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Friday, 16 September 1949


Mr DEDMAN (Corio) (Minister for Defence and Minister for Post-war Reconstruction) . - First, I draw attention to the terms upon which the honorable member for Reid (Mr. Lang) has based his motion -

The need to call to the bar of this House the Governor of the Commonwealth Bank for examination regarding the international monetary position, with particular reference to the dollar crisis, Australia's international reserves, the price of gold, and international exchange problems generally.

I should have thought that the honorable member would be the last gentleman to draw attention to the previous occasion on which the chief officer of the Commonwealth Bank was called before this Parliament, because that subject is linked with the depression period, in which the honorable member himself played no small part. If honorable members will refer to Hansard for the period from the 23rd April to the 4th June, 1931, they will find in it the statements that were made by Sir Robert Gibson, who was then Chairman of the Commonwealth Bank Board. It was following upon the evidence that was given by Sir Robert Gibson before the Senate that certain legislation, which later became known as the Premiers plan, was introduced. Every honorable member knows the effects of the Premiers plan upon the people of Australia, particularly the workers. The honorable member for Reid himself was in the chair at the conference of Commonwealth and State Ministers at which the Premiers plan was agreed to. I read from page 5 of the report of the conference of Commonwealth and State Ministers held at Melbourne from the 25th May to the 11th June, 1931, just to prove beyond any doubt that the honorable gentleman himself was responsible for the Premiers plan and put the motion in regard to it. I am reading this extract-


Mr McDonald - What has that to do with the matter?


Mr DEDMAN - It has this to do with it, that the honorable member for Reid has suggested that the chief officer of the Commonwealth Bank should be brought before the bar of this House to give certain evidence. I am directing attention to the fact that when the chief officer of the Commonwealth Bank, the late Sir Robert Gibson, was on a previous occasion brought before the bar of the Senate to give evidence, the consequence was that a plan was inaugurated to the great disadvantage of the workers of this country.


Mr McDonald - That has nothing to do with the matter.


Mr DEDMAN - It has a great deal to do with it. The report reads -


Mr LANG - You were objecting to the flatrate imposition there, and now you want to say that we ought to have the flat-rate here. As acting chairman, I shall put Mr, Hogan's motion in the form in which it has been amended as we have proceeded. It is -

That, for the guidance of the Legal Sub-Committee, the Conference is of opinion that there should be a reduction of 20 per cent, in all adjustable Government expenditure as compared with the year ending the 30th June, 1930, including all emoluments, wages, salaries, and pensions paid by the Governments, whether fixed by statute or otherwise, such reductions to be equitably effected. Motion agreed to.

So the honorable member for Reid, who was senior Premier in the Commonwealth, was responsible for the introduction of the Premiers plan, which brought untold hardship and misery to the workers of this country, and the plan was a consequence of calling before the Parliament of Australia the then chief officer of the Commonwealth Bank.


Mr Lang - What the Minister says is not true.


Mr DEDMAN - Look at the records.


Mr Holt - That has nothing to do with the issue.


Mr DEDMAN - There is a great difference between the circumstances in which Sir Robert Gibson was called before the bar of the Senate and the circumstances to-day. At that time, it is true, the financial policy of Australia was dominated by the Commonwealth

