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Thursday, 7 December 1911


Senator McGREGOR (South Australia) (Vice-President of the Executive Council) . - I move -

That thisBill be now read a second time.

I desire to clear away a little misunderstanding that may have arisen with respect to. the course of action intended to be taken by the Government. Honorable senators are aware that when we are approaching the close of a session it has always been the practice to put contingent notices of motion on the paper for the suspension of the Standing Orders. I have acted only in accordance with that practice. These contingent notices of motion can be brought into operation on the receipt of messages from another place, and the adoption of this course in this instance affords me the earliest opportunity to move the second reading of this Bill. When I have done so, it will be open to the Leader of the Opposition, or any other member of the Senate, to move the adjournment of the debate. I said that the debate might be resumed at a later hour of the day because I do not desire that before 10 o'clock this evening we should find ourselves in the position of having no other business to go on with.

SenatorMillen. - Is the honorable senator holding out an inducement to us to talk upon other matters until 10 o'clock to-night ? I believe we might do so if that were desired.


Senator McGREGOR - I am holding out no such inducement. The Minister of Defence has another Bill to submit. There is the motion for the printing of the Budget papers to be discussed, and private members' business may also be taken. But if it is the wish of the majority of honorable senators, I am quite prepared to agree to the debate on the second reading of this Bill being resumed to-morrow. That was my intention all along. But I wish to prevent any mischance in the circumstances to which I have referred. I might have postponed the second reading of this Bill until after Senator Pearce had submitted his business. I refrained from doing that because I wished to give honorable senators an opportunity of fully studying the Bill which is now under consideration. This is one of the measures which the Government consider themselves under an obligation to introduce and carry.


Senator St Ledger - With the Savings Bank provisions?


Senator McGREGOR - With everything connected with it.


Senator St Ledger - That is not on the Labour platform.


Senator McGREGOR - We consider that we are under an obligation to carry the whole Bill. The constitutional power of the Commonwealth Parliament in connexion with banking' includes the establishment of. Savings Banks, and. everyother kind of banking. I may say that so far as the platform of the Labour party is concerned one of the most important of its planks is the establishment of a Commonwealth Bank.


Senator Chataway - A State Bank is the expression used in the platform.


Senator McGREGOR - Whatever it states, it means the establishment of a Commonwealth Bank.


Senator St Ledger - The platform of the Labour party, from top to bottom, never mentioned Savings Banks.


Senator Fraser - The Government have only power to do Commonwealth business.


Senator McGREGOR - That is all we propose to do.


Senator St Ledger - But the Government are stealing in the Savings Bank.


Senator McGREGOR - Stealing the Savings Bank ? I do not think that such a term should be applied by any honorable senator to the action of the Commonwealth Government.


Senator Millen - Suppose we say that the Government are trying to do so?


Senator McGREGOR - No ; nor are we trying to do so. There is no intention on the part of the Government, or of the supporters of this Bill, to do any injustice to any man, woman, or child in the Commonwealth. But, as I have said, it is our duty to introduce this Bill.


Senator Fraser - If it is wanted.


Senator McGREGOR - The proposal would not have been on our platform if it had not been considered to be necessary. It has to be remembered that the Labour party came into existence in this country at a time when its financial affairs were disorganized to a very serious extent by the failure of one after another of the banking institutions of the country.


Senator Chataway - Now the Government propose to disorganize financial affairs still more.


Senator McGREGOR - No ; we propose to put a regulator upon the machine that will prevent it from being disorganized again.


Senator Fraser - The Government can do that by Statute, without establishing a bank of their own.


Senator McGREGOR - We are doing it in our own way, because we consider that to be the best way. It may be considered by a great number of people that it does not fall far short of presumption for those who have not Iia 3 much experience in financial matters reintroduce legislation of this ; description. Up to the present time, however, it must be admitted that the results of the financial policy of the Labour party, both in the Commonwealth and in the States, bear favorable comparison with the results of any other section of the community. Everything that we have done up to the present time in financial matters has met with the approval of the people of Australia, not only in connexion with taxation systems, but also in other respects.


Senator St Ledger - What about the Associated Banks to-day?


