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Thursday, 16 April 1931


Senator KNEEBONE (South Australia) . - May I, at the outset, express my sincere regret at the circumstances responsible for my presence in this chamber. The late Senator Chapman, whose place I occupy, was a personal friend and neighbour of mine for several years. I appreciated highly his sterling worth as a citizen and a member, first, of the South Australian Parliament, and later of the Commonwealth Parliament. I feel that if I discharge my duties as a senator with the same integrity and singleness of purpose as he did, I shall have done well. Since my arrival I have been much encouraged by the uniform kindness shown to me by all honorable senators. The only unkind remark I have heard so far was the suggestion from the right honorable the Leader of the Opposition that we should go back to the country at once. I am so convinced of the need for extraordinary and unorthodox action, however, that I am prepared to go to the country at any time and stand or fall by the principles that I shall endeavour to enunciate while I am. a member of the Senate. I recognize that I enter this chamber at a period of extreme crisis in the history of the country. Whether my stay be long or short, I hope that if I am not able to do anything of service to the nation I shall do nothing that will have a detrimental effect on the people of Australia generally.

It is rather significant that, during the first week of my presentation to this Senate, I should speak upon a matter that is of the utmost importance to the people of the Commonwealth; a highly controversial subject, judging by the manner in which Senator Pearce dealt with it. I believe that this bill has been designed by the Government of the day to meet an extraordinary position. Whether it meets with success or not, I give the Government credit for having introduced it for that purpose. It has been admitted that, generally, the most serious problems at present confronting Australia are financial in nature. This bill is mainly financial in character. With all due respect to other authorities, I submit that no purely financial scheme will solve our problems. A plan must be submitted that calls for a nation-wide effort to round the corner to which Senator Pearce referred. Knowing the people of my country as I do, I believe that all sections are prepared to make that effort. The trouble heretofore has been that they have not been sure as to the right step to take. Those in control of the destinies of the nation have been proceeding for some time along certain lines, and I do not think that any one will claim that they have achieved very great success.

I should like to deal with this matter from a nation-wide and not from a purely party political aspect. At times we are prone to resort to the despairing cry that Australia is " down and out ", that we have defaulted, repudiated, and cannot pay our debts ; that we cannot do this and we cannot do that. I do not subscribe to such views. Just as Australia played its part and won through during the war, so it will do again, during times of peace. But I do believe that we must resort to methods other than those availed of in the past.

It might be out of place at this juncture for me to review Australia's position, even briefly; but it makes a graphic story. I am of the opinion that we should, on such occasions, review our nation's wonderful history during the past century, in order to disabuse the minds of those who think that we are down and out, and cannot pay. Until the Great War broke out the Commonwealth Government had incurred practically no national debt. Because of the part that we played in that holocaust it was necessary to establish such a debt, apart altogether from our State debts, but most of it is held in bonds and debentures by the 6,000,000 people who inhabit our country. The major portion of our national debt was advanced to Australia by Australians. I believe that it will be honoured to the last penny. The Leader of the Government yesterday estimated that the private wealth in Australia amounted to some £3,000,000,000. Probably that figure was calculated some months, or even years ago. I suggest that, by a selfimposed process of deflation we have destroyed hundreds of millions of pounds of our national wealth, and made the position worse instead of better.


Senator Foll - What does the honorable senator mean by " self-imposed process of deflation"?


Senator KNEEBONE - I contend that there was no need for either the States or the Commonwealth to take up the cry that has proved futile in other countries, and impose slashing cuts in all directions. That process of selfimpoverishment has led us into a worse position than the one in which we originally found ourselves. The wealth of a country is the wealth that it produces. Just prior to the recent depression the bank deposits of Australia increased over a period of five years at the rate of £10,000,000 a year. In 1907 the wealth production of Australia was £188,000,000, or £41 per head of the population. In 1930 it had increased to £450,000,000, or £75 per head. Our power of wealth production was never greater than it is to-day.