Bank Board, of which Sir Robert Gibson was chairman, and it is also true that at that time the Australian Parliament had no say whatsoever in the financial policy of Australia. So there was some excuse for calling the then chief officer of the Commonwealth Bank before the Parliament, because it was he and the other appointees to the Commonwealth Bank Board, the representatives of vested interests, who were appointed by honorable gentleman opposite when they were the Government, that decided the financial policy of Australia at that time. It was because of that policy that we were led into the depression. The circumstances to-day are entirely different. There is no reason whatever for calling the chief officer of the Commonwealth Bank before the Parliament to-day, because, as a result of the Commonwealth Bank Act 1945, which was passed by the Parliament, the Commonwealth Bank Board was abolished, and the financial policy of Australia is decided by the government of the day, which is elected by the people of Australia and is responsible to the Parliament and the people. So there is a great difference between the circumstances when Sir Robert Gibson appeared before the bar of the Senate and the circumstances to-day. The honorable member for Reid suggests that the Governor of the Commonwealth Bank should be brought before the bar of - this House, although the circumstances have entirely altered, and altered for the better, in that the Government, not the erstwhile Commonwealth Bank Board is responsible for financial policy. If Opposition members had their way, they would bring back the Commonwealth Bank Board. Then it would be necessary to get a full explanation of the financial position by bringing before the bar of the House the Chairman of the new Commonwealth Bank Board. Opposition members have made that perfectly clear, because, concluding his second-reading speech on the Commonwealth Bank Bill 1945, the Leader of the Opposition (Mr. Menzies) said - . . on behalf of my colleagues, and myself, I desire to make quite clear to the House and to the people that when we on this side of the chamber are returned to office, we shall take prompt steps to restore board control to the Commonwealth Bank ... I make that statement publicly, here and now, because it will be well that when the people of Australia come to pass judgment upon this matter, they should know exactly what is the issue, and where we all stand upon it.

There is no need whatever to call any officer of the Commonwealth Bank, the Governor or any other officer, before the bar of the House to explain the financial situation to-day.


Mr Lang - Why not ?


Mr DEDMAN - Because it is the Government of Australia, and the Cabinet elected by the Labour party, that decides the financial policy of the country and how it shall be applied.

Having dealt with the previous occasion on which an official of the Commonwealth Bank was called before the Parliament, which had certain consequences that, in ray opinion, led us into a bad position-


Mr Lang - The Premiers plan was inspired by the then Prime Minister, the right honorable member for Yarra (Mr. Scullin).


Mr DEDMAN - The honorable member for Reid was chairman of the conference when the resolution was passed.


Mr Lang - Nothing of the sort!


Mr DEDMAN - Having dealt with that matter, I now pass to the dollar situation, which also was mentioned by the honorable member for Reid. The dollar situation is quite easy to understand if one takes the trouble to understand it. The plain fact is that Australia earns dollars by the export of goods to the United States of America and other dollar countries. It earns each year from the sale of goods, including gold, which also was mentioned by the honorable member for Reid, an average of £50,000,000 in Australian currency, but when it comes to spending dollars on the goods that Australia requires, the country needs about £70,000,000 worth of dollars in Australian currency. The difference between what we earn and what we spend in the dollar areas has to he made up by drawing on the sterling area reserve of dollars and gold. That is a simple fact. I indicated in a previous debate that last year we had to draw from the sterling area reserve of dollars 174,000,000 dollars and that this year we shall have to draw 72,000,000 dollars.


Mr Thompson - By how much did we build up the sterling area reserve of dollars?


Mr DEDMAN - The sterling area reserve is being depleted all the time. I recently gave the figures showing the extent to which it is being depleted. It fell from 500,000,000 dollars in the first quarter of this year to 406,000,000 dollars in the second quarter, and, while the economic conference was sitting in London, it fell to 385,000,000 dollars. The drain has continued since then, but I am not at liberty to divulge the latest figures.


Mr Fadden - Are only direct credits taken into account in that reserve, or are indirect credits taken into account? Is any consideration given to indirect credits ?


Mr DEDMAN - -Every factor that we are entitled to consider is taken into account.


Mr Fadden - Who gives the entitlement?


Mr DEDMAN - If the right honorable gentleman can suggest any single item that has been neglected in making up the balance between Australia and the dollar area or the sterling area, I should like to know it. It is useless to talk generalities about some item having been missed.


Mr Fadden - We do not know the position to-day and the Minister does not know it.


Mr DEDMAN - The position is quite clear. We get credit in dollars for all the goods that we sell to the dollar area and the gold that we sell to the United Kingdom. The total credit for the whole of our sales to the dollar area and the sales of gold amounts to about £50,000,000 a year in Australian currency, but we require about £70,000,000 a year in Australian currency to buy the things that we need from the dollar area. We are in the position of having to go to the United Kingdom, which manages the sterling area reserve of dollars, and say, "We require a few more dollars than we earn. Will you give them to us ? " So far we have been given all we require, although not so much as we should like.


