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Tuesday, 20 October 1931


Mr GABB (Angas) .- There is a danger that Parliament, in its present mood, may be disposed to accept anything agreed to by the Premiers Conference, instead of examining all proposals, and dealing with them according to their merits. [Quorum formed.] The Leader of the Opposition (Mr. Lyons) said that he approached the discussion of these bills with feelings of regret. I may say that I approach the matter with feelings, not only of regret, but of shame as well. I feel ashamed that the affairs of this country were allowed to drift to such an extent in years gone by that we are now unable to find the sum of £9,000,000 falling due in the next fifteen or sixteen months, which must be paid if we are to keep our contract with our bondholders. It is only eleven years ago since this Parliament - I shall not say as an act of bribery, but in an attempt to catch votes, allocated between £20,000,000 and £30,000,000 for the payment of gratuities to returned soldiers. That measure was passed with little debate, and in a light and airy manner. We, who were so prodigal then, cannot now even keep our word as a government to those who lent us money to make the payment.

Clause 4 of the Commonwealth Debt Conversion Bill is as follows: -

Notwithstanding anything in the Debt Conversion Agreement or in the Commonwealth Debt Conversion Act 1921 contained, every holder of existing securities which have not been converted into new securities in accordance with the provisions of that act shall, notwithstanding that any holder of those existing securities may have signified or may signify dissent, be deemed to have made an application in accordance with section 9 of the net for their conversion into new securities, and they shall be deemed to be so converted accordingly.


Mr Bell - If that can bc done, why does any government ever enter into any contract?


Mr GABB - If it can be done, the Government can break any and every agreement it ever enters into. It' is no wonder that I feel ashamed that such a proposal should come before this Parliament, and that it seems likely to be accepted, if not light heartedly, at least without any apparent qualms of conscience. This clause of the bill tells the dissentient, in effect, that his " no " means " yes ". It tells him that, no matter what the agreement entered into by the Government; no matter what the date upon which his bonds fall due for repayment ; no matter what he thinks or wants, or needs, the Government will not keep the terms of its contract.


Mr Keane - It is all part of the plan for which the honorable member himself voted.


Mr GABB - I object to that statement. Compulsory conversion was not in the plan, and the honorable member knows it. The Leader of the Opposition (Mr. Lyons) said that he wished that the very plain statement in clause 4 had been worded in a manner not quite so plain. The Treasurer suggested that the Leader of the Opposition would like to have it camouflaged. I am pleased that the statement has been set forth as plainly and frankly as possible. The credit for that, I am sure, is not to be given to any politicians, but to the draftsman. Had politicians drawn up the clause, they would have endeavoured to soften the harsh frankness of the statement; they would have sought' to hide the fact that repudiation was about to take place. The effect of this provision will be that the Government has obtained the money under false pretences, or at any rate, that it is retaining money under false pretences. A private citizen who attempted to do the same thing would very quickly find himself in " Queer Street ".

I do not intend to vote for this bill. Some time ago, when a similar proposal was brought before the Labour caucus by the honorable member for Bourke (Mr. Anstey), I objected to it on the ground that it amounted to repudiation, and members of the Ministry at that time adopted the same attitude. The honorable member for Bourke proposed that payments should be deferred for twelve months only, and it would ill become me, who refused to accept that, to agree to the present proposal, according to which payments are to be deferred, in some cases, for 30 years. I cannot support this act of repudiation. The honorable member for Gippsland (Mr. Paterson) said that this measure could be justified only on the ground of inability to pay. In my opinion, it should be put even more strongly than that. The only justification for the bill, and particularly for clause 4, is, not stated inability, but proved inability to fulfil the contract. So far it has not been proved that we are not in a position to fulfil the contract entered into with the bondholders who have dissented regarding amounts falling due within the next three or four years. The honorable member for Gippsland said that it would be possible, if the National Debt Sinking Fund Commissioners were agreeable, for a sum of £4,800,000 to be made available annually from the fund to meet the claims of those who have dissented, and to relieve necessitous cases among those who have converted.


Mr Paterson - I claimed only that- £4,800,000 would meet, for -the first two years, the claims of dissenting bondholders; the others I said should receive consideration.


Mr GABB - In order to meet the claims falling due over a period of three years, three times £4,800,000 would be available.


Mr Coleman - Is the honorable member aware that seven governments agreed to this proposal?


