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Wednesday, 2 November 1927

Senator Sir WILLIAM GLASGOW (Queensland) (Minister for Defence) [3.33].- I move-

That the bill be now read a second time.

In submitting the bill for the consideration of honorable senators, I desire to review shortly the action taken by the present Government to extend and improve the functions of the Commonwealth Bank. In 1924 the act was amended by placing the bank under the control of a board of directors, by giving the bank control of the note issue, and by enabling it to operate as a bank of reserve, discount and exchange. These amendments enabled the bank, in its altered form, to do valuable work for the people of Australia. Exchange and currency troubles have been removed and the sale of our surplus production has been facilitated. A further amendment in 1925 permitted the bank to establish a rural credits department to provide short-term credits to assist in the regular marketing of primary products, particularly those that are exported. The progress made by this department has been marked. There was a turnover of £8,000,000 for last year, being three times the amount for the previous year. Over twenty primary products have been brought within the provisions of the act, and there is no doubt that in future the usefulness of the rural credits department will increase. It is now proposed to use the savings bank founds to assist persons of small means to provide homes for themselves. The Government has, therefore, examined the whole of the functions of the Commonwealth Bank to see if the administration could be improved to give effect to this policy. The functions of a central bank are to act as a bank of reserve, and to stand behind the other financial institutions of the country. The bank's funds should, therefore, be as liquid as possible so that they may be always available in times of need. Amongst other things, the Commonwealth Bank Act provides that the funds associated with the note issue can only be invested in certain securities. Trading bills of more than 120 days' currency cannot be accepted. The trading banks which have to provide accommodation for business people must of necessity have their funds as liquid as possible. The rural credits department of the Commonwealth Bank has been established to allow shortperiod credits to be given to permit of the best methods of marketing our primary products being utilized. These credits are short-term investments, because the advances are limited to a year's duration. Savings bank money, however, is used mostly for long-term investments. The receipt of a regular recurring income enables the bank to make advances at a lower rate of interest than is possible for the other branches of the Commonwealth Bank. It is considered, therefore, that there should be separate administration of the savings bank department, because of the difference between its operation and outlook and those of the other two departments of the bank. The proposed administration of the Federal housing scheme as part of the savings bank department of the Commonwealth Bank was discussed with the directors with. the result that the board passed the following resolution: -

This hoard feels that to accept the responsibility of the administration of the Federal Government's bousing scheme as part of the functions of the savings bank department would be overweighting the work falling upon the institution : and further that such functions are in no way related to the general bunking business or to that of a note issue bank or a reserve bank, and the board is, therefore, of the opinion that, under the circumstances, it would be wiser to accept the proposal of the Government to separate the savings bank department from the bank for the purpose of enabling the currying out of the housing scheme. It is better, in the interests of the bank as a whole, that the Government should take the necessary steps to bring about the separation proposed, and the board will be glad to assist and advise the Government to the best of its ability as to the method of effecting the changes necessary to carry this out.

The Government, therefore, proposes in this bill to separate entirely the administration of the- two branches, but a liaison is to be established between the two by providing that one of the commissioners of the savings bank shall also be a member of the board of directors of the Commonwealth Bank. The bill provides that the savings bank is to be governed by a commission of three, of whom one will be a permanent full-time commissioner, and the executive officer of the institution, and two part-time members. As one of the commissioners will be a member of the board of directors of the Commonwealth Bank, co-operation and mutual understanding between the two institutions will be possible. No commissioner may be a director of other banks except the Commonwealth Bank. Further, the members of the commission may be removed from office at any time for bankruptcy, incapacity, or any other reason. Two commissioners will form a quorum. Power is given for the appointment of the Commonwealth Bank to act as agent for carrying out the savings bank work of the commission. Thus the existing facilities and machinery will be preserved and the economical working of the institution will be assured. In Queensland and Tasmania the State Government savings banks have been transferred, by agreement, to the Commonwealth Bank, and under this bill the rights of these States as set out in the agreements are preserved. The profits of the savings bank will be divided in the same manner as the profits of the Commonwealth Bank are divided at present, namely, half will be paid into the bank's reserve funds, and half into the national debt sinking fund. About S5 per cent, of the deposits in the savings bank department of the Commonwealth Bank have been invested in Commonwealth, State Government and municipal securities. From twelve to thirteen per cent., represents cash, and practically nothing has been invested in other securities. The bill provides that the Commonwealth Savings Bank may invest one-half of all increases in deposit over the total amount of the deposits existing at the commencement of the Commonwealth Housing Act, and one-fourth of all repayments of loans from savings bank moneys, in making advances for the purchase or erection of dwelling houses and for the discharge of mortgages on dwelling houses. Moneys may also be advanced for the erection of warehouse or storage facilities intended for the warehousing or storage of primary products, including the erectionof plant for treatment to ensure their preservation and preparation for marketing. Further, the savings bank may invest its funds in debentures issued by the Commonwealth Bank for the purposes of its rural credits department, and may also place its funds on fixed deposit with the Commonwealth Bank. In the Commonwealth Bank Rural Credits Act 1925, provision was not made for the building of warehouses, &c, but under this bill it will be possible for the savings bank to invest its funds in this manner. The Commonwealth has received several requests that assistance should be given in this direction, and some time ago received the following resolution from a conference of State Ministers of Agriculture: -

That the Commonwealth Government be asked to give early consideration to the widening of the scope of the Commonwealth rural credits scheme to provide finances on terms and conditions more suitable to marketing boards and kindred associations.

This resolution was amplified by certain particulars which were furnished by the Premier of South Australia, and which included the following statement : -

Limitation of the advances to produce precludes the utilization of the rural credits scheme for storage and manufacturing plants. A maize pool may require grain silos. A cooperative dairying group may require to build a factory. Hay and chaff producers may need storage sheds. Very frequently these facilities are essential factors to successful marketing, yet the provisions of the rural credits scheme arc not available for these.

This bill and the Commonwealth Housing Bill are supplementary to each other. The Housing Bill provides that the Treasurer may borrow moneys in order to grant to the savings bank such a sum as. with the amount provided from other sources, will make available a total of £20.000.000 for housing.

Debate (on motion by Senator Needham) adjourned.

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