Senator McGREGOR - I may inform Senator St. Ledger that there is nothing in this Bill' to prevent the Commonwealth Bank entering into that association. Notwithstanding what the Associated Banks may say, it is satisfactory to know that even to-day a telegram has come from London stating that, in the financial supplement of the Times approval is given to the proposal to establish this bank. It is stated by that authority that the Bank Bill of the Government of the Commonwealth is a conservative, sober-minded measure. There is, therefore, nothing to be alarmed about.


Senator Millen - The Labour party indorsed by the Times!


Senator McGREGOR - Yes, indorsed, by the Times! I am sure that even Senator St. Ledger, with all his presumption and all his dexterity, could not hope for a better authority than the .financial supplement of the Times. I should like him, on that account, to consider very carefully both his interjections and his subsequent remarks. It may be considered by some people to be* presumption for a Bill of this kind to-be introduced by a Labour Go- .vernment. They may say, " What dp miners, labourers, mechanics," and other persons of that sort know about finance?" Well, we are going to make a very good try to prove to the public that our knowledge is quite sufficient to guide us in the successful management even of a great concern of this description.


Senator Sayers - Of course, the Government have a man who can do anything in the world. Mr. O'Malley is the father of this Bill.


Senator McGREGOR - As the honorable senator is so ready in recognising the parentage of the measure, I trust that he will be equally ready to recognise its merits. I do not suppose that any one will expect a very lucid explanation of this Bill from a humble individual like myself. . I am not supposed, to have had very great banking experience. But I can imagine a great many things, and imagination . with some people - as in the case of Senator St. Ledger and myself - makes up for experience and education.


Senator St Ledger - If tempered with intelligence.


Senator McGREGOR - I can assure the honorable senator that I will endeavour to exercise all my intelligence in the explanation that I shall make. By the exercise of my imagination, I can go a long way back in the history of banking. I can realize its commencement. Banking to-day is a very different thing from what it was in its origin. The very term " banking " does not, in its original signification, embrace the financial affairs of a Government like ours. The original idea was that people wanted to put their money in a safe place. I can imagine times when the weaker, the more timid, and the less aggressive members of a community would hand over their valuables to a chief, or to the more powerful in their tribe to be taken care of. That, I suppose, was the real origin of banking. The idea was to place valuables in safe keeping. . But the time came when the accumulation of wealth in the hands of a few created the idea that use should be made of the valuables so stored.It was a secondary move on the part of those intrusted with this wealth to lend it out to persons, not for the purpose of returning interest to depositors, but to make profit for themselves. Then, as civilization grew, those owning the wealth that was thus deposited for safe keeping in the hands of responsible and reliable individuals, came to the conclusion that they also ought to get some benefit out of the investment of their valuables. Consequently, interest came to be paid to what are now known as depositors. It has now been considered advisable to establish a bank common to all the people of the community, in which all the people can safely deposit their surplus wealth, and receive, not a very small portion of the earnings of that wealth, but the full benefit. Consider the enormous sums that have been distributed within the last couple of hundred years amongst the shareholders of banking institutions.


Senator Chataway - The depositors will receive what is due to them in Commonwealth notes, I suppose?


Senator McGREGOR - The honorable senator need not be anxious about Commonwealth notes, because they are recognised anywherein Australians being just as good as gold. I can assure the honorable senator, also, that the Common wealth Bank is going to be placed in no more favorable a position than any of the other banking institutions in Australia in regard to Commonwealth notes. The bank will have in. its possession no note for which it has not given a sovereign. The honorable senator knows that, or ought to know it.


Senator Chataway - That knowledge will be of no use to me unless I can get 2 os. for my note.


Senator McGREGOR - I suppose the honorable senator would like to get twentyfive? I, however, hope that the day will never come when Commonwealth notes will be either at a premium or at a discount. I hope that they will always be at par. I have already referred to a bank as an institution for taking care of the surplus wealth of the people. I have incidentally referred to the time when the possessors of this surplus wealth received consideration from those who were taking care of it. I have mentioned, in reply to an interjection, that the Labour party has for twenty years had on its programme a proposal for the establishment of a State Bank. At the time when this plank in our platform was adopted, the Commonwealth was not in existence. Then we could only think of State Banks. Now we are proposing to establish a Commonwealth Bank. I have reminded Senator Fraser that if there were anything in the world that emphasized that idea in the minds of themembers of the Labour party, it was what occurred iri 1893, when all these banks went smash one after another.


