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Wednesday, 27 October 1971
Page: 2594


Mr Lionel Bowen (KINGSFORD-SMITH, NEW SOUTH WALES) - I want to make some comments about the Bill itself, but before doing so I should like to make a few remarks concerning the speech just made by the honourable member for Mitchell (Mr Irwin). He deplored high interest rates, and I agree with him. I would remind him, however, that his own leader has suggested that increasing interest rates is one method of countering inflation. I think that this has been one of the greatest errors made in assessing the present economic position.

This Bill was introduced some time ago. The second reading speech did not say very much about what was the defect which we were trying to correct. It indicated that some foreign interests may be anxious to acquire existing Australian banks and that the introduction of this piece of legislation would be one effective way to prevent them from doing so. It appears that this legislation is related to banks incorporated in Australia, yet I am advised that one of the major banks, namely the Australia and New Zealand Banking Group Ltd, is incorporated in the United Kingdom and, therefore, on the face of it would not be subject to control. Further, I understand that this bank is 90 per cent foreign owned so there would be little chance of doing anything with one of the major banks now operating in Australia. I understand also, not from the Minister's second reading speech but from making some inquiries, that a Queensland bank was about to be the subject of a take-over. This bank apparently is a co-operative or permanent building and banking company in Brisbane. I am wondering why the Government has been motivated suddenly to do something to protect the bank in question. Could it be related directly to the fact that there may be some relationship between the directors of the Commonwealth Banking Corporation and someone with this bank in Queensland? This seems highly likely.

Apparently the only motivation - the only reason - for the Government introducing into the national Parliament a Bill to protect that bank is that there may be some affiliation between the directors of the Commonwealth Banking Corporation and that Queensland bank. Of course, there is a parallel for this case because honourable members will recall that the Government was motivated, during the time of the previous Prime Minister, to do something about the Mutual Life and Citizens' Assurance Company Ltd. Why? Because there was an interlocking directorship between the Commonwealth Banking Corporation and the Mutual Life and Citizens' Assurance Company. So we have the position that the Government perhaps is motivated more by personalities than by the problems of a situation. One wonders whether if there had not been this interlocking directorship between the MLC and the Commonwealth Banking Corporation anything would have been done at all. In other words could, for example, Sir Roland Wilson be the one person who can encourage this sort of legislation, because he is the gentleman who happens to be on all of the boards in question? Perhaps this is not altogether a fair comment because I want to applaud the Government for the extent it is trying to retain Australian control of Australian assets. However when we examine the legislation before us it says merely that a person shall not have an interest in one or more voting shares if the nominal value of that share is not less than 10 per cent of the aggregate of the nominal amounts of all the voting shares of the bank.

The Canadian legislation is particularly appropriate. It is comprehensive regarding shareholders. That legislation would run rings around our banking legislation. Our legislation does not contain the detail of the Canadian legislation which provides clearly that at least three-quarters of the directors of a bank shall be Canadians who shall be ordinarily resident in Canada. The Canadian legislation virtually limits any foreign domination or control to some 20 per cent at the most. Would it not be appropriate for us to make similar provision in our legislation? While there is a limitation of 10 per cent with respect to voting shares there could be many 10 per cents and overall control could be lost to Australia. As I have said, control has been lost in respect of the ANZ Bank. That bank has many foreign interests. It is mixed up in merchant banking - a situation which has been deplored by previous speakers. It sold some of its major interests to the American National Bank and it now has, I think, a wholly owned subsidiary, ESANDA Ltd. 1 should think that as a result of the Rocla pipes case the Government should look urgently at merchant banking because what the Government is trying to achieve is Australian control of Australian assets and such control should apply to merchant banks whose assets are substantial. Their interest rates are high and they have extensive foreign investment within their structure. The Commercial and General Acceptance Limited is related directly to the Commercial Banking Company of Sydney Limited. CAGA has borrowed some $ 10.4m from the Bank of America and representatives of that bank are now on the board of CAGA. According to this morning's Press the Americans are now participating in Australian uranium through Queensland Mines Limited. Foreign domination is not related only to money but applies also to our assets. Our assets are coming under foreign control because foreign investers have capital which they make available. We have ample capital in Australia and the labour resources to develop our assets ourselves. We do not have to go into pawn or to say that foreign investment is in the interests of Australia. As 1 have mentioned, the Canadians designed their legislation deliberately to prevent American take-over of their financial structure, and the Canadians have been able to prosper. The Japanese, whom we defeated not so long ago and who were virtually on their knees, also have restrictions which protect their assets. With respect to banking, foreign control in Japan is limited to a 15 per cent total. The Australian Government does not seem to be dealing effectively with the situation in this legislation.

