great possibilities in the way of conferring certain favours upon constituencies. But, taking it all in all, there is no doubt that the present Treasurer made the very best possible use of his opportunities. He presented a Budget which was packed with statistical plums gathered from the fruitful orchards of the whole Empire. He placed them before us, not only for the benefit of honorable members, but for the benefit of the Empire. I should like to see the right honorable gentleman made the first Treasurer of the Federated British Empire, so that he would have an opportunity to give play to his hopeful ideas. The practice of always looking upon the black side of everything is, to my mind, a reprehensible one. There is sufficient gloom in the world without the Treasurer of the Commonwealth increasing it. I have given a good deal of attention to the proposals submitted by the honorable member for Mernda in regard to the taking over of the States debts. I have also looked east, west, north, and south upon the propositions made bv the Treasurer himself, and I must confess that, unless both of these gentlemen are philanthropists, or are engaged in dispensing Commonwealth charity, I can see no earthly reason - viewing the matter from a cold-blooded business stand-point - why the people of Australia should take over one shilling of those debts, except as the States request them to do so - except as they mature, and as the people themselves * can benefit by their conversion. What is the reason for the wonderful sympathy exhibited by honorable members with the bondholders, shareholders, and debentureholders of Europe? Did the latter invest "their money in Austraiian securities because of any special love which they had for this country ? If they could have obtained a better security from the United States, from Canada, from the Argentine Republic, or from Chili, Paraguay, Uruguay, or China, would they not have accepted it? The Australian States went into the money market and borrowed in the open exchange. Honorable members whose hearts go out to the bond-holders in Europe who have the best lawyers and the best investors in the world to advise them, fail to remember the struggling masses in the tropics of Queensland, in the back-blocks of New South Wales, and deep down in the mines of Western Australia and Tasmania, who produce the wealth with which to pay interestupon these bonds. Unless we are to be actuated purely by philanthropic motives, we should carefully and conscientiously consider the question before we determine to bind the Commonwealth under a legal lien to take over a liability of £236,680,139, with no guaranteethattheStates,assoonastheyare thus relieved, will not again rush into themarket anddoubletheirexistingindebtedness.Iwasgladtohearthedeputy leader of the Opposition point out that as soon as the States were relieved of their responsibility in this way they might be disposed to raise further loans. Let us consider for a moment what would be the tactics of a clever candidate for election to one of the Parliaments of the States. He would naturally dangle before the people some alluring proposal ; he might promise to support the construction of a railway to some out-of-the-way place, or some extensive public work that would not be reproductive: and if he were returned with a majority he would at once go into the London market and float a loan on behalf of his State. Other States might follow that example, with the result that in ten or twenty years they would have a further indebtedness of perhaps £200,000,000. Would the Commonwealth be prepared to again rush in and take over further liabilities thus incurred ? There ought to be reason in all things. I have looked into this question. and find that the States of the Commonwealth have issued debentures, Treasury bills, bonds, and stocks of various kinds, representing £49,267,400 at 3 per cent. On turning to the Times. I find that the average price of this 3 per cent.stock is as follows: - New South Wales- maturing twenty-nine years hence - £88 10s. ; Queensland - maturing in some cases fifteen years hence, and in others at a still later period - £87 10s. ; South Australian, £87 ; Tasmanian, £85 ; Victorian, £87 10s. ; and Western Australian - maturing between 1915 and 1935- £88 10s. The Melbourne newspapers show that these stocks can be bought here at £90, and these figures give an average price of £88. We have been told that we must arrive at a sound businesslike proposition, and, having regard to that fact, it seems to me that the Commonwealth should take over these stocks only at the price at which a private investor would purchase them.


Sir John Forrest - The States have to pay.


Mr KING O'MALLEY - I desire to be absolutely fair. On the one hand, we have the investor, with his eyes open to business, and on the other we have the people who pay. I understand that it is the desire of honorable members that this question should be fully discussed, and, that being so, I wish to put before the House what little knowledge I possess with reference to it. I am sure that we desire a full interchange of views, so that we may extract the plums of wisdom from the proposals that are submitted to us. A prominent accountant today checked with me the figures that I am now about to put before the House. I find that if the Commonwealth were to buy these 3 per cent. stocks at the price at which they are to-day quoted in London and Australia, it would save the people no less than £5,912,088. In other words, we should save the miners and the farmers - in short, the people who must pay the interest on these debts - this immense sum, notby swindling or begging, but by a fair business transaction. I have not yet considered what would be the positionin regard to the other stocks; but I would point out that if the sum of £5,912,088 so saved were invested at 3 per cent., the Commonwealth would gain £177,362 per annum for all time. Canada goes into the market and purchases her own stock. If the Commonwealth takes over the debts of the States, or guarantees to take them over as fast as they mature, it will be at the mercy of speculators, brokers, and money mongers, and we shall mortgage the heritage of the people of Australia, not for . £236,680,730, but for £8,488,669 per annum. That is the amount which must be paid away annually in respect of interest, whether we have bad seasons or good seasons, droughts, grasshoppers, or the codlin moth. I do not desire to prosper on the misfortune pf my country ; but many of the men who are prepared to lend money to Australia have no hesitation in making us pay very heavily for it, especially when better terms are offered to South Africa. In this connexion, I would remind honorable members of the position in which Mr. Irvine was placed when, shortly before retiring from office as Premier of Victoria, he had to float a conversion loan. The money-lenders with whom Victoria had then to treat were certainly not philanthropists. They had no hesitation in telling Mr. Irvine that he would have to pay, and he had to do so. Notwithstanding these facts, the Treasurer and the honorable member for Mernda are prepared to acquiesce in a proposal that the Commonwealth should guarantee to take oyer the debts of the States as they approach maturity. As soon as we have given that guarantee, how shall we be able to negotiate? When we suffer from a drought, and the sheep die on the plains, the Labour Party mav be blamed-


Mr Webster - It has been blamed for such things.


Mr Maloney - And will be so blamed again.


Mr KING O'MALLEY - I admit that we ought "to assume the indebtedness of the States in respect of the interest payable on the transferred properties. So far as that question is concerned, we are not dealing honestly with the States. It is true that the Treasurer has handed back to them a sum of £5,233,591 in excess of the threefourths of Customs and Excise revenue to which they are entitled. But had we taken over these properties, which have an estimated value of from £10.000,000 to £11,000,000, six years ago, we should have had to pay to the States by way of interest £385,000 per annum, so that, allowing for that liability, the Treasurer has really returned to the States only £^2,923, 591 in excess of the three-fourths of Customs and Excise revenue to which they are entitled. What are these properties? They consist of telegraph offices, including telegraph and telephone lines, and instruments, and stores, Customs-houses, drill halls, forts and other buildings, gun boats, guns, ammunition., and supplies generally estimated to be worth between £10,000,000 and £11,000,000. On the sums expended in the purchase or erection of these properties the States have been paying interest for the past six years, and are still doing so, although the Commonwealth has been in possession of them, and has used whatever income they have produced. Estimating the amount of interest paid at 3J per cent. - the annual payment amounts to £385,000, although the average rate of interest, as was shown by the honorable member for Mernda last night is more than that, being about ,£3 12s. 2d., so that the payments have been still larger. Therefore, during the six years the States have paid in interest on. properties held by the Commonwealth £2,310,000, while they have received back £5,233,591, so that the actual sum they have received is only the difference between these amounts or a sum of £2,923,591. Where then is the wonderful generosity of theTreasurer? It is all very well to be generous with another's property ; but where is the evidence of the wondrous, boundless, Continental benevolence of which, we have heard. The Commonwealth should pay for the properties which have been, transferred to it by the States. But the States have never begged us to take over their debts. Why should we act as accountants and caretakers for them? It seems to me absolutely preposterous that the Commonwealth should take over thedebts of the States unless it is in a position to float loans at par. London is themoney centre of the earth, and it may happen that Australia will require £4,000,000, or £5,000,000, or £10,000,000 when times are bad in England, and interest high, and! loans are being applied for by Canada, South Africa, and India. If the Commonwealth were not saddled with the whole of thedebts of the States, the money required' could probably be borrowed at 3 per cent, in Australia from our own people, and' when stocks were depressed in London wecould authorize our High Commissionerthere to go into the market for the protection of our interests, as is done in connexion with the public debts of Canada, the United States of America, and other countries where businesslike methods prevail. Our bondholders in Europe must not be led to expect different treatment from the people of Australia thanthat given to debenture and stockholders generally. I am absolutely- opposed to the Commonwealth taking over any portion of the debts of the States, except as they mature, and it can make terms with those who have put money into Australian stocks and bonds. I admit that it is very unpopular not to be with the crowd who clamour for the taking over of the debts; but the great thing is to feel that one is in the right, and I feel that on this question I am absolutely right. I do not see why the Commonwealth should make a gift of £5,912,088 to those to whom we have so long been paying interest on £49,267,400 worth of 3 per cent. bonds in England and in Australia. To my utter amazement, I have discovered that, according to Coghlan, only £16,000,000 of the amount borrowed by Australia has come to this country.


