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Tuesday, 2 May 1961

Mr HAYLEN (Parkes) .- Mr. Speaker,when this bill was last discussed, the honorable member for Bradfield (Mr. Turner) made no bones about the fact that he opposed the Government's thinking in relation to this measure. He said, if I recall his words correctly and if 1 may quote him without quoting verbatim, that what the honorable member for Reid (Mr. Uren) had said ought to be remembered - that this was a point at which socialism could make an entry into the plannings of the Liberal Party of Australia. I beg to remind the honorable member for Bradfield and the House that the point at which socialism could make such an entry has long since been passed. As a matter of fact, were it not for the socialist moves that the present Government makes, it would not be able to stagger along at the present time. We see another instance of its staggering in this measure. After chopping and changing and deciding on one thing after another, the Government has at last brought in its measure to deal with the investment of moneys by insurance companies and superannuation funds, and the magic 30/20 per cent, formula comes up. It is neither so savage nor so predatory as had been expected. We on this side of the House approve it because, as the honorable member for Melbourne Ports (Mr. Crean) has said, it provides some sort of a method by which these matters can be adjusted.

The Government, by this measure, places itself in an extremely invidious position. That position is hypocritical as well, as has been pointed out by the honorable member for Bradfield. On the one hand, this Government is never done with denouncing socialism but, like the secret drinker, it does not mind having a swig from the bottle when the going gets tough. And for this Government the going has got very tough indeed, particularly in matters of investment. So we have a tiny little dose of controls - just a wee deoch and doris before we gang awa'. And this Government will certainly gang awa' in November or December of this year, or perhaps in March of next year. I say to all Caesars of finance who are concerned about this measure: " Remember what Shakespeare had to say, Beware the Ides of March ' ".

The Government goes on with its proposals in relation to this matter, and so before us we have a curious melange of force and persuasion aimed at the insurance companies. The introduction of this measure represents an eleventh-hour attempt to restore the popularity of government stocks and bonds as an investment. This measure represents an attempt to bring the investment companies, including insurance companies, into line and to get the people, by example, back to gilt-edged investment. That is quite a reasonable thing to do, but it is not attempted very courageously in this bill so far as we on the Opposition side of the House can see. To change the metaphor, the Government has not the moral guts to grasp the nettle firmly.

This measure and its implications were explained to the House by the honorable member for Melbourne Ports with what seemed to me to be flawless logic in an impeccable argument which was stated in one of the best speeches on economics that we have heard in this House. The honorable member must have been listened to with avid interest by the honorable member for Bradfield - a Government supporter - w'ho, at a later stage, as I said in my opening remarks, smote the Government hip and thigh for what he called its incursions into socialism. His speech is there in " Hansard " for us all to read. He made it clear that he did not agree with the Government. He did not agree with talented amateurs like the Treasurer (Mr. Harold Holt) trying to teach the Australian Labour Party how to implement a section of its own policy. He agreed with the Labour Party - at least by implication - that the Treasurer's formula contained in this bill was too little too late. Because of the troubles about us in every aspect of the economy, the Government's contribution to the solution of our problems in terms of this measure which we are now discussing is pathetic. It does not solve the big problem.

Labour's policy on insurance, with particular reference to the question of how much insurance money goes into investment - government and other investment - was declared by the late Mr. Chifley when he introduced the Life Insurance Bill 1945. We have watched this policy very carefully, because it is ancillary to banking policy, and there are very cogent reasons why it should be watched. This policy has been supplemented from time to time by decisions of the federal conference of the Australian Labour Party and decisions of our Economic Planning Council, which is in almost continuous session.

Labour's point with respect to this measure is clear, and we are able to advise the Government as to how far it has fallen short of what should be done. The point that we make here is that this trifling bill does not get to the heart of the insurance and superannuation problem. Many millions of pound's worth of investment funds - the amount is increasing yearly - are floating about the country and making some very peculiar landings indeed, to say the least of it. When wrongly invested, these funds add to inflation. The Treasurer tries to mend the leak in the pipeline of government investment by plugging the hole with soap - soft soap. As a result, he is being criticized by his own side; he has disturbed the insurance companies and he is getting ironic cheers from members of the Australian Labour Party. We say to him: "You do not know how to handle this matter. You ought to turn it over to us. If you do, we shall show you how it ought to be dealt with." And our time will come.

