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Wednesday, 27 October 1971
Page: 2592

Mr IRWIN (Mitchell) - I rise to support the Bill. There were some half truths in what the honourable member for Cunningham (Mr Connor) said. There is not very much that I can disagree with in what the honourable member for Melbourne Ports (Mr Crean) said. But perhaps it would be advisable to take a tour over the years just to see why certain things came about. The purpose of the Bill is to give the Government adequate control over banks and to make sure that the present ownership - which is in the main Australian - remains constant and secure. The Government has a special interest in banking because its control of banking is the one method whereby it has monetary control and influence. But the banks have become impotent and are playing a lesser role than they ever played or were intended to play. Evidently the provisions of the Banking Act are not sufficient to prevent a takeover bid or to prevent a bank from being absorbed by devious means, through a straightout sale of its business or by the accumulation of shares. It is most desirable that any one shareholding shall not be more than 10 per cent and in the main this Bill makes provision to protect the ownership of the banks in Australia by ensuring that there will not be any one shareholding in excess of 10 per cent.

By traversing the history of banking perhaps I can show that we are in a difficult position today because of the control over banking which was legislated for under the Banking Act. The banks have been forced into the unfortunate position of conducting the costly business, which produces very little revenue, of carrying millions of dollars in non-earning cash to pay wages each week and the collection of cheques. They have had to accept controls on the rate of interest that they could pay on fixed deposits and on the interest they could charge. Had they not been forced into that position they would not have been left in the unenviable circumstances in which they now find themselves, in that they are being deprived of the ability to earn sufficient profit to meet the expenditure of which I have just spoken. This has all come about because of the Government's control of banking.

After the War, if my recollection is correct, the banks could pay only 3 or 3i per cent on fixed deposits up to 24 months. Of course, during the period after the war money was required and various organisations advertised higher rates of interest. So the holdings of the banks in fixed deposits gradually went down. But in 1949 the Government had a mandate from the people to protect the then banking system and equally the banks had received a mandate. They should have fought for the right to carry out that mandate. But we found that the Government brought in controls on banking and instead of fighting for their rights the banks took the easy way out and became partners in finance companies to ensure that the profits from that area would be sufficient to pay for the costly side of banking which they were forced to conduct. This is where all our trouble began in regard to banking and this is how the Government has lost the monetary control that it once had. Even Dr Coombs has admited since his retirement that the control of banking was too fierce and too restrictive and that many of the financial difficulties that the Government has run up against were due to these restrictions imposed by the Banking Act which the Government, to our disgrace, brought in.

Let me refer to hire purchase companies, explain to honourable members how hire purchase was first introduced to Australia and indicate what a wonderful boon it was for Australian merchants. It provided a cheap method of getting money. When hire purchase was first introduced a trader sold an article and a hire purchase agreement was entered into. The trader accepted a promissory note for the amount of the indebtedness. Having made his profit on the sale of the article, all that the trader required in the way of interest was the payment of interest of 1 per cent above the bank overdraft rate of interest. His purpose was to trade. He accepted a promissory note which he took to the bank and the bank thereupon allowed kim to overdraw up to 80 per cent of the value of the promissory note. If the bank overdraft rate was 5 per cent, the purchaser of the goods was required to pay only 6 per cent interest for the use of the money. But the point is that now a person buying goods under hire purchase is paying between 14 and 16 per cent interest under a hire purchase agreement.

This is the iniquitous part of the whole scheme of things. Because there is control of banking, because of the interference with the banking system, at the present time a low wage earner is paying up to 14 per cent interest on a refrigerator and the other amenities that he requires which he is buying under hire purchase. Had the banking legislation not been introduced we would not have seen the upsurge of these finance companies which do trade unconscionably. There is not the slightest doubt about that. The main concern of finance companies is to lend money, and provided they have sufficient security to cover the indebtedness they could not care 2 hoots. It is a most unethical way of lending money, and it is unfortunate that Australia is presently in the position where finance companies, as a result of their lending activities, are more in control of the monetary situation than are the ethical banks.

Of course, merchant banks have come in under the lap. It has been maintained by my Party and by leading barristers that in view of previous decisions of the High Court and of the Privy Council we do not have any control over merchant banks. But it would appear from the Rocla pipes case that it is just possible that we will now be able to exercise some control over both hire purchase companies and merchant banks, and it is desirable that we do so. I have never been able to understand the argument that money borrowed at 14 per cent interest has a less inflationary effect than money borrowed at 6 or 7 per cent interest. Economists and people in authority appear to imply that money borrowed from a merchant bank or a finance company at a high rate of interest has a less inflationary effect than money borrowed from trading banks at 7 or 8 per cent interest. People have adopted this stupid attitude towards methods designed to dampen down the economy. If a person desires to commence a business or to enter into a property deal, then if he is sanguine, if his judgment is correct and if he is prepared to back his judgment, there is not the slightest possible chance that an additional 2 or 3 per cent interest will stop him from borrowing money and going on with the deal.

I think I have given a factual and practical demonstration of the effect of controlling banking and of the fact that the upsurge in finance companies should never have occurred. The Government is partly to blame in this matter, and I would have been much prouder of the banks if they had fought for their rights instead of allowing the government of the day to introduce legislation which controlled them and made them become impotent in regard to the monetary situation. Of course, representatives of the finance companies have come along to interview the Government's economic committee. It appears that they give the Government some undertaking when there is a desire to restrict the lending of money, but knowing them as I do, they are in business for only one purpose, and that is to lend money at a usurious rate of interest. It is to our everlasting discredit that this position has been allowed to continue because unfortunately, until the Rocla pipes case, we had no idea that we could possibly control this type of business.

I should like to see finance companies controlled and the function of lending money revert to the banks, where it rightly belongs. If this were done I think that Australia would be a much happier place. We would not be allowing finance companies to adopt unethical methods in order to accumulate the great wealth which they have over the years. I" support the Bill and congratulate the Government. I look forward to another Bill being introduced so that we can restore to the banks the power and the privilege which they had prior to the Banking Act being introduced by this Government.

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