Mr Bamford - That is in hard cash.


Mr KING O'MALLEY - Yes.


Mr Bamford - We got shoddy for the rest.


Mr KING O'MALLEY - The rest has been paid away in interest. When we float a loan in England, the money does not come to Australia, though the effect is to enable companies having offices in London to sell their Australian properties at advanced prices, and to enable speculative shipments of goods to be sold here. What Australia gets for her loans is chiefly the shoddy that comes oversea. I have had some calculations made in regard to the payments made by the States in connexion with their debts. . The aggregate amount annually paid in interest is £8,488,669, which in sixty years would amount to £509,320,000, while the debt would still remain. In twenty-one yearswe should pay in compound interest the full amount of our debts - £236,680,39 - and in fortythree years that amount three times over, or £710,042,317, while the debts would still remain. I give these figures to show that the great financiers of the past have placed the people of Australia under an ironclad mortgage, and that they are now being ground under theheel of the European money-mongers. In sixty years the interest on our debts, if allowed to accumulate at 3 per cent., will amount to £1,384,106,680. while we shall still owe the original £236,680,739. In other words, our obligation in the way of interest, in addition to the obligation under the existing debts will be more than the properties of Australasia, including

New Zealand, are valued at, and those in 1903 were worth £1,204,042,000. Therefore, if this country discontinued the payment of interest on its debts, semiannually, at the end of sixty years it would owe more than the present value of ail the property and improvements in Australasia. The six States of Australasia have, floating in the Commonwealth, 3 per cent. debentures, Treasury notes, or bonds to the value of £15,744,381, and, in London, to the value of £33,523,019. If we wish to be sensible, reasonable, and just to the struggling masses who have to earn the money necessary to pay interest on this debt, we shall not place the Commonwealth guarantee on the back of any debenture, bond, or other stock certificate, binding them for all time, and preventing them from taking advantage of a cheap money market here or elsewhere. Look at what the Victorian Premier is doing to-day. He is Richard Seddon the second. A few 'years ago the financiers of Europe thought that they could charge any price they liked for their money. Money is of no use except you can get rid of it. It is of no value in one's pocket. In order to get value for it, it must be spent. Today Mr. Bent is stepping into the markets of Victoria and' is prepared to liquidate the English obligations of the State with money obtained from local financiers. He is thus keeping the interest in Australia. There is a vast difference between paying interest on loans to Australians who will spend their money with the merchants and shopkeepers and the producers of the country, and handing it over to the financiers of Europe.


Mr Wilks - Even the honorable member's country rushes to Europe.


Mr KING O'MALLEY - I admit that my country has been rushing to Europe for the last thirty or forty years; this is my country - Australia. I have compiled some figures with a view to indicating the earning power of £200 in sixtyyears. My own impression is that no country ought to pay more than 2 per cent. interest upon its loans. In sixty years, £200 at1 per cent., becomes worth £363; at 2 per cent. £656; at 3 per cent., £1,178 ; at 4 per cent., £2,102; at 5 per cent, £3,735.: at 6 percent, £6.597; at 7 per cent. £11,589; at 8 per cent, £20,251; at 9 per cent, £35,206; and at 10 per cent., £60,896. These figures show why povertyprevails throughout the world - why the vast multitude of people who pay interest are in poverty. I have been through the crusher,and I know something about it. I often used to wonder why it was that when I was paying interest I was growing poorer, whilst those who had lent me money were growing richer. My ideas upon the question of Australian finance are as much entitled to receive attention as are those of other honorable members who are not scientific financiers. . 1. must confess that up to the present, I have not heard of any exceptionally scientific financiers in Australia. It is very easy for any one to rush in and borrow money, but it must not be forgotten that there is always a day of reckoning. When that day arrives, you begin to see the folly of borrowing. I have made a special investigation of the expenses connected with the flotation of loans. I find that we have to pay about per cent. for underwriting the loans. We also have to pay21/2 per cent. for brokerage. Then again, we have to make an allowance for discounts and other expenses, which, added to the brokerage and underwriting charges, bring up the total cost to about 8 per cent. I venture to say that of the £236,000,000 which represents the total indebtedness of the States, £20,000,000 was paid for discount, brokerage, and underwriting. Therefore, we are being called upon to pay interest, not only upon the legitimate debt, but also upon the incidental expenses.


Mr Wilks - What about the charges made by the banks for paying the interest to bond-holders?


Mr KING O'MALLEY - They are not included in my calculations, and I venture to say that I am not very far out in stating that our stocks have been watered to the extent of about £20,000,000. The fact that we have to pay upon this vast sum of money interest at the rate of 3.61 per cent., or £3 12s. 2d., is of sufficient magnitude to induce us to consider whether we should not take advantage of every opportunity to lighten the burden of the taxpayer. We should follow the example of our brethren in Canada. They go into the market and back up their ownstocks by buying them. The Commonwealth could do the same thing, if it were not saddled with the whole of the indebtedness of the States. If times were bad in one country, they might be good in another. We could go to America, Japan, or France, if money were cheap in their markets, and borrow upon the security of Commonwealth bonds, and buy up the States stocks in

London. Last year I brought forward a scheme which was looked upon as Utopian. I am now going to make further reference to it. I suggested that the Commonwealth should borrow its first £500,000 for the purpose of erecting a Commonwealth building of steel in the heart of London. This would be one of the soundest investments that could be made by the Commonwealth, and I believe that honorable members, after sleeping upon my proposition for a few years, will come to the conclusion that it is sound. Ten years ago, I introduced into the South Australian Parliament, a motion designed to prevent men from leaving their wives, and families destitute. I had a terriblebattle, extending over three years, before I succeeded in carrying the motion ; even when I did carry it, it was, in spite of the opposition of the right honorable and learned member for Adelaide, and others. Now Mr. Mackinnon has introduced it into the Victorian Parliament, and Mr. Bent, a progressive Premier, has made it a Government measure. I feel proud of that fact, especially as the proposal was ridiculed at the period to which I refer. The fact of the matter is that projects which were regarded as fads tenyears ago are today concrete proposals. My suggestion has reference to the representation of the Commonwealth in London. Take the various States of America as an example. They have buildings in the cities of Philadelphia and New York. In those buildings they exhibit samples of all their produce. Similarly the Commonwealth must establish an office in London, and the sooner it does so the better. It must appoint a High Commissioner, and the sooner it does that the better. I claim that for £500,000 we could purchase the necessary ground, and erect the building, not far from the Bank of England. The structure should be ten or twelve stories high. The basement should be reserved for Australian wines, spirits, &c. The next floor might be let as offices for insurance companies and various other mercantile institutions. Upon the next floor we might establish a restaurant, in which only Australian produce should be sold. The top story might very well be utilized as a show-room by the six States of Australia, and the New Zealand Government would willingly establish its offices there. As each of the States intends to maintain a representative in London, every one of those representatives might have art office in the building, and the Commonwealth might also have its own offices, and its own bank there. London is a great city. It is the centre of the earth, and a structure such as I suggest, erected there, would be the pride of the Commonwealth. The High Commissioner will perform different functions from those discharged by the representatives of the States. All the rotten financing which is now done through the banks - I call it " debauchery " financing - would be dispensed with, and the work which is now performed by those institutions would be done by the High Commissioner. The latter should have with him what is known as a "credit" man, whose business it would be to hunt up the investors in Australian stocks. I do not saythat the gentlemen at the head of the banks in London are not above suspicion, but I do maintain that they have the interests of their clients at heart'. It is not their business to look after the interests of Australia, but to conserve the interests of those who buy Australian bonds. At the present time, with the exception of South Australia, the warrants for the payment of interest by the various States of the Commonwealth pass through the banks, and not through the hands of the Agents-General. The latter do not know the name of a single investor in Australian stocks. But the banks know them. Is that satisfactory financing? I tell honorable members that if I had reared a boy who was fifteen years of age. and he possessed such ideas of finance, I would ask some doctor to suffocate him with opium. Under our existing system of financing, it is no wonder that Australian stock has been well watered and discounted. The banks, in looking after the interests of their clients - perhaps a trust company or an investment company - may advise them to hold back a while, in order to obtain a higher rate of interest. Under existing conditions they have merely to hold back a loan for a month or two to induce the Treasurer to increase the rate of interest. He may increase it by one-half, or oneeighth, or, perhaps, by only one-sixteenth, per cent., but we .must recollect that the people of Australia have to pay that amount. If the office of the High Commissioner were established in our own buildings in London, he would be able to inscribe our own stock, so that any man possessed of a five-pound note would be able to purchase over the counter an' Australian consol bearing interest at 3 per cent.