Senator Fraser - They did not. The Vice-President of the Executive Council is quite wrong.


Senator McGREGOR - Well, the great majority of them went smash.


Senator Fraser - I can name a great many which did not go smash, and which had no reason to do so.


Senator McGREGOR - None of them stood the test without the assistance, or promised assistance, of the State in which they existed. If New South Wales had not gone to the assistance of the Bank of New South Wales, if Queensland had not gone to the assistance of the Queensland National Bank, and if other States had not promised similar assistance to various institutions, the disaster would have been greater than it was. I merely wish to show that if, prior to that date, there had been any doubt in the minds of members of the Labour party, that financial crash supplied the necessary evidence as to the wisdom of the policy which they have advocated ever since, and which they are now endeavouring to bring into operation. Senators Fraser, St. Ledger, and Chataway, who seem to be so excited-


Senator Fraser - I am not at all excited. The Vice-President of the Executive Council is quite wrong. But I look with a good deal of contempt upon what he is saying.


Senator McGREGOR - The honorable senator always does that, because we differ so greatly in our ideas. At the same time, I do not think that he ought to use the word "contempt," because he really does not mean it. He looks with disapproval upon what I say.


Senator Fraser - I withdraw the word "contempt." I say that I look with pity upon the statement of the Vice-President of the Executive Council.


Senator McGREGOR - I hope I shall be permitted to make points in regard to the banking institutions of Australia, and the necessity which exists for the establishment of a Commonwealth Bank. If honorable senators will refer to a return which was laid on the table of the Senate not long ago - I think at the request either of Senator Walker or Senator Chataway - they will find that it sets out the liabilities and assets of the different banking institutions of Australia, as well as the dividends which have been paid, and the reserves which have been built up by those institutions. Honorable senators have only to look at that return, iand to take five-year periods, between 1880 and 1890, to note that, during those periods, these banks greatly increased the amounts which they held in fixed deposits, and . deposits without interest. But, during the next five-year period, these deposits materially decreased, and a very large amount of capital disappeared entirely. From another return I can show that, during the same period, twenty-two prominent citizens. of Victoria became insolvent, their liabilities amounting to nearly , £3,250,000, and their asset's representing only£28,000. A large amount of the so-called capital which then; existed in the commercial and financial affairs of. the country, was of a spurious . nature, and that. system- was encouraged by the rotten, system which obtained . previously.


Senator Fraser - The capital never existed.


Senator McGREGOR - That is what 1 am saying. I wish also to show that this £3,250,000, which was confiscated by pror minent citizens in Australia, who are now strong opponents of the Labour party, was taken from the poor. It represented the investments of the poor in building societies and other financial institutions. It was gathered together by these prominent citizens, with all the, hands that they could stretch out, and it Was absolutely confiscated. Very few of them have gone to the destitute asylum, or are asking for oldage pensions. A sufficient portion of that money stuck to them to enable them to live in affluence to-day.


Senator Fraser - Rubbish !


Senator McGREGOR - I am very pleased that Senator Fraser's name does not appear on that list.


Senator Fraser -i was a very strong opponent of many things which were done at that time.


Senator McGREGOR - These were the times which influenced the thoughtful members of the Labour party. If honorable senators choose to trace the period from 1895, when the crisis terminated, till1910, they will find that the capital, deposits, investments &c, in the banks have greatly increased, because the Labour party has grown and has created greater confidence in them. This may be regarded as a boast, but it is a boast which I anl going to make on every possible opportunity.


Senator Needham - It is a very justifiable one.


Senator McGREGOR - Of course it is. Honorable senators will also find, by reference to the return to which I have alluded, that even from 1880 to 1890, and from 1895 to the present day, a large proportion of the surplus wealth of the. general population of Australia was deposited in these banks, for which the depositors never received a single penny. The whole of that benefit found its way. into the pockets of the shareholders through the management of the directors.


Senator Millen - The Vice-president of the Executive Council is referring to the deposits at call. Will the Commonwealth' Bank allow interest upon those deposits?


