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Wednesday, 8 October 1941

Senator DARCEY (Tasmania) . -Clause 3 of the bill reads -

The Treasurer may, from time to time, borrow, under the provisions of the Commonwealth Inscribed Stock Act 1911-1940, or under the provisions of any act authorizing the issue of treasury-bills, moneys not exceeding in the whole the amount of £50,000,000.

I am glad that we now have a Government which will do away with the selling of inscribed stock ; it is quite unnecessary.

Senator Foll - And the payment of interest ?

Senator DARCEY - If we sell inscribed stock we must pay interest; but this Government has a scheme whereby we can obtain the money we require without paying interest. Three years ago, when I urged that the Commonwealth Bank should issue interest-free money, I was told that I was a voice crying in the wilderness. We now hope to see that done. Last night I listened to the broadcast of the big meeting held in the Sydney Town Hall, to launch the £100,000,000 loan. The announcer incorrectly stated that the loan was a conversion loan of £100,000,000. The fact is that whilst £70,000,000 will be converted, £30,000,000 of new money is required. The Sydney Morning Herald tells us in its columns this morning how that money is to be raised, that is, how much has been promised already, and that the banks have kindly consented to convert all of their holdings, and are also prepared to supply any new money required. We know how the banks acquire new money. The previous Government allowed the private banks to provide almost the whole of the first war loan of £20,000,000. We were told that that loan would be raised through the agency of the Commonwealth Bank and the private banks, but when I asked the ex-Treasurer how much was put through the private banks I was refused that information. However, Mr. Gillespie has " spilled the beans ". When he was speaking to the shareholders of the organization he represents and " cracking up " the patriotism of his bank he said that the first war loan of £20,000,'000 was supplied by the private banks. Apparently, nothing went through the Commonwealth Bank at all. This Government is going to put the business through the Commonwealth Bank. Unless one knows how it is done it seems extraordinary that the Australian Mutual Provident Society, for instance, after putting over £3,500,000 into the first loan subscribed £2,500,000, and is also offering to convert all of its stock* I do not believe that any honorable senator thinks for one moment that the Australian Mutual Provident Society, big as it is, has £6,000,000 to put into war loans in any one year However, I explained this trick on a previous occasion. All that the general manager of the Australian Mutual Provident Society needs to do is to instruct the society's banker to apply for £2,500,000 in the loan. The manager of the bank applies for that holding, and sends a cheque for that amount to the Treasurer. On that subscription the bank draws a commission of nearly £4,000. I have explained before that all applications for war loans carry a commission of 5s. per cent. The bank then holds those bonds as security for the overdraft advanced to the Australian Mutual Provident Society. It can hold as many bonds as it likes, and if it holds them long enough, it can easily transfer them. I am amazed at the small sums which some banks are converting, particularly when we have been told that they have done so much for the country. All government stock and debentures are above par. So it is easy to raise £5,000,000 in government bonds. The banks send a cheque to the Treasury, and then put the bonds on the market when they can reap the enhanced value. That explains to some degree why the Commercial Banking Company of Sydney holds only £1,642,000 for conversion. This year the Australian Mutual Provident Society has subscribed £6,075,405 to government loans. All life assurance offices must satisfy the Government that they have the money. They have not only big revenue but also very high expenses in meeting policies as they mature. I am quite sure that this Government will not give the private banks a chance to create this £30,000,000 out of nothing, and loan it to the nation at 3½ per cent. interest. That is what has been done in the past.

Senator Herbert Hays - The Sydney Morning Herald did not say that.

Senator DARCEY - No ; I am just telling the honorable senator what is going to happen. Of course, the bankcontrolled press can only say what it is allowed to say by the banks, and, apparently, that presshas not yet been allowed to say what I am now saying. It is extraordinary that the private banks subscribed huge sums to the £20,000,000 loan, and yet, when I asked how much of that loan went through the Commonwealth Bank and how much through the private banks, I was told that such particulars could not be disclosed without the permission of the private banks. However, as we know now that the Commonwealth Bank has only £6,186,000 to convert, it did not put through very much. Most of that money, obviously, is held by the private banks.

SenatorFoll. - Would it not be better to give this information to the Government in caucus?

Senator DARCEY - I wish to show that, at last, heed is being paid towhat I have been saying in this chamber for three years. We shall use the credit of the nation. Even in this time of crisis, banks in England are paying dividends of from 14 to 16 per cent. The chairman of directors of one bank in announcing the dividend to the shareholders said that so high a dividend was possible because the bank was lending hundreds of millions of pounds to the Government. When Sir John Simon was asked if he was prepared to alter the charter of the Bank of England, and to say who owned it, and in whose interest it was conducted, he replied " No ". Sir Kingsley Wood gave a similar reply to the same question. National credit is not being used in England as we shall use it in Australia. The Bank of England rules Great Britain, as, so far, the banks in Australia have ruled this country. The present Government will, however, alter that state of affiairs. In 1939. Mr. Montagu Norman, of the Bank of England, in referring to a loan of £50,000,000 to the German Government, said -

We will have to lend the money to Germany. Although we may never sec it again, it is worth £50,000,000 to sustain Nazi-ism.

The cost of converting loans is tremendous. Less than two years ago, Tasmania wished to convert a loan of £4,500,000. The Treasurer of that State desired that the conversion be arranged through the Commonwealth Bank, in London, but the Loan Council would not allow that course to be followed; instead, it insisted on the transactions being handled through Nivison and Company, the brokers for the Australian Government. That procedure cost Tasmania £137,000; and as the loan was of only two years' duration, it is probable that a similar amount will have to be paid next January for a further conversion. The cost of conversion works out at about 12s. a head of the population of Tasmania.

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