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Thursday, 3 November 1921

Senator PRATTEN (NEW SOUTH WALES) . - The times are not so easy asthey once were, and, consequently, I think it is the duty of the Senate to know exactly where we are before passing this Bill. I do not rise to opposethe passing of the measure,though we have been given but scanty information bythe Minister for Repatriation (Senator E. D. Millen) in movingthe second reading. We have heard, first of all,that the terms, rate of interest, and so on will be fixed, as usual, by the Governor-General in Council. We have been told, also, that ofthe £5,000,000 which the Government seeks the authority of the Senate to borrow £3,000,000 will be spent in the redemption of Treasury bills, and it is intended that £2,000,000 shall be spent on works. A Budget statement was brought down by the Treasurer (Sir Joseph Cook) a few weeks ago, wherein he intimated that the public debt of the Commonwealth waa so many hundreds of millions sterling gross, and so many hundreds of millions net. I should like to know if the Treasury bills which are to be redeemed from money borrowed under this Bill are included in this statement.

Senator E D MILLEN (NEW SOUTH WALES) - The Senate is not being asked to vote to redeem those bills now. The money having been raised under the authority of this Bill it will be necessary for the Government, in the exercise of their authority, to spend £3,000,000 of the total of £5,000,000 in redeeming the Treasury bills.

Senator PRATTEN (NEW SOUTH WALES) - I do not think that the Minister has quite gob my point. This is a proposal bo aubhorize bhe Governmenb to borrow £5,000,000 for the purpose of redeeming £3,000,000 worth of Treasury bills, and to spend £2,000,000 on new works. I wanb bo know whether the Treasury bills which are to be redeemed out of the proceeds of this loan, were taken in as a liability by the Treasurer when he delivered his Budget recently.

Senator E D MILLEN (NEW SOUTH WALES) - I am informed that they were included in the country's total indebtedness.

Senator PRATTEN (NEW SOUTH WALES) - I. am glad to have that assurance from the Minister. It means then,thatthis is practically a bookkeeping entry.

Senator E D MILLEN (NEW SOUTH WALES) - It means one set of debbors baking bhe place of another set. The country's indebtedness is not increased by the process.

Senator PRATTEN (NEW SOUTH WALES) - That is the information I wanted to get. This proposal, therefore, seems to be largely formal. But there is one other point. This Bill authorizes the raising of a loan in London, not locally, because recently a local loan of £10,000,000 was raised for repatriation purposes under an authorization given by Parliament last year for a larger amount than was borrowed at that time.

Senator Vardon - This loan has already been floated, has it not?

Senator PRATTEN (NEW SOUTH WALES) - I am not aware that it has been floated, butthat was another point that was in my mind. I should like the Minisber to say if this loan proposal has any relation whatsoever bo bhe loan of £5,000,000 arranged by him when he was in London last year.

Senator E D MILLEN (NEW SOUTH WALES) - None at all.

Senator PRATTEN (NEW SOUTH WALES) - I take it, then, that the loan has not been raised yet, bub bhab ib is the intention of the Government to place it on bhe market at a convenient date, and, I presume, in England.

Senator E D MILLEN (NEW SOUTH WALES) - The Bill is silent on bhab poinb. Ib gives aubhoriby bo borrow wherever bhe Government likes to place the loan, but it is bhe intention of the Government bo borrow in London.

Senator Vardon - There was a statement in the press the other day to. the effect that the loan had already been floated?

Senator PRATTEN (NEW SOUTH WALES) - That could not be so, becausethe Government have not yet received the authorization.

Senator Keating - The Government may be merely coming to the Senate as a matter of form.

Senator PRATTEN (NEW SOUTH WALES) - We ought to have the matter cleared up, and know whether bhe loan has already been floated or nob. So far as I am aware, ib has nob yet been placed on the market. The terms upon which bhe loan will be floated, and bhe rate of interest to be paid, would be extremely interesting to the Senate. Under no circumstances do I think the Government ought bo go bo America bo obtain the money.

Senator Keating - If the loan has already been floated, what you are saying is beside the purpose.

Senator PRATTEN (NEW SOUTH WALES) - But bhe Minister for Repatriation has indicatedthat bhe loan has nob been floated yet.

Senator E D MILLEN (NEW SOUTH WALES) - The Bill is not yet law.

Senabor PRATTEN.- Quite so. I take ib that if the Government dared to float a loan before having received authorization from bhis Parliament they would be committing a serious breach of bhe law.

Senator Keating - Breach of the law ?

Senator PRATTEN (NEW SOUTH WALES) - The law which provides that no expenditure shall be incurred and no loan shall be raked without the approval of Parliament. Australia is, bo some extent, at the parting of the ways with regard to raising loan, moneys. Three options arebefore the Commonwealth and State Parliaments; (1) to raise money internally,

(2)   to raise money in London, and

(3)   to consider the question of raising loan money in America. I heartily indorse all that the Treasurer (Sir Joseph Cook) has said about the advisableness of Australia confining her external borrowings to within the Empire. I see no point in borrowing money from America, at all events on the terms upon which the recent Queensland loan was raised or the terms upon which money is being offered to other State Governments and, I believe, certain public institutions.

Senator de Largie - What is the matter with American dollars, anyhow ?

Senator PRATTEN (NEW SOUTH WALES) - The matter is that we cannot buy as many of them for our good British money as we ought to. Consequently, to that extent, American loans are not advantageous from our point of view.

Senator Keating - It is to be hoped that the honorable senator will use that argument when the Anti-Dumping Bill is before the Senate.

Senator PRATTEN (NEW SOUTH WALES) - I shall be governed by the circumstances of the case. At present I am talking about the advisableness, or otherwise, of the Commonwealth borrowing outside Australia; and if so, of borrowing outside of the Empire. Again, on the question of the terms and conditions of this proposed loan. Heretofore the Government, by good luck or good judgment, have obtained money on favorable terms, and therefore I hope they will wait until they are reasonably sure of a satisfactory result in connexion with this proposal. The loan raised by the Minister for Repatriation early in the year was, I think, placed on terms as favorable as could have been obtained at that time. I am one of those who think that money is going to be cheaper rather than dearer. New York loans to prominent American institutions are being issued to-day at 1 per cent, less than six months ago. In other words, the average rate of interest obtained, from New York loans to public institutions in the United States of America six months ago was about 6¾ to per cent., whereas loans to similar institutions to-day are not averaging more than about 6 per cent.

Senator Vardon - What you are saying is a good argument for the restriction of public borrowing as far as possible at the present time.

Senator PRATTEN (NEW SOUTH WALES) - It is. I do not think the Commonwealth Government should pay an excessive rate for any money borrowed abroad because, after all, we do not actually get the money. It is quite an hallucination to think that large sums are exchanged in payment for goods, because I do not suppose that more than 1 per cent, of all commercial and exchange transactions are paid for in coin. When we speak of money we really mean credit, and if we borrow from America it means more American goods, and if we borrow in Great Britain, more British goods.

I desire to direct attention to the very great importance of legislating, as far as we possibly can, in the direction of encouraging a favorable balance of trade, because our total indebtedness now to Great Britain means an annual interest . bill of approximately £20,000,000, which has to be sent out of the country. That can only be sent out in the form of goods, and, consequently, if our balance of exports over imports does not amount, approximately, to £20,000,000 annually, governmentally, commercially, and privately, we are running into further debt. I am glad to have the Minister's assurance that this loan will not increase our public indebtedness if £3,000,000 more is borrowed in Britain for the redemption of floating Treasury bills, because it is really a book entry.

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