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Wednesday, 15 October 1947


Mr CHIFLEY (Macquarie) (Prime Minister and Treasurer) . - I move -

That the bill be now read a second time.

The purpose of this bill is to empower the Commonwealth Bank to take over the banking business at present conducted in Australia by private banks. State banks and savings banks will not be affected.

It will be the responsibility of the Commonwealth Bank under this legislation -

(a)   to provide, in accordance with the conditions of normal banking business, adequate banking facilities for any State or person requiring them;

(6)   to conduct its business without discrimination ;

(c)   to observe, except as otherwise required by law, the practices and usages customary- among bankers and, in particular, to maintain strict secrecy within the law as to the affairs and dealings of its customers.

The bill also envisages the development, under public ownership, of a comprehensive banking service that will strengthen and assist the growth of the Australian economy and provide facilities adequate to its rapidly expanding and changing needs. ,

Modern Policy on Banking.

I feel that I hardly need to argue here the importance of money and credit in a modern economic system. As the means by which resources are brought together in production, good9 are bought and sold, and prices, wages, contracts and debts are determined, it plays a part as vital to the economic body as the blood-stream to the human body. No single factor can do more to influence the welfare and progress of a community than the management of the volume and flow of money. Mismanagement of money, on the other hand, has contributed to the greatest economic disasters of modern times - booms and slumps, mass unemployment, waste cf resources, industrial unrest and social misery.

Because these facts are recognized, there is very wide agreement to-day as to the purposes which a monetary and banking system should serve in a modern economy. In that connexion I quote the views expressed in 1937 in the Report of the Royal Commission on Monetary and Banking Systems in Australia -

The general objective of an economic system for Australia should be to achieve the best use of our productive resources, both present and future. This means the fullest possible employment of people and resources under conditions that will provide the highest standard of living. It means, too, the reduction of fluctuations in general economic activity. Since the monetary and banking system is an integral part pf the economic system, its objective will be to assist with all the means at ite disposal in achieving these ends. (Para. 510.)

Those views as to the place and functions of money and banking in Australia were subscribed to by all members of the commission, even though there was some difference of opinion as to ways of achieving them.

The Labour View.

The Labour party has maintained for many years that, since the influence of money is so great, the entire monetary and banking system should be controlled by public authorities responsible through the Government and Parliament to the nation. On this principle the Labour party has held further that since private banks are conducted primarily for profit and therefore follow policies which in important respects run counter to the public interest, their business should be transferred to public ownership.

For this view the strongest reasons can be stated. In the absence of control, private banks can expand or contract the volume of their lending and so vary within wide limits the supply of money available to the public. They can also determine when and where they will lend and upon what terms ; and in these operations they are guided primarily by the interests of those who own and control them. - Whatever regard they may claim to pay to the wider concerns of the nation, their policies are dictated in the last resort by the desire to make profits and to secure the value of .their own assets. Experience of the past has been that private banks increased their lending in good times and contracted it in bad times, lent always where the profits seemed largest and most assured, and charged the highest rates they could obtain for their loans and general services.

Since trading banks have handled practically all commercial lending within Australia, 'their influence on the state of business has been enormous - indeed dominating. Moreover, the number of banks has been progressively reduced through amalgamations, of which twelve have been carried through since 1917. Two more were announced this year and had they been completed the number of major private trading banks in Australia would have been reduced to seven. By this means the great power of private banking in Australia has become concentrated in the hands of boards of directors comprising a relatively few men who are responsible for the exercise pf their powers not to the nation but only to a limited number of people, some here and some abroad, who have invested money in bank shares.

Time and again the policies of the private banks have run counter to national needs for steady growth and high levels of employment. To go some years back it is correct to say that the banks fed the boom and promoted unsound development in the 'twenties. When the depression came the banks as a whole restricted new lending and called in advances. Between December, 1929, and March, 1932, their advances fell by approximately £45,000,000. The effect of this was to accentuate the contraction of business and the unemployment of those years. They helped but little in recovery during the thirties, waiting rather for improvement to come from other sources instead of taking the initiative and helping to promote recovery. They followed these courses because it seemed best and safest from the stand-point of their own interests.

