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Tuesday, 2 June 1942

Senator DARCEY (Tasmania) . - The greater part of this short session has been taken up in the consideration of money bills which we are to deal with more fully to-morrow. For some years I have been trying to convey to honorable senators certain principles of finance. I find that, in this respect I am supported by no less an authority than the Loudon Times. In its issue of the 25th March last, it published the following statements: -


In war-time the only limits on production are those set by the ava.ila.ble man-power and raw material?. It is financed by credits which. although they arc; issued by the banks in the form of loans!, are really national credit owing their value not to any stocks of bullion held by the banks, but to the rapacity of the country to provide the goods mid services for which its currency constitutes a claim. We should, it is argued, avoid nightmares of depression and unemployment if we frankly adopted this principle in peace as well as in war, and made the consequential changes in our financial system.

In his World OviniaMr. 'Churchill 'ha3 described the situation at the end of the last war and the sudden change which occurred at 11 o'clock on November 11, 1918: -

A requisition, for instance, for half-a-million houses would not have seemed more difficult to comply with than those we were already in process of executing for 100,000 aeroplanes, or 20,000 guns, or the medium artillery of the American. Army, ov 2,000.000 tons of projectiles. But a new -set of conditions began to rule from 11 o'clock onwards. The money cost, which had never been considered by us to be a factor capable of limiting the supply of the armies, asserted a claim to priority from the moment the fighting stopped.

This reversion to the traditional money criterion us a limit on production and employment for which the real resources of organization, labour, and capital equipment were available in plenty was possibly the master blunder, from which have flowed in inevitable sequence all the frustrations and' miseries of the past twenty years. We are not likely to solve our post-war problems unless we make up our minds to treat money as a bookkeeping technique to facilitate the production and exchange of goods and. services, not as something the supply of which sets a fixed upper limit to our productive activities. It plays much the same part in economic life as railway tickets play in transportation. It is dishonesty, akin to inflation, to issue tickets for more trains than can be run. It is absurd to cut down the railway service because the ticket office has run short of tickets.

The portion of the article that I have quoted proves the soundness of the system I have been advocating inside and outside this chamber. I shall now quote an ex- . tract from another article which appeared in the London Times of the 24th March, 1942-

By the agreement signed on 23rd February, the British and American Governments have laid down the principles which are to govern their future economic policy in pursuit of the objectives set out in the Atlantic Charter: "Improved labour standards, economic advancement and social security "." it is impossible under the present monetary system to improve social conditions. We must deal with finance as it is. The statement ha3 been made that the nations which signed the Atlantic Charter will go back to the gold standard. In my judgment a return to the gold standard would have a most disastrous effect. Factories in Birmingham, Manchester and other large cities of England were closed as a result of the Bank of England bringing about a depression in 1932. Shipyards and factories are still closed and if they were now in operation they would be of tremendous help to Great Britain in the present war. There is substance in the statement that the banks can, at any time they choose, monetize the money wealth of the nation. We in Australia are particularly fortunate that we have the Commonwealth Bank. In Great Britain there is only one bank controlling the finance of the nation - the Bank of England - and it is a private bank. The Commonwealth Government has promulgated a regulation which prevents private banks from advancing money to clients for the purchase of Government bonds. Only three methods are available for dealing with the present financial position. One is higher taxes, another is borrowing and the third is the use of national credit. The Commonwealth Government needs money and it proposes to raise an additional £12,000,000 a year by direct taxation under the uniform tax system. In view of the fact that the Commonwealth is spending nearly £1,000,000 a day on- the war, £12,000,000 would finance the war for only twelve days. There is only one way to prevent this country from drifting to political ruin; the system is crumbling and the only means being taken by the Government to meet the crisis is higher taxes and borrowing. I think that the Atlantic Charter is a scheme of high finance. If this country is to progress, a changed method of finance must be adopted, but recommendations as to the changes have not been acceptable to our governments. For example, the recommendations of the Royal Commission on Monetary and Banking Systems have not been given effect by any government in Australia. To meet the tremendous costs of the war, we need a new orientation of thought on finance. We are living under the most unorthodox condition of finance that the world has ever known, and many honorable senators still think that the old conservative ideas to which they have adhered for so many years will see us through. They will not provide the remedy. I shall not discuss the subject further to-night, because J intend to speak on it when the four uniform taxation bills are debated tomorrow.

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