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Wednesday, 27 October 1971
Page: 2600

Mr GRASSBY (Riverina) - No more important piece of legislation than this Bill has come before us recently, not because the legislation itself has any great purport but because of the implications of the banking system for the whole of Australia. The honourable member for Wentworth (Mr Bury), who just resumed his seat, made a very unconvincing defence of foreign investment in, and foreign exploitation of, Australia. He could perhaps have informed himself of the profitability of General Motors-Holden's Ltd. It is interesting to note that Professor C. P. Kindleberger analysed the profitability of GMH and came up with the fact that that company has earned on its original investment 560 per cent. In fact, there was such a great outcry in the 1950s about the high level of profitability that GMH decided that it had better buy out the Australians who remained, or the small group which was associated with the company. GMH did buy them out. It transformed itself into a private company and now is under no obligation to publish its accounts. I do not know whether the honourable member and the Government as a whole defend that situation but we on this side of the House do not.

It is 34 years since we had a royal commission into banking in our country and I make a plea this afternoon that members on all sides of the Parliament consider the need for a further royal commission into banking. I would hope that if such a royal commission were established one of its members might be the Prime Minister (Mr McMahon), who seems to be completely at sea about legislation governing banking and his own responsibility in it. The Prime Minister indicated in this House on 30th September that the Government, for example, had no right to dictate to the Reserve Bank of Australia how it should act. In fact, he said it would be either imprudent or impudent - I was not sure of which from his diction - of the Government to attempt to do so.

Apparently it escaped his attention that, under section 11 of the Reserve Bank Act, the Federal Executive Council may, by order, determine the policy to be adopted by the bank. So, I suggest that this is a good time in the history of the country to examine the whole ramifications of bank ing. As my good friends, the honourable members for Melbourne Ports (Mr Crean) and Kingsford-Smith (Mr Lionel Bowen) pointed out, while we welcome this Bill, it is a mere token. Something better and more effective should be done.

The honourable member who has just resumed his seat apparently did not listen to his successor as Treasurer when he said that the whole purpose of the Bill 'was to ensure that the Commonwealth has adequate power to control the acquisition by local or overseas interests of large shareholdings in banks incorporated in Australia'. We are looking at overseas control of banking, but we have an incredible situation in our country; we have a closed shop in banking. It is not possible for somebody to come in and open a bank and charge the normal interest rates prevailing at the time, but it is possible for a foreign interest to come in and buy a hire purchase company and charge anything up to 24 per cent and, in some cases, even 36 per cent. According to the Government, this is perfectly logical and right.

Mr James - It is legalised robbery.

Mr GRASSBY - As my honourable friend says, as a result of the present policy thousands of Australians are now being charged excessive interest rates. Each week, in fact, Mrs Australia in every town and city in the nation is being misled. She is being given wrong or inadequate information as to what she will be paying in interest. In some instances, salesmen have made their ploy based on effective interest rates of 36.4 per cent. Customers are being bamboozled. It is common knowledge and factual that some goods are being sold at an effective interest rate of 24.4 per cent. One also finds that cars are being peddled, particularly to young people, at an effective interest of 36 per cent. Australia is third in the world in relation to hire purchase debts. In fact, we owe SI 75 a head. In comparison, the British owe $50 a head and most Europeans owe $40 or $50 a head. The interesting thing is that we do not owe this money to companies that are substantially under our own control but we are in hock to overseas interest to this extent. Again, it might be said 'How did we get to this stage of financial bondage?' The policy of the Government has led us very clearly to exactly that position.

This Bill purports to exercise some control, but let us see what the Bill does in relation to the major foreign banking house that we already have in this country. Let us examine the scope of the Bill, following along the very good and sound remarks of the honourable member for Kingsford-Smith, as it relates to the Australia and New Zealand Banking Group Ltd. The object of this Bill, as stated by the Treasurer (Mr Snedden) in his second reading speech, is to provide a method of exercising control over the possession by local or overseas interests of substantial interests in shares in banks incorporated in Australia. The Australia and New Zealand Banking Group Ltd is incorporated in England. The Bill does not provide a method whereby the Commonwealth Government can exercise effective control over the ownership of this bank. The fact that the ANZ banking group is incorporated in England constitutes a significant weakness in the coverage of the legislation. In fact, the Bill provides support for the Government's policy only in respect of banks incorporated in Australia, and not of all existing banks.

