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Wednesday, 27 October 1971
Page: 2598

Mr BURY (Wentworth) - As this debate has gone on we have got further and further away from the Bill and its true purposes. To begin with, I would like to say to the honourable member for Kingsford-Smith (Mr Lionel Bowen) that this Bill as such has nothing whatever to do with foreign interests foreign takeovers or foreign shareholding.

The main objective of this Bill is to prevent any one shareholder acquiring more than 10 per cent of the capital and thus preventing any one group obtaining control. This a very old working principle in the Australian banking system.

The Bank of New South Wales, which is our oldest bank, has had for a very long time in its charter, which is subject I think to the original British legislation, a provision severely curtailing the shares which any one shareholder may acquire or own. The object of this, of course, was to prevent any one shareholder or any one small group obtaining control of a bank. This is done for a very special reason. I refer to the fact that the Banking Act does confer peculiar and special privileges on those who hold banking licences and this carries with it the capacity to create credit and provide cheque facilities. In other words, it does have a very close relationship to the total volume of money extended in Australia. The object of the Bill is to circumscribe this function.

I think that the honourable member for Melbourne Ports (Mr Crean) said earlier that this Bill had the support of the Australian Labor Party, but, of course, this is a very limited Bill. It does not provide for all the other things which various honourable members have tacked on to it and built into this debate. I would like to refer also to the remarks of the honourable member for Mitchell (Mr Irwin) because he seems to think that all finance companies are first cousins to the local pawnbroker and charged interest rates accordingly.

Mr Lionel Bowen (KINGSFORD-SMITH, NEW SOUTH WALES) - He was a bank manager.

Mr BURY - Well, this by 1971 is a very simple view of finance companies and merchant banks which in fact do provide a lot of sophisticated credit facilities. They have found ways and means of financing all kinds of ventures which would not be known in Australia if we had not had some foreign interests coming in and certainly we would not have anything like the sophisticated monetary system that we have now if these companies had not taken root here. I think that this view is a correct one.

I refer to the remarks of the honourable member for Cunningham (Mr Connor) who noted the fact that over recent years the proportion of finance and loans made by the banking system relative to other institutions had steadily declined from about 70 per cent in the early 1950s down to less than 50 per cent at present, lt is true that the first impact of this change was probably to lead to a deterioration in the quality of credit granted. Inexperienced institutions collected money, began lending, made losses and so forth, compared with the long established experience of the banks themselves. But these institutions have contributed a great deal towards bringing the system up to date and ensuring that in fact our financial system kept well abreast of world standards. The honourable member for KingsfordSmith (Mr Lionel Bowen) worked General Motors into the subject. It is worth noting, particularly after the remarks of the honourable member for Cunningham, that it was Mr Chifley himself who determined the arrangements under which General Motors has operated in this country.

Mr Lionel Bowen (KINGSFORD-SMITH, NEW SOUTH WALES) - The honourable member has been prompted but that does not make any difference.

Mr BURY - Well, he made the arrangements and he did so with considerable foresight because we now have a company which contributes more to our foreign exchange receipts every year than it takes out of the country and in fact a large proportion of its top personnel are Australian. The honourable member for KingsfordSmith seemed to have the idea that research and everything else were done by American citizens. I would suggest that if the honourable member were to go to some of the General Motors research institutes, the personnel there would be pleased to show him around. The honourable member could see in fact who is there, what kind of people they are and what nationality they are. To bring General Motors into this debate is like introducing a red herring. Such is irrelevant to this issue which, as I said, has nothing to do really with foreign investment.

This Bill is aimed at limiting a total shareholding in any bank. The reason for this is quite different. Such a move wi!'; prevent takeovers; it will prevent one group from getting together, acquiring the assets of a bank and using them for its financial purposes. This is an important aim in itself. The ownership of a bank by one shareholder is limited. Of course, the possibility of further legislation may now come into view as far as the merchant banking and finance community is concerned, after the Concrete Pipes decision. But this is a subject which has been long under close scrutiny and study by experts in our Reserve Bank and the Treasury. It is a matter which has been the subject of a great deal of expert thought and consideration.

In this connection it is worth mentioning - and I am sure that the honourable member for Melbourne Ports has probably seen this already - that Britain has been confronted with very much the same problem - that is the problem of the banks financing a shrinking sector of the community and losing ground continually to other financial institutions. Britain has recently established a highly competitive system to restore full-blooded competition between the banks composing the banking system and has also made new arrangements so that the banks are in direct and continuous competition with all the other finance companies and credit institutions. I would suggest to the honourable member for KingsfordSmith that he would find it fruitful to study these examples, particularly if he has in mind bringing forward any legislative changes because there are many possibilities coming into view in a field which has operated virtually on one system or with one mode with small modifications for 25 years.

Again, far be it from me to throw any doubt on Mr Chifley's great understanding of the banking system, banks, what went on there, industry generally and how to handle the situation. I wish that this part of his wisdom had been transmitted to some of his successors. However, honourable members opposite may remember that in applying the Labor principles on banking he put himself and his Party out of office and it has stayed there for a very long time.

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