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Thursday, 14 April 1904

Mr MAHON (Coolgardie) - I have great pleasure in seconding the motion. I think it would be futile to attempt to add to the information afforded by the excellent and exhaustive speech of the honorable member for Bourke. I desire to' compliment him upon the thoroughness with which he has examined the subject, and elaborated it to the House. He ought to have satisfied the majority of honorable members - at any rate, the majority of those who are not interested in assurance companies - as to the soundness of his scheme. The proposal is one that the Government should take in hand as soon as possible, and I agree that no more important matter has been brought before the House for seme time. The honorable member has demonstrated the necessity of the State establishing a department of this kind. He has instanced the success of the State Assurance Office in New Zealand, and the critics of his proposal are invited to go to New Zealand, and, if they can, find any flaws in the Department that has been administered there for some years. I have never heard of any complaint, and I think that the figures adduced by the honorable member tend to show that the Department is increasing in popularity among the poorer classes and others for whom it is our business to see that some provision is made. The parallel which the honorable member draws from Germany is one which - if we are not prepared to follow him to the full length of his proposal - we might take as an example. We might with great advantage adopt the German scheme to a still further extent, because in that country an admirable system of old-age pensions is provided. I should like to see the honorable member's proposal so expanded that the proposed department should also take over the management of any funds that may be subscribed by employers and employes to provide for those who have passed the working age. I understand that in Germany the employ^ pays one-third, the employer another third, and the State contributes "the balance to a fund for the maintenance of workers who have passed their prime. A system such as the honorable member proposes would pave the way for an old-age pension scheme of that kind, which, after all, would be the soundest that could be established. It is all very well to say that we should establish old age pensions by taxing the general public, but we have seen the outcry raised in Victoria because the money required for the payment of these pensions is taken from the pockets of the taxpayers. The unfortunate people who have been depending on the pensions have been squeezed down to the very lowest amount upon which it would De possible for a man to subsist, whilst in some instances pensioners have, upon some ridiculous pretext, been absolutely deprived of their miserable pittance. I- think that if we desire to establish a stable old-age pensions fund we should adopt something in the nature of the German system. Such a fund would be invulnerable. It could never be attacked by any class in the community, because it could not be said that the people deriving the benefit were not direct contributors to the fund. The honorable member for Bourke has also demonstrated that his scheme would offer greater security than is afforded by any private company to persons assuring. Naturally that must be so, because the credit of a State is sounder than is the credit of any number of private individuals, of which these mutual and proprietary companies are really composed. I do not wish to say one word which would raise a suspicion concerning the assurance companies, whether mutual or proprietary, which are doing business in Australia. In their own way they are performing good work. But when they are held up to be so absolutely perfect as to deprive those who advocate State interference of all warrant for such advocacy, we have a right to ask what would be the position of these institutions if a crisis similar to that experienced by the banks in 1893 confronted them ? They have never faced such a position as the Australian banks did in that year, and until they do, those who talk so loudly about their soundness had better be very careful in their choice of language.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - They never can face such a crisis, because their liabilities do not become due at the same time.

Mr MAHON - It is very fortunate for some of them that their liabilities do not fall due upon a single day. Seeing that these institutions lend money on mortgage, and that the value of their securities fluctuates from time to time, does any one suppose that they are so absolutely sound that they can offer a security resembling that afforded by the State? The honorable member for Bourke has dilated upon the fact that insufficient supervision is exercised over these companies. We do 'not know what they are doing; we do not know whether their securities represent anything like the value which they place upon them. We are unaware how often their directors advance large sums of money upon flimsy security to their own particular friends. I suppose something of that kind has been done, even in the model State of Victoria. I know that it has been done in some of the other States, where the directors of assurance companies, like those of banks and other financial institutions, have their- particular favorites, whose securities are not scrutinized with the same degree of keenness to which those of an outsider are subjected. I repeat that these institutions have never been tested by conditions similar to those which prevailed during the great banking crisis of 1893, and it is a very fortunate fact for some of them. I have no desire to include all the assurance companies doing business in Australia in any sweeping condemnation ; but I believe that Government, supervision is required in some cases. The honorable member for Bourke has also pointed out that the heavy expenditure incurred by these institutions renders it necessary for them to charge high premiums to the persons whom they assure. A State Life Assurance Department would be able to save a large portion of that expenditure. For example, it would not need to send canvassers all over the country, with medical officers following in their train. Its advantages would soon become known to the public, who would embrace them eagerly without being canvassed. Thus a State Department would save an enormous sum, which is now spent by private assurance companies upon representatives and medical officers. The industrial companies are the greatest shiners in extravagance. In some cases I have heard that it costs them 18s. to collect £1. There is another aspect in connexion with them, of which this Government and Governments elsewhere ought to have long ago taken cognizance. I refer to their practice of paying assurances upon the death of mere infants. That is a wrong principle to adopt, and no Government ought to allow an assurance company to pay over moneys upon the death of children. On the contrary, it would be far better - especially for the Government - to pay a premium to every person who rears a healthy child up to fifteen years of age. Without casting any reflection upon the public in this connexion, I hold that it is a very dangerous principle to allow assurance companies to assure the lives of child- ren so that their parents may benefit by their death. The practice, however, is sufficiently prevalent to call for notice. When the Government are legislating upon the matter I trust that this aspect of it will receive attention." I believe that the funds of a Government Life Assurance Department could be invested very nearly as well as can the funds of private companies. No doubt it would be very injudicious for a State Department to lend money on mortgage in the ordinary way ; but it is not altogether a new practice, because even in Victoria the State advances money upon freehold property at 4^ per cent.

Sir George Turner - That is an independent tribunal.

Mr MAHON - I presume that the. Department which we propose to establish would also be an independent tribunal.

Sir George Turner - No; it would he. a Government Department.

Mr MAHON - Does not the Government of Victoria guarantee the other institution ?

Sir George Turner - It does not interfere with its management in any shape or form.

Mr MAHON - Does not the Government of Victoria guarantee every depositor in the institution to which I refer ?

Sir George Turner - Of course it guarantees the Savings Bank; but that is not a Government Department in any shape or form.

Mr MAHON - Does not the Savings Bank advance the funds of its depositors upon mortgage, and is it not guaranteed by the Government of Victoria?

Sir George Turner - As a matter of fact, the Savings Bank does not advance the funds.

Mr MAHON - Well, the Commissioners of the Savings Bank do so. The Government are responsible to the depositors of that institution, whose money is advanced to freeholders at 4J per cent. There is nothing to prevent a State Department from doing precisely the same thing. At any rate, if it objected to do that, it could go upon the open market, and purchase Government bonds which would absolutely return it 4 per cent. It could buy some bonds which would return a still greater interest, and it could even purchase the bonds of the Metropolitan Board of Works, which would yield £4 9s. per cent. That would be a very good return. The money thus received from premiums might, with advantage, be devoted, as it accumulates, to' the redemption of the Government debt of Australia. At any rate, it would earn sufficient to enable a reasonable allowance to be paid to every one who had decided to depend upon an honest assurance office. The Department would have the civil servants to form the nucleus of its list of policy holders; members of the outside public would also take out policies from time to time, and with the .present opportunity to invest funds at a high rate of interest there is not likely to be a more favorable time for its establishment. I commenced my observations with the remark that I did not intend to traverse in detail the' speech made by the honorable member for Bourke, because I had not had the opportunity to fully study the matter as he has done. I shall, therefore, conclude by expressing the hope that the motion will be carried, and that the Government will establish the Department as soon as possible.

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