But I would go further that that. I would receive money upon deposit at the High Commissioner's office - money which could be utilized in Australia. All our experience is based upon the country in which we live. If we have lived in a small country our ideas are small and parochial, and vice versa. I know something about the price of real estate, and of the rents which it ought to produce, and I claim that we can borrow £500,000 for 3 per cent. - in other words, for £15,000 annually. I further maintain that we can derive 6\ per cent, interest upon our investment in a property such as I have outlined. As a matter of fact, I do not know of a single property held by the institution with which I have for years been associated - in any city where it has purchased wisely - which does not return interest at the rate of per cent. Our income, therefore, would be £32,500. Against that, I have set down £2,500 for upkeep and insurance, although I do not see any reason why the Commonwealth should not insure its own buildings. Surely it is as strong as any insurance company. 1 have also provided for a sinking fund of 2 per cent. , because I do not believe in perpetuating the borrowing policy. The sinking fund would amount to £10,000, the interest at 3 per cent, would represent £15,000, and the upkeep and insurance £2,500. Thus there would be a total expenditure of £27,500, so that we should still have £5,000 to pay rates and taxes and cover any loss which might he incurred by reason of offices being vacant. I do not know what rates and taxes are imposed in London, but upon the basis of the amount which is paid in Melbourne, they would represent about £1,000 or £T.-5°° a year. Thus we should have our own building in the metropolis of the world, the various States offices would be grouped at one centre, and Australia would receive an advertisement for all time. Then whenever a man visited London, and was asked to view the building of the Commonwealth there, it would mean something to him. When I came to Australia the institution with which I was connected had ample funds on deposit with tHe banks, but possessed no buildings in Australia. Subsequently it erected buildings in Melbourne and Sydney, and since then all doubts about its assets in Australia passed away. Upon the erection of those buildings the people recognised that the company had substantial assets in Australia, and that would be our position in England if my suggestion were adopted. It is worthy of the consideration of honorable members. Hundreds of Australians are constantly travelling, and in the great building which I suggest should be erected in London we should have an Australasian club which would be the head-quarters of Australians in England, who would naturally take an interest in the affairs of the Commonwealth. Years ago, various banking institutions in Australasia used to receive deposits from English investors, but since 1893 the latter seem to have lost confidence in them. Millions which had been invested here by people in the old country were called in or lost, and the money has never returned to Australia. If the Commanwealth were to receive the money the position would be altogether different. The people would know that it was not going into the hands of speculators to be used for their own private interest ;they would know that, although individuals might come and go, the Commonwealth would live for ever. It has been said during the debate that the legislation of the Labour Party might have a prejudicial effect on money-lenders. Have we reached such a stage that it is necessary for an honorable member, before speaking in this Chamber, to send a cablegram to London inquiring what are the views of the gamblers on the Stock Exchange? If we have, then we are living not in a democratic country, but in a despotism worse than that of Russia under the Czar, and with the Duma abolished. I shall now refer briefly to the position of the sinking funds established by the States in connexion with their various loans. As the result largely of the action of the right honorable member for Swan, when Treasurer of Western Australia, that State has a substantial sinking fund, but the sinking funds of the other States appear, mosquito-like, to have flown away. The exact position of these funds is shown in the Budget papers. I find that NewSouth Wales, with an indebtedness of about £82,000,000. has a sinking fund of £439,033, that Victoria has a sinking fund amounting to £298,579, whilst Queensland's sinking fund amounts to , £68. South Australia has a sinking fund of £144,601, whilst Western Australia, which has made absolute provision for the discharge of her comparatively small indebtedness, has a sinking fund of £1,112,652.

The total amount to the credit of the sinking funds is £2,209,104.


Sir John Forrest - We have a 3 per cent. sinking fund in respect of the Coolgardie waterworks loan.


Mr KING O'MALLEY - That is so. Tasmania has a sinking fund of £214,171. Do these figures disclose anything in the shape of true financing? The indebtedness of the States amounts to £236,000,000, and the only one that has made any substantial provision by way of a sinking fund is Western Australia. All honour to the right honorable the Treasurer, who, when Treasurer of Western Australia, had the good sense to take a different course from that pursued by the Treasurers of the other States. 'The following particulars illustrate my remarks concerning our indebtedness and trade: -

Public debts at 30th June, 1905, per head of population as at 31st December, 1905 : - New South Wales, . £55.185; Victoria, , £46.625; Queensland, £80,079; South Australia,£76,079; Western Australia, £66,773; Tasmania, . £52,301. -Total, £58.404.

Oversea trade of Commonwealth : - 1903. - Imports, £37,811,471; exports, £48,170,164; total, £85,981,635, 1904. - Imports, £37,020,842 ; exports, £57,489,216; total, £94,510,058. 1905. -Imports, £38,346,731; exports, £56,841,035; total, £95,187,766.


Sir John Forrest - I did not begin the practice to which the honorable member referred just now. It was initiated in the Crown Colony days.

Sitting suspended from 6.28 to 7.30 p.m.