The prosperity of a country is not gauged by any measure of currency, but by the actual wealth that it produces. It is an extraordinary fact that this young country of ours, with its remarkable natural resources, the finest race in the world inhabiting it, and a sparse population, should have idle at least 250,000 of the best workers to be found anywhere. That uneconomic position has been aggravated by the policies of past State and Federal authorities. Paper or gold money has no national significance as wealth ; it is merely a medium of exchange between those who produce the wealth and those who use it. In view of the tremendous wealth-creating power that is possessed by the Commonwealth of Australia our present economic position is extraordinary and illogical. Nature has not failed us. We are not suffering from droughts, fire, or flood. Is it not illogical, therefore, that an intelligent people such as ours should allow an unduly high proportion of its kith and kin to go hungry and cold? This cannot be attributable to the failure of the people of Australia to produce. I, and my colleagues, believe that the trouble arises from the breakdown of our monetary system, and so this Government, which was returned eighteen months ago by an overwhelming majority, is applying its theories in an endeavour to solve the problem. They may be right, or they may be wrong. Similar action was taken by other countries in different circumstances, and the results were not always as successful as we would have desired. This bill is submitted as part and parcel of the Government's financial plan to deal with the position with which Australia is confronted. It is available for comparison with any scheme advanced by any other section of the community. The people of Australia are entitled to select that which they think is the best.

South Australia, whence I have just come, is in the extraordinary position that one-third of its workers are out of employment, another third but partly employed, while the remaining third is unable to bear the burden of the cost of carrying on the State. That community is heading for a financial, social, economic and industrial crisis. In view of the facts, this Government is obliged to take steps which have not hitherto been resorted to by those controlling the affairs of the nation.

The main objection to the bill is embodied in the sweeping statement that it represents " wild inflation ". In all sincerity, I submit that it' would be an insult to the intelligence of the people of Australia generally, and of the parliaments of the country particularly, if representatives in this and another place submitted to the introduction of a scheme of "wild inflation", allegedly aimed at the destruction of Australia's currency. Any government that advanced such a proposal could not survive for many weeks. I believe that when the facts are placed before the people of Australia, and it is realized that this bill is part of the rehabilitation project of the Government, the measure will be accepted. Charges have been levelled against it similar to those that were made against the Commonwealth Bank Bill, introduced by the Fisher Government. It was said that the Labour government was establishing a bank; that as soon as the administration became impecunious it would rob that bank and print more, but useless, banknotes. Nothing of the kind was done. On the contrary, the Commonwealth Bank saved the nation during its greatest crisis. Well do I remember walking outside Westminster on the fateful 4th of August, 1914, staring up at " Big Ben ". The clock struck twelve. Germany remained adamant in its decision to violate its pledge: the British nation became a participant in the war. For the next four days the world's Gibraltar of finance, the Bank of England, dared not open its doors. The doors of the Commonwealth Bank of Australia were open all the time. Why? Because our bank was backed by the confidence of the people of Australia. That was not the case with the Bank of England. The directors of the latter institution waited upon the then Prime Minister and said that they dared not open the doors of the bank, as they could not return to the people the money that they had deposited with it. The people of Great Britain, through their Prime Minister, came to the support of the Bank of England, by extending it an initial loan of some £50,000,000. Immediately its credit was re-established and confidence restored. The crisis was averted, and the bank again opened' its doors. Not only the Bank of England, but many other private enterprises collapsed temporarily during the war period, and it was necessary to introduce nationalization schemes before the war could be won for the British Empire and the Allies.


Senator Guthrie - Some people were not too anxious to win the war.


Senator KNEEBONE -That is true, but I am not referring to them. I know that I was not in that category. This measure is a genuine attempt to meet an extraordinary position. It provides for the rehabilitation of our industries, and the re-employment of workers who are now idle.

The most serious problem that confronts Australia is not a financial one, but that of having so many of our people consumers and not producers ; a liability to the nation instead of an asset. That has an entirely demoralizing effect on the economic stability of the nation. So long as it continues, the position must inevitably become worse.