Labour policy on banking has envisaged that, together with the elimination of private banking, the Commonwealth Bank would be strengthened to give it adequate control of monetary and credit conditions within Australia and its services would be extended to meet the needs of all sections of the people. The Labour party has in particular advocated the reduction of interest rates which, in the absence of control, were maintained at excessively high levels.

The Commonwealth Bank.

The Commonwealth Bank was established in 1911 by the Labour Government as a national bank, intended primarily to compete with the private banks upon their own ground and break the monopoly they held over the business of banking in Australia.

Despite bitter opposition from private interests and many prophecies of failure, the Commonwealth Bank rendered great service to the nation and grew rapidly during the First World War and the succeeding years.

In 1924, however, the government of the day reconstituted the bank and placed it under a board comprised predominantly of representatives of private industry and commerce. This board was mainly interested in turning the Commonwealth Bank into a bankers' bank and its policy was to forbid the bank from competing actively with the private banks for general banking business, thus restricting its expansion and defeating the key purpose for which the bank had been established. That fact was clearly demonstrated in evidence before the banking commission. The late Sir Ernest Riddle, who was then Governor of the bank, stated that even if the bank had funds available over and above those deposited with it by the trading banks it would not use those funds for advances to people who wanted to transfer their accounts from trading banks to the Commonwealth Bank. That kind of situation prevailed until the Labour Government took office in 1941.

Moreover, the Commonwealth Bank Board, as constituted by the Bruce-Page Government, alined itself with the private banks during the crisis of the early thirties in attempting to force upon the Government a policy of monetary deflation and curtailment of wages and social service payments. That policy was stated in the following extract from a letter addressed by the chairman of the Commonwealth Bank Board, Sir Robert Gibson, to the then Treasurer, Mr. Theodore, on the 12th February, 1931, which read -

Subject to adequate and equitable reductions in all wages, salaries, and' allowances, pensions, social benefits of all kinds, interest and other factors which affect the cost of living, the Commonwealth Bank Board will actively co-operate with the trading banks and the governments of Australia in sustaining industry and restoring employment.

Thus during a critical time in Australia's history the bank was used by reactionary interests for a purpose directly opposed to the welfare of the Australian people and in opposition to the will of the Government of the day.

In spite, however, of conservative management under a board for many years, the Commonwealth Bank, including the Commonwealth Savings Bank, has made remarkable headway. At the 30th June last it had 377 branches spread throughout the length and breadth of Australia, as well as branches in Papua, New Guinea and in London. Total employees exceeded 9,000 and total assets, apart from those held in respect of deposits of the private banks, were almost £900,000,000. It has nearly 4,000,000 accounts and is unique amongst the banks of the world in that it provides comprehensive banking facilities for business and personal needs through its General Bank, Savings Bank, Mortgage Bank, Rural Credits, Industrial Finance and Housing Departments.

In both wars the bank made advances against primary commodities to enable the producers to be paid promptly despite serious delays in sea-borne trade. These advances exceeded £350,000,000 during the six years of the last war.

In another field the bank has administered controls over banking, interest rates, the note issue, foreign exchange and gold and has developed the full functions of a central bank.

In all, the record of the Commonwealth Bank stands as a great justification of publicly-owned banking and demonstrates beyond question that a public banking institution is capable of being highly efficient, progressive and adaptable.

In another respect also the bank has largely fulfilled the intentions of its founders that it should be a bank for the people. Together with its associated institution, the Commonwealth Savings Bank, it has become pre-eminently the bank for the average man and woman. To-day it has a far greater number of depositors than the whole of the private banks taken together. At the end of April this year the number of deposit accounts with the Commonwealth Bank and Commonwealth Savings Bank was about -3,800,000, whereas the number of deposit accounts with the trading banks was approximately 1,250,000.

Assisted by the existence of the Commonwealth Bank, the Labour Government has been able to make notable progress in carrying out its policy of lower interest rates. After the 1914-18 war the interest rate on government loans reached as high as 6^ per cent. At the outbreak of the last war, the rate for long-term government loans was almost 4 per cent. It is now 3 J' per cent. The treasury-bill rate is now 1 per cent, as compared with a rate of 6 per cent, in 1930. The maximum overdraft rate has been restricted to 4-J per cent., as compared with rates of 6 per cent, and higher some years ago. Substantial reductions have also been made in the rates at which semigovernmental bodies are able to borrow, and in many other rates.

