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Wednesday, 12 October 1927

Senator GRANT (New South Wales) . - It does not matter very much whether the people are taxed through the State or through the Commonwealth Government, or through both. What does matter is the amount they are called upon to pay. The annual interest burden of the taxpayers of Australia is appalling. In Great Britain the interest bill is. in round figures, about £1,000,000 a day. It is a staggering load to carry. The amount which the Australianpeople have to pay in the form of interest on Federal and State loans is, approximately £1,000,000 per week. That is a fairly heavy burden to bear and. immediate action should be taken to reduce our responsibility in that regard. The financial experts opposite have always favored the old method of borrowing money abroad on which interest has to be paid for an indefinite number of years. I wish to again stress the point that when we borrow money in London or in New York, no money actually comes into the country. We receive only foreign goods.

Senator Ogden - Surely that is not a discovery.

Senator GRANT - Of course it is not. It is rather amusing to hear protectionists favoring overseas borrowing and at the same time advocating the local manufacture of all the goods we require. They do not seem to realize that only a limited quantity of goods can be used in the Commonwealth, and that goods manufactured in low wage foreign protectionist countries are imported into the Commonwealth, to the extent of our borrowing, to compete with Australian manufactures. Senator J. B. Hayes hopes that theTreasurer will obtain abroad the money required, but he seems to forget that if he does so an even larger quantity of foreign goods will be imported.

Senator Hoare - He is a protectionist.

Senator GRANT - No, he is a high revenue tariffist, and in advocating such a policy assists in misleading people. The honorable senator knows that when loans are floated abroad no money actually comes into the country, but that foreignmade goods are sent instead. Those who support such a policy are arrant humbugs.

Senator HERBERT HAYS (TASMANIA) - Can the honorable senator explain why importations increase under high Customs duties?

The PRESIDENT (Senator the Hon. Sir John Newlands). - I direct the honorable senator's attention to the fact that this bill does not deal with Customs duties.

Senator GRANT - Senator J.B. Hayes said that farmers and others find it difficult to secure the necessary financial accommodation, and that the money is not in the country. That statement is distinctly misleading. In the Commonwealth Gazette, No. 107, of the 6th inst., I find on page 2047 the statement that Australian notes of various denominations issued and not redeemed are of the value of £48,393,226 10s. Of that sum. £22,950,957 is held by the banks and £25,442,269 10s. by the public. Gold valued at £20,721,000 is also held. Why should we borrow abroad while the banks are holding £22,950,957 ?

Senator Herbert Hays - Does the honorable senator suggest that that amount is not in use?

Senator GRANT - It is under the control of the banks, and is not being used.

Senator Ogden - But it is earning interest.

Senator GRANT - No.

Senator Foll - It is held against liabilities.

Senator GRANT - It is held by the banks. In continuing its present borrowing policy, the Government is systematically robbing the people who have to meet the interest charges. Prior to the war, it was thought to be impossible to raise loans within the Commonwealth. It was also considered disloyal and objectionable to go outside the Empire for money. A State Premier was severely criticized when he floated a loan in New York; but it is now the policy of this Government to obtain financial accommodation in the United States of America. The amount now sought, in conjunction with that raised under Loan Bill (No. 1), will total £9,211,046. If £8,000,000 were required, it could be raised free of interest, and the debt liquidated without loss to the community. Honorable senators will remember when the Commonwealth Bank was established and an arrangement was made under which £5,000,000 was made available without the necessity of borrowing. Instead of going to the London or New York money market and paying heavy commission, advertising costs, and other incidental expenditure, the Government should, in this instance, ask the Governor of the Commonwealth Bank to advance £S,000,000 free of interest, from the £22,950,957 held by the banks. I should like honorable senators to show where the scheme I have put forward is at fault. If the Commonwealth Bank agreed to make available an addition £8,000,000, notes to the value of £400,000 could be destroyed at the end of each twelve months. That would be at the rate of 5 per cent, per annum. Our present method is to borrow £S,000,000 in London and each year, for twenty years, to send to London goods valued at £400,000. But at the end of the twenty years nothing has been paid off the £8j000,000 and we are then obliged to refloat the loan, in all probability at a higher rate of interest, or take steps to convert it. Under the scheme I propose the £S,000,000 would be paid off in twenty years at the rate of £400,000 a year, and during the twenty years the Commonwealth would have the use of the money without the liability to send goods abroad in payment of interest.- We have a sinking fund, but as we are still borrowing, there is a steady advance in our indebtedness, which, to my mind, should be brought to an end. The scheme I have submitted is feasible feasible and would forever stop the payment of interest. It is a serious drain upon our resources that the Commonwealth Bank's activities, and before a week in interest. When Andrew Fisher was Prime Minister and he proposed to issue Australian notes for a certain amount we were told by a number of wiseacres that these " flimsies " would be of no value, and that it could not be done. But now we find that we can buy as much for an Australian £1 note as we can for a sovereign. The reason is that the Australian bank note has behind it the credit of the Commonwealth. If there is any real desire on our part to minimize our enormous interest bill we should put into operation some other scheme than that which now obtains, and I invite financial experts on the other side of this chamber, if there are any, to show what is wrong with the scheme I have propounded. It is time we departed from the mischievious and out-of-date method of raising loans and adopted a policy whereby the payment of interest would be completely obviated.