Mr GABB - The honorable member for Reid (Mr. Coleman) appears to be taking the same stand as the Treasurer (Mr. Theodore) did. To them the fact that seven governments have agreed to a thing is sufficient justification, no matter what is done. They would, on that account, condone even the breaking of a contract. Who are the seven Australian Governments that they are sacrosanct? I regret that this Parliament should feel bound to agree to a certain course of action, merely because Mr. Lang, Mr. Hill, the Treasurer, and the Prime Minister came to a certain arrangement in a half secret conclave. If this is to be done as a matter of course, we may as well close this Parliament. Up to the present time the Commonwealth Government, particularly, has not tried to meet the claims of the dissenters. The amount falling due to dissenters in December next is £4,273,872. That means that about £2,250,000 is required, since the Treasurer states that £2,000,000 will be available from the amount that would ordinarily go into the national debt sinking fund. How does the Treasurer, or anybody else, know that the people of Australia are not prepared to find another £2,250,000 to save the honour of this country? In this far-flung continent, with a population of over 6,000,000, would it be impossible to provide an additional £2,250,000 to prevent the faith of the people in government contracts from being destroyed? No Treasurer is justified in giving the people of this country credit for so little honour, by December, 1932, it will be necessary to provide another £2,940,321. The Treasurer said that he would be able to find at least £1,000,000 out of sinking fund payments in order to meet that liability. That means that by December, 1932, it would be necessary to provide £1,900,000 to meet all claims for the redemption of bonds up to that time, and it is not impossible for that money to be obtained. By February, 1933, a further £2,386,211 would have to be found, and I admit that that would be somewhat difficult ; it might not be possible to raise the money until the sinking fund amounts became available after the following June.

Apart from the moral aspect of the matter - the importance of upholding our national honour - let us consider the bill from a purely business viewpoint. I agree with the Leader of the Opposition, who said the other day that the time when we should have to face up to the effect of destroying the faith of the Australian bondholder in the pledged word of the Government was the year 1938. I am confident that the various governments of Australia are taking a wrong stand in repudiating their contracts before they have exhausted every means of honouring their compacts. Since 97 per cent, of the bondholders have agreed to the conversion of their stock, it would be a bad business deal, in my opinion, to detract from the success of that effort by agreeing to the present bill before it had been proved that the claims df dissenters cannot be met.


Mr Gibbons - Should we allow the ultra-selfish bondholders te obtain their last pound of flesh?


Mr GABB - I intend to deal with that aspect of the matter. The Treasurer, moving the second reading of the bill, said that those who had converted had willingly made a sacrifice of income, and, perhaps, had incurred hardship through the deferment of the payment of the principal, and he added that it would be unfair to the overwhelming majority of the bondholders if those who dissented were placed in a more favorable position. I say to those who have converted their stock that the Government is much more unfair in depriving those whose bonds mature in 1938 and 1941 of an opportunity of obtaining their money. [Quorum formed']. It seems to me that this talk about unfairness is hut a cloak for vindictiveness. I gather from the condensed report of the proceedings at the first financial conference in Melbourne that the majority of the Premiers and Treasurers, and even the Prime Minister, had there displayed a vindictive attitude to those bondholders who were expected to dissent.


Mr Martens - Is the honorable mem. her a dissenter?


Mr GABB - No. "What little government stock I hold has been converted, and even an amount of £9 12s. of surplus capital, which I could have drawn in cash, I have allowed to remain in the loan until 1.961. I was strongly tempted to dissent, because I felt indignant that, after entering into a covenant with the Government, it should have gone back on its agreement. The stand taken by the Government with regard to compulsory conversion has given me surprise. I thought that it might tax the interest of dissenting bondholders up to 25 per cent, or 30 per cent., and that would not have been a severe hardship, compared with the reduction of 22£ per cent, in interest, seeing that the dissenting bondholders would have had access to their capital at the agreed dates. We should realize that any display of vindictiveness towards these bondholders will have a boomerang-like effect ; I think that this will be proved in 1988. An analysis of the 491 cases mentioned by the Treasurer in his secondreading speech makes it clear that the persons who dissented did so because of need, rather than greed.


Mr Coleman - What about the two cases of over £1,000,000 each?


Mr GABB - One of them, is the Government Savings Bank of New South Wales. I think that the Treasurer will admit that the dissentients in respect of bonds of over £50,000 were Organizations, not individuals. Of the 491 cases mentioned, 225 were elderly persons whose holdings represented their life savings. It can truthfully be said that 359 of those 491 dissentients were unwilling to convert only because they had need of their money.


Mr Theodore - Those cases will be met under the hardship provisions of this measure.


Mr GABB - -I admit that some of them will be met, and I am glad that provision has been made for them.


Mr Lewis - All needy cases will be met.


Mr GABB - It is not sufficient merely to say that all needy cases will be met. When seven governments are prepared to break their pledges, we are justified in refusing to accept the word of any government. The Treasurer described the action of bondholders in refusing to convert their holdings as the grossest form of selfishness. I admit that some bondholders dissented for selfish reasons; but most of them did so because they needed their money.


