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Friday, 6 March 1942

Senator DARCEY (Tasmania) . - I express extreme regret concerning the method adopted by the Government for raising these necessary war credits. Tasmania, through its Premier and Treasurer, has strongly objected to this method. At the recent Loan Council meeting, the Premier of that State, Mr.

Cosgrove, proposed the following motion : -

1.   This Loan Council concurs in the view expressed by the State Parliaments of Western Australia, South Australia, Queensland and Tasmania that national credit, operated through the Commonwealth Bank only; should be utilized in financing the war for the general well-being of the people of Australia.

2.   In order to give effect to this policy in a practical manner, the Loan Council recommends to the Commonwealth Government the adoption of the following principles: -

(a)   In future, no subscriptions to public loans should be accepted from the trading banks, nor should the trading banks be permitted to increase their holdings in Commonwealth bonds ;

(b)   Public loan flotations should be limited to amounts within the capacity ofthe public market, as distinct from trading banks and the Common wealth Bank;

(c)   Other borrowings should be in the form of direct advances from the Commonwealth Bank;

(d)   Adequate steps should be taken to neutralize increases in cash held by the trading banks and to prevent an expansion of trading bank advances for purposes not consistent with the Government's war policy

3.   The Loan Council further urges the Commonwealth Government to use its war-time emergency powers to make whatever legal arrangements are required to give effectto these principles.

The Loan Council agreed to consider at its next meeting a proposal by the Queensland Premier (Mr. Forgan Smith) that the procedure should be varied to enable expenditure by a semigovernmental body tobe authorized to cover a term of years instead of having to be authorized piecemeal from year to year. The first money raised for the defence of this country was £10,000,000 by way of a loan which was approved by the Loan Council. Mr. Dwyer-Gray, then Treasurer and Acting Premier of Tasmania, expressed the opinion that to continue to borrow money in the ordinary way from thebanks was an ignoble concession to an antiquated system of finance. He said that it was just as necessary for us to beat the present banking system as itwas to beatthe Germans. The motion moved by the Premier (Mr. Cosgrove), which 1 have just read, was ruled out of order by the chairman of the Loan Council, who is now Leader of the Opposition in the House of Representatives. For the last four years I have been trying to impress upon honorable senators the suicidal nature of the policy of borrowing money from the private banks when, according to the finding of the Royal Commission on Monetary and Banking Systems, there is no necessity to do that at all. That is made quite clear in paragraph 504 of the royal commission's report. Paragraph 530 of that report is also important. It states that ultimately Parliament is responsible for the finance and good government of Australia. The Commonwealth Bank has certain powers delegated to it to be used in the interests of the nation. If at any time there he a difference of opinion between the Commonwealth Bank Board and the Government, there should be a free and frank discussion on the matter, and if that discussion fails to clear the position, the Commonwealth Government should tell the Commonwealth Bank Board that it proposes to take full responsibility and instruct the Commonwealth Bank Board how to act. This private bank racket has been going on long enough. To-day there is a nation-wide demand for monetary reform. Already five of the six State Parliaments have passed resolutions demanding that the findings of the royal commission be put into effect, and that the Commonwealth Bank Board be asked to finance all the necessary credits for public borrowing. Over and over again I have exposed the swindle of our private banking system.

Senator Allan Macdonald - The honorable senator should not use the word " swindle ".

Senator DARCEY - I repeat that it is a swindle, and honorable senators opposite have acquiesced in it for years. Every bank branch throughout the Commonwealth has a notice over its door, " Buy War Savings Certificates ". Some time ago I asked the Minister representing the Treasurer in this chamber what was the value of war savings certificates sold by the private banks. The answer I received was £15,000,000. On that occasion I pointed out to honorable senatorsjust what the selling of war savings certificates over the counter of a private bank involved. I asked further, how did the banks pay the Treasury for the war savings certificates which they sold, and the answer was that payments were made by cheque. That merely proved what I have always said, namely, that when a loan is floated no actual money reaches the Treasury. The hard-working public has been asked and urged to buy war savings certificates, and latterlythey have been threatened that if they do not give their money voluntarily it willbe taken from them. The money obtained by the private banks from the sale of war savings certificates merely goes to swell their cash reserves. Not one penny reaches the Treasury. Any one with a know ledge of finance knows that cash reserves of the banks represent their lending or purchasing power in government bonds. After selling £15,000,000 worth of war savings certificates, the banks are in a position to purchase war bonds from the Commonwealth Government valued at about £130,000,000, Can honorable senators imagine a bigger racket than that ? Am I not right when I call it a swindle? I have drawn attention to this matter time and time again and no one has been able to contradict my claims. If I am wrong then it is time that honor able senators opposite were able to prove it. but beyond a sneer or a jeer there has been no attempt to prove that my statements on finance are not correct. I also brought to the notice of honorable senators the fact that in 40 years a balancesheet has never been presentedby any government showing how thiscountry stands as a trading concern. That shows how little most people know about the principles of political economy. George Bernard Shaw once defined political economy as the art of spending the national income in such a way as to bring happiness and prosperity to the greatest number of people. Surely no honorable senators can claim that this Government or any other government of Australia has ever worked on that sound principle. It cannot be denied that the incompetence and inefficiency of democratic governments brought dictatorships into being and is directly responsible for the rotten state of the world to-day. People place their destiny in the hands of their governments, and the present world conditions can be charged only to democratic governments. At this stage I thinkI am quite justified in reading to honorable senators the objectives of the Australian Labour party in the matter of banking -


Platform and Objective - Progressive Reform.