Senator McGREGOR - We will not have many deposits at call. The £57,000,000 deposited in the banks at call can be regarded bythe managers and directors as an almost reliable amount. It is fluctuating, but it is reliable, and they can invest 75 per cent. of it without incurring any risk.


Senator Millen - That is what they did, and that is what brought about the trouble. The Government will have the Times withdrawing its commendation of this Bill if the Vice-President of the Executive Council talks like that.


Senator McGREGOR - I would point out to the Leader of the Opposition that these deposits at call represent an enormous sum - a sum which has increased from £25,000,000 to £57,000,000. Who receives the benefit of these deposits? Not the depositors, but the shareholders of these institutions.


Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel SirAlbert Gould. - They are wicked people.


Senator McGREGOR - I am not suggesting that they are. No honorable senator need imagine that I entertain any animus towards the directors, managers, or shareholders of banks. I have had some business with banking institutions, and I have always been treated fairly by them. I am not finding fault either with the shareholders, the managers, or the directors of our private banks. I am merely dealing with the system which prevails. I say that the enormous amount of wealth which is represented by deposits at call in these institutions confers a benefit only upon a few individuals. The great majority to whom it belongs receive no benefit more than that which the poor little savage received from the big savage to whom he gave the hind leg of a chicken to mind for him. That is exactly the. position. I leave it to Senator St. Ledger to illustrate it better if he can. But if that £57,000,000, or any proportion of it, were in the Commonwealth Bank, and the manager of that bank could make use of it in the interests of the institution, who would benefit? Obviously, the people of Australia would be benefited indirectly. Is not that a better condition of things? We say that if the Commonwealth Bank takes care of money for the owners of it, and can, in addition, make a profit, the remainder' of the public will share in that profit. I wish, also, to point out that there is a great similarity between the' institution which we propose to establish and even the Bankof England : itself.There is a very great similarity,as well as a difference.


Senator St Ledger - Especially a difference.


Senator McGREGOR - Senator St. Ledger can look at the Bank of England only as it exists to-day, and as he cannot view the proposal to establish a Commonwealth Bank without prejudice, obviously he cannot be a reliable authority. In 1694, when the Bank of Engiand was established, it had a capital of £1,200,000.


Senator ST LEDGER (QUEENSLAND) - Private capital.


Senator McGREGOR - The Commonwealth Bank will be established with a capital of £1,000,000.


Senator Millen - But it will be established with borrowed money. It will have to pay interest upon that money, whereas the Bank of England had not to do so.


Senator McGREGOR - We propose to borrow this money from the public, and we are going to distribute the benefits which will accrue from the establishment of the Bank amongst the public. Some persons may say that a capital of £1,000,000 is not. sufficient. I have heard it said that to start a bank nowadays all that is required is a room, a table, a chair, and a hooked nose.


Senator St Ledger - You forget the prison cell.


Senator McGREGOR - That does not matter. Sometimes I like to forget things. I do not want to remember all the unpleasantness in this world. When the Bank of England was established this money was contributed for the purpose of assisting the Government, which had guaranteed to contribute £100,000 from the Consolidated Revenue every year. That was a very substantial interest on the amount subscribed by the promoters. I feel sure that honorable senators donot wish me to trace the history of the bank up to the present time. It has had a varied history, and is a great institution to-day. There is nothing to prevent the Commonwealth Bank, if established on safe lines - and we have the authority of the Times that our' bank is being established on safe lines - from becoming in the same period of time as great an institution as the Bank of England. It must be remembered that it is considerably over 200 years since the latter bank was established. Honorable senators must noi look at the small amount of capital with which our bank is going to be started. I consider that it will be quite sufficient, because the public will deposit their surplus wealth there, feeling quite certain that it is the safest institution in existence.


Senator Millen - They will go where they can get the best terms.


Senator Guthrie - Where they can get the safest terms.


Senator McGREGOR - They will go where they can get the safest terms, and we always know where they can get the best terms. Apart from any profit and any benefit which may be conferred upon the public, it must be remembered that to a very great extent the Commonwealth Bank will influence the rate of interest which borrowers will have to pay to other institutions in the future. 1 am sure that Senator W. Russell, and other senators from South Australia, can bear testimony to the facts which I am going to put before the Senate. I think it was in 1894, or shortly afterwards, that we, in South Australia, advocated the establishment of a State Bank. At that time few persons were getting money out of any of the banks at less than 8 per cent., and authentic instances have been quoted where certain persons have had to pay as high as 12 per cent.


