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Thursday, 14 April 1904

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I have no desire to enter into any lengthy discussion of this question, but I wish to place certain considerations before the House. Whilst I give the mover of the motion credit for the manner in which he has dealt with certain aspects of the question, I feel constrained to say that he failed to bring before the House a great deal of information that should have been placed in its possession before it was asked to deal with an important matter of this kind. For instance, we had Government companies quoted. But we had no comparison between the rates charged by those companies and public companies, and the privileges granted in return, nothing by which we could estimate the advantages offered to the assured by each. We had not that full information as to the character of these different Government schemes which is desirable before we are asked to commit ourselves to a resolution of this description. I admit that abstract resolutions, whether carried or not, mean very little, but we ought to be careful not to commit ourselves to a resolution unless we are satisfied that action should be taken in the direction decided upon. Section s.i of the Constitution empowers us to make laws with respect to -

Insurance, other than State insurance ; also State insurance extending beyond the limits of the State concerned.

There are different ways of exercising that power. I believe that our first duty is, not to establish a Commonwealth assurance office, even if that may eventually be shown to be desirable, but . to meet the circumstances which honorable members who have spoken have detailed in connexion with the management of existing private institutions, by providing for an inquiry into their condition, so that the public may know that they are solvent, and that by the supervision of their operationspayment of the policies when they become due may be guaranteed.

Mr Wilks - We require a Commonwealth Audit Department.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - We need a Commonwealth Insurance Department similar to that of the United States. There should be a very strict and searching examination of the operations of assurance offices. In some of the States there is practically no law aimed at securing the solvency of these offices, although the public have invested in them such large sums of money, and have indeed, in some cases, intrusted to them their future.

Mr Wilks - This lack of legislation is very marked in New South Wales.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It is a credit to those who have had the conduct of assurance business in Australia, that, notwithstanding these extraordinarily loose conditions, there has been practically no default. But it is not safe to allow this state of affairs to continue, and it should be our first business, not to establish a Commonwealth Department of Insurance - leaving the existing private offices to continue their operations under the loose conditions which now prevail, and perhaps diminishing their solvency by our competition - but to pass a law providing for searching inquiry and thorough investigation into the position of the existing companies, so that the public may have a guarantee as to the security of their investments. The honorable member for Coolgardie referred to a very' important point in connexion with Commonwealth life insurance. It dovetails into the old-age pension question. .He was perfectly right in saying that if we establish, not the charitable old-age pension scheme which exists in one or two of the States, but one based upon contributions from those who are eventually to benefit, thus encouraging thrift, and removing the charitable aspect which is repellant to many, greater security for the regular payment of any given pension will be obtained than when the money has to be dragged from the pockets of the taxpayers.

Mr Wilks - In Germany it has been found difficult to keep up the contributions.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - There are difficulties, which in Germany are to some extent surmounted by allowing the employer to deduct the contributions from the wages of his employes.

Mr Wilks - That is all very well where people have permanent employment.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Yes, but liberal conditions might be allowed, providing for the reinstatement of policies upon the making of payments at subsequent periods. The whole question, however, requires consideration, and the subject of both life assurance and old-age pensions should be referred to a Committee of the House for inquiry, before we attempt to deal with either. We shall probably not have an opportunity to establish an old-age pension scheme for a long time to come, but the whole subject might receive trenchant investigation at a period considerably anterior to that at which we are likely to be called upon to deal with it. Conditions are not alike in every country, and therefore an inquiry should be made as to whether compulsory or voluntary insurance is the better, as to whether a scheme of insurance can be combined with an old-age pension scheme, and in regard to other points. I do not say what my conclusions upon this subject will be. No honorable member can do so until such an inquiry has been made, and the evidence ta.ken, presented, and reported upon. The question, however, deserves investigation. It has been raised by Mr. Chamberlain and others in Great Britain, and should be thoroughly looked into. We are now trying to determine something by a resolution which either means nothing, or, if it has a meaning, must be followed by action before any proper inquiry is made. Then, again, circumstances are not quite as the mover of the motion supposes. In the first place, while there is extreme danger in the operations of private companies without supervision, there is also danger in the operations of a Government Department. We have seen the reckless attachment of Savings Bank funds by a Government, and the wanton use of loan money, and it cannot be expected that any Government continuing that policy would always remain solvent. There might be an occasion when such a Government, like a bank, would be unable to meet its liabilities.

Mr Webster - If there had been reckless expenditure '.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Does the. honorable member express ignorance of reckless expenditure already having been undertaken ?

