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Monday, 25 June 2018
Page: 6100


Mr KATTER (Kennedy) (10:14): I move:

That this bill be now read a second time.

With the great upheavals that have occurred in the western democracies—the so-called free economies, which are really mixed economies—the greatest one being the Great Depression of 1929, to understand what has taken place you must read John Kenneth Galbraith's very erudite and readable The Great Crash, 1929. You must read Trevor Sykes's The Bold Riders: Behind Australia's Corporate Collapses about the dreadful crash of the late 1980s in Australia and the Laurie Connells and the Alan Bonds, and you must read, of course, The Big Short, the American book that came out after the GFC collapse.

Having said that, the Great Depression was immediately addressed by the United States Congress with the Glass-Steagall act of 1933. The Depression hit right at the end of 1929, effectively starting in 1930, and within three years they had drafted legislation to ensure that this would not occur again. In that small but magnificent work of Galbraith's, he quotes the congressional hearings. I don't know the names of all the companies, but they asked Goldman Sachs, 'So, you in fact owned and floated a company called Whitehaven?' They said, 'Yes'. 'And Whitehaven's total assets were shares in Blue Seas?' 'Yes.' 'And Blue Seas' total assets were ownership of Silver Surf, and Silver Surf's total assets were shares in—' and it went on and on and on. In actual fact, the only thing that any of these 19 companies owned was shares in the parent company, right back to Goldman Sachs, who'd floated it off with about 0.000001 per cent of their shares. They floated off the company with a share issue in Goldman Sachs, which was of negligible value to Goldman Sachs and negligible value to the people. What we're talking about here is derivatives: when you don't buy a loaf of bread; you buy a contract to buy a loaf of bread. That is what we call a derivative.

Glass-Steagall came in and it overcame the vast bulk of those problems so that the American economy ran fairly effectively, making it three, four, five times the size of any other economy on earth, until Mr Bill Clinton, 'Mr Free Markets' himself. Even in the notorious movies about him, he addresses workers, telling them all, 'You'll be much better off when we free all the markets up, though you will take some pain in the shorter term.' In 1999, he abolished the Glass-Steagall act. Within two years, the dotcom collapse occurred, taking down trillions of dollars of savings, superannuation and retirement moneys of Americans and the rest of the world, and in 2008, as we're all familiar with, came the GFC.

Clearly, that time line indicates the necessity for Glass-Steagall legislation in this place. I must single out, by way of thanks and because it's one occasion where I did not do the hard work on the bill, Anne Pleash, my chief of staff, and Robert Barwick, associated with a number of organisations in Australia. He's very articulate and intelligent and he's done some excellent work here. Wilson Sy is one of the great Australians. He was a whistleblower, but also—I don't like that term—he was a man who had the courage to say the truth when the truth was going to cost him greatly but would be a great contribution to this nation, so we owe Dr Wilson Sy a very great debt. Bob Butler did a lot of solid work in drafting this bill and bringing the Australian economy into it.

Swan put money into circulation the minute the GFC hit, and history books will be very, very kind to Wayne Swan as a Treasurer. The opposition complained that it was given to people to just go out there and spend. Well, that's exactly what you do in a depression to head off the depression. It was an incredibly stupid statement by the opposition at the time. Swan and Hockey guaranteed the big four banks, and that was a very good thing for both sides of the parliament to do. I think that that needed to be done. So we headed it off.

The other thing that really headed it off was the terrible evil in Australia which is recourse lending. If you can't make your house repayments, the house is taken away from you and sold out from under you for less than its loan value, so the bank has the debt and you become a wage slave for the rest of your life. You carry that debt and that debt accumulates interest for the rest of your life, unless you take bankruptcy.

The situation in Australia is ugly and it is evil, and this legislation is needed to overcome those problems. Effectively, what it says is: 'Mr Bank, you are no longer out there in the market, the arena, buying and selling. No, your job is to loan to people who buy, sell, develop and invest. You don't do that; you judge them.'

The 'bold riders' were the Laurie Connells, the Alan Bonds and all of those people from that period. In fact, if Alan Bond had been restrained by prudential bank action, he would today be a great hero because he did a lot of wonderful things. Similarly with Christopher Skase, if he'd been restrained and controlled by prudential banking—APRA is not worth two bob. They left great monuments for the Australian people, one of them—which is not working today, because of another bold rider—being the nickel plant in Townsville. They left the most beautiful tourist resorts in the world. These were the things that these people created. But, because they had a non-prudential banking system that allowed them to do whatever they liked, they went out on splurges which destroyed all of their good work and took millions of Australians down and destroyed their savings, their superannuation and the little bit of security that they had.

I include on this note that I jumped university, because everyone was making a fortune in mining, and my now wife invested some money in a company called Toledo. I read the prospectus, and there was more copper in my pocket—this was the year before decimal currency—than they had in all of the copper reserves of that so-called mining company. I said: 'I love this share market! This is the greatest mechanism ever devised by man for a smart country boy to take money from dumb rich city boys.' So I jumped university to go out in the mining boom. The crash came, but we still brought mines into production.

The housing boom in Australia today—does anyone seriously think that we are not sitting on the brink of disaster? A quarter of Australia's population, maybe a third, live in Newcastle, Sydney and Wollongong. The average price of a house is over $800,000. That means that 50 per cent of the houses are over that value. Yet the average income for an Australian after tax is about 50 grand a year. So how are they going to make the repayments on a house? And yet they're buying houses. The banks are financing them. The banks make money when you go broke and they sell the house out from under you. They don't lose money; they make money out of what has occurred. They should be held responsible.

I would love to be in a business that is guaranteed by the government. If I buy a corner store and I know that, if I go broke, the government's going to give me the money, everyone will be buying corner stores in Australia. They are given this, but there is no responsibility placed upon their shoulders to act in a prudential manner. The recent economic history of Australia proves absolutely that they were never involved in that.

I conclude with a quotation from Robert Menzies: 'Government must be involved if our economic prosperity is to be preserved.' I don't often quote him, but I will on this one. (Time expired)

The SPEAKER: Is the motion seconded?

Mr Wilkie: I'm delighted to second the indefatigable member for Kennedy's bill and reserve my right to speak.

Debate adjourned.