Mr KING O'MALLEY - I desire now to draw the attention of honorable members to the military expenditure of this country. I find that in 1901-2 our military expenditure was £807,897 ; in 1902-3, £712,290; in 1903-4, . £742,522;in 1904-5, £734,339; and in 1905-6, £798,431 ; while the estimated expenditure for the current financial year, 1906-7, is £876,078, of which, no doubt, a good deal has already been spent. These sums total £4,671,557. It is a serious matter for 4,000,000 of people to have spent that large sum upon militarism in a period of six years. No doubt we have got for it a, certain quantity of feathers and glory ; but what the country requires is population. We desire to encourage the immigration of white men. The Commonwealth has been unable to give back to the States money for the promotion of closer settlement, because of this immense sum which it has wastedin inviting the nations of the world to come and fight us. Militarism wastes a people's wealth; it depresses ' the great masses ; it withdraws capital from reproductive works ; and sinks it in desolate, non-productive monuments of human folly. Militarism paralyzes industry, wastes property, and mildews economic progress. I wish to enter my protest against this waste of the money of the people on a military circus. Does any man possessing reason and judgment believe that if a great nation like Japan wished' to conquer this country it would hesitate to attack us because of the 4,000,000 people here? Would it hesitate if it were not afraid of the British nation? We are reaching a period of history when the nations of the world, instead of building forts to keep other people out. are encouraging them to come in. They are endeavouring, in every way they can think of, to obtain healthy, vigorous immigrants, knowing that if the immigrants harmonize with their people, and if the nation is capable of absorbing and digesting them, they will each be worth from £200 to £300, as the late right Honorable Richard Seddon said at the Labour banquet, the last public function which he attended before his death. If the money which we have wasted on militarism had been spent in encouraging immigration and closer settlement, by the undertaking of water conservation in the interior, and other public works, we should have settled here a great army of Europeans, men of indomitable pluck. I find that the expenditure of . £4,67:1,557 would have enabled us to settle on the land at least 10,000 able-bodied men, giving them 100 acres each. To each of these 10,000 ablebodied men might be allowed a family of five, making a population of 50,000 souls. That result might have been brought about ifwe had not wasted the money on glory, on arsenals, and forts, on gun-boats, and ammunition ; on institutions that produce no flour, and bake no bread. We have spent it merely in supporting men who are utterly useless according to the laws of economics- nice enough gentlemen in themselves, but not needed here, because we have no fighting to do.If they were sent into New South Wales to shoot the rabbits which threaten to eat out the squatters there, they would be usefully employed. I am willing that a few thousand pounds should be spent annually in maintaining rifle clubs, and, if we do not wish, to maintain a navy of our own, I am agreeable to making a contribution towards the maintenance here of ships of the British Navy. Not only could we have given 10,000 able-bodied men 100 acres each, valuing the land at £4 per acre, but . we could have given them, over and above, £671,557. These men and their families would produce wealth for the Commonwealth; they would have goods to transport by our railways;they would purchase the products of our factories ; they would purchase the Age, the Argus, and the Herald, if settled in Victoria, and would pay through the Customs £110,000 per annum. Everybody in Australia would benefit by the expenditure, in the way I have suggested, of the £4,671,557 which we have wasted on militarism. Even if war did occur, we should not be in a position to defend ourselves, because our guns and gun-boats would be obsolete, and we should not be in a financial position to provide modern armaments. In this connexion, the following newspaper abstract is worthy of the attention of honorable members -

ENGLISH ARMY IS CALLED ABIG SHAM.

Disgusted Peer Declares there are not Sixty Up-to-Date Guns in Britain.

Government Admits It.

Secretary for the War Office says the Island has really noand defence.

London, May 14.- In the House of Louis today the Earl of Wemyss and March, Conservative, called attention to the question of home defence.

He asserted that the country was practically without an army, and that there were not sixty up-to-date guns in the Country. The question, he said, would he solved if the Government had the courage to adopt the system of compulsory service at home and voluntary service abroad.

The Earl of Portsmouth, Parliamentary Secretary for the War Office, replying, said the Government had a mobilization scheme under which it was hoped it could mobilize its forces for defence as quickly as any Continental power. Further schemes had been prepared for the defence of British ports, which the speaker confidently anticipated would be placed in a position to resist any sudden attack.

In these schemes the Admiralty, theFarl of Portsmouth said, full concurred. He reaffirmed the principle that the country must look to the navy and not to the army for its defence against invasion.

Great Britain has spent millions upon her army, and yet she has not now sixty guns fit to shoot with. All the others have become obsolete and useless. All these things pass away, Machine guns have only a few years of usefulness, and. then they must be thrown on the scrapheap. But is not the position of old England a lesson for us, a peaceful commercial nation ? Should we not discontinue our nonsensical attempts to maintain an army in Australia?


Mr Johnson - What would we do if hordes of Russians came here ?


Mr KING O'MALLEY - The poor Czar has enough to do at home without bothering about us. Are we not a Christian people? Let me read what the Reverend Theodore Parker, Minister of the Twenty Eighth Congregational Society at Boston, U.S.A., said on this subject -

A man who has grown up lo read the Older Testament of God revealed in the beauty of the universe, and to feel the goodness of God therein set forth, sees him not as force only, or in chief, but as love. He worships "in love the God of goodness and of peace. Such is the prevalent character ascribed to God in the New Testament, except in the book of " Revelation." He is the "God of love and peace," "our Father," "kind to the unthankful and the unmerciful." In one word, Goc! is love. He loves us all, Jew and Gentile, bond and free. All ar? His children, each of priceless value in His sight. He is no God of battles; no Lord of hosts ; no man of war. He has no sword nor arrows; He does not water the ea'rth nor melt the mountains in blood, but He maketh His sun to rise on the evil and on the good, an/I sendeth rain on the just and the unjust." He has no garments dyed in blood ; curses no man for refusing to fight. . . . War is in utter violation of Christianity. If war be right, th-" Christianity is wrong, false, a lie. Hut if Christianity be true, if reason, conscience, the religious sense, the highest faculties of man, are to be trusted, then war is the wrong, the falsehood, the lie.

We have men in this count ry who call themselves Christians, and who are constantly talking about fighting some one. Mr. Elihu Root, speaking recently at Rio de Janeiro, the capital of Brazil, declared that in a few years all the South. American Republics would join the Hague Peace Conference, and would settle all their differences by arbitration. If nations engage in war thev must ultimately resort to arbitration. After the great war between Russia; and Japan, arbitration had to be resorted to. If a nation exhausts its wealth in providing arsenals, accoutrements, ammunition, gunboats, which soon become antiquated, and other war material that must ultimately go on the scrap heap, it will have no resources left when the time for fighting arrives. If the money now wasted in military folly were devoted to settling people on the land, we should within twenty-five or thirty years have 8,000,000 or 10,000,000 people here, and would be able to reduce our per capita indebtedness. Our power would be increased to such an extent that no foreign nation would dream of attacking us.


Mr Johnson - We can best secure peace by being prepared for war.


Mr KING O'MALLEY - Our security lies in the fact that we belong to the Empire. If we have any money to spend we should not waste it upon an army. If any hostile nation wished to invade Australia, the forts at the entrances to our harbors would not stop them. The forts at Port Arthur did not finally exclude the Japanese. Some of the strongest of fortified cities in Europe, such as Vienna, Buda-Pesth, Paris, and Berlin, have fallen before invading armies. Napoleon marched into Berlin, and the Emperor William the First of Germany, marched into Pari?, notwithstanding the millions that had been spent in fortifying that city. In Europe there are cities, the fortifications of which Have cost more money than all the churches, the warehouses, and the homes of the people within their walls. I enter mv strongest protest against wasteful expenditure upon so-called defences. I know that I am almost like a dog barking at the sun when I raise my voice against those people who have gone mad upon militarism. They are suffering from a species of nostalgia which renders them blind to all reason. They are making a fad of militarism to such an extent that some day the general with his spurs and his feathers and his glory knot on his shoulder will take possession of the country. The soldier does not weave his own glory knot, hammer out his own sword, make his own guns, or make his own boots. He is the most useless creature one can imagine. For many years the United States did not spend any money upon an army, and vet when the time came they were able to fight, because thev had the necessary resources. England conquered Europe because she was able to supply the smaller nations with money, and they in their turn were able to provide the fighting men. Now to turn to another subject, I do not notice any reference by the Treasurer to the subject of old-age pensions. One of the finest: reports ever submitted to any people was that presented bv the Royal Commission on Old-age Pensions. We have within the Commonwealth 66,000 or 67,000 people who are denied the advantage of an allowance sufficient to furnish them with the necessaries of life in their old age. In Victoria, the right honorable member for Balaclava introduced the oldage pensions system, and his action in that regard will stand to his everlasting credit. The Minister of Trade and Customs did the same thing in New South Wales. But; there is no provision for old-age pensions in Tasmania, South Australia, Queensland, or Western Australia. In those States they have citizens who have done valuable work in pioneering, and who have been capable and praiseworthy soldiers in the army of industry, and yet no attempt has been made to provide them with a little comfort in their old age.


Mr Tudor - In connexion with the introduction of the penny postage system it is proposed to sacrifice money that could, with greater advantage, be devoted to the payment: of old-age pensions.


