SHIPMENT OF GOLD

