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Tuesday, 5 November 1985
Page: 1520


Senator COATES —Has the attention of the Minister representing the Treasurer been drawn to media reports of a study by a group led by a Mr Paul Coughlin, of the Melbourne University Graduate School of Management, into the operations of the Commonwealth Banking Corporation? The report claimed that in profitability, efficiency and growth the Commonwealth Bank lagged behind other banks and concluded that the Bank should be sold. Does the Minister agree with the conclusion drawn by the study, particularly the claim of a loss of $182m? If not, will the Minister outline the major benefits, both social and economic, that have accrued to the Australian people through public ownership of the Commonwealth Bank and how these benefits might be affected if, as the report suggests, the Bank were sold to private interests?


Senator WALSH —I am aware of the report; I heard it yesterday morning on the wireless. However, I am informed that the figure of $182m, which has been cited in the Press, does not appear in the report. The source of that figure is unknown to me. It was also reported in the Age yesterday morning that the principal author of the report, a Mr Paul Coughlin, worked for the Leader of the Opposition, Mr Howard, when Mr Howard was Treasurer. So I think it would be fair to say that there is at least a possibility that there might be a certain amount of ideological prejudice involved in preparing the report. Whether Mr Coughlin helped Mr Howard cook the books when he was preparing the 1982 Budget, or deceived the public early in 1983 as to the likely size of the deficit--


Senator Chaney —Mr President, I raise a point of order. I do not think there is any protection for Mr Coughlin under the Standing Orders but there is protection for Mr Howard, and I suggest that you ask the Minister to withdraw.


The PRESIDENT —I ask the Minister to withdraw his remarks in respect of a member of another House.


Senator WALSH —Very well, I withdraw, Mr President, but I was not accusing Mr Coughlin of anything. I was about to say that I did not know whether Mr Coughlin did those things.


The PRESIDENT —Order! The Minister has withdrawn. I ask him to continue his answer.


Senator WALSH —Certainly, Mr President. The study as reported, and the study according to my advice, has some inconsistencies. However, it would appear that the figure of $182m relates to some assumed difference between the amount of tax that would have been paid by the Commonwealth Banking Corporation over a 10-year period and the amount actually paid to the Commonwealth in dividends. It would appear that that is the source of it. Until 1 July 1984 the Commonwealth Banking Corporation was not liable to pay income tax. Since that date it has been liable to pay income tax. That was one of the reforms introduced by this Government.

However, even if everything in the report is factually and financially sound, a few other points are overlooked. One is that the making of profits was not the entire reason for originally setting up the Commonwealth Bank and I believe that the great majority of Australians have taken this view ever since. It does, to a much lesser degree certainly, like Telecom Australia and Australia Post, accept some social responsibility to provide services in areas where probably other banks would not. In addition, some State governments have received long term benefits from favourable loans provided by the Corporation.

It should also be noted-and this has particular relevance to any claim that the Commonwealth Bank has been less profitable than the major private banks-that the new capital injection provided by this Government in 1984 was the first such addition to capital other than retained earnings that the bank had enjoyed since its inception. In the last two years there has been strong growth in profitability by the Corporation, with 55 per cent growth in operating profit before tax in 1983-84-that is, on the 1982-83 year-and a further 24 per cent growth in 1984-85 on 1982-83. I personally have not seen the report. I asked yesterday for a copy to be provided to me. I do not think it has arrived yet but I will certainly have a look at it when it does arrive.