Mr Killen - When?

Mr HAYLEN - I do not forecast the date, but our time will assuredly come.

I return now to the Treasurer. When he is not whipping out his magic formula, he threatens the insurance companies or cajoles them or bribes them with tax rebates and a lot of hyperbole about insurance generally. As I have already said, we believe that this- measure leaves the problem unsolved. The Government's policy is weak. This bill, the purpose of which, technically, is to amend the Income Tax and Social Services Contribution Assessment Act, has a wider scope because it extends to insurance and permits the discussion of that matter. But the bill leaves the big question of investment still in the dark and still not properly declared. What are the reasons for this lack of investment in government securities? Figures have been given and we have had poured on our defenceless heads statistics about the amounts that used to be put into government securities and bonds and the like. Statistics have been used to show that, despite increased earnings and greater capital gains, money is no longer being invested in government securities.

The Opposition's point is that, under this Government's weak policy, the insurance companies have been able to do very much as they like. The fringe organizations which are fed by them and by the trading banks do not come under the control of the Reserve Bank of Australia or under the provisions of the Banking Act. I think that there is a great need for some form of control over the insurance companies throughout Australia. Indeed, by their actions, they are crying out for some sort of control to-day. Of course, anybody who is interested in what I am saying, or who reads my speech in " Hansard " later, may say, " Would the Australian Labour Party resort to nationalization? " We know what happened to the Chifley Government's banking legislation, of course, and we know that there is a parallel here between the insurance companies and the banks; so we do not speak in terms of nationalization. But we do think that control by competition is a very good thing.

I shall tell honorable members why this has much relevance to the issue now before us. Surely every reasonable Australian will agree that there is plenty of room for reform in the insurance field. I believe that the Australian nation should have its own federal insurance authority. Circumstances are literally crying out for such an authority. T believe that we should compete with the private insurance companies for life, fire, marine, accident and other insurance. And we should plough the profits back into the national economy. If we established an authority of the kind that I suggest, we would not have to go cap-in-hand to the insurance companies and ask them for a share in their investment portfolio. We would have earned that investment ourselves on behalf of the people and have made a contribution to the welfare of the national economy by balancing investments. We would have contributed to the investment portfolio, not of private business or of the insurance bloc or the banking bloc, but of the people's government and thereby of the people themselves. If we had our own federal insurance authority, we would not. like Oliver Twist, be asking for another serving of investment porridge. We would be running the country instead of handing it over to the financial houses, the insurance bloc, the banking bloc, and the fringe banking bloc.

We have to do something about the situation, and the government of the day, especially, has to do something about it instead of faltering in its handling of the problem and seeming content to deal with it merely by proposing a trifling amendment of the Income Tax and Social Services Contribution Assessment Act and uttering a few pious platitudes in this House. The Government must face up to the problem as we face up to it. I believe also that we should have our own export insurance corporation to insure cargoes and so on and so save the millions of pounds we lose every year in the payment of invisibles. There is no more badgering problem, no more anxious problem for the Government, and no more newsworthy problem than the problem of the balance of payments. The barometer of the balance of payments goes up and down. I am no economist; I am merely a humble student. However, I can say that if we undertook our own insurance and the ancillaries that go with it we would be able to save many millions of pounds and we would keep the barometer steady by controlling its feverish activity. Much of our exporting and importing is done at set times of the year. If we undertook our own insurance, we would have money available to see us through the flat period and we would not be engaged in the futile activity of paying for invisibles, which wreck a common-sense and planned balance-of-payments scheme.

Mr Crean - There is a lovely new one now, called re-insurance.

Mr HAYLEN - Yes. Here we go from strength to strength; it is insurance and reinsurance, which is like taking in other people's washing. The suggestion 1 have made is one way of solving the badgering problem of balance of payments, which has the Government run ragged. We have not at any time heard anything in this House of any formula that the Government may have to effect some stability in this sphere for the sake of the nation.