Mr Webster - I am doubtful of the truth of the assertion that it has.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Then the honorable member would require extreme evidence to convince him.

Mr Webster - I am afraid that the statement is readily accepted without evidence.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - I think there is evidence for it. Where are the Savings Bank funds of some of the States?

Mr Webster - Wisely invested.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - Portions of them are unprofitably invested in Government work on which no interest whatever is being returned. I am not speaking now of any particular Government, but suppose a run was made upon a Savings Bank whose funds at a time of monetary distress had been thus misappropriated - used as ordinary revenue, or for purposes which should be met out of revenue. Where would the Government be then?

Mr Webster - The Government would come to the rescue of the bank.

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - It would have no money in hand.

Mr Webster - They hold the power.'

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - -To re- . fuse to pay. No doubt any of our Governments would pay eventually, though I know Governments which I should not like to trust.

Mr HUME COOK (BOURKE, VICTORIA) - Would not the fact that the Government was behind the bank prevent a run?

Mr DUGALD THOMSON (NORTH SYDNEY, NEW SOUTH WALES) - No. I have seen a run upon a Savings Bank guaranteed by a Government. It was the most extraordinary sight I ever saw. No ordinary run upon a bank was like it. Honorable members who come from New South Wales know the run that took place there. On that occasion it was not the

Government but the other banks which, by providing gold, prevented the Savings Bank from shutting its doors. Institutions are not necessarily sound and solvent and superior to runs or to strain merely because they are Government institutions. Good management must be exercised in connexion with both Government and private institutions if they are to remain solvent, and it is only good management that can make a Government institution equal to a successful private institution. It has. been said that if there were any shortage in a Government insurance fund the people could be taxed to make good the deficit. That is a most unfortunate argument. The insurance money due by Government institutions should be provided by the premiums paid by those who insure, not by the taxpayers. Those who have insured in private offices should not be called upon to assist in making good the shortage in a Government fund so that payments might be made to others who had insured with the Government Department. The Government Department should stand on its own footing, and pay its own liabilities. The honorable member for Bourke stated that the premium rates of the New Zealand Government Department are lower than the rates of the private companies doing business there, but they are obviously lower only if the Government office gives the same privileges as are given by private companies, and he stated that they do not. Consequently it cannot be shown that they are lower unless a very exact comparison is made, and wc have not been given a'i opportunity to make such a comparison. The honorable member said that the lowest rate of interest earned by public life assurance companies in Australia was 3.9 per cent., and that the highest average rate earned by any company was 4 J per cent. That is the interest returned upon the investments. I know that it is possible that some of the investments of these companies 'may not be accurately valued. That is why I say that we should appoint some authority to make a searching inquiry. In many cases, however, there is ample security afforded to those who are assured. I am not speaking as one who has any connexion with life assurance companies. I neither hold shares, nor am I a director, nor do I hold a policy in any life assurance company; but I am aware that some of the companies make the most ample provision for any drop in the value of their assets. Funds are set aside for that purpose, and the rate of interest upon which they calculate their rates is reduced from time to time, so thai it is gradually becoming lower and lower. That is one of the methods which the companies have of offering additional security to investors. A State Assurance Department, such as proposed, would invest its funds in Commonwealth bonds, and possibly in State bonds. I do not see how a Commonwealth institution could invest in municipal bonds. Therefore the Government could not expect, at the usual rates for money, to earn more than 3 per cent. The New South Wales Government credits its Savings Bank depositors at present with 31 per cent., but for years the rate was only 3 per cent. That is a considerable reduction on the rates earned by private companies, and must mean some reduction of the advantages offered to persons assuring. I do not say that this is an absolutely fatal argument against the establishment of a Government Life Assurance Department ; but I contend that it shows the necessity for a searching inquiry before we commit ourselves to any resolution. I cordially agree with all ' that has been said regarding the objectionable practice of assuring the lives of infants, 'but that has nothing to do with the proposal to establish a Government Life Assurance Department. Independently of any question of that kind we should require to pass a law dealing with the life assurance companies now in our midst, in order to put a stop to the objectionable practices mentioned. I certainly cannot vote in favour of a bald motion of this kind until we have first taken all the steps that are within our power, under the Constitution, to regulate private assurance companies, and until we have inquired into the question of Government assurance, particularly in Germany and New Zealand, and have obtained a report instituting a comparison between the conditions in those countries and in our own. This would be necessary before Ave could arrive at a proper decision, and, therefore, I must vote against the resolution.

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