War-time Experience.

The experience of the war years emphasized the vital importance of public control of the banking system. Through governmental expenditure for war purposes, the liquid resources of the tradingbanks - and hence their capacity to expand credit - .increased rapidly. To prevent " secondary inflation " arising from such an expansion of credit, even the then Treasurer (Mr. Fadden) felt that someaction was necessary, and, in 1941, he obtained an undertaking from the privatebanks that they would inform the Commonwealth Bank of the amount of surplus investible funds they held from time to time and would deposit with the Commonwealth Bank such amounts as were determined by that bank.

On assuming office in November, 194.1,. the Labour Government carefully examined the arrangements made by the- previous Government and decided that it was necessary to introduce the National Security (War-time Banking Control) Regulations. These regulations greatly strengthened and increased in scope the arrangements agreed to by the previous Government. They also ensured that the private banks would not make unreasonable profits out of the war and implemented certain recommendations of the Royal Commission on the Monetary and Banking Systems.

Legislation of 1945.

In the light of experience gained in the administration of these regulations, the Government decided in 1945 that the main principles on which they were based should be embodied in substantive legislation. At the same time the Government decided to reconstitute the Commonwealth Bank and to assume greater powers over banking policy.

The main objects of the system of control provided by this legislation were -

(a)   To strengthen the central banking functions of the Commonwealth Bank, especially by providing for - (i) the co-ordination of banking policy under the direction of the Commonwealth Bank; (ii) control through the special account system of the volume of credit in circulation; (iii) control of bank interest rates and bank advance policy; and (iv) the mobilization and control of the foreign exchange and gold resources of the Australian economy.

(b)   To ensure that the financial policy of the Commonwealth Bank would be in harmony with the general economic and financial policy of the Government and in the interests of the people of Australia.

(c)   To reserve to publicly-owned and controlledbanks the banking business of governments and governmental authorities.

(d)   To safeguard the depositors of the banks against loss of their deposits.

The Commonwealth Bank Board wa abolished and management of the bank was entrusted to the Governor, assisted by an advisory council.

Opposition to 1945 Legislation.

This legislation was very strongly opposed by the trading banks, by some sections of the business community and by the Opposition parties. It was said that the legislation would hand over the banking system to political control, that it was " nationalization on the cheap ", and that it would open the way to the general socialization of industry by indirect means.

In his second-reading speech on the legislation, the Leader of the Opposition made a pledge that, if he and his colleagues were returned to office, they would restore the former method of control of the Commonwealth Bank by a board and would hold themselves obliged instantly to review the working of the legislation.

Legislation Endorsed by Electors.

In spite of the sectional clamour against the legislation and the prediction of dire consequences to follow from it, the Government was returned to office at the general elections last year.

It may, therefore, he said that a majority of the electors have endorsed the Government's 1945 . banking legislation and have approved the purpose for which it was enacted, namely, to give the Government full and effective control over monetary and banking policy in Australia. That object was made clear to Parliament and to the country.

Constitutional Issues.

The Banking Act of 1945 was framed on the best constitutional advice and the Government felt confident that it would withstand any legal challenge that might be directed against it.

For example, it seemed quite clear that Parliament had made a law with respect to banking, and had thus acted within the scope of the powers conferred by section 51 (xiii.) of the Constitution, when it enacted section 48 of the Banking Act. This section prohibited trading banks, other than State banks, from carrying out banking business for a State or any authority of a State, including a local governing authority. The provision was regarded .by the Government as an important part of the legislation. It embodied the principle that the banking business of all public bodies should be reserved to publicly-owned and controlled banks. Further, in most other countries it has long been accepted that all government banking business should be conducted through the central hank so as to give the central bank added strength to control the supply of credit and to enable it to take action in time to offset any disturbance to credit conditions resulting from government operations. In the aggregate the banking business of State governments and State authorities is large and -so are some of their individual transactions. They have an important bearing on current financial conditions. It was the Government's view that the powers of the central bank should be strengthened by making it as far as practicable the banker for public authorities.