Mr KING O'MALLEY - I do not condemn the proposal for the introduction of penny postage, because it is based on progress, and I am always behind those who show that they are ready to advance. Some people say that we are not ready for such a re-form, but I ask: "When is the day?" To-day is my day, because I may be dead to-morrow. I am grieved that the Treasurer did not openly tackle the question of old-age pensions. I pointed out to him how simply he might arrange matters with the Spates. The Premiers of New South Wales and Victoria are willing to hand over their old-age pension systems to the Commonwealth, and to thus make available between £700,000 and £800.000 per annum.


Sir John Forrest - Will they give us the money that thev now pay to old-age' pensioners ?


Mr KING O'MALLEY - They would permit the Treasurer to retain that sum out of their share of the Customs and Excise revenue.


Sir John Forrest - I never heard that stated before.


Mr KING O'MALLEY - When the right honorable member for East Sydney attended the Hobart Conference he put the position before the Premiers of the States, and the representatives of Victoria, New South Wales, and Western Australia approved of the imposition of duties upon tea and kerosene with a view to providing funds for the payment of old-age pensions. I am content that such duties should be levied for that purpose.


Mr Johnson - I am not, because we should have to raise £4 for every £1 that we require.


Mr KING O'MALLEY - The honorable member is labouring under a delusion. The States could pass enabling Acts to permit the Commonwealth Treasurer to retain the money realized bv the duties.


Mr Johnson - They could not go behind the Constitution.


Mr KING O'MALLEY - There is nothing to prevent the States from agreeing that certain revenue shall be ear-marked for the purpose of paying old-age pensions.


Mr Johnson - That would have to be done with, the approval of the .majority of the people of the States.


Mr KING O'MALLEY - But the Parliaments represent the people of the States.


Mr Johnson - That would not be sufficient for the purposes of the Constitution.


Mr KING O'MALLEY - I understand the Constitution perfectly well. I helped to make it by advocating its adoption in South Australia and Western Australia. I made a speech in Western Australia in favour of the Federal Constitution long before the Treasurer did.


Mr Thomas - The honorable member is on a good wicket when he advocates the payment of old-age pensions, but he is wrong when he talks about imposing duties upon tea and kerosene.


Mr KING O'MALLEY - I should be willing to' impose duties on those articles for the present, with a view to remitting them later on.


Mr Thomas - It would be better to raise the money by means of a tax upon land values.


Mr KING O'MALLEY - I am in favour of a proposal of that kind. The Treasurer has said nothing with regard to a progressive or graduated land tax such as has been advocated by the democratic section of this House.


Sir John Forrest - I am not in accord with it.


Mr KING O'MALLEY - If the- Treasurer had adopted the proposal of the democratic party, the whole position would have been simplified, so far as the payment of old-age pensions is concerned. It is suggested that a tax should be imposed upon unimproved values, but that land up to the value of ,£5,000 should be exempted. Upon land the unimproved value of which is over £5,000, but not more than £10,000, the tax would be a halfpenny in the pound ; upon estates the value of which is over £10,000, but does mot exceed £15,000, 'it would be a penny ; upon land the unimproved value of which is between £15,000 and 420,000, it would be a penny halfpenny ; upon estates of from £20,000 to £25,000 of unimproved value it would be twopence j upon land of an unimproved value of from £25,000 to £30,000 it would be twopence halfpenny ; and upon, estates of ' an unimproved value of from £30,000 to £40,000 it would be threepence in the pound.


Mr Kelly - From what is the honorable member quoting?


Mr KING O'MALLEY - I am quoting from the Argus of 12th July. The tax upon land of the unimproved value of from £40,000 to £60,000 would be threepence halfpenny, and upon estates of more than £60,000 unimproved value ' it would be fourpence in the pound. Hundreds of people throughout the country are talking wildly of confiscation, and are urging that the Socialists desire to confiscate their property. 1 cav that any person who holds £10,000 worth of unimproved land values ought to pay a little taxation. Taxation ought to be based upon equality of sacrifice. The following figures show the incidence of the suggested tax upon the basis which I have indicated : - An estate the unimproved value of which . was under £5,000 would bear no taxation. An estate which was worth £10.000 would contribute only £10 1 8s. 4d. per annum.


Mr Kelly - Would the payment of that sum have the effect of bursting up an estate ?


Mr KING O'MALLEY - We do not want to burst up the estates of little men, and we regard an individual who is possessed of only £10.000 worth of unimproved land values as coming within that category. An estate which was worth £15,000 would pay £3.1 5s. annually, one which was worth £20,000 would contribute £6.r. ros., one which was valued at £25,000 would be taxed to the extent of £104 3s. 4d., one which was worth £30,000 would pay £156 5s., one which was valued at £35,000 would pay £218 15s., and one which was worth £40,000 would contribute £281 5s. An estate which was valued at £50,000' would have to pay £427 is. 8d., one which waa worth £60,000 would contribute £572 18s. 46., one which was assessed at £70,000 would Pa)' £739» us. 8d., one which was worth £80,000 would return £906 5s., one which was valued at £90,000 would yield £1,072 18s. 4d., one which was worth £100,000 would pay £1,239 ns. 8d., one which was valued at £150,600 would yield £2,072 18s. 4d., and one which was valued at £200,000 would produce £2,906 5s. I quote these figures with a view to showing that if the Treasurer had . submitted such a proposal, and had earmarked a portion of the revenue- thus derived for the purpose of paying old-age pensions, and another portion for the purpose of establishing a sinking fund, -he would have had my blessing, as well as my support. Now I wish to say a word or two upon banking. I hold that we have a magnificent opportunity to establish a Commonwealth national postal banking system, for the purpose of assisting the small producers, the small distributers, and the small consumers. The present banking system is all right for the big men. It is founded upon the existence of millionaires. Lt has materially assisted to concentrate wealth in the hands of the privileged few. Only a few years ago the average wealth of the Commonwealth was about £300 per head. Since then it has been very materially reduced. In this connexion I desire to place before honorable members a few statistics. The twenty-two banks which are doing business in Australasia have a paid-up capital of £'18,490,500, exclusive of £2,500,000, which is guaranteed by the Government of New Zealand, to the Bank of New Zealand. These banks are on an exceedingly good wicket. They hold deposits amounting to £106,625,362. I admit that they have assets of £167.000,000. That, however, does not mean that they have £.167,000,000 in gold. It simply means that they have that amount in bonds, mortgages, deeds, and securities of all descriptions. But I would point out that those securities come from the people. The liabilities of these banks to-day is £141,535,809. lt will thus be seen that they have £126,000,000 of the people's money with which to do business as against their own paid-up capital of £18,000,000. That is not bad. If private institutions can contract liabilities to the extent of £141,000,000 upon a paidup capital of £18,490,500, they owe it to the people of Australia with whose money they are doing business. Now, let me examine the profits which they have made during the past seven years. I have not their balance-sheets for the past six months. I find that in 1905 these twentytwo banks made a net profit of £1,700,631, in 1904 of £1,705,068, in 1903 of £1,622,686, in 1902 of £1,579,499 in1901 of £1,506,305, in 1900 of £1,304,441, and in 1899 of £908,080. Thus their total net profit during the seven years to which I have referred was £10,326,710.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - What interest does that represent upon their capital?


Mr KING O'MALLEY - It is not a bad interest upon a capital of £18,000,000. It will average about 7 per cent.


Sir John Forrest - That is not extraordinary.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It is not 7 per cent.


Mr KING O'MALLEY - It is not very far short of it.


Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It is about51/2 per cent.


