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Tuesday, 1 May 1973
Page: 1476

Mr KEATING (BLAXLAND, NEW SOUTH WALES) - Is the Treasurer aware that the Australian Guarantee Corporation, which is 51 per cent owned by the Bank of New South Wales, is seeking to attract finance at the rate of 6 per cent by offering what are termed unsecured notes repayable on demand, a practice never previously carried on by fringe banking organisations in Australia? Will this device move huge amounts of funds on a scale comparable with that of funds moving into the building society area and away from the trading banks where the normal interest bearing deposits attracting 3f per cent to 5 per cent are a source of low interest rate funds for housing and other desirable priorities? Is the Government going to tolerate the private trading banks' circumventing the banking system and to allow them to get into the dear money business, with a consequent reduction in trading bank liquidity being suffered in deference to the increased profitability available to the banks through their fringe operators? Will the Treasurer devise a measure to discourage this activity - perhaps a requirement that 25 per cent of the funds raised be invested in government securities, similar to the legislation introduced in relation to foreign funds with the Reserve Bank of Australia?

Mr CREAN (MELBOURNE PORTS, VICTORIA) (Treasurer) - I am not aware of the precise action of the firm referred to by the honourable member for Blaxland but I am greatly concerned about the rising interest rates in the community because they have very serious repercussions not only on prices but also, in particular, on those who want to purchase their own homes. I have called for information from the Treasury and the Reserve Bank of Australia about the various forms of credit providers. As I have stressed in this place before, those who lend money certainly cannot lend it at a lower rate of interest than that at which they borrowed it. Any device that forces the borrowing rate up has adverse effects at the other end. This is a very serious problem to grapple with. I have said over and over again that if it is thought wise that there should be controls upon the activities of banks and insurance companies it does not seem unwise that some kind of regu latory provisions should be imposed upon other providers of credit. The precise mechanisms for doing this can lead to differences of opinion but the honourable member can be assured that these matters are under consideration. I hope in the next few weeks to be able to make statements on this and allied measures. Unfortunately, sometimes when we alter the law, particularly as it applies in the income tax field, to give a concession, often for quite genuine reasons, we find a curious combination of clever legal and financial minds trying to pervert what was a genuine action. This is why it is not always easy to close loopholes without endangering some genuine measures. I thank the honourable member for his question and will call for a report about the matter he raised. Perhaps at a later date I will be able to make a more general statement about this whole area.

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