I listened with considerable interest to the Leader of the Opposition's criticism of this measure, and was utterly disappointed at the fact that the only suggestion which he had to offer was to wait until we had reached the turn in our affairs. If we continue a policy of deflation, we shall never reach the corner. If we allow existing conditions to continue, the position will become steadily worse as the days go by There must be a reversal of policy. It may be said - indeed, the right honorable senator made the suggestion a few moments ago - that a government which resorts to an unpopular policy will go out. I am not concerned as to whether a policy is unpopular or not, so long as it is right. If I can gauge the temper of the people - and I have just come from them - they are calling aloud for a change of policy. In South Australia, in normal times, it takes 10s. out of every £1 of revenue received to pay interest on the national debt. At the present time, I suppose, the amount is 14s. or 15s. In that State there are workers with large families who are working only part time. They would be better off if they ceased work and went on the dole. Yet we hear people slandering the unemployed, and saying that the workers will not work. It is costing the State Government in South Australia £15,000 a week to feed people who are deprived of the right to earn their own living. One person in every ten in that State is to-day living on the dole, and that number is rapidly increasing. Therefore, it is not surprising that the Premier of South Australia should subscribe to this scheme, and that he is waiting for it to go through so that money may be made available to his Government for the assistance of his people.

The right honorable senator said that the proposed fiduciary notes are to be used only for financing sewer works or other public enterprises. That is not the case. If he has read the bill, he must know that this issue may be used at the discretion of the authorities to foster any industry.


Senator Sir William Glasgow - It was the Leader of the Government (Senator Barnes) who said that.


Senator KNEEBONE - If the Leader of the Government made the statement, he also was wrong. I am not pledged to the voicing of an untruth. If honorable senators read the bill they will find that under it power is given to assist industries. Its main object is to lift industry out of the existing depression. I am unable to see that there is very much difference in the effect on the people of borrowing £18,000,000 from ourselves or borrowing a similar amount overseas, except that when you borrow overseas you have to pay a fixed rate of interest. The position that I, at any rate, am taking up is that, failing a better scheme, we should give this a try-out. I am satisfied that it does not mean purely and simply increasing the note issue. It means giving extra credit to the people of Australia. It has been suggested that by passing this bill we shall show the people outside of Australia that we are lacking in confidence. I believe that it will have the opposite effect. If they are watching us as closely as we are led to believe they are, and they see that we are prepared to finance ourselves, it appears to me that the natural result must be increased confidence in Australia. But, if we take up what I submit is the absurd attitude of saying that the people of Australia are out for a wild, hare-brained scheme of inflation which will destroy everything, I cannot imagine anything that is more likely to damage our prestige as a nation or our credit overseas.

We admit quite frankly that the banks of this country, as of other countries, have played a very important part in its history. By the power that they have obtained they can either accelerate or retard the progress of the country. I believe that they have done either one or the other at different times in our history. A few years ago, before the war, I think, the position became so acute in Great Britain that a Conservative Government appointed a Treasury committee to inquire into the aggregation of power by financial bodies over which the Government then had no control. That committee furnished a report, which said -

Any approach to a banking combine or money trust would undoubtedly cause great apprehension to all classes of the community, and would give rise to a demand for the nationalization of the banking trade.

That demand, I submit, is not confined to the party to which I belong. There is a demand by all sections of the community that the wealth of the country shall be controlled by the people of the country. The nationalization of banking - and this measure is a step in that direction - has been a plank on our political platform for many years. Had it been given effect when the Commonwealth Bank was established, we would not now be faced with a crisis. This committee went further, and said -

The Bank of England has been undermined as the supporter and the regulator of the money market of the world.

It is known that a majority of the directors of the Bank of England are not British subjects.


Senator Foll - Who are not?


Senator KNEEBONE - About eight of them are Americans, and four are Germans, out of a total directorate of 22. Recently, the present Prime Minister of Great Britain, made the following statement : -

The Bank of England, by a decision taken in secret, without warning or explanation, and without an opportunity being offered for discussion or criticism, created widespread dislocation, the ramifications of which affected the whole of the economic life of the community.

He went further and said -

A handful of financiers determine, as they deem expedient, the rhythm of the economic life of the community.