Mr Beazley - We are entitled to it, surely when Great Britain owes us £450^000,000.


Mr DEDMAN - That is an entirely different position. It is true, of course, that arguments can be adduced to the effect that we should be able to get large quantities of dollars from the United Kingdom. On the other hand, of course, there is this to be said, that we are keen to get this credit in the United Kingdom because that country is our best market. If we did not sell goods to the United Kingdom - and it is the selling of these goods that enables us to develop our sterling credits in London - where would we sell them? We should probably be unable to sell them in the United States of America, certainly not for dollars.


Mr Holt - To what goods is the Minister referring?


Mr DEDMAN - I am referring particularly to food items such as wheat and wool.


Mr Holt - Does the Minister claim that there is not a world market for wheat at present?


Mr DEDMAN - I am not claiming that there is not a world market for some commodities, but it would not be possible for us to sell wheat and meat to the United States of America. I remind honorable members that when the Minister for Commerce and Agriculture (Mr. Pollard) attempted to sell a small quantity of butter to the United States of America he was confronted '-with many difficulties. That emphasizes the basic cause of the dollar shortage problem throughout the world, which concerns not only the countries of the British Commonwealth of Nations but also every other country in the world. It has arisen because the United States of America is such a wealthy country, so far as natural resources are concerned, and because the techniques and methods of production in that country have advanced to such a stage that there is no need for its people to obtain commodities from any other country in the world. On the other hand other countries must obtain certain types of goods from the United States of America.


Mr Rankin - Do not the Americans want zinc and rubber?


Mr DEDMAN - They do not really need rubber. The United States of America developed huge synthetic rubber plants during the war and could now, at a pinch, do without any natural rubber at all. Legislation in the United States compels manufacturers in that country to use specified proportions of synthetic and natural rubber. That should make the difficulty of the dollar problem quite clear to honorable members. The need of the people of the United States of America to buy goods from other countries- is not nearly so great as is the need of other countries to obtain commodities from the United States of America. When speaking on this subject the other day, I explained that the conference in London had decided on a certain course of action. The present crisis is not the first crisis in relation to dollar problems. In fact it can be said to be the fourth of such crises. The first dollar shortage crisis occurred immediately after the war. That was met by a loan from the United States of America to the United Kingdom. The second crisis, which could be called the convertibility crisis, was overcome by certain action that adjusted the situation for the time being. At a later stage a critical situation again developed; it was met by the introduction of the European recovery programme. We are now facing the fourth crisis. No individual in the world has yet been able to provide a solution of this problem, the basis of which is the disbalance of the productive capacity of the United States of America compared with the production of other countries of the world. I consider that there are two ways in which the problem could at least be alleviated. One is the reduction of tariffs in the United States of America to enable the freer inflow of goods from other countries. The greatest contribution that that country could make to the economic prosperity of the world to-day would be to abolish all of its tariffs. Of course that would be very difficult to do because certain vested interests in the United States of America would lobby against such action being approved by Congress. I do not know whether it would be practicable for the United States to adopt that course.


Mr Abbott - Would there be a reciprocal arrangement?


Mr DEDMAN - No. We are dealing with the free flow of goods into the United States of America, which would help to alleviate the present position. The second way in which the problem could be alleviated would be by the private investors in the United States of America adopting the technique of investors in the United Kingdom who were in a comparable position up to the end of the last century, and, indeed, up to the outbreak of World War I.


Mr Lang - That would make the position very difficult.


Mr DEDMAN - I do not agree with the honorable member for Reid. At that time, although the United Kingdom occupied the dominant economic position in the world, there was no difficulty about currency. The people of all countries could sell goods to whatever country they chose, change the money received into sterling, and subsequently change that sterling into the currency of any other country in the world. We want to get back to that position if at all possible. The world was then able to enjoy a system of that kind, free of limitations with relation to particular currencies. It was able to enjoy that pattern of trade because investors in the United Kingdom were able to send their money to any other country in the world, and whenever there was a disbalance of trade in any country it was counteracted by the investment policy of the United Kingdom. I am not referring to government policy.







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