Mr KING O'MALLEY - It is more than that. The honorable member must recollect that I am speaking of their gross profits. This £10,326,710 has been paid by the producers of Australia during the past seven years for the use of money. It has been paid by them for the use of their own property, for, after all, if they had been able to obtain their money at the average rate of 3 per cent, they would have had the difference in their own pockets. As it is, that difference goes into the pockets of those who work not. for money-lending certainly does not involve labour. All that a moneylender has to do is to examine titles, bonds, mortgages, and other documents. The money he lends this morning may be lent again this afternoon. His duties simply involve the balancing or cancellation of debts. The Commonwealth, with its wealth and credit, shouldcarry on asystem of banking in connexion with the Postal Department. A man having a small business or a little farm, and who requires £50, £100, or £200 to tide him over a bad season,should be able to go to the local post-office, and, on depositing his deeds, obtain what he wants at not more than 4 per cent. The interest on permanent bonds should not exceed 2 per cent. Money lying in a box or in a man's pocket has no value; it is only when exchanged for property, or bonds, or mortgages, that it acquires a value. I find that the banks of Australia have on deposit no less than £143,930,401. I do not mean to suggest that they have such a sum in their vaults. The gold in circulation in Australia amounts to £5,777,800; the silver in circulation is £1,070,000 ; and the bronze in circulation £95,800; making a total of £6,943,600. If we add to this £3,786,020, representing the bank notes in circulation, we have a total of £10,729,620. The gold reserves lying in the banks total £19,358,469, so that the total value of our gold reserve and bullion and notes in circulation is £29,788,089. If, as shown in the Budget papers, there is a sum of £143,000,000 on deposit in the various banks, and the reserves and money in circulation amount to £29,000,000, the expansion of credit and commercial paper must represent £114,000,000. If the banks can do business on paper - because a cheque, promissory note, or mortgage, is currency - why should not the Commonwealth be able to establish a nationalsystem of finance? There are not many difficulties in the way. The Commonwealth, through the medium of the Postal Department, could carry on a satisfactory system of banking. The post-offices could be utilized as branch banking offices, and the system could be extended without interference with the existing banking institutions. The banks say that their note issue rests on a gold basis, but what becomes of their gold when a crisis occurs? On such occasions gold is a fugitive from justice, it is like a thief stealingaway in the night. Where was it during the crisis of1893 ? If the late Sir George Dibbs, who was then Treasurer of New South Wales, had not made bank notes a legal tender, and so enabled the banking institutions in that State to distribute their gold over the rest of the States, not one of these institutions would have remained open. No system of currency should rest upon a commodity, so to speak, that is managed by stock gamblers, money-mongers, and various other men who have the management of the gold of the world. The Commonwealth isbig enough and strong enough to have a representative of its own property. Let me give an illustration showing the danger of the present position. We have a currency of £10,729,620 ; and if we had in the Commonwealth 200 men worth £150,000 each, they would represent £30,000,000, or more than the whole of the gold reserves and currency. Let us suppose that these men had £4,000,000 loaned on promissory notes, bonds, mortgages, and various other paper instruments. These 200 capitalists decide to call in 50 per cent, at a time when all the money in the Commonwealth was in active circulation - when the people were engaged in active commerce, whilst ships were waiting at the wharfs for our produce, and the crops of the farmers were waiting to be harvested. If it is ex-changed three times a week, a, circulation of £10,700,000 is quite sufficient for a population of 4,000,000. In those circumstances it would pay off debts amounting to over £32,000,000 every week, because the money which is given in exchange for one thing in the morning may cancel 100 debts before night. Let us assume that these men decided in the circumstances I have mentioned to call in 50 per cent, of the loans, with a view to holding the money for a higher market. The money so called in - £2,000,000 - would be onefifth of the entire circulating medium ; so that one-fifth of the whole of the debts of the Commonwealth would have to remain unpaid, because all the money was required before to pay the debts. Hundreds of producers would be put through the Bankruptcy Court, whilst in other cases debts would be compromised, or property sold by public auction. This having been done, these 200 men would withdraw their money from their vaults, buy up the property of the debtors at one-half their cost, and thus enrich themselves at the expense of their unfortunate fellow countrymen. As the result of their action, the value of all property and labour would have been depreciated, and the ability of the people to liquidate their obligations would have disappeared. It is a serious matter to allow the currency of a nation to remain in the hands of private gentlemen. In barbarous countries barter is the method of exchange. The moment that a country becomes civilized, new methods of exchange must be adopted, awd these methods have to be intrusted to some one. I wish to know why the directors of bar.k- ing institutions in Australia should have the power to either contract or expand our circulating medium? By what special dispensation of Providence have these men been selected to usurp the fundamental prerogative of a Government? The fundamental prerogative of the Government is to create the medium of exchange, to circulate it, and to contract or expand its circulation as is desired. But to-day this power is in the hands of private bankers - gentlemen who, although right enough in their way, belong to the guineapig aristocracy. I have the greatest respect for them, but I say that they are exercising a function which rightly belongs to the Government. We have given them the power to contract the circulating medium, and to gather the wealth of the people into the hands of a few. I hold that the Treasurer should have come down with a Commonwealth postal banking system of currency. In my opinion, the currency of this country ought not to rest on gold. Wherein is the efficacy of gold or silver? When a currency is based on gold, it is based upon a commodity which is controlled, owned, and managed by the financial stock gamblers of the world, who have the power to take it out of the country. Australia possesses so many million pounds in gold ; but when money rises in value in another country, this gold leaves our country, because gold always follows the market. You always have gold when you do not want it, and you never have it when you want it. It was not here when we wanted it in 1893, for example. The system of banking creates a crisis about every twelve or fifteen years. We have to-day £19,000,000 in gold lying dead in the vaults of the banks. That coin is useless. It does not produce a dollar ; it does not earn one penny. I understand that some gentlemen connected with banks desire to get the right to issue paper money. They know that paper money won the wars of Napoleon. When the Bank of England suspended specie payments, the wars of England were fought on paper alone. It was paper money which fought the United States war ; it was paper money which paid off the great national debt of France to Germany. Let us for a moment examine another power which the bankers have. If we do so, we shall discover another reason why the Commonwealth should utilize its great credit. It can utilize it only by establishing a banking system. Mr. Currie, in the course of a recent newspaper interview with regard to the offer of the Victorian Savings Bank to Mr. Bent of £2,000,000, said that in 1893 the Victorian Government guaranteed the deposits of the people, who now 'have confidence in the bank, because the Government is behind it. At this stage I should like to say that the Labour Party is not responsible for my remarks. King "O'Malley is the architect of his own superstructure. I consult no one as to what I should say, or as to what I should not say. I am only putting before the people the result of my study of financial questions. I lived in the United States from i860 to 1872, and know that the paper money of the country, the greensbacks, were considered the best money in circulation, and the public had the most perfect confidence in it. It was only in 1873, when they began to tinker with, the gold resumption, that a panic was brought on, because the circulating medium was contracted. If the volume of paper money is regulated, and its circulation is based on the value of the properties, the products, and revenues of the country, it is a far better circulating medium, and medium of exchange, than either gold or silver.'


Mr Brown - What about international trade? How could it be carried on by means of a paper currency?


Mr KING O'MALLEY - I hope that my honorable friend does not think that the currency of a country affects in the slightest degree its trade with other countries. Australia does business with China, with Chili, with Japan, and with other foreign countries ; but this is conducted under a system of international exchanging of debts known as the foreign exchange system. This enables the traders of commercial nations to liquidate their debts to each other, without having to send money from one country to another. These debts may represent goods exported or imported, money borrowed, loaned, or invested, interest, or profits, cost of transportation, commissions for service, and other charges in connexion with financial or commercial operations, and must be paid, either in cash or by the exchange of commodities. The expense of transmitting gold or other currency, and the risk incurred by doing so, are also taken into consideration, with the result that what is called an international exchanging of debts is arranged, and this is done bv means of commercial paper, accepted throughout the world. The kind of money used by a country for its own circulation has nothing to do with its trade with other countries We use the, same monetary system as is used in Great Britain, and our coins are the same; but the rate of exchange between Australia and London is often higher than between the United States and London, or between France and London. Furthermore, practically the whole foreign trade of the Commonwealth is now carried on by means of bills of exchange, and when balances have to be met they are settled by the exchange of commodities. Among such commodities is gold, which is not exchanged in the form of sovereigns, but as bullion, being weighed and valued in the same way as potatoes, oats, beef, or other commodities. If there is a balance against Australia, we owing England £10,000,000, that sum remains at interest until we can sell beef, mutton, or wool, or exchange bills, or gold, or other commodities in settlement and cancellation of the debt.


Mr Brown - Then what becomes of the objection to sending money out of the country ?