Let us have a look at the importance of this group. In May 1971, the ANZ banking group held 19.8 per cent of the total deposits held by all trading banks. This amounted to $1,47 6m. The Australia and New Zealand Savings Bank Ltd held 9.3 per cent or $70 lm of depositors' balances with all savings banks. On the basis of total deposits held, the ANZ banking group is the third largest trading bank :n Australia. It follows the Bank of New South Wales and the Commonwealth Trading Bank of Australia. It is evident that the ANZ banking group is one of the most important of the existing banks referred to in the legislation, yet it is beyond the scope of the present Bill for the Government to exercise effective control over the ownership of this bank. Who owns it? The honourable member for Kingsford-Smith posed this question. The facts are that the vast majority of shares in the ANZ banking group are held by residents of the United Kingdom. The proportion held by Australians is less than 10 per cent and a small proportion is probably held in New Zealand. So, there is a situation in which the third largest sector of the banking industry is just not covered by a Bill that has been brought into this Parliament and which purports to do something that in fact it cannot do. I suggest that the Minister representing the Treasurer or the Treasurer himself should address himself to this great inadequacy.

Mr Peacock - We already have and 1 will explain that to you later.

Mr GRASSBY - I hope that you will. I referred earlier in my remarks to the fact that it is possible for any foreign interest to come into Australia and go into the money business, provided that it does rot go into what is known as the traditional banking business. It has been the policy of the Commonwealth Government since 1945 not to grant overseas interests authority to carry on banking business in Australia, but in other sectors of the capital market, such as finance companies, which I have mentioned, and merchant banking institutions, mentioned by my colleague from Kingsford-Smith, there has been substantial foreign investment and I think the House should take particular note of what has happened in this field.

A very comprehensive analysis of foreign investment in the non-bank sector of the capital market has been made by Mr M. W. Acheson, the deputy representative of the Bankers Trust Company of New York. I name my authority in case honourable members opposite felt that it came from one of our erudite Australian Labor Party committees and, therefore, might be a little biased. His main findings from the survey can be summarised in this way: In the past 2 or 3 years, the flood of foreign banks into Australia has constituted a veritable invasion. Ninety-five foreign banking institutions have started banking in Australia. Twelve have only representative offices, another 27 have representative offices plus an equity participation in one or more local financial institutions and the 83 foreign banks with local investments have a total of 102 investments in 52 separate financial institutions. More than 60 per cent of the merchant banks and other financial institutions in which there are overseas interests have a local equity content equal to or greater than 50 per cent.

The rate of foreign investment in this sector of the capital market perhaps could slow down because they have already picked the plums. But let us be quite clear; the invasion has been strong and definite and it is now an influence which could well be inimical to our own independent economy. The changing structure of the capital market in relation to the increase in assets should be noted. It will be found that the increase in assets of financial institutions between 1960 and 1969 amounted to 121 per cent. When one considers the trading banks, it will be found that their assets have increased by 88 per cent, while instalment finance companies have increased their assets by 155 per cent. The assets of development finance companies have increased tenfold in that period.

Sitting suspended from 5.59 to 8 p.m.

Mr GRASSBY - Returning to what I was saying before the suspension of the sitting, it is evident that finance companies and merchant banks - development finance companies - have expanded at a faster rate than the capital market as a whole, and in particular the banks. It is likely that more recent statistics will reveal a further substantial expansion in these 2 sectors, especially in the merchant banks. I stressed earlier that there had been a big inflow of money and a rapid expansion of these merchant banks and an increasing importance of foreign banks generally. There has been - and rightly so - further calls from honourable members on this side for direct control of non-bank financial institutions. The comments of Dr Harold Bell, economic adviser to the Australian Mutual Providend Society, are quite pertinent in this regard. He said:

Although Australia has not traditionally been in the international circuit of flows of 'hot money', our money and capital markets have become increasingly well known to foreign investors and it seems likely that at least some of the currently heavy influx of overseas funds may be of a shortterm or speculative type. As foreign banking and investment groups establish here so, too, is the element of short-term capital inflow likely to be encouraged.

This is added reason why there is a case for looking again at the definition of banking business and the exercise of some closer oversight of those banking type institutions not at present covered by the banking legislation.