He went still further and said -

If the nation is to be master of its own house, it is essential that it should bring the larger issues of banking policy under its control.


Senator Payne - Has the honorable senator the details of the decision of the directorate of the Bank of England?


Senator KNEEBONE - Yes. The policy of deflation that has been carried on in Great Britain emanated from this secret decision; and, as we know to our sorrow, it has had widespread effects throughout the Dominions. In Great Britain the Government stands for the nation controlling its wealth, just as it stands for the nation controlling its coal. The dearest thing in life, it seems to me, is the health of the community. Would anybody suggest that control of the lives of our people should be handed over holus bolus to private enterprise? Certainly not ! The safeguarding of the health of the community is the duty of the Government. We have on our notice-paper at the present time, a bill which seeks to give to the Government of the day the authority to carry out a scheme for the nationalization of banking.

The present Chancellor of the Exchequer in Great Britain deals in a very interesting way with this very question. The position of Australia is relatively easy compared with that of Great Britain, which, as honorable senators know, came out of the last war with a dead weight debt of £7,000,000,000. Previous wars, going back to the Crimea, laid on her the burden of a national debt of something like £900,000,000 ; but when the last war broke out it had been reduced to something like £600,000,000. The Chancellor of the Exchequer says -

No scheme of national financial reform can be effectively carried out without the nationalization of the banking institutions. The war-time experience of borrowing conveys a severe lesson of the power of the private financial interests to exploit public necessities.

Honorable senators know that during the war these banking institutions dictated their own terms and increased the rates of interest. Mr. Snowden says -

The rate of interest had increased from 3 per cent. to 7 per cent. for public borrowing, and a considerable portion of the British national debt is represented by the inflation of credit.

Great Britain is paying interest to-day on an inflated national debt. He goes on to say -

The banking business of Great Britain is rapidly evolving into a great monopoly. Private banking has disappeared and five great banks now control the bulk of the trading business of the country.

Recently, we Lad in Australia a direct representative of those five big banks. Mr. Snowden proceeds -

This money trust, together 'with the Bank of England, fixes the bank rate, and the rate of discount of treasury-bills, which in their turn, determine the price of money to the traders and borrowers.

Therefore, the essential means of exchange between the producer and the consumer, between one section of the community and another, is controlled, not by the people themselves, but by some private concern.

The right honorable senator in his able address referred, rather flippantly I thought, to the manner in which it is proposed to deal with the currency of the country. But no less an authority than an ex-Chanceller of the Exchequer in Great Britain, Mr. Reginald McKenna, who is a leading financier and chairman of, I think, the Midland Bank - one of the five big banks - says that there is absolute need for something on the lines here proposed. His statement reads -

With a growing population in all trading centres and a progressive improvement in industrial plant, the world is constantly developing in productive power, and, failing further economy in the use of gold, some annual addition to the monetary stock is essential to the maintenance of a stable price level.


Senator R D ELLIOTT (VICTORIA) - As Chairman of the Westminster Bank a few months ago, he said that it could not find an outlet for its resources.


Senator KNEEBONE - I shall deal with that point in a moment, if the honorable senator will allow me to complete this quotation -

Although there has been a substantial addition to the gold stocks, more than twice the amount has been absorbed by two countries without any corresponding increase in tha amount of money in circulation. That gold is as barren as when it was down in the mines. There must be an international consciousness in monetary affairs.

In the very able speech that he delivered yesterday, Senator Mclachlan said that we cannot solve this problem in Australia. I do not think that it can be solved even within the Empire. It is a problem that has international dimensions. We are proceeding along right lines in establishing in Australia government control - which is control by the people - of the wealth of the nation, and the medium of exchange between the producer and the consumer. When we, as a component part of the British Empire, have established our part of the structure, it will be comparatively easy for us to fit in with the financial operations of the Empire, and later, to co-operate with an international financial organization to control the finances of the world.


Senator R D ELLIOTT (VICTORIA) - Are we not doing all we can to kill any possibility of Empire finance ?


