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Thursday, 8 August 1946

Mr BURKE (Perth) .- The ability and integrity of the Treasurer (Mr. Chifley) require no defence against the imputations of the honorable member for' Deakin (Mr. Hutchinson). The honorable member did a grave injustice to my leader when he cast' an unwarranted reflection upon him, and he deserves to be reproved for it. In ability, he is not able to hold a candle to this great and outstanding Australian.

The Leader of the Australian Country party (Mr. Fadden) used a method of financial reasoning which he has from time to time adopted. His- contentions revealed a lack of elementary knowledge of financial procedure, or an unwillingness honestly to propound the views in which he believes. He said that" this money should be invested in consolidated stock, and not in what he disparagingly referred to as I O U's, namely, treasury-bills. Of course, the right honorable gentleman knows that the reason for the low rate of interest on treasury-bills is that these balances are virtually cash. The factors that decide interest rates are, first, the security behind the promise to pay, and secondly, the knowledge that if the money is required from time to time, the full amount of the investment may be obtained ' without loss or brokerage fees in cashing the security. Based on those two procedures the interest rate of 1 per cent, on treasury-bills compares very favorably, as evidenced by the willingness of the Commonwealth Bank and the private trading banks to accept this security, with Commonwealth ordi- nary loans for periods of five, ten, or fifteen years, and even longer. The security behind both classes of' stock is the same. The reason why the' interest rate on treasury-bills is comparatively low is that the owner of funds loses control of the money for a purely limited period. The rate of interest is higher, on other Government securities, because the owner of the money or the holder and controller of a fund loses control of it for' a much longer period.' For these reasons, the rate of 1 per cent, on treasurybills is as valuable a return as a slightly higher rate paid for a long-term security. Certain other considerations arise. One person may invest in consolidated stock because he 'wants the interest. Another person may- desire to use the principal as and when the need arises. If the investor wants to use the interest only, the original investment should be made for a long term at the higher rate of interest. If the investor is uncertain as to when and how the principal will be required, he naturally will invest in a security which, does not tie up his money for a long period, or involve any 'sacrifice of principal in the cashing of the security. Therefore, the argument of the right honorable gentle- man is completely hollow, displaying, not perhaps a lack of knowledge, but, more reprehensibly, an unwillingness to support openly a principle in which he believes. He has attempted to deceive the. people about what he knows to be the actual facts. From time to time, the right honorable gentleman has said that the National Welfare Fund, the balances of which are invested in treasury-bills, is bankrupt. Presumably, if the funds provided for in that measure are invested in treasury-bills) the right honorable gentleman will once again say that the fund is bankrupt. It is true that he interjected on one occasion when I was speaking, that he referred to the fund being bankrupt of ready cash. That con tention is no more justifiable or valid, because if investment in treasury-bills, the evidence of which . holding are the treasury-bills themselves, is proof of bankruptcy either of cash or assets, by the same reasoning, the person who holds a. deposit in a bank, the only evidence of which is a hank pass-book and the entry therein; is also bankrupt of ready cash and principal. If the holding of treasury-bills is evidence of bankruptcy or even of an immediate lack of cash, ] would be content to be bankrupt to the extent of an unlimited volume of treasurybills. '

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