When challenged in the High Court, however, section 48 was held to be invalid on the grounds that so long as private banks existed States and State authorities could not be denied the use of their facilities. The decision showed that full public control of banking as sought under the 1945 legislation could not be secured without public ownership of banking. The decision forced the Government to re-examine all the circumstances, constitutional and otherwise, surrounding the legislation of 1945. In particular, the Government has had to reconsider the constitutional basis of sections IS to 22 of the Banking Act which required the private banks to make deposits in special accounts with the Commonwealth Bank ;and also the attitude of the private banks towards those sections.

The special accounts are the crux of the control of credit given to the Commonwealth Bank by the Banking Act of 1945. The necessities of war-time finance greatly increased the base of liquid reserves on which trading banks normally build a superstructure of secondary credit. In order to prevent secondary inflation with rising prices it was necessary to immobilize some part of the banks' deposits in special accounts with the Commonwealth Bank from which the banks were not allowed to withdraw any amounts, except with the consent of the Commonwealth Bank. If the amounts in these special accounts were freely available to the trading banks, they could, by increasing their advances, build up a secondary credit expansion of formidable dimensions. Added to the spending power already available to the public, this might easily produce a dangerous inflationary situation. It would be- disastrous, from the point of view of the people of Australia and the prospects of economic stability, if sections 18 to 22 of the Banking Act were held to be invalid and the consequent loss of control over the banking system led to an inflation of credit, with all the loss and disorder which inflation entails.

These sections necessarily severely limit the freedom of action of the trading banks. This was their intention. The Government was determined that the control of the Commonwealth Bank in this field should be absolute and beyond dispute.

While the precise form of special accounts provided for in the Banking Act of 1945 was peculiar to Australia, the essential features of the control of credit by this means are to be found in operation in the United Kingdom, Canada and a number of other countries. The same conditions which made a control of this kind essential in Australia have forced governments elsewhere to adopt similar measures. They are to-day an accepted part of central bank technique in many parts of the world.

The private banks in Australia, however, have always bitterly resented any attempt to place restrictions on their power to create or restrict credit. When the 1945 Banking Bill was before the House they fought these provisions with all the means at their disposal. Towards the end of 1945, when the bill had become law, they were required to transfer their war-time special deposits to the special accounts established under the new legislation and to make their first monthly lodgment to these accounts. The private hanks, obviously acting in concert and on legal advice, made it clear at that time that, while they were submitting to the legislation for the time being, they were reserving the right to challenge it at a suitable opportunity. The following reservation was made by one of the banks in a letter to the Commonwealth Bank :-

We are most anxious to co-operate with your Bank to ensure the continuance of our present harmonious relations, but you will appreciate that our duty to our shareholders compels us to have regard to our legal position: therefore, we feel it necessary to advise you, with all due respect, that acquiescence or compliance on this Bank's part with any request or directions from you is not to be taken to import any contract with your Bank in the terms of the" Act.

Statements to a similar effect were made in letters sent by six of the other banks. These reservations were brought to the notice of the Commonwealth Government at the time for legal consideration.

This indication of the attitude of the banks assumed greater significance when the special account system was challenged in the statement of claim made by the Melbourne City Council in connexion with the section 4S case - even though eventually the challenge to sections 18 to 22 of the Banking Act was not pressed, [t assumed still greater significance when the High Court decision on section 48 made it clear that, although the Commonwealth Parliament had by the Constitution been given power to legislate on banking, nevertheless a law which was clearly a law with respect to banking could be held invalid on other constitutional considerations.

The position which confronted the Government was that while doubts had arisen as to the constitutional validity of its banking legislation, there was evidence that the private banks were maintaining their hostility towards- this legislation and were biding their time against a suitable opportunity to challenge it in the hope of throwing off the restraints they so strongly disliked.

Uncertainty or Economic Outlook.

With economic difficulties increasing overseas the Government must be in a position to act with certainty and effectiveness to ensure fulfilment of its policy of full employment and the maintenance of economic and financial stability. During the war and since its conclusion the Australian economy has been kept more stable than the economy of any other country in the world. It must be remembered that an important part of the machinery for maintaining that stability has been the control over the banking system exercised under the 1945 banking legislation and that an essential part of that legislation is the special account procedure.