Senator KNEEBONE - I think that we shall do so if we adopt the policy that was outlined by the right honorable the Leader of the Opposition (Senator Pearce) this afternoon, which appeared to me to be to get the people poorer and poorer. Mr. McKenna proceeded to say-

We have only of late years began to realize how important a factor the management of money is in the machinery of our economic and social life. The twentieth century will probably see a development in our monetary ideas and practice, almost, if not quite, as striking as the advance in industrial and trading practices of the past century.

We are on the eve of tremendous changes. The orthodox methods of the past have failed. We are faced with new conditions and for their solution new steps must be taken. Mr. McKenna says -

It is a great mistake to say we are helpless in the face of " world forces ", over which we have little control. Those world forces are nothing more than the net result of the monetary policies of different countries, and our country is particularly powerful in shaping that net result.

If honorable senators will carefully consider these matters and not view them from the point of gaining party political advantage, they will see that whether the scheme now before us is absolutely right or not, the need exists for something to be done on lines different from those hitherto accepted. Senator Pearce referred to the need for credit or confidence. Fiducia means trust.


Senator Reid - No one will trust the present Government.


Senator KNEEBONE - I have a better opinion of my fellow countrymen than that. The currency of the day plays a very small part in the monetary transactions of Australia. I suppose that 75 per cent, of them are carried out by the signing of bits of paper. The merchant receives a cheque from a country customer and accepts it, not knowing at the time whether the customer has anything to his credit in the bank on which the cheque is drawn. The banknotes already in circulation play a very small part in the financial transactions of Australia, and it may not be necessary to turn out further notes like sausages from a machine, as one honorable senator has suggested may be done. In my opinion the bill is amply safeguarded in that respect,but, if necessary, it can be made more so. In any case it may not be necessary to issue a single note. The South Australian Government, although pledged to what is known as the Melbourne agreement, that no loans shall be raised overseas until the different States have balanced their budgets, has attempted to do so, but has been turned down by people overseas.


Senator Guthrie - Does the honorable senator wonder at that ?


Senator KNEEBONE - No ; it is not to be wondered at when there is so much ridicule of a genuine effort to do the right thing. Such talk is likely to bring discredit on Australia. Sir George Paish, One of the leading financiers of the world, speaking on the question of credit and confidence, said -

The chief cause of the present lack of confidence, with its attendant trade depression, is an entire absence of understanding of fundamental conditions on the part of those directly responsible for the affairs of the nations. Never were the underlying conditions more favorable to great prosperity, and never were the policies of the nations more effective in causing severe depression.

I submit that that bears out the statement I ventured to make a few moments ago, that a continuation of the policy pursued in the past will aggravate the depression. Every week potential wealth-producers are being forced through the bankruptcy court, and unless some change is made they will be driven to accept the dole and become a permanent drain on the community. Sir George Paish went on to say -

Thus, the progress of science in farming, in manufacturing, in transportation, and in banking, has given the world far greater powers of wealth production and distribution than it has ever previously enjoyed, and all that is needed to bring about a great expansion of trade and of income is that the nations should take advantage of this progress, but this they are unwilling to do.

Indeed, this progress of science seems to be regarded with feelings of suspicion and anxiety, and vigorous efforts are made to stultify its consequences. Never did science call, as it is calling to-day, for a new system of complete world economy, and never were the nations more determined to maintain its old and inefficient system of national economy.

With such authorities showing us the way we ought to rise above what we, in Australia, have called the pastime of indulging in party political squabbles, and deal with these matters on national lines. I am pledged 100 per cent. to labour. Others are equally pledged to their respective parties, but on occasions like the present, particularly after hearing that we are supplicants at the door of the British Government for financial assistance, we should be prepared to do something as Australians for Australia.

