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Tuesday, 2 May 1961


Mr BEAZLEY (Fremantle) .- Mr. Speaker,this measure is a consequence of inflation. This afternoon, one after another of the Government's back-benchers quoted one statistic or another in justification of this bill in complete ignorance of the tremendous force with which each particular fact cited struck at the Government's prestige. Government supporters have directed our attention to the fact that although the investible funds of the insurance companies have increased by £562.000,000 over the last ten years, only £4,000,000 of this has been invested in Commonwealth securities. Surely that indicates that the people who make the decisions under a system of free enterprise in which they have the power of free choice have looked soberly at the current investment value of Commonwealth bonds which were quite a good investment in the days of the Chifley Government. The people who make the choice under the system of free enterprise now condemn Commonwealth bonds.


Mr Fox - That is a little different from what we have been told.


Mr BEAZLEY - That is the decision made by the insurance companies. In the last ten years, they have not considered Commonwealth bonds to be a desirable investment. Does the honorable member dispute that? The fact that in ten years the insurance companies have invested only £4,000,000 of £562,000,000 of investible funds in Commonwealth securities indicates that these companies do not consider those securities to be a good investment.


Mr Bandidt - That is because higher interest rates can be obtained from other investments.


Mr BEAZLEY - No. There are many reasons other than that, and the honorable member knows it.


Mr Anderson - What other reasons are there?


Mr BEAZLEY - Here is one. If you lent £100 to the Commonwealth Government in 1945, you lent about 24 weeks of the basic wage of £4 5s. What do you get back now - sixteen years later - when those bonds fall due? You get back about seven weeks of the present basic wage. Do Government supporters think that any intelligent investor will go on investing funds subscribed to insurance companies in Commonwealth securities if the Government does not arrest inflation? Of course, he will not. Commonwealth securities are not maintaining their face value. But let us forget about their face value. The process of inflation means that the Government has dishonoured its pledge to the people who have invested in Commonwealth bonds, and therefore such investment is no longer sensible.

Earlier speakers - I refer particularly to the honorable member for Higinbotham (Mr. Chipp) - spoke about the position prewar, when the insurance companies invested up to 50 per cent, of their investible funds in Commonwealth bonds. By 1949, the proportion had reached 68 per cent., but I leave out that year, because war-time controls and other factors operated in the intervening years. Commonwealth bonds were the only thing in which insurance companies could invest during World War

II.   The situation was different in 1939. From 1926 to 1939, the basic wage remained stable at about £4 5s. a week. A person who lent money to the Commonwealth Government in 1926 received back substantially the same amount in 1941. So, quite clearly, the attractiveness of Commonwealth bonds depends on whether you can hold the currency. If you cannot hold the currency, they are not a good investment.

There is a great suspicion that all governments throughout the world use inflation as a device for getting out of debt. Whether or not they have that intention, in point of fact they pay their debts by inflationary methods, and have done so in the immediate post-war years.

The original proposals foreshadowed by the Government were proposals of compulsion on the insurance companies. Had the Government carried through those proposals, we would have had a form of capital issues control applying only to the insurance companies, lt would have been very interesting to have seen the Government do this, because the Commonwealth has constitutional power to legislate with respect to insurance; it has not normally the constitutional power to effect capital issues control. If the Government had applied capital issues control to insurance companies, it would have admitted in principle that this ought to be done in other sectors - of the economy. The Government has stepped back from applying these controls and instead is offering the inducement of tax rebates to insurance companies which invest in Commonwealth bonds.

It is not a question of supporting or opposing this legislation. It is a question of honestly facing what has caused it. If the Government is honest, it will admit that the cause of this legislation is the failure over ten or twelve years to arrest the processes of inflation.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clauses 1 and 2 - by leave - taken together, and agreed to.

Clause 3 (Definitions).







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