That is a responsible comment by an important economic voice in our community. I repeat the plea that I made before dinner for a further royal commission into all aspects of banking, fringe banking and associated financial institutions. In the 34 years since the last royal commission the entire financial structure has changed. It can be truly said these days that the only people who care about Australia and those who live here are the people themselves. They are speaking more eloquently than ever before and they are asking questions that the Government has a duty to answer. It has been suggested that the control which is necessary over the ANZ banking group - to which I referred earlier - is adequate under another Act. I understand that the Minister will spell out the Government's position and attitude on this. But this does not and cannot justify a position where there is a closed shop in Australia for one section of money business and a completely open door for all others.

I repeat: What possible justification in sense or community interest can there be in a system which allows a foreign bank to buy up a hire purchase firm and to charge effective interest rates of over 20 per cent while denying the same bank the opportunity to operate at the normal rate of interest? What kind of philosophy is this? What is the justification for it? Why have the Australian people been allowed to go into pawn to moneylenders outside the country at rates which they failed to appreciate in the first instance? It is time that we brought the Australian economy back home to serve the people here. It is time that we followed the example of our Canadian cousins and the recommendations of the Canadian House of Commons Committee on External Affairs which stated that Canadians should control at least 51 per cent of Canadian companies, whether in the financial or in the development sphere.

The inflow of hot money into Australia has brought with it the inflation with which the Government says it is concerned. The Budget figures tell their own story. More than $ 1,000m has been used to build city skyscrapers, city blocks with luxury offices, but only $300m has been used for the construction of new factories. This is a misapplication of resources on a tremendous scale. Part of this misapplication is assisted by the inflow of hot money - beyond the Government's ken or care. For some years now the message has been clear. Speculative money coming into Australia has distorted the economy and it has been a major factor in our inflation. It has tied us more securely than ever before to the multi-national managements which make the decisions on the maximisation of global profits and not the community good or the national advancement. The royal commission on Canada's economic prospects, set up in 19S5, pinpointed the essential dilemma. This is what that commission found: . . instalment finance companies' policies in times of inflationary pressures may be directly opposite to those which the central bank is trying to promote through the operations of the commercial banks.

How much more impossible can the situation become when the companies are controlled outside this nation and are beyond the scope of any existing legislation? This is the position at the present time. France, Britain and Japan control very strictly foreign inflow and foreign speculation in relation to their own economies. At a time when these developed nations and others are probing the ramifications of the multinational corporation and trying to understand them we in Australia, either in this Parliament or outside it, have not paid sufficient attention to this matter. We have not even attempted to understand the ramifications of multi-national corporations. Yet we have a situation where our own standards of living have slipped and where control of the economy has slipped and is slipping further away from us.

The Prime Minister (Mr McMahon) has left Australia tonight on a trip overseas. The questions being asked in every part of Australia are: 'Has he gone to sell another bit of the country? Has he gone to sell another bit of the farm or another bit of the mine?'

Mr Giles - What nonsense.

Mr GRASSBY - 'What nonsense', the honourable member says. I might say that that is the essential question at this time. What has he gone for? Why has he gone? What is he going to sell of our national assets? The whole roll call of our economy illustrates how much has already been eroded. If honourable members opposite think that they will have any significance in an economy totally dictated from outside this nation then they are living in the world of Alice in Wonderland. When they come out of the rabbit burrow in which they now live they will find that it is too late to make any effective contribution at all. This Bill is a token and nothing more. It leaves intact the policy which is selling out our country and our people's future. It is being done daily. I submit to the Parliament that we should at least follow Canada, even now, and set up a royal commission which will give us the facts before we are placed in a position where we will have to write to London, to New York or to Tokyo to find out what we might be able to do or what we may be able to plan for the future of this nation. The control of money resources is the key to the advancement of this country.

At the beginning of my remarks on this Bill I drew attention to the exploitation of the average man and woman in Australia who buys on hire purchase. If supporters of the Government wish to defend this situation then let it be on their own heads. The effective interest rates which apply are hidden from the purchaser at the time of the purchase. This is not just an abstract matter for the economists or even for parliamentary committees. This is a matter which strikes at the very root of government and the control of the destinies of the nation. I suggest that we have been left behind in our attention to this matter. As we on this side have said, the Government has at least made a token effort in introducing this Bill and as a token we give our support to it. But what we ask for tonight, and what I in particular ask, is that more should be done. We have not even the raw data for future decisions. I appeal to the Government, in its remaining months of office, at least to follow Canada. Let us have the economy brought home as far as is possible. Let us set up a commission to probe the present position and plot the future in the interests of our nation and its future.

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