Let us look at insurance broadly, because the bill does allow us to consider investments made by insurance companies and superannuation funds. As the honorable member for Melbourne Ports traversed this subject in his speech, I shall follow in his footsteps. The insurance companies today have to be examined in relation not only to their investments but to the whole operation of insurance. If we are to have a modern, intelligent economic plan for the whole of Australia, let us look at the insurance companies and how they operate. Their tariffs are the same, with the exception of some small, quite insignificant companies. The rates for life, fire, accident and other insurance covers are the same. There is no competition, except by State insurance companies.

Here is the tragedy for the Australian workers, in whom I am interested. The solid £1 put into life insurance policies years ago is now paid in inflated money and the policy-holders suffer. The rich insurance companies get richer by this device and the policy-holders get poorer. The citizen who tries to provide for his old age is robbed by inflation. As a result, the Government, milling around seeking some sort of surcease, introduced an amended means test, of which we approved. But these measures are only patches on the whole pattern of finance at the moment, and they should go deeper.

The capital gains of insurance companies, which were mentioned by the honorable member for Melbourne Ports and other honorable members, are not only enormous but notorious. Every second big building in Sydney is owned by an insurance company. These companies are building and so amassing assets from which they make capita] gains. One wonders at how far the Government is getting away from the reality of the situation. As the statistics given by the honorable members for Reid, Melbourne Ports and Blaxland (Mr.

E.   James Harrison), as well as other honorable members on this side of the House, have shown, the insurance companies to-day are rich beyond the dreams of avarice, and they should disgorge their funds to the policy holders - the people from whom they got the money in the first instance - and they should, of course, disgorge their funds to the Commonwealth Government by investment at low interest rates in gilt-edged securities. That is the reason for the bill now before us.

There are many reputable and wellconducted insurance houses in Australia, particularly in the field of life insurance, but we should examine the lunatic fringe of insurance. Has this not been one of the causes of our troubles? The Government has not been game to touch the fringe financial institutions because they are the illegitimate offspring of banks, which openly used them as their stoolies to obtain higher interest rates, and of the insurance companies, which have made immense deposits with the trading banks. Between them the banks and the insurance companies control the activities of these so-called fringe organizations. What has been the result of this mad loss of trusteeship principle and sense and this flight from gilt-edged securities about which the Treasurer spoke? The gilt-edged market should be the field of investment for trustees, insurance companies and others who hold money in trust. The insurance companies, of course, must provide for life policies that are falling due. for payments on accident policies and so on. These are the commitments of insurance companies.

But what happens? We might ask ourselves a question, and it is a pretty valid question. What has happened to the stability of the business of insurance companies? What happened to the Standard Insurance Company Limited, which collapsed after 80 years of business? The life insurance side was sound because it was protected by forward-looking legislation introduced in the days of Chifley and the guarantees associated with it. But this company failed in the investment field. It went after big dividends, and the money thai could have gone into Commonwealth securities as the Government desires was invested by the company in lunatic adventures. The " Delfino " sheep ship was one such venture. One American alone raked in £70,000 for telling the company how to get a shipload of sheep to the United States. How completely stupid! The other activities of this company also failed. Other small groups that have been financed by insurance companies are also collapsing. That is why this bill, weak though it is, is long overdue. The headlines in the press tell the story.