The difficulties of the transition from war to peace are far from over. In fact, in some directions they are increasing. The rapid exhaustion of the United States loan to the United Kingdom has confronted the sterling area - and many other countries as well - with serious balance of payments problems and this is only one aspect of a. general situation which is highly unstable.

To deal with the economic and financial problems both of the transition period and of the following years, the Government must have the necessary powers over banking and monetary policy. Fluctuations in business activity and employment are not solely due to monetary causes, but they are certainly greatly influenced by financial policy. The Government would not be justified in gambling on the outcome of possible threats to the 1945 legislation.

The structure of banking based upon the legislation of 1945 went part of the way towards the objectives which the Labour party has long advocated in regard to banking. At the same time it offered to the private banks the opportunity to co-operate within a national system of banking, subject to overall control by the Commonwealth Bank, as they had, in fact, done during the war period. That position was never accepted without reservation by the private banks and now that the legal foundations of the system have been challenged the Government has decided to proceed with its long-standing policy of full public ownership.

Provisions or Bill.

The bill which is before the Housegives effect to the Government's decision. Before the Attorney-General (Dr. Evatt) left Australia, he gave close attention to the legal and constitutional aspects of the bill, and laid down the main lines on which the preparation of the measurehas proceeded.

I would emphasize that under this measure there will be no interruption or disturbance of the usual banking facilities available to the Australian community. The bill provides that the private banks shall maintain their services until they are taken over by the Commonwealth Bank. As the banks are taken over, either through the acquisition of their shares or of their assets, they will be kept in operation as going concerns. Customers will not notice any difference after the control of the bank with which they have been dealing has passed to the Commonwealth Bank. They will be able to continue their banking business without change or interruption. .

The bill imposes on the Commonwealth Bank an obligation to conduct its banking transactions in accordance with the practices and usages customary among bankers particularly in regard to the non-disclosure of information concerning the affairs of its customers.

The confidential nature of the relationship between banker and customer is well established in law; and, subject to certain exceptions sanctioned or required by law, bankers are under an obligation of secrecy with respect to their customers' affairs. The bill specifically provides that this position will he preserved.

Methods of Acquisition.

Differences between the constitutions of the various private banks and the fact that some are incorporated in Australia and some overseas make it desirable to provide alternative ways in which the Commonwealth Bank may acquire their business. Accordingly the bill provides for two main processes of acquisition, viz. : -

(1)   voluntary or compulsory acquisition of the Australian business and assets of the private banks, or

(2)   compulsory acquisition of shares. The first could be applied to all banks, whether incorporated in Australia or overseas, and in the case of banks incorporated in Australia, any part of their overseas assets may also be acquired compulsorily.

Under the alternative process, the shares of a private bank may be com pulsorily acquired if the Treasurer is satisfied that the majority of its shares are registered in Australia. This process would be applied only to banks incorporated in Australia, and would be the initial step towards an eventual transfer of their businesses to the Commonwealth Bank.

Acquisition of Assets.

As a preliminary step to the acquisi- sition of the business of a private bank, provision is made for the Treasurer, by due notice, to invite the private bank to make an agreement with the Commonwealth Bank for the transfer of its business on a specified date, which must be not more than two months later than thedate on which the notice is given.

If an agreement for the transfer of the business of. a . private bank, which is willing to negotiate, is not completed by the specified date, the Treasurer may extend the currency of the notice until agreement is reached. Agreement must, however, be reached - if there is to be agreement at all - before the notice expires. Once the notice expires, the assets of the bank concerned forthwith becomes vested in, and its liabilities are assumed by, the Commonwealth Bank.

There is, of course, nothing in the bill to prevent the Commonwealth Bank from reaching an agreement with a private bank for the acquisition of its business before any notice is issued at all ; but all agreements, whether made before or after notice is given, will be subject to the approval of the Treasurer.

The bill also includes a provision whereby the Treasurer may, after the business of a private bank is acquired by the Commonwealth Bank, require that private bank to cease carrying on further banking business in Australia.

Taxation.

