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Tuesday, 16 February 1971
Page: 45

Mr CONNOR (Cunningham) - The Opposition does not oppose this Bill but offers criticism of the paucity of its provisions, the delay in its introduction and the failure of the Government adequately to conceive of. the modern trends in the world of banking. In terms of mechanics this Bill merely repeals section 88 of the Bills of Exchange Act and substitutes in its place proposed sections 88b to 88e inclusive. It is true that finance is government and, of course, this Government typically justifies the old saying of 'a mountain in labour which has brought forth the proverbial mouse'. The Government's thinking is outmoded. It is living in an economic and intellectual backwater. Quite a number of years ago the Manning Committee brought down a very substantial report. It adequately and conscientiously covered the whole field of cheques and bills of exchange. It went so far as to draft a new Cheques Act which it suggested might be considered by the Government. Of course the Government with its usual Fabian concepts and modes of behaviour has failed to do anything about it. For what the Bill is worth it merely deals with some of the mechanics of handling cheques payable to order.

Mr Garland - Very substantial ones.

Mr CONNOR - Very substantial, of course, in terms of the mechanics of banking and the number of tellers to be employed. There will conceivably be a quite substantial saving to the trading banks. We do not disapprove of this but we offer very strong criticism of the absence of legislation relating to the crossing of cheques and also the absence of a new Cheques Bill. As a matter of fact, as the Attorney-General (Mr Hughes) mentioned, the general law relating to Bills of Exchange originated way back in the year 1882 because our Bills of Exchange Act as it now stands is based substantially upon that measure. On the mechanics of the handling of cheques payable to order I repeat the comment made by the AttorneyGeneral that of some 800 million cheques issued annually in Australia about a quarter were order cheques and at least three-quarters of all cheques that were drawn were deposited to the credit of the payee.

The most that this Bill does is to say that if a cheque payable to order is paid into the account of the payee there is no obligation on the teller to examine the endorsement on the back of the cheque or even to check if there is an endorsement. In the case of a cheque presented over the counter for payment where it is payable to order there is still an obligation on the banker. In respect of a collecting banker there is, of course, an obligation to check an endorsement but again there is an exemption offered to the paying banker, and we do not disapprove of that. But we do say that the Government is about 20 years behind the times in its whole approach to banking. A cheque is, of course, a bill of exchange drawn on a banker and bills of exchange have a very long history. There is perhaps a very rudimentary form of a bill market in Australia and it is time that the Government considered stimulating a true bill market, because if one takes the example of the English financial system the rate of discount for bills of exchange is the main economic regulator of the British economy. It could well be done in this country. A bill of exchange is a very potent and valuable weapon and a very good means for a government actually to control the credit on issue in a country.

In more general terms this Government has completely failed since the early 1950s to prevent the gradual filching of the control of the credit system of the country that is taking place by the hire purchase system and by the fringe banking system - the grey banking system as it is called - and more recently it has completely failed to control the advent of merchant banks from overseas. Wherever there is a honey pot one will find the flies gathering. I do not disapprove of the Government's policy of restricting the number of banking charters. We quite agree with that. One of the main characteristics of banking in the last 20 years has been the gradual diminution of the number of trading banks and so far as I am concerned - and I speak for the Opposition - they are reputable, well administered, sound and conscientious organisations. But if one examines the total advances of the hire purchase system today one will find that they almost equal those of the banking system.

That is due to the decision of the Government in the early 1950s to curtail the extent to which trading banks could discount the promissory notes and hire purchase agreements offered as security by various finance companies. When they were told there was a limit to the credit available to them they decided to thumb their noses at the Government and to go on to the open market and borrow directly from the public. That decision resulted in the distorted interest rates which prevail in this country today. This situation is nothing short of a major scandal.

I particularly want to draw the attention of the Government to a decision of the High Court of Australia given 57 years ago. I refer to a case in the High Court between the Commissioners of the State Savings Bank of Victoria and Permewan, Wright and Co. Ltd in which it was held: . . that the essential characteristics of banking were the collection of money by receiving deposits on loan, repayable when and as agreed upon, and the utilisation of the money so collected by lending it again in such sums as were required. A majority held further that it was not necessary, in order to bring a banker within the Bills of Exchange Act that he should as part of his business collect cheques for, or pay the cheques of, his customers.

In other words, that definition exactly fits the functions of the average hire purchase company in Australia today. Those companies are not dealing merely with hire purchase. They are usurping the functions of banking. Every form of credit must be brought under the control of the Banking Act and under the control of the national government. The power is there. Let the Government use it if it will because the activities of these organisations today are responsible for the record rate of interest being paid on long term loans that are being raised by this Government. The only way to curb this is to place these institutions under control.

Perhaps one of the least satisfactory aspects of the banking system today is the participation by the major trading banks in subsidiary hire purchase companies. There is an old motto that if you cannot beat them, join them. Under the circumstances I suppose that there is some justification for this participation by the trading banks but the sooner we place the control of all credit back in the banking system the better for all concerned. I do not suggest that these fringe banking organisations should be given full banking charters but I do say that they ought to be brought in under a secondary charter and placed in a subordinate capacity. Equally today we find merchant banks coming in-

Mr SPEAKER -Order! I think the honourable member is getting a little wide of the Bills of Exchange Bill 1970. While the honourable member was speaking I found it very difficult to see the relevance of what he was saying about banking and fringe banking when the main purpose of this Bill is to do away with the necessity for endorsement on order cheques and bank drafts.

Mr CONNOR - By definition a cheque is a bill of exchange drawn on a banker.

Mr SPEAKER -I agree with that but this does not agree with the definition of policy.

Mr CONNOR - I accept your ruling, Mr Speaker, and I pass on to another point. In terms of banking techniques we are faced with a new age - the electronic age. The Government has yet to come to grips with all the implications proposed in electronic banking which will involve simultaneous transmission of transactions from a retail store to the bank where there will be an immediate cancellation on the account. It will also involve magnetic credit cards. The Government has not considered the implications of this new age. In addition the Government has failed to consider the activities of the trans-national companies which are the major corporations intruding in Australia today and which are completely bypassing the provisions of the Bills of Exchange Act. The technique used by these corporations is a simple one. When a major overseas banking company cannot get its charter in Australia it either forms a subsidiary or forms a suitable link with a known and reputable local company. It then proceeds to do everything in the way of banking with the exception of issuing cheques and dealing with bills of exchange. I do not propose to take up the time of the House any further. I commend my remarks to the serious consideration of the Government.

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