Senator Ogden - The honorable senator is advocating the manufacture of paper money.

Senator GRANT - The Commonwealth already has paper money to the extent of £48,393,226 10s.

Senator Ogden - But that has a gold backing.

Senator GRANT - It has some gold behind it.

Senator Ogden - To the extent of 40 per cent.

Senator GRANT - But behind all that is the credit of the Commonwealth.

Senator Herbert Hays - There is a limit to the credit of the Commonwealth. We could not continue issuing bank notes indefinitely.

Senator GRANT - That is quite true, and that is why I do not propose to stretch it unduly.. I propose merely to deal with the bill now before us and I suggest £S,000,000 which in twenty years with annual retirements of notes to the value of £400,000 would be completely wiped out. No doubt at a later date the scheme could be applied to other small loans. I shall be told, of course, that such an issue of notes would result in the inflation of the currency, but we have heard that talk so often that it passes by as so much empty wind.

Senator MCLACHLAN - Does the honorable member suggest that the currency cannot be inflated?

Senator GRANT - No; the currency could be inflated if we adopted some of the silly schemes that have been suggested, but I am only suggesting a paltry £S,000,000. Towards the end of this year the Treasurer will be issuing flaring posters throughout the Commonwealth and paying fabulous sums of money to various newspapers to advertise the fact that we want money for the payment of a Commonwealth loan which will then mature. The whole of that expense has to come out of the pockets of the taxpayers.

Senator Herbert Hays - But why docs the honorable senator limit his proposal to £S,000,000?

Senator GRANT - Because the Government at the present moment does not want more than £7,000,000 odd, and I am going a little better, and making the amount £8,000,000 for the sake of having round figures.

Senator Herbert Hays - But if the scheme the honorable senator propounds is good for this year would it not also he good for next year?

Senator GRANT - When Ave come to next year Ave may or may not extend the scheme. I have been told that when one of the Channel Isles put a similar scheme into operation to liquidate the payments involved in building a market it worked most satisfactorily. Whether that is so or not honorable senators must not forget that our weekly interest bill of about £1,000,000 is a serious drain on the people of Australia, and if any scheme can be devised to relieve us of that financial strain Ave ought to put it in operation. The present time is opportune for the Treasurer to abandon the old method of borrowing, and in this case adopt the scheme I have suggested, particularly when most of the works for which the money is intended are directly or indirectly revenue producing. Our indebtedness is almost unbearable. We know what has taken place in Russia. The public, in revolt against the payment of interest on the national debt of the country, has wiped it out altogether. We also know that in England quite recently, in order to avoid great trouble, arrangements were made to pay annually £60,000,000 in doles to those who could not find employment. Scheme after scheme of that sort has been put into operation, but the real basis of the trouble has not yet been touched. I make my suggestion believing that it is a good one, and commend it to the approval of honorable senators.

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