The honorable member for Wide Bay, who is curiously named Bandidt and who is now interjecting, reminds me that I want to talk about the bandits of big business known as the fringe banking organizations. On the question of superannuation, there is another matter to be decided and a few questions to be asked. Why has the drift been away from the old trusteeship idea of putting money into gilt-edged securities and so discharging the obligation to workers whose insurance investments aggregate enormous funds? I asked a question some weeks ago about the very solidly founded and very financial Commonwealth Superannuation Fund. So far J have not been answered. I shall ask my question again. Why did the Commonwealth Superannuation Fund lend £1,000,000 to David Jones Limited at 8 per cent, while thousands of contributors to the fund were seeking money for homes? The contributors have a gnawing need for money for homes; yet £1,000,000 can be taken by the trustees of the fund and lent to a company in Sydney to build a workshop out in the western suburbs! I asked that question and I have not received an answer. As is common in the House, when a relevant question is asked of the Treasurer, honorable members are fobbed off with a little farrago of words. When the answer is examined, we find there is nothing in it. I want to know and the Australian Labour Party wants to know how a superannuation fund of the stability and strength of the Commonwealth Superannuation Fund was trapped into such a phony deal. We have had no answer, but when we get the answer people may be amazed at the circumstances it will reveal.

Wherever we go we find the same story. Small shypoo insurance companies, a number of which are operating in Sydney, are lending money for wildcat ventures and are wrecking the economy. They lend money at 18 per cent., 17 per cent, flat, or anything they like, and are pushing the economy downhill. These companies are formed because of the possibility of obtaining high interest rates on investments. I do not refer to life assurance offices, but to the little companies that are bankrupting themselves as did the Standard Insurance Company Limited in this mad race for money, while more sober business concerns cannot get a penny. The position to-day is such that repercussions are felt in the economy when anybody seeks to channel finance off to his own uses. Because of these things men fall out of work, and the ugly word " depression " comes marching grimly into our consciousness. You cannot describe it in any other way. In the meantime, there are before us indications that the Government has created its own problem by allowing the unrestricted growth of the fringe banking institutions which, as I have said, are the offshoots of banking and insurance, because their directorates are interlocked and their investments are interlocked. Everybody says, " But, it is only this ", and, " It is only that ". Do not believe it! Capitalism is a very big set-up and when these fringe banking organizations get going, they have the blessing of the capitalist system. The trading banks piously tell us over television that, "You can bank anywhere and you will get the same splendid service ". Perhaps you do, but what about these little brigands of the fringe banks begging in the street for every penny that comes along, and they make enormous profits which flow back to them. For instance, the time-payment system is owned by the banks and the insurance companies as are the companies that finance the purchase of motor cars. As the honorable member for Melbourne Ports (Mr. Crean) pointed out, that is where the Treasurer (Mr. Harold Holt) wants to look for the cause of the trouble.

One result of the credit squeeze is that finance, denied normal outlets, oozes out from unofficial and unethical sources while the real founts of money are dried up at their source. Trading and finance take a speculative trend, the Government loses money, loans are under-subscribed and the public cease to invest in government securities. Because of inflation, the members of the public, too, are chasing the mirage of high interest returns. Insurance companies that have money to invest have held out to them the tempting bait to tread the primrose path of dalliance with propositions they would not normally entertain. In addition, the ordinary investor deserts the gilt-edged fields, and sometimes, too, the trustee. It is here that the fringe banker works his nefarious worst on the Government and the community. Security, which should be the keynote of investment, is subverted to greed for the fast buck, the quick quid.

By this means, we get a situation in which, either by persuasion or statute, the Government requires those concerned to do the right thing. It has moved in with this bill, which attempts, in a rather feeble and weak way, to do something about the matter. Under this legislation which we are discussing, certain insurance companies are properly targets for to-day in this matter of financial adjustment. And so are the superannuation funds which are misused for investment purposes, a trend which should be corrected. This is indeed a deep abiding perplexity to the Government, but the Government can remedy the situation if it will only take more vigorous action.

To the Labour Party, it presents no problem. Our policy on insurance is defined. We cannot nationalize the insurance companies at this stage, but they must assuredly submit to some form of control, if only for the reason that the people have made the insurance companies rich, and they are now being financially crucified by their own money. The investment of money by the people in life assurance, in accident insurance premiums and in insurance on motor vehicles and other things has made the companies rich, but, by a curious and most astounding anomaly, the people are now being financially crucified by their own money. The money invested by insurance companies, which aggregates £600.000,000, comes mostly from those who labour, small businessmen and others, and it has never been used for the benefit of the worker or the small businessman. In these days of credit squeeze and other things, control of their own funds has long since passed out of the hands of the people who subscribe these funds to insurance companies. Curiously enough, £20,000,000 is paid by the Commonwealth Savings Bank in interest on the people's money, yet, because of the credit squeeze, banking legislation and bank directives, nothing is being done to provide homes for the people or to bolster small businesses. Money for housing, home improvement or the development of small businesses, finance for the builder, a thousand or so for the struggling trader or manufacturer, cannot be supplied. The primary cause is the credit squeeze, but the investment policies of some insurance companies at least must share the blame.