Banking.1.The Commonwealth Bank to he developed onthe following lines: -

(a)   A nation-wide trading bank handling the ordinary business of the community;

(b)   A savings bank performing the ordinary functions of such a bank ; and

(c)   A Credit Foncier system for the purpose of providing advances to primary producers and home builders.

2.   The following is adopted as a declaration of policy and in amplification thereof: -

Purpose.- The utilization of the real wealth of Australia to ensure a maximum standard of living consistent with the productive capacity of the Commonwealth through national control of its credit resources and the establishment of an efficient medium of exchange between production and consumption.

Principles.-1. The direction and control of credit resources and banking to be vested in the Commonwealth Bank, operating under the powers and responsibilities defined by the Commonwealth Parliament.

2.   The ensuring of essential community pur chasing power by the organization of employment and the expansion of social services to enable Australian primary and secondary industries to operate at their maximum capacity.

3.   The control of interest rates to reduce the burden upon public and private undertakings.

4.   The financing by the Commonwealth Bank at the actual cost of insurance and services of public works at not less than award rates, to aid national development.

Plan of Action.- 1. The operations of the Commonwealth Bank to be removed from and made entirely independent of private banking interests and free from sectional influences or constraint.

2.   The abolition of the Commonwealth

Bank Board and the re-establishment of the original method of control as set up at the time the Commonwealth Bank was founded.

3.   Expansion of the bank's business as a trading bank, with branches in all suitable centres, in vigorous competition with the private banking establishments.

4.   A statutory provision that the banking of all public bodies shall be reserved for the Commonwealth Bank.

National Credit.- A national credit advisory authority will be set up to collaborate with the Commonwealth Government and the bank to plan the investment of national credit and thus utilize to the fullest extent the real wealth of Australia.

Objects to attain include -

(a)   To financethe building of homes and to adjust mortgages at present existing to present values by amor tizing private mortgages and re placing them with loans issued under the authority of the Commonwealth Bank.

(b)   To plan future agricultural develop ment with loans issued at nominal rates of interest to promote closer settlement and to effect complete adjustments of existing farm mortgages.

(c)   To plan the extension of Australian secondary industries to securea maximum of industrial self sufficiency, and to provide for effective transport services for the nation.

I should like to read also an extract from an article by the Prime Minister (Mr.Curtin)which appeared in the Locomotive Journal, volume 2, No. 3, of the 14th December, 1939. The article is headed "Labour and War", and contains the following statement: -

Everything in war must be paid for - not by reducing wage standards but by the use of the national credit. Because of a Labour government in the Federal Parliament, there is a Commonwealth Bank. It was created as a means for releasing national credit. But because Labour lost office the national bank has been transformed by our opponents into a mere puppet of the private banks. Asa requisite to national defence the Commonwealth Bank must have restored to it its original charter. When we are in power, we shall proceed to redeem the national bank from its slavery. The cost of war can be met without piling up huge debts, andwithout interest payments sucking our national lifeblood.The Commonwealth Bank must, witha Labour government, work out a freer and fuller life for our people.

The old bugbear of inflation which ha? been used by the banks in the past to intimidate the people can no longerbe used, because it has been proved tobe only a bogy. To-day there is a nationwide demand for banking reform, and it is time that this Government decided to use the national credit to the fullest possible advantage, in accordance with the Labour platform. I must confess that I am amazed at what is going on. If the banks were actually lending money it would he a different thing. We are now told that bank profits are to be limited and controlled, but I am not concerned at all about the 4 per cent. ; I am concerned because I know for certain that loan subscriptions by the private banks are not in the form of money at all. All that is used is credit which the banks themselves create out of nothing. According to the chairman of directors of the largest private bank in New South Wales, all the money for the Commonwealth Government's £20,000,000, floated some time ago, -was subscribed by the private banks. When the bill providing for the loan came before Parliament, I asked how the money was to be raised and I was told that it would be raised through the agency of the Commonwealth Bank and the private banks. I was very doubtful . at the time as to how much was to come from the Commonwealth Bank, and when the loan was floated I asked how much of it had come through the Commonwealth Bank and how much through the trading banks. The Government refused to reply to my question. Surely members of Parliament should know something about the Government's financial transactions. We were asked to pass legislation under certain conditons -, those conditions were not fulfilled, but the Government refused to tell us what had been done. The men who come back from this war will be taxed to meet the cost of it, just as the soldiers of the war of 1914-18 were taxed. There has been no alteration of the financial system since then. The men who return from this war, and the widows and orphans of those who are killed, will have to pay in perpetuity simply . because government after government in Australia has adhered to the old orthodox ideas of finance. Conditions have never been so unorthodox as they arc to-day. Under the present system, governments do not govern at all. They are under the thumb of high finance, and must do -what the banks tell them to do. The banks also control the newspapers and the radio stations, which have great power to' mislead the people. I have often heard it said that the people get the sort of government that they deserve. I do not agree with that. Millions of honest- people in Australia would like to have a different system of government.

Senator McBride - They would like a different government.

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