Mr Theodore - The 491 cases mentioned were described by me as cases of hardship.


Mr GABB - That may be so ; but the honorable member's speech indicated that he regarded dissent as the grossest form of selfishness.

I am concerned that preference should be given to overseas traders. In the course of the Treasurer's speech, I interjected that, if we paid overseas traders in full, there would be less money available to meet necessitous cases in Australia. The Treasurer described my interjection as a cheap gibe; but, later, he explained that seven governments had agreed to treat the overseas traders in that way. I do not know that a contract made with an overseas trader is more sacred than one made with an Australian bondholder.


Mr Theodore - Provision to meet the cases of overseas investors was included in the Debt Conversion Bill, No. 1, which has already passed this chamber.


Mr GABB - I take it that these moneys represented profits made in Australia, which were invested here because the exchange position made it unprofitable to send it out of Australia.


Mr Theodore - It was overseas money invested in Australia on short terms. The Premiers Conference made special provision for such cases.


Mr GABB - I should like to know whether any of that money represented profits made by overseas companies who invested it in Australia because of the unfavorable exchange rate.


Mr Theodore - Some of it might have come within that category; it was all trade money.


Mr GABB - The money was invested as a business transaction, and there, is, therefore, no justification for giving overseas traders special treatment. I should like to know whether the details of these investments by overseas traders were made out when the first bill was introduced.


Mr Theodore - The matter was left to the Loan Council which, in turn, left it to mc, as chairman. Provision to meet these cases was made in the scheme accepted by the Premiers. Before the conversion scheme was, submitted to this House the banks ascertained the amount of money invested in that way. It was fully understood by the Premiers Conference, before the first bill was introduced, that these amounts should be met.


Mr GABB - Under the old arrangement there would have been payable to overseas traders before the end of 1936 the sum of £3,351,000; they will now receive £3,376,000 by 1935. That is to say, in a shorter period they will receive £25,000 more than they would have received in the ordinary way. I cannot understand the reason for giving them that preference. The figures supplied by the Treasurer are capable of no other in- terpretation than that overseas traders will receive more generous treatment under the new arrangement than they would have received in the ordinary course. Why should they receive £25,000 more than they otherwise would have received while needy persons domiciled in Australia will receiveonly about £6,000,000 of the £12,000,000 to which they are entitled? Parliament will be sadly lacking in a sense of duty if it allows this differential treatment of bondholders. I, for one, shall not remain quiet while such things are contemplated. One wonders whether these overseas traders include the big oil companies and the film combines. Thehonorable member for Warringah (Mr. Parkhill) has charged the present Government with favouring big monopolies. It certainly stands for the big manufacturing monopolies, and it would appear that in this legislation it is favouring certain overseas traders, particularly those from the United States of America, while penalizing Australian bondholders.

The honorable member for Gippsland (Mr. Paterson) seemed to be somewhat mixed-


Mr Martens - He often is.


Mr GABB - No. It would be well if other honorable members put as much into their speeches, and expressed themselves as clearly as does the honorable member for Gippsland. I am not surprised that even he was confused with regard to the amount to be taken from the sinking fund to meet the claims of overseas traders. The position is not yet clear to me, although I have read the Treasurer's speech three times. I should like the Treasurer to say whether £2,000,000 will be taken out of the sinking fund before the 30th June next.


Mr Theodore - Yes, for cases of hardship.


Mr GABB -Does that amount include about £250,000 for overseas traders?


Mr Theodore - No.


Mr GABB - Am I to understand from the Treasurer that the £1,000,000 per annum to be provided to meet necessitous cases in Australia will be separate from any amount set apart for overseas traders ?


Mr Theodore - Yes.


Mr GABB - I am glad to have that assurance, for it will save me from saying one or two hard things which otherwise I would have been compelled to say.

The Treasurer said that he did not know whether I thought that the Government should not make any attempt to meet the special requirements of overseas investors whose money was tied up in government securities. I did not make any such suggestion, and I object to such words being put into my mouth. I am concerned that an effort should be made to meet the amount due to every bondholder as it falls due. In my opinion, nothing can condone default unless an unsuccessful effort has actually been made to meet each case as it arises. It is not a case of my desiring to single out overseas traders for breaches of contract, but that I do not see that a bondholder domiciled in Australia should be placed at any disadvantage compared with a person from overseas who has invested his money in this country. Possibly the bill isno worse thanthe proposal that the honorable member for Bourke propounded to caucus. That scheme would have operated for one yearonly, but there is no doubt that it was renewable. I do not feel justified in voting for the measure until the Government has exhausted every avenue to effect, a settlement. That has not been done. An expression of opinion is not sufficient justification for the Government repudiating its contract. Until the Government proves its inability to meet the position, it is not justified in breaking its solemn contract.







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