Senator Fraser - Certain borrowers here pay 20 per cent. now.


Senator McGREGOR - The honorable senator refers to the pawnbrokers. We are not going to our uncle, but to our godmother or godfather. We do not intend to do any foolish things. T am sure that Senator Fraser had no necessity to go to bis uncle when he was in London. Consequently, I do not know how he has acquired so much experience. He must have been either a pawnbroker or a customer to know as much as he does. But I suspect that he is only guessing, which I advise him to refrain from. At that time in South Australia there was even a greater agitation against the establishment of a little State Bank than there is against the establishment of a Commonwealth Bank to-day. The agriculturist - the poor producer about whom we hear so much - was told that every kind of disaster would follow in its wake from the financial point of view. Since its establishment, however, the rate of interest has come down, even in the big financial institutions, to as low as4½ and5½ per cent.


Senator Guthrie - And 4 per cent.


Senator McGREGOR - That is for very large amounts, which, of course, do not trouble the small producer. From that time up to the present the producing por tion of the population has not gained by hundreds or thousands of pounds, but by hundreds of thousands of pounds, from the establishment of the State Bank, and those who have had any experience with regard to the institution can verify my statement.


Senator W RUSSELL (SOUTH AUSTRALIA) -I got a notice from my bank.


Senator McGREGOR - I am not going into those matters. I could give hundreds of illustrations as to how the State Bank has operated. If the Commonwealth Bank does not give direct benefits to the whole people it will so influence the interest, the transactions, and the conditions in financial institutions that the whole people will be bound to benefit. With these preliminary remarks I shall explain the provisions of the Bill. Part I., which includes clauses1 to 4, deals with preliminary matters, such as the commencement of the Act by proclamation, and the definitions, "the Bank," and "the Governor." Part II., which includes clauses 5 to 10, refers to the establishment of the Bank ; the powers and authorities which it is to possess, and everything appertaining to the establishment of a truly financial institution, with the capacity to operate in any direction that any other financial institution can do. Part III., which contains clauses 11 to 20, deals with the management, the appointment of the Governor and Deputy Governor, the functions of those two officials, the appointment of officers by the Governor, the seal, who is to use that seal, and how it is to be used. Part IV., which embraces clauses 21 to 34 contains general provisions in connexion with the depositors. Then we come to a very debatable part in which Senator St. Ledger seems to take much interest, and that is the establishment of a Savings Bank branch. What objection can there be taken to the establishment of a Savings Bank by the Commonwealth? Has it not in the Constitution a direction to enter into banking of any description?'


Senator Fraser - It has the power but not a direction.


Senator McGREGOR - Is not the power to be exercised?


Senator Fraser - Yes.


Senator McGREGOR - When the honorable senator was at the Federal Convention did he give the Commonwealth Parliament powers merely to lie dormant for ever? It is more than eleven years since he finally settled this question with his colleagues, and did he mean when he was giving powers to the Commonwealth that they were never to be brought into operation ?


Senator Fraser - If they are not wanted they should not be.


Senator McGREGOR - They are wanted, as I am going to show.


Senator Fraser - That is .where we differ.


Senator McGREGOR - We will agree to differ, as we have been doing for thirty years).


Senator Fraser - Not so long as that.


Senator McGREGOR - I thought that the honorable senator had been a Conservative for thirty years, while I have been a Labour man.


Senator Fraser - I have been a Liberal, but you have been the other.


Senator McGREGOR - The honorable senator admits that the Constitution gives the Parliament the power, but the time to exercise the power is not ripe. I do not hold that view.


Senator Fraser - It is not proper to crush other institutions.


Senator McGREGOR - No crushing is intended. The honorable senator might as well say that the Commonwealth Bank to do ordinary business is being established for the purpose of crushing other banking institutions. Nothing of the kind. If other banking institutions crush out its bank the Commonwealth will have to put up with that result, and if the Commonwealth Bank ultimately supersedes the other banks, the latter will have to put up with the result. It will still be carrying out the doctrine .which the senator has been preaching for so many years : the survival of the fittest.