If a private bank enters into a voluntary agreement for the acquisition of its business by the Commonwealth Bank, it will be entitled to receive an exemption from taxation on the amount paid to it in pursuance of the agreement. It is further provided in the bill that shareholders of the bank will be exempt from taxation on any dividend or distribution which directly results from the payment received from the Commonwealth Bank under the agreement. These concessions will not apply in the case of a compulsory acquisition.

The exemptions referred to will not relieve the private bank from liability for any tax payable by the bank in respect of profits derived in the normal course of its business but upon which the ordinary tax liability has not been met. The bank and its shareholders will still be liable to taxation in relation to profits earned after the year of income ended on the 30th June, 1947, or any accounting period substituted therefor, and before the date of transfer, or in relation to any interest which may become payable under the agreeement

Acquisition of Shares.

If shares are acquired by voluntary purchase, the price paid by the Commonwealth Bank must not be less than the market value in Australia of those shares at the 15th August, 1947. These prices have been carefully ascertained and are specified in the Second Schedule to the bill.

The provision made for the compulsory acquisition of shares will apply only to the shares of private banks incorporated in Australia, which are the institutions referred to in Part I . of the First Schedule to the bill. Where the majority in number of the shares of any of these banks are situated in Australia, the bill provides that the Treasurer may, by notice published in the Gazette, declare that the shares in the bank concerned shall be vested in the Commonwealth Bank on a date specified by th Treasurer; and on that date the Commonwealth Bank will, by force of the legislation, become the holder of the shares and a member of the bank in question.

Management of Private Banks.

It is provided that the directors of an Australian private bank, the shares of which have been compu'lsorily acquired by the Commonwealth Bank, will cease to hold office on the date on which the compulsory acquisition becomes effective. The Governor of the Commonwealth Bank will, with the approval of the

Treasurer, thereupon appoint directors, including a chairman of directors.

The directors appointed by the Governor of the Commonwealth Bank will have full power to manage the bank in question, to dispose of its business in Australia to the Commonwealth Bank and to dispose also of the bank's business outside Australia : but any arrangement for disposal may only be concluded if approved by the Treasurer after he has received a recommendation from the Governor of the Commonwealth Bank.

Compensation.

For all property or shares of the banks, compulsorily acquired, fair and reasonable compensation will be payable. The compensation payable may be determined by agreement, approved by the Treasurer ; or, failing agreement, the amount payable will be determined by the Court of Claims to be established under the proposed legislation. The bill sets out the procedure to be followed in reaching agreement or, alternatively, in referring claims to the court for determination.

Federal Court of Claims.

The bill provides for the establishment of a Federal Court of Claims consisting of a Chief Judge and such other judges as are appointed. The court may, if it thinks fit, appoint two assessors to assist it.

The court will have jurisdiction to hear and determine claims for compensation arising under this bill. Regulations may be made under other acts also to confer jurisdiction on the court to determine claims arising out of the operation of those acts. The jurisdiction of the court in respect of compensation under this bill must be exercised by not less than three judges. Jurisdiction may, however, be exercised by less than three judges by agreement between the parties concerned.

A determination of the court will be final and conclusive and not subject to appeal to the High Court.

Staff Provisions.

The bill makes provision for the protection of officers of private banks in respect of continuance of employment, salaries and conditions of service.

The bill provides that when the Commonwealth Bank proceeds by way of acquisition of the shares of a private bank, the salary and general conditions of service of officers of the private bank will not be disturbed, and will be secured to them. Similarly, when the Commonwealth Bank takes over the assets of a private bank, including the assets of a bank whose shares have previously been acquired, each officer of the private bank who was employed in the service of that bank in Australia will be entitled to be employed by the Commonwealth Bank at the salary and on the general conditions of service applicable to his existing employment.

The Commonwealth Bank will be obliged to appoint each such officer, being a British subject, to an appropriate position in the Commonwealth Bank service. This will be done as soon as practicable after employment commences with the Commonwealth Bank. Special provision also is made to enable that service to absorb all officers stationed outside Australia whose duties are connected with the Australian business.

It will be seen that during the period necessarily elapsing between the date of acquisition of a private bank, either by way of shares or assets of the private bank, and the date when an officer of that bank is appointed to an appropriate position in the Commonwealth Bank service, he is fully safeguarded. He will continue to be employed with salary, pension benefits, and sick and long service leave at least as favorable as when in the employ of the private bank. When later appointed to the Commonwealth Bank Service, he will enjoy all the rights and privileges of an officer of that service, with protection in respect of existing salary, pension benefits, and sick and long service leave.

