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Wednesday, 27 October 1971
Page: 2590


Mr CONNOR (Cunningham) - This Bill actually stems from doubts on the part of the Government as to the scope of powers contained in section 63 of the Banking Act under which the Treasurer (Mr Snedden) and, therefore, the Government have the opportunity and the undoubted power to control any general disposal by a bank of the whole of its assets or shares or to merge with another bank. For that reason the Government has submitted this measure. By the same token - and it is easy to be wise after the event - had the concrete pipes case decision been promulgated at the time this legislation was introduced it might have taken a different form. Nevertheless the Opposition welcomes the measure so far as it goes. But the Opposition has a very substantial criticism to make because the main purpose of this measure is to ensure that as a matter of broad principle no overseas interests, whether a company or a consortium, can acquire holdings in the shares of any Australian bank beyond 10 per cent except in certain cases with the authority of the Treasurer.

It is worth noting, of course, that with a total investment in Australia of 16 per cent, overseas interests have been able to acquire control, direct or indirect, of 40 per cent of Australian secondary industry. Therefore, the Government has been in this case rightly apprehensive of the consequences of the acquisition of bank shares. Of course, this in turn is a lineal descendant of what we might call Gortonomics where the former Prime Minister decided, in his typical tactic of shooting from the hip, that he would deal with specific situatons, if and when they occurred, in the most pragmatic fashion. Nevertheless he has distinctly Australian protectionist sentiments, and we give him credit for that. It is a long way back in history to the days of King O'Malley when the conservative parties of that day laughed to scorn the suggestion that there could be a national bank, lt is a long way back, too, to the period of the sneers at Fisher's flimsies when the first Commonwealth banknotes were issued. Of course, a lot of us - particularly those on the Government benches - would prefer to forget the attitude of Sir Robert Gibson at the time of the depression in the late 1920s and early 1930s.

But today, thanks to the foresight of Labor spokesmen of an earlier generation, the Commonwealth banking group ranks 37th amongst the accepted banks of the world. I think that in itself is no small achievement. It is worth noting that today, as a result of various amalgamations and takeovers, we have operating in Australia a government banking group, 6 local public banks, an English banking group as well as 3 small branches of foreign banks which collectively and exclusively transact deposits or cheque-paying banking and have full control of a lucrative dealings in foreign exchange. In addition we have some 95 banking institutions grouped together under the name of merchant banks, having their respective establishments in Australia and with assets of about $500,000m - 5 times in aggregate the gross national product of this nation for the last 5 years - and having 80 times the local assets of our collective banking system. It is like sleeping alongside an elephant: You never know what will happen when it rolls on you. That is the position today.

The Opposition makes a very valid criticism. Here I quote the words of Dr Coombs, a former Governor of the Reserve Bank of Australia. In one of his addresses, which honourable members ought to refer to, entitled 'Other People's Money' - it is available from the Parliamentary Library - he said that there has been a progressive de-control of the aggregate of the money of Australia by the banking system. As a matter of fact, in 1953 70 per cent of the total money flow of Australia was controlled by the banking system. By 1960 it had dropped to 57 per cent and today it is less than 50 per cent. Whilst this Government is busy protecting Australia from an incursion of overseas control, at the same time we find that no longer is the banking system of Australia in control of the aggregate finances of Australia. That is a position to be regretted and one which an incoming Labor government will undoubtedly correct, because finance is government. The abuses which exist today, in terms of interest rates and rackets, stem directly from the quite deliberate failure of the Government to control the para or grey or black market banking system which has developed.

Until World War I our banking system was relatively primitive in its form. Of course, all wars are financed by inflation and it was necessary, because of the creation of extra money at that time, to introduce a system of statutory reserve deposits. That was done in the Chifley era. Let us pay tribute to a man who knew banking and who was prepared to apply Labor principles to banking. I pass on from there to the gradual development of the need for consumer credit and the emergence of entirely new forms of intermediaries and some degree of sophistication in the Australian banking structure. In the early days those intermediaries were the hire purchase companies which financed themselves in a completely different way then from the way they do now. That in its turn was due to the fact that the present conservative Government chose to give directives to the trading banks that they were no longer to discount hire purchase contracts and associated promissory notes as security. The hire purchase companies duly thumbed their collective noses at the Reserve Bank and the Government, and decided that they would raise money directly from investors by virtue of their status as limited companies. This they did, and with such success that we reached the point where the cops had to join the robbers and where every major trading bank in Australia became either wholly or substantially associated with a major hire purchase company.

Today we have reached a situation in which the total deposits in the trading banks are about $4,700m and the total advances by the hire purchase companies are a matter of $3,900m. In a little while hire purchase advances will exceed trading bank deposits. As my colleague the honourable member for Melbourne Ports (Mr

Crean) correctly pointed out, in many cases major and formerly proud trading banks are prepared humbly to acknowledge that the major proportion of their profits are coming from their finance company subsidiaries. In the process there has been a distortion not only of the interest rate structure of Australia but also of our national priorities. Whilst I do not deny the right of hire purchase companies to exist and to function I do challenge them on their choice of interest rates and the way in which, unfortunately, in many cases the trading banks are directing to their hire purchase subsidiaries business which ought legitimately to be transacted by them at the regular and orthodox rates of interest.

The Reserve Bank and the Government must control the money structure of Australia. As a government, Labor will see that this happens. The 1950s saw quite a number of other very interesting developments. For example, we had the growth of the building societies. They were discharging functions which in the main ought properly to have been discharged by the trading banks. We have had the growth of the credit unions, the short term money market and the inter-company market, with the borrowing backed in each case by the overdraft limits of the respective companies participating. We have emerging an infantile, rudimentary commercial bill market. An even further development has been that of negotiable certificates of deposit. They are to be welcomed also. Now we have an Australian Resources Development Bank.

Taken as a whole, this legislation, whilst it is good, is like the curate's egg; it is good in parts. But it still does not face up to the major problem, which is the overriding control of the money supply of Australia. The national Government - the national Parliament - can, must and should at all costs exercise full powers over the national economy. As the economy is becoming progressively distorted we find a remarkable rise even in interest rates for the orthodox overdrafts granted to prime borrowers by the major trading banks. From memory, in 1949 when this Government came to office the general overdraft rate was 4i to 4i per cent. It is 8J per cent today. At a time when Australia needs money and needs it really urgently we are paying too great a price for it. The Labor Party has always advocated the cause of lower interest rates and the creation of the necessary money, backed by the necessary assets, to ensure that national development takes place on a basis of planned priorities.

It is generally accepted in company practice that to acquire 20 per cent of the trading shares of any company is to have effective control of that company. There is a number of reasons for this, of course. At ordinary annual meetings there is a fair amount of diffidence on the part of shareholders to attend but an effectively organised bloc of shareholders can certainly take control. Today we have knocking at the door repeatedly requests by Japan, by the United States and by Britain too for the granting of further banking charters. In this - and we give the Government credit where it is due - the Government shares a common policy with us of restricting the number of charters to those now in operation. But even in this regard it was not until 1942 that the Government of the day introduced legislation by which overseas companies could not commence banking. Many of the companies which are here can scarcely be classed as merchant banks. It is rather difficult at the best to say what is the definition and what are the functions and the status of a merchant bank, but I would suggest that a lot of the present total of exchange reserves that the Government vaunts so proudly in the main consists of funds that have been brought in here for investment. That is very good so far as it goes provided that they are used for investment and provided in turn that there is still a dominant Australian equity participation in those companies. But beyond that there is a very real danger and that danger will continue until there is a change of government and a change of outlook, and this is a consummation that we believe will occur in 1972.







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