While this legislation has some merit in what it is seeking to achieve, it should be redrafted immediately so that in respect of our banking structure, including the merchant banks, it provides that Australia shall do the same as other countries and permit only a 20 per cent foreign investment in it. I repeat that many of the profits made by the merchant banks or hire purchase companies are related to what might be termed the non-essential fringe position. Profits are being made from recently subdivided land. Because land is recently subdivided and might not have a high inherent value people are obliged to go to finance companies to borrow money which bears an interest rate of 13 per cent. The finance companies secure money from the Australian loan market. They compete for Australian loan raisings, so they are borrowing money from the Australian people at 7, 8 or 9 per cent and lending it back to Australians at 13 or 14 per cent on an annual basis. This is where these companies gain their profits.

A considerable sum is channelled into the motor vehicle industry, over which Australia has no control. It has been said quite advisedly that there will be no Australian owned motor industry in the next 100 years because it is now owned by the British and the Americans. This is a serious problem for Australia. It is important that our best brains, engineering and otherwise, should be engaged actively in industries like the motor industry because it has some direct relativity to defence and the type of research involved in defence. The Australian Government virtually encouraged General Motors-Holden's Pty

Limited to commence operations in Australia and money was made available from the Commonwealth Bank for that purpose. General Motors did not put anything into it. General Motors established here on the basis of advice from the Australian Government and that company has no Australian participation in it. However, there is considerable Australian participation in the profits of General Motors-Holden's Pty Limited through the merchant banks or other banking structures in Australia. This participation is not through normal trading operations but through back door subsidiaries like the Industrial Acceptance Corporation, ESANDA and CAGA. Banks are involved in these subsidiaries. In many other merchant banking associations, overseas banking structures are involved. The Scottish Bank, which comes to mind, owns 20 per cent of Associated Securities Limited which is making enormous profits. But on what assets is this company lending?

The Japanese have an intelligent appraisal of money. They say: 'Why do you want to bring money into our country? Prove first that you are interested in the basic industries and, secondly, that your investment is in the interests of the Japanese economy or that it will encourage employment'. These are the type of tests which should be applied to anybody trying to establish an investment position. The American Government is now providing incentives to American companies. Provided those companies increase production in America and not in their overseas concerns they gain a benefit of some 7 per cent. This must mean that if there is foreign control, production in the home country might well decline because of foreign domination. This is a point which has been made in previous speeches in this House concerning the danger of foreign control which does not necessarily encourage the best development of an asset. It could well retard it in favour of the overseas investment. I understand, for example, that we have a French bank involved in some ventures that might well be related to oil exploration in Western Australia. The French bank is the State owned bank. We have the incredible situation of saying that the French Government, through our banking structure, can drill for oil in Western Australia and we will subsidise it under our oil exploration scheme. There would be no other country in the world involved in this sort of nonsense.

The Australian people expect the Australian Government to retain control of our assets and development for the benefit of Australia. From a party point of view, we have differences of opinion on how best that should be done, but we agree that it should be done in the best interests of Australia. This has not happened and I am fearful that this piece' of amending legislation will only tinker with the situation. It does not say that in the banking structure - I would like to incorporate the merchant banking structure - there shall be 80 per cent Australian control. It should say it. This suggestion that one person may have an interest of less than 10 per cent in a bank does not appear to bridge the wide gap, because if there is more than one person with nearly 10 per cent interest there may be 50 per cent or 60 per cent control by a few people. That is what we want to say. In our own basic industries, as has been elaborated, we have lost control to the extent of about 80 per cent. We should be getting back into those industries. We should be acquiring these assets. This is an opportunity to do it through the banking structure, because with the assets that the banks control, if they are Australian orientated and Australian dominated, the banks would be motivated to get these other assets under Australian control; that is, the banking structure could well be advancing money to the entrepreneurs in mining exploration and other fields to develop Australian industries. If an Australian wanted to establish a motor car industry he should be given top priority and the money could well be advanced through the banking structure. But that does not happen now, nor will it ever happen under the present system. Could we imagine, for example, a director of a bank in which there is some definite foreign interest, such as an American controlling interest, encouraging a rival to General MotorsHolden's Ltd? It is just not on. It will not happen.

So when we look through this problem of banking and the problem of directorships we see that the interlocking structure is so great that it virtually becomes a very personal problem. That great journal the Sydney Morning Herald' built its present new edifice through the interlocking structure of the Bank of New South Wales and the Australian Mutual Provident Society. It would have had no opportunity to do so if it were not for this combined directorship. lt is all very well for the 'Sydney Morning Herald' to say how fair that was. It would get that money because of a family relationship through the board of directors and in no other way. It would not follow that any other industry would get the same amount of money from the Bank of New South Wales, because the 'Sydney Morning Herald' got a special concession. All the policy holders in the AMP would be interested in what happens to their money because it is given out by directors and not necessarily to the general advantage of all the policy holders.