Service in the private bank, continuous with service with the Commonwealth Bank, will count as service with the Commonwealth Bank for purposes of promotion, leave and pensions.

In order to establish an officer's present entitlement to pension benefits and sick and long service leave, the bill provides for the appointment of a committee in respect of each private bank affected, consisting of a judge, or a person qualified to be a judge, an officer of the Commonwealth Bank, and a representative of the bank officers concerned, to ascertain the benefits which are, or would have been granted in accordance with the practice of the private bank concerned, or of the superannuation fund of that bank. The findings of this committee will then become a legally enforceable right in respect of the future employment of these officers even though they may not have at present any such legal protection.

The industrial awards now governing the employment of persons in private banks will continue in force until appointment to the Commonwealth Bank service is made. Further, during this period, officers will continue to have the right to apply to the appropriate tribunal for variations of these awards. Upon appointment to the Commonwealth Bank service, they will have the same rights in respect of industrial matters as are now enjoyed by officers of the Commonwealth Bank.

The Commonwealth Bank is recognized as a good employer. On the whole the genera] conditions of employment in its service are at least as good as, if not better than, those generally provided by the private banks. Its employees are given special legal protection as to promotion, dismissal and disciplinary action. Under Part XIII. of the Commonwealth Bank Act promotion and disciplinary appeal boards have been constituted. Those boards, which are under an independent chairman and include representatives of employees, are empowered to give final decisions on appeals relating, respectively, to the promotion and to the punishment, dismissal or reduction in status of officers. Such rights of appeal are not at present enjoyed by employees of the private banks.

The changed conditions of the expanded Commonwealth Bank service mil, of course, render it necessary to examine the provisions of the Commonwealth Bank Act relating to the Commonwealth Bank service, and any amendments considered desirable to meet the position will be brought forward at an early date.

With regard to former officers of the private banks who have retired on pensions from the private banks' services, their position, as well as that of dependants of deceased officers, is also fully safeguarded. The Commonwealth Bank will assume responsibility for the payment of pensions in accordance with existing rights, which will be converted into legally enforceable claims.

As the Commonwealth Bank is required to assume liability for pensions, both in respect of retired officers and officers now serving, it is necessary that an appropriate amount of the superannuation funds established in association with the private banks to meet these obligations should be transferred to the Commonwealth Bank. The bill contains the necessary provisions to give effect to this requirement.

Finance.

There will be no necessity for a parliamentary appropriation to provide for compensation. In acquiring the business of the private banks the Commonwealth Bank will also assume the liabilities of these institutions. The amount of compensation payable will necessarily have regard to this factor and it will be well within the capacity of the Commonwealth Bank to meet the payment from its own resources. The Commonwealth Bank will make payment in cash or government bonds as desired.

Advantages of Public Ownership.

As I have said before, the Government believes that a publicly owned and controlled banking system, in which final responsibility for policy i3 in the hands of a government directly responsible to the electors, conforms much more closely to the requirements of a democratic community than the system advocated in 1945 by the Leader of the Opposition, who with his party is pledged to restore control of banking and monetary policy to a body having no responsibility to the electors.

In most advanced countries there has been during recent years a strong trend towards public ownership of key public utilities. This trend has not been confined to governments representing particular political parties. Such projects have been brought forward both in Australia and elsewhere not only by Labour governments but also by non-Labour governments who recognized that in the circumstances of the case the balance of' advantages from the community standpoint lies in national rather than private ownership and control. But if any service fits the description of a key public utility it is banking. As I have said earlier, no element in the working of our _ economy has a greater influence for good or evil upon economic, and social welfare than the management of money and credit. {Extension of time granted.] I thank the House for its courtesy.

The Government is convinced thatunder public ownership the banking system will have immense opportunities for serving Australia. It will have the backing of the entire credit resources of the nation. It will be free from the cramping limitations of sectional private ownership which bid the private banks to serve this interest but not that interest, and to judge all business from the narrow standpoint of maximum- profits for the smallest outlay. It will be able to take longer-term views of projects requiring finance and, since the whole Australian economy will be its field, it will have the widest scope for initiative and for the spread of its investments.