Mr KING O'MALLEY - Money does not leave the country. In 1901 the United States exported £300,000,000 worth of products to Europe, and imported £180,000,000 worth. One would naturally imagine that the balance of £120,000,000 was also transmitted; but that was not so. Every man travelling from the United States to Europe carries a letter of credit, just :as any one going from Australia to England would take with him a letter of credit. The result is that the bankers in Europe charge up to the people of the United States the money that they advance on these letters of credit. Therefore, instead of the United States getting £120,000,000 at the end of the year, they had to send £670,000 over to Europe. I wish to point out the wonderful profits that are made out of deposits in banks. I have had a little banking experience in the United States, and I know something about it. The honorable member for Parramatta pointed out last night that a great mistake had been made by the Commonwealth in not taking over the Post Office Savings Banks. I hold that it is not too late for us to establish a bank in connexion with the post-offices for the purpose of receiving deposits and carrying on discount and ordinary banking business.


Mr Wilks - Would the honorable member make it a bank of issue, and put greenbacks upon the money market?


Mr KING O'MALLEY - I do not want to be led off the track. After the great war with Germany, France paid all her debts with paper money, which was issued to take the place of the gold that had left the country. We are a debtor nation, and we should be careful not to place ourselves at the mercy of those who have a monopoly of the gold and silver in the money markets of the world. When a bank is established, and 1,000 customers come forward with deposits on current account, averaging £200 each, the bank at once has £200,000 placed at its disposal. No interest has to be paid in respect of this money, and therefore the bank makes a clear profit upon such amounts as it lends to other customers. Money is continually passing over the bank counter, and every afternoon, at three o'clock, the whole of the cash returns to the bank, and is available to be loaned out the next day. One man mav reduce his credit to £50, or another to £5, whilst in some cases an overdraft may be granted upon security. Upon the other side, one pays in £50, another £100, and still another £10,000. At the end of every afternoon, however, matters are adjusted, and the same amount of money is available for the next day's transactions. Why should we not, in connexion with our post-offices, establish a banking system for the benefit of the poorer classes in the community ? I have no objection to our present private banking system, because I can get all the money I require; but I desire to help the poorer classes. If the Commonwealth had a bank of issue and discount, under the management of a ComptrollerGeneral, who would be entirely removed from political control, paper money could be issued for the payment of salaries and for the liquidation of other liabilities incurred by the Commonwealth. The Commonwealth notes could be made a legal tender.


Mr JOSEPH COOK (PARRAMATTA, NEW SOUTH WALES) - The honorable member is plagiarizing the scheme of the honorable member for Brisbane.


Mr KING O'MALLEY - No, I am not. The honorable member for Brisbane bases his scheme upon a gold standard, whereas I am opposed to gold as a standard. If we ha'd a bank of issue tomorrow, and based our currency upon a gold standard, the capitalists would combine to demand payment of their debts in paper money, with a view to afterwards rushing the State bank and demanding gold for the State notes. The United States made a great mistake in basing their currency upon gold, because they placed themselves within the power of the gold-bugs and gold- jobbers. The poorest public financiers that the world ever knew were those who made money for themselves, and the best public financiers, have been those who never could make a dollar for themselves. The greatest financier in Australia was the late Sir Henry Parkes, and the greatest financier that the United States ever knew was Daniel Webster, who died comparatively poor. Honest paper money, honestly managed by an honest comptroller of finance, based upon the property and products and revenues of the country, would make the best medium of exchange, because it could be made available to the people at a low rate Of interest. Our banking system could be worked under arrangements which- would permit of a man who had £100 for which he had no use, depositing it in the State bank, and receiving in return £100 worth of consols at 3 per cent. The money thus placed at the disposal of the bank could be brought into circulation for the benefit of the public. Great Britain had to fight a war when- the gold cleared out of the country like a thief. She had' to whip Napoleon with paper money. In the same way, the northern States of America had to whip the southern States with paper money. I would not permit the Treasurer to issue paper money, because probably he would avail himself of his powers too frequently, or under circumstances which would operateto the detriment of the Commonwealth. I would' leave it to the Comptroller-General to issue paper money, based, not upon gold or silver, but upon the wealth and revenues of the country. With such currency, tEe public would be able to exchange .their properties and products without having to depend upon the Rothschilds, Vanderbilts, or Rockefellers. What chance would this country have if J. D. Rockefeller came here and "wanted to run the show? Let us for a moment consider the various utilities of paper, in which case a legal power expressed in it is deemed sufficient security for 95 per cent, of the financial transactions of the world in the ordinary every-day affairs of life. A piece of paper is used in connexion with giving titles for land, in making payments for land, and in making loans, upon mortgages and otherwise, and, in fact, all transactions upon credit are carried out by means of paper. The value of these paper instruments lies in the fact that they give the holder a legal lien upon the property to which they relate. They have no value in themselves. All money, whether gold, silver, or paper, is created by the laws of the land, and has no value, except that given to it as a medium of exchange or its commodity value. The difference between a private obligation, such as a mortgage or promissory note and money, is that the two former are private legal liens - the mortgage on a specified piece of property, and the promissory note on any or all the property of the individual making it - while money is a public legal lien on all property for sale, whether owned by the Government or individuals. Between the Government and individuals, the law secures the enforcement of aLT contracts by mortgages and other paper instruments. If these paper instruments can be made safe and sound legal representatives of property between two individuals,' there is no reason why they cannot be made safe and sound legal representatives of property between any .number of individuals ; and if between any number of individuals, for limited periods of time, is there any earthly reason why they cannot be made safe and sound legal representatives of property, when made payable on demand ; and if made payable on demand, in something capable of producing an immediate income. They then are able to perform all the functions of actual money, and are money, for money can have no other utility except to exchange for property, or to loan for an income. Bank notes, I would point out, are regarded as money, although they are not legal tender for "the payment of debts. But the banks are chartered by law, and by -reason of that fact the notes which they issue are regarded as money, and pass as such. When I came to Australia some years ago I visited a bank for the purpose of getting £100, and I received the money in notes. Now the banks pay in gold, because they are charged 2 per cent, for the privilege of issuing the notes. I want to put another illustration. Let- us suppose that an honorable member received £1,000 in sovereigns from a. bank, and carried it into the country, where he entered 'another bank and said, " I am tired of carrying these sovereigns; give me £1,000 in bank notes in lieu of them." His demand having been complied with, we will further suppose that he purchased a farm with those notes, and that the vendor immediately deposited them with the bank which lent them out. They would travel all over the country, they would probably be used to purchase other properties, to effect hundreds of mortgages, and generally to enable, people to derive a certain amount of prosperity. Why ? Because, to all intents and purposes, they would be mopey. After passing from hand to hand a thousand times, they might, at the end of ten years, find their way back to the bank. During the whole of that period they would have performed all the functions of money, whilst the sovereigns which lay idle in that institution would have discharged none of them. When they returned to the bank, if there were no. gold to redeem them, would any of the transfers of property which had been made by reason of those bank notes be assailable in law? Certainly not ! I repeat that they would have performed all the functions of money, whereas the gold would have performed none of those functions. I want honorable members to get themselves out of the hands of the gold bugs. The existing banking system has enabled a few individuals to gather into their hands the property of millions. Every day we read in the newspapers distressing accounts of poverty. In the Herald last night I read an article which was headed, " The Destitute. Their Bitter Cry. Why should there be Destitution?" Why should there be poverty ? Indeed, if the wealth of the people had not been gathered into the banks, there could be no poverty. I merely desire to show that the value of all property, labour, and rents, falls in proportion to the increased value of the sovereign, by which it is measured. If the rent of any property be not sufficient to produce an amount equivalent to the value of the property itself in as short a time as will the money loaned at interest, the property will fall in price until the rent bears the same proportion to the value of the property that the rate of interest does to the principal. The value of property depreciates in proportion to the increase of the value of the sovereign that measures it. Whenever the value of money increases by a rise of interest, there is a corresponding decrease in the value of property. With the rise of interest on money, property falls in price, so that one sovereign in money balances two, three, four, or five times more property than it did before the rise of interest. Enough property must be added to make the rent equal to the interest on money no man will purchase property unless it yields as much as the money paid for it will yield by way of interest. Therefore, the price of property must fall wheneven the interest on money increases. All obligations for the payment of money are based on money, and hold the same position with respect to labour and property. All bonds, stocks, and debenture investments, fall similarly. For example, if interest rises from 4 to 9 per cent., a State bond bearing 4 per cent, will fall below its par value, but will continue to bear the same rate of interest that it did before the rise of interest on money ; yet the bond can be exchanged for more property than before the rise of interest. Hence the liabilities of all debtors whose means of payment are fh their property, or in their ability to labour, are increased in proportion to the increase of interest on money, or in other words, the rise of interest has decreased the market value of property and labour, so that two, three, four, or five times the quantity formerly required must be sold to procure money to cancel debts. The injustice done to debtors by increasing the value of the measure by which debts were contracted is evident. Money, the measure of value, constantly fluctuates. The sovereign is the measure of more or less property, according to the rate of interest. Let me illustrate what I mean by putting a supposititious case. Let us assume that two men are working for wages and saving their money, which they lend out at interest. I will suppose that they are located in a population of 5,000 - in a small community in which nobody speculates. I will assume, further, that they save 4s. 2d. daily, and that they lend out their money at 7 per, cent. If they worked 300'days a year, at the end of sixty-one years and four months each would have saved £2.480, so that their joint savings would be £4>96°- At sixty years) of age they would be worth £25,000, despite the fact that they had earned only £4,960. Let us assume that they now' remained idle for twenty ve,irs loaning money. At the end of that time they would be worth £104.002. In other words, they would have earned by their labour £4,060. and would have gained £99,042 bv interest. The present system of money lending does not afford a chance to a man in a small way of business, and means the gradual gathering of the wealth of the people into the hands of the privileged few. I am continually being told that if the Government place on a piece of paper a promise to pay, that piece of paper has no value, but that a piece of paper so indorsed by a bank is valuable. When 1 inquire the reason for this, 1 am told that a promise to pay on the part of a bank is valuable, because it rests upon a Government bond. And the Treasurer tells us to-day that Government bonds are valuable to the people. Are not these bonds promises to pay ? Is not a Government bond a promise to pay, even if it be only in respect of a limited number of years ? Supposing that we were to " coin " the £236,000,000 representing our indebtedness, and to make it a promise to pay, would not the position be as good as it is to-day ? The only difference would be that we should use our debts as a means of exchanging our produce and other property. I trust that the Treasurer will look into this matter. When I was in the States I never saw gold or silver. There we used "shinplasters." I could go into a store, buy what I wanted, and pay my _paper money. There was never any trouble about the system until the " greenbacks " were placed on a gold basis. Under the heading of "A Metal Base is a Cause of Industrial Crises," T find in Rational Money the statement that -