Senator Guthrie - And the hardest hitter.


Senator McGREGOR - Yes, that is exactly what will happen. The Savings Bank branch is not to be established by the Commonwealth for the purpose of crushing out the State Savings Banks. I recognise that State institutions in common with other financial institutions which have anything to do with the States, have carried out a very good work, and in some instances in a very good way. But that is no reason why an institution established by the Commonwealth should not bring benefits which cannot otherwise be obtained while we have different State institutions and private institutions running under Commissioners at the same time.


Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel SirAlbert Gould.- - How will the Commonwealth Bank do that?


Senator McGREGOR - There are dozens of places where it would be quite convenient for our Savings Bank to establish branches which the State Savings Banks have neglected to establish, and so enable the poorer people to make deposits of their savings. In the back-blocks, about which we hear so much, no provision of this kind has been made hitherto. It may be all very well for honorable senators to rise here and say, " The State institutions will establish branches when they find it necessary." They will do it as soon as an attempt in that direction is made by the Commonwealth. A bank of this description established by the Commonwealth in their interest can give greater conveniences to the great Savings Bank depositing public. South Australia is making a little noise at the present time, but the depositors in its Savings Bank have no Government guarantee with respect to their deposits if it should go wrong, or if the management should be defective, or if it should lead them astray. Any man may say, " Oh, but the Government would be compelled to come to the assistance of the Savings Bank."


Senator ALBERT GOULD (NEW SOUTH WALES) -Colonel SirAlbert Gould. - Would they not do so?


Senator McGREGOR - I do not know.


Senator Millen - They borrow twothirds of the money.


Senator McGREGOR - It is a fact that the Savings Bank in South Australia is not, in the sense that it has the Government at its back, a Government institution.


Senator Millen - You are not suggesting that it is not sound?


Senator McGREGOR - No, but I am suggesting that it would be much sounder if the Commonwealth Government were at the back of the depositors, and no one can doubt that for a moment. Senator Fraser can laugh, but he knows as well as I do,- that with the Commonwealth Government at its back an institution has a far greater guarantee for the depositors than it otherwise has.


Senator Fraser - It is not the question of a guarantee, but the question of management.


Senator McGREGOR - The honorable senator must admit that the guarantee of the Commonwealth at the back of a financial institution is a greater security than would be the guarantee of one, or two, or three, or four, or five of the States. Consequently we shall be able to give a greater guarantee of security to depositors in the Savings Bank branch of the Commonwealth Bank than can be given by any other institution in the Commonwealth. I have next to refer to the power given in Part VI., of this Bill, clauses 54 to 61, enabling the Commonwealth Bank to issue debentures. This provides the way in which the Bank is to obtain its capital. Originally the Treasurer will be prepared to advance . £1,000,000 to the bank to set it going. The bank will then have power to issue debentures, and Part VI. of the Bill includes the provisions regulating the issue of debentures by the Bank. Honorable senators can have no objection to that. When these debentures are taken up the Bank will be able to pay the £1,000,000 back to the Treasurer, we shall find that, with this power, neither the Treasurer, the Bank, nor the public, will be at any disadvantage. The. last part of the Bill, including clauses 62 to 64 contains the necessary miscellaneous provisions.


Senator Millen -I understood the honorable senator to say that the Treasurer can advance to the Bank some portion of the capital required for banking business, but, as I read clause 10, of the Bill, all he can advance is the amount necessary to meet preliminary expenses.


Senator McGREGOR - That is what 1 say, and the Treasurerwill be able to advance any amount up to£1,000,000.


Senator Millen - I do not see how he can' do so under this Bill.


Senator McGREGOR - We shall find out that he can do so. Provision is made to enable the Bank to repay the Treasurer from debentures, and ultimately the debentures can be redeemed from the profits made by the Bank, I have, of course, no desire to enter at this stage into the details of the clauses, but I have no doubt that, in Committee, honorable senators will make inquiries, and I shall be prepared to give them all the information I can. I hope that the Bill will have a safe passage through the Senate.

Debate (on motion by Senator Millen) adjourned.







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