I know that once this speech appears in " Hansard " the public relations officers of the insurance companies will smother me with statistics about the millions of pounds lent for homes, businesses and so on. Even so, that may not alter the general principle, for it gets back to the old homely phrase - how much have you got? How much will you give? After all, to whom do we owe the first responsibility? Surely to our own country? Is it good business in the long run to say to a man wanting to build or buy a house: " You are one of the lucky ones? We have some money for housing. You may have a loan at 8 per cent, interest flat" - it is 17 per cent, in effect - " but you have also to insure your life with our company in Order to get that house." That is a fantastic position. A married man of 40 years of age, who has children, and who is struggling to get himself out of the rat race for a home, is told by the insurance company: " You are lucky this week. We are releasing a little money for housing." Then the insurance companies impose this condition of a flat rate of 8 per cent, interest, or, as I have said, an effective 17 per cent, interest.

Such a disgusting state of affairs is deserving of the deep social scorn of the nation. It is disgusting to think that these luckless people who are seeking a home have imposed upon them a double liability. A man seeking a home is loaded with an extraordinarily high rate of insurance premium also because of his dire need. You may be sure that the insurance companies do not encourage the young man to do business with them. He is cared for in other ways. They seek the business of the man approaching middle age who is thinking in terms of his responsibility. What a burden to place on a decent citizen who. above all things, is looking for a home for his family! I think that is one of the worst features of the whole system. Members of the Country Party may smile at what I say because they have become so buried in their own egotistical concern about how they can get a quid out of the country that they cannot imagine that there are tragedies in the city. They cannot imagine that these unfortunates who happen to be looking for money, who happen to be battling, become the victims of the sharks. I do not care how high the reputation of the insurance company may be, there is room for a great deal of improvement and reform in the direction I have mentioned. Why. Ned Kelly himself would not get a living in the holdup business in Sydney these days when we see what is happening, when we see such things as the imposition of double charges on a man who wants to build a home!

I come now to the fringe bankers. Dr. Coombs has pointed out in his annual report for 1960 that these fringe institutions are not subject to supervision of their standards of liquidity. We do not know how they are fixed! They are not backed by central bank guarantees of support in the event of a run developing. But they are, nevertheless, encouraged by the trading banks which, in turn, are encouraged by the deposits of insurance companies. So far as the citizen is concerned, these companies are all in the racket. These fringe organizations flout the Banking Act and Reserve Bank control. I do not know whether they can be taken care of under the Banking Act. Recently, T read some reference to this matter in the financial column of the " Sydney Morning Herald ". The " Sydney Morning Herald " is not even sure of the position. These institutions create their own interest rates. They pay 4 per cent, on current accounts while the trading banks pay nothing. These people say they are acknowledging the market. It is in reality only another dirty word - " black market " - made to look legal. But that is merely in passing.

Let me revert now to insurance and the bill before us. Let me deal with the insurance companies which team up with hire-purchase firms in insuring motor cars purchased on terms. To gain some idea of the effects of their business methods, let me quote the case of a young man in my electorate who bought a motor car on hire purchase. He did not read the small print on the contract and went off with his new car only to wake up later to the fact that his insurance premium was fantastically high. Sometimes the insurance premium is nearly twice or three times as high as that fixed by a reputable concern like the National Roads and Motorists Association, which readily comes to mind because of its decency in trading methods. I would like to show honorable members a contract which I have in my possession, under which a young constituent of mine paid a £59 insurance premium on a £700 policy for his car, with little or no rebate for an accident-free year, when the rate around the town for that was about £22 10s.

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