The variations of money, due to natural or artificial causes, constitute a prolific source of panic, originating or permitting and intensifying every industrial crisis. Wendell Phillips said-

Every one has heard of Wendell Phillips: - "The great lie called 'specie ,basis ' has destroyed the commercial prosperity of the United States once every six years since the nation started." Looking over the history of England and America, we find that panic:? of the first magnitude occurred in England in 176.?. 783. 1.793. 1/07, 1S16, 1825, 1837-8, 1847, >SS7- 1866, 1875, and 1S90-3, and in the United States in 1819, 1825, 1877, 1830, 1847, 18^7, IS71. ami 1893 (with a plentiful supply of lesser disasters in intermediate years), and every one of them was either directly caused by the movement of money, or grew to ruinous dimensions because the money volume failed to expand at the proper time to relieve the financial pressure, metallic money being far more apt to sh""1' away and hide itself in time of danger than to come to the rescue of commerce when credit money is shaken.

Only a proportion of the deposits in the banks-i-that represented by the savings of the workers - is available for permanent investment. The remainder, which constitutes the greater proportion of bank deposits, represents only an expansion of credit. When a bank lends a customer £1,000 on his promissory note, it discounts that note, placing the money to the credit of the customer, but the bank's loans and deposits are increased by £1,000. No money is added to or taken away from the bank. It is a mistake for people to imagine that bank deposits actually mean that an equivalent sum is held 'by the bank. They simply mean credits in ledgers. Even when a customer draws cheques against his banking account, the money in the bank may not be reduced by one penny; his cheques may go to the credit of other customers of that institution, or find their way into other banks, where they are used as a set-off to similar transactions. If that credit be wisely made, it would be redeemed by the customer accumulating in the bank sufficient money to enable him to give his cheque :and refire the promissory note. The credit thus given by the banker to the customer has practically added during its currency to the resources of the business community." A vast amount of business is accomplished by means of the credit system, and very little money is required to balance it. If a credit be unwisely made, the bank must lose, because, while its resources are reduced to the extent of the amount borrowed, its liabilities remain undisturbed. When we read in the newspapers that there is an increase in bank deposits, we should recognise that that may mean an expansion of credit rather than an actual monetary increase. In the same way, when we read of a reduction of deposits, we should not forget that that may mean a contraction of credit rather than an actual withdrawal of money. Ninety-five per cent, of all the business of the Commonwealth is done on credit, and in the majority of cases the remaining s per cent, represents only credit in another form. We credit the Commonwealth with our salaries for the month, and the Commonwealth credits some one else. The whole system of finance is one of credit. We shall soon become bushed if we lose sight of the place and potency of credit. In credit modern commerce lives, moves, and has its being. It is not merely the means by which we buy and sell and pay, which it is difficult to designate, but it is the means by which the representatives of property or value are exchanged. Credit lives on confidence, and confidence is only a reflection of existing economic conditions. When confidence prevails credit expands easily. When confidence is shaken credit contracts in proportion to the gravity of the cause. When confidence is destroyed a financial panic follows, and thousands of honest small producers and traders are ruined. The funds which absorb floating investments come from various sources. In the first place they come from savings bank deposits, representing not an extension of commercial credit, but the actual savings of the working people. In the second place, they come from the profits of commercial banks which can be withdrawn and invested. Thirdly, they come from fire and life assurance companies, benevolent, charitable, religious, and educational institutions, and from estates, the trustees of which have decided to remove their trust moneys from the general risk incidental to business transactions, and to invest them in permanent securities that call for no management. Then, again, they come from the funds of retired business men who adopt a similar practice, and from the investment accounts of commercial banks maintained for the purchase of liquid securities which can be speedily converted into cash whenever it is desired to do so. Finally, thev come from the unearned increments of estates. These are the sources from which the funds of the people come.


Mr Webster - Where do thev go?


Mr KING O'MALLEY - To enrich and strengthen the money power of the privileged few who run this country. I want the Labour Party to take courage. They should pav no attention to the nonsense that is talked about " shin-plasters," nor to the utterances of those who talk mildewed, double-distilled rot, on other phases of this great question. They ought to tackle this question, they ought not to be frightened to grapple with it. We have a great history, but .we must take care to look into the history .of other nations. The Bank of Venice was for 600 years the most powerful banking institution in all Europe.


Mr Webster - What happened to it?


Mr KING O'MALLEY - Napoleon Bonaparte stole the proceeds of its transactions. Let us not forget that Rome fell. Carthage fell, and Greece fell. Whilst they are gone, we are here ! Not a broken arch, not a prostrate column, not a crumbling capital, in all the drifting shoals of antiquity, But witness these truths. A hundred flourishing empires first exalted, then humiliated, conquered and cast down, should teach men that the laws of nature and nature's God may not be violated with impunity. The stony lips of von Egyptian sphinx which keeps its silent vigils over the sepulchral valley of the Nile, once the home of so many millions full of life and hope and energy - there buried, kindred, name and memory : engulphed and swallowed for ever in that awful winding sheet of band, out of which those mighty pyramids arose, each one an imperishable monument to the tyranny of ancient rulers - repeat to all subsequent ages the folly of wasting the energies of millions to subserve the pleasures and passions of the privileged few.







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