Essentially the task of the new organization will be to provide a financial mechanism appropriate to the needs of our rapidly growing economy. Australia is destined to see great developments in the coming years and this process, which is already under way, must be promoted by every means possible. There will be. a great increase in our population. Industries will expand in all fields and we must extend our markets abroad. The basic services of transport and communications, water supply, power, housing, health and education must be enlarged to meet the needs of a larger economy working at higher levels of technique and productivity. The stress everywhere will be upon new forms of enterprise, new methods of production, and new uses for the resources of this country.

Finance must co-operate and take the initiative in this progress. As new types of industry are developed, new types of finance will be required and the banking system should anticipate these needs and be in the field with the right kind of facilities to assist and encourage such developments.

Moreover, there can be no doubt that a bank should be more than a mere money lender. A banking system created to serve the welfare of the community can aid industry by the quality of its advice and the incidental services it renders as well as by the financial accommodation, it provides. Hence the Government sets particular store on the development of these ancillary services. It has in view the building up of a highly qualified staff that will enable the Commonwealth Bank to give skilled advice as part of its banking service. Secondary industries, for example, will be able to turn to the bank for the assistance of production engineers and cost accountants to help them with their problems. Primary industries will have the aid of agricultural experts. I contemplate, too, that the bank would establish, at least in the capital cities, departments of advice which would help individuals with their daily financial problems. "Whether any charge would have to be made by the hank would naturally depend upon the circumstances of each case but as far as possible these facilities would be provided freely as part of a strengthened banking service.

But if the financial system is to meet these requirements it must be comprehensive, strong and flexible. It must be alive to the requirements of the times and be capable of seeing ahead. It must have one goal for its policies and one standard for its work - the service of the nation in all its interests, great or small. The Government believes that only under a national system of banking can this ideal be approached. Only under such a system will finance be a real servant of industry and not its master.

Fears are being spread by opponents of this measure that the people will lose an advantage by reason of having only one bank to deal with instead of a choice between several banks. This brings up the question of competition between the private banks - how far it exists and what it has been worth to the community and to customers of the banks.

The Royal Commission on the Monetary and Banking Systems went into this question of competition at great length. It found that the private banks did not compete in any serious way as regards interest rates and other charges but sought rather to attract customers by offering various other inducements. In general, they behaved in the manner of semi-monopolistic institutions which stood in fear of ruining their own market. There was certainly nothing like the all-out rivalry to give the public the widest and cheapest services which we are asked to suppose exists between them.

Amalgamations on the other hand have reduced the number of banks, so accentuating the monopolistic character of those that remain. There are to-day really no more than eight trading banks doing a nation-wide business where 30 years ago there were twenty, and we have no reason to suppose that this process would not go further if private banking continued. The average man, I suggest, will find it hard to believe that fewer banks mean greater competition.

We recall how the former Commonwealth Bank Board, which considered itself to be conducting a bankers' bank, prevented the Commonwealth Bank from competing with the private institutions. We have the admissions of private bankers that competition between themselves is of a limited kind. We have seen the number of banks dwindling over the years, each amalgamation removing one or more possible competitors from the ring. It is a fair conclusion, I think, that from the stand-point of benefit to the community, banking competition has meant little for some time past and would probably have meant less as time went on.

On the other hand, I may point out that the Commonwealth Bank is charged under the legislation to be strictly impartial as between customers and to avoid all discrimination. A system of appeal will be provided so that a person who considers he has not had reasonable treatment from a local manager will be able to refer his case to a regional authority for reconsideration. Special arrangements will be made to ensure that this reconsideration is given without delay.

In view of these considerations, therefore, it appears to me that the advantages of having a choice between several private banks as compared with a single national bank are largely illusory.

Conclusion.

The proposal to take over the banks is being condemned in some quarters in recklessly extravagant terms ; all kinds of hidden purposes are being wrongly ascribed to it from the same sources. The simple truth is this - the reasons and motives for this measure and the uses to which it can and will be applied are no more and no less than I have stated.


Mr White Mr. White interjecting,







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