It is important that we now have a look at what is done. I happened to see recently a large advertisement in the 'Australian Financial Review'. It included the rather interesting statement that Air Lease International Finance was offering 20 million 9 per cent guaranteed bonds and 15 million 84- per cent guaranteed notes. It then recited the banks that are interested in the concern. They are mainly British but include a large number of others, mainly European. Not one Australian bank is mentioned in that advertisement. One wonders what Air Lease International is going to do. I would hazard a guess. It is going to compete effectively with Qantas Airways Limited. Here we are being advised that all these securities have been sold. This announcement appears as a matter of record only. That is the sort of thing that is happening now. That advertisement appeared in the 'Australian Financial Review' comparatively recently.

In the whole monetary structure we seem to be out in the cold. We should be right in the middle of Australian development. One would like to see this piece of legislation brought up to date in line with the Canadian position. This would need a much more extensive amendment to the Act than is envisaged in this Bill. One would hope that there could be, we might as well say, another committee of this House to have a look at the banking structure as it is, including the merchant banks, see who are the directors, see what companies they are interested in and whether they are actively interested in the promo tion of all things that are necessary for Australian development. We have now large interests coming into the Pacific from Japan, France and America, and we are holding the minority position. Our banks, if they are involved at all, are involved to the extent of about 25 per cent. They have no greater involvement. So it becomes a real problem for this country in that if there are such massive resources available in the way of sheer money it can weil affect the development in a number of fields, whether it is oil, minerals or finance. It affects every Australian when the money going overseas in the form of profits becomes more than the amount of foreign investment coming in. This must follow surely, because we now find ourselves on the wrong end of the stick in regard to this magic term 'capital inflow'. If we look at it, capital inflow is never enormous. In fact the present Budget provides for a surplus well above the capital inflow in any year.

It is important that Australia retains its assets and that through the Government if necessary, and certainly through the banking structure, we develop these assets to the advantage of Australia. I think it is important, in view of the decision in the concrete pipes case, that we legislate immediately to control Australian interests in the merchant banking field. They are financial corporations trading within Australia. They are already incorporated. This can be done. Secondly I would like to think that all banks retain Australian interests. The one bank that does not do so at the moment is the Australian and New Zealand Bank. We should have a good look at that, because the more we look at the United Kingdom the more we see that it is no longer interested in. Australia. If we read the recent speech by the Prime Minister of the United Kingdom addressing his own party on the advantages to the Government that he is leading of Britain's entry into the European Common Market we see that Australia does not get one mention. We are not even mentioned in a speech of about 20 pages. There is no interest in us at all.

Let us face up to the facts of where we are heading. We are in a rather interesting situation in the South East Asian complex. We have a large land mass; we have our population mainly on the seaboard; we have problems in all of our industries; our work force is highly skilled if it is properly motivated. Yet when we look at our banking structure we find that in many cases the banks are owned, directly or indirectly, by people who are not Australians. We must protect our interests in this respect. While it is all very well to say that there have been limitations in the past and that we may not have been able to deal with the merchant banking situation, we can deal with it now. I would like to see this Bill taken back and redrafted. I would like to think that whenever a second reading speech is made we are given full information as to what we are aiming at. It should have been said in the second reading speech that we are aiming at a particular bank in Brisbane and it could have been said perhaps in all honesty that the reason we are doing this is that somebody has advised us that something is going to happen. But what about all the other companies that have been taken over because nobody has ever bothered to look at what has happened to their assets? We had a splendid example recently of a so-called defaulting situation where we have a receiver selling the assets of a company, and in every case they are bought by the American interests. It is then excused on the basis that it has to be done because we had a receivership and we had to act to the benefit of the creditors. It is a joke.

Let us face up to it. If the facts are that there is to be no foreign domination, there should be no foreign domination even if the creditors are to lose a little. But let us not put it on the basis that because it is a receivership sale, as happened recently with Mineral Securities of Australia Ltd, this must be tolerated. We have now lost control of uranium and other resources. So the whole situation comes back to this: Redraft the legislation on the Canadian principle. It can be done. The amendment to the Act has to be much more extensive than is envisaged in this Bill. The Bill is innocuous. It is of no real value. It should not be opposed, because it is trying to do something; but it will not achieve a solution.

Mr DEPUTY SPEAKER (Mr Cope)Order!The honourable member's time has expired.







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