A few months ago any one who dared to suggest that we should approach the British Government and ask for a reconsideration of the 1921 funding agreement would have been dubbed a repudiationist, yet Mr. Bruce in his Joseph Fisher lecture at the Adelaide University in 1927 said-

Since Great Britain came to her arrangement with America for the funding of her debts and for the payment of interest at a rate of from 3 per cent. to 3½ per cent.,I have thought it would be only just and equitable that the arrangement with Australia should be varied, so that we would only pay the average rate of interest paid by Great Britain for her war indebtedness. This point of view I have put to three successive Chancellors of the Exchequer, and have argued strenuously in favor of it. Unfortunately, up to date, I have not been able to induce any of them to share the view which I hold. I am confident, however, that in the future some arrangement will be come to, qualifying the agreement entered into in 1921.

Mr. Scullinis not the first to approach the British Government for assistance, although apparently he has not pressed the question of the reconsideration of the agreement itself. In view of our serious financial position, our Government has merely asked that the payment of interest which we are entitled to pay and which we do not, and I hope never will, want to repudiate, may be deferred until we are in a better position to meet the charge. We know from the statement made by Senator Barnes this afternoon that Great Britain has treated Australia, as it always will treat component parts of the Empire, in a most liberal way.

I recognize that this Fiduciary Notes Bill is unprecedented in Australian history, but a lot of other things we have to do are without precedents. We cannot control this dreadful policy of deflation. The Premiers signed the Niemeyer agreement with the best of intentions, but they must have known that they could not carry it out although they might try their best to do so. People have been sacked and taxed and, in some cases, sent to premature graves, and yet we are as far off balancing our budgets as ever we were. No one would suggest that the power conferred on the present Government by this bill is likely to be made use of to turn out notes like sausages from a machine. I am not concerned with what is taking place in other countries. It is not possible in a democratic country like this. No government could live in Australia and violate principles of democracy for which the people stand. The people have their safeguards. Quite recently an appeal was made on one important question and the people decided intelligently and I believe rightly. The power of control always rests with the electors.

We must look at matters now from a different angle. I was in London at the outbreak of the war. Various estimates were put forth as to how long the war would last. I think Lord Kitchener was the first to say that it would last four years. Economists ridiculed him. They said that a war of such dimensions could not be financed for more than twelve months. So far as finances are concerned the war could have gone on until now without breaking down. It broke down because there was an excess of man power on one side over the other. Currency is only a means of facilitating the exchange of what the country produces.


Senator Barnes - In the farming areas to-day people are exchanging their produce without money.


Senator KNEEBONE - I hesitate to refer to the condition of the farming industry. I do not like to bring it into the debate; but a fortnight ago delegates from farmers' organizations asked permission to address a Labour conference in Adelaide. I thought some Labour delegates were pretty "red," but from what I gathered from the representatives of those farmers' organiza tions I believe that 80 per cent, of the farmers of South Australia will vote for this fiduciary issue if it is properly explained to them and is properly safeguarded. The only alternative is to go on as we are doing until we turn to the right or to the left or the rightabout.

The objective of honorable senators opposite is that we are so to re-establish the country's peculiar financial equilibrium that it can borrow some money. I do not think much of that suggestion. The general trend, I think, is for a sensible co-ordination of the accumulated wealth of the country, call it money or capital. First we should have government-controlled central banks throughout the dominions. What would be the use of having a central bank controlled by outside bankers? I believe in the Government controlling the wealth as well as the health of the people of Australia. Side by side we should have the consumers' and producers' banks, national institutions. We have one national financial institution now, the Commonwealth Bank. When the private banks fell down on their jobs during the war, when the farmers could not send away a bushel of wheat or the dairy-farmers their butter and cheese, the Commonwealth Bank was the means of bringing £400,000,000 to the producers of Australia. This is shown in the official report of the Commonwealth Bank. According to Sir Denison Miller if the bank could do that in war time it could do ever so much more in peace time when money is advanced for production and not for destruction. We issued paper money during the war for purposes of destruction. The dead weight national debt of Great Britain is £7,000,000,000- whereas only one-third of the Comonwealth national debt is a dead weight liability. As we have assets for every £1 we owe overseas, those who say that Australia is bankrupt are libelling the nation.


Senator Barnes - We have £3 for every £1 we owe.


Senator KNEEBONE - That is well known.

I am afraid that there is a tendency to study this important proposal too much from a party political viewpoint, and to totally disregard the requirements of those whom it is desired to benefit. It is admitted that in the matter of Empire finance, Australia cannot act independently. In this connexion I quote Captain McDonald, a member of the British House of Commons, who said -

One of the most serious hinderances to national recovery is the chaotic state of Empire finance. There is no common credit or banking system which can bc used to provide the satisfactory nexus between the trading centres of the Empire.

Captain McDonald has suggested that a banking system entirely under Empire control should be established to deal with Australian and other dominions products overseas. I submit in all sincerity that the proposal embodied in this bill will fit in with such a scheme, and that we shall ultimately have linked up throughout the Empire, an Empire organization which will deal with such matters as exchange, and help to stabilize currency throughout the Empire. An honorable senator said this afternoon that an Australian fi note is worth only 13s. 4d. in Colombo, whilst a bank of England note is worth 20s. there. Why should that be so? The assets of the Bank of England, as compared with its liabilities proportionately are no greater than are those of the Commonwealth Bank, and generally speaking, the people of Australia are in a better position financially, industrially, socially and educationally, than are the people of Great Britain. Who decides the relative values of a " Fisher Flimsy " of Australia and a " John Bradbury " of England? The people themselves, who after all are the real assets of a country should decide and control the rates of exchange, and as a matter of fact the people of Great Britain are struggling as hard as those in Australia to obtain control of the wealth they produce.

There is another phase of this matter with which I should like to deal. The Leader of the Opposition (Senator Pearce), referred to fluctuating prices levels. This measure is an honest attempt to increase price levels. Whether it will immediately affect beneficially or detrimentally the wage-earners, remains to be seen. Is it not obvious that by reducing price levels, as we have been doing, thousands are thrown out of employment? That is the history of the world. Australia is not the only country which is experiencing depression. It is interesting to note that the International Labour Conference at Geneva, appointed a committee - not a Labour body - which conducted an investigation in seventeen different countries, as to the relative effect of fluctuating prices levels on unemployment. We know what has been the effect in Australia. Some time ago there was in Australia an intensive campaign for increased production. The slogan employed was "Produce, produce, produce." That was to be the way to national salvation. It was soon found, however, that it did not get us anywhere. Then came the cry, "Reduce, reduce, reduce", and we are now experiencing the evil results of a full sized dose of reduction. An attempt has been made to stabilize industry, but a different policy will have to be adopted if Australian industry is to be rehabilitated. One of the objects of the bill is to encourage production, and to increase the price of commodities. We are told that that is wholesale inflation, and that the issuing of more notes will tend to destroy their value. The Leader of the Opposition wanted to know how we could fix prices within a given period. Under the existing policy we cannot do anything, but if as the result of this scheme, prices rose unduly, price-fixing commissions could be appointed, as they were during the war, to prevent profiteering. Safeguards could be taken under this bill to prevent profiteering. The report of the International Labour Conference to which I have referred, shows that from 1920 to 1929, in the great majority of the countries where a policy of deflation was adopted unemployment increased, and that where prices were stabilized employment decreased. That has been the experience in many countries. We have been told of what has been done in Germany and other countries under a policy of inflation, but we have not heard anything of the experience of those countries where a policy of deflation was followed by one of inflation. In such countries it was found that inflation is more readily controlled than deflation, and that under deflation unemployment increased, but decreased under inflation.

I ask honorable senators to compare this proposal with what is suggested by the Opposition. What is the alternative?

The only alternative is to continue as at present. I again express disappointment at the statement of the Leader of the Opposition, that there is no course other than that which we are now pursuing. That seems to me to he a hopeless policy for any governing authority to adopt. I suggest that rather than continue a policy of further deflation, reductions and dismissals, and the readjustment of our obligations to the aged, the infirm, the wounded, and the mothers of Australia, or any interference with our present social services, we should attempt to bring about our economic salvation by passing this measure. I think it was Burke who said, " Government is a human device for providing for human welfare." I hope that the Senate will assist the Government in providing for the welfare of the community, by giving this measure serious consideration, and passing it into law. If it does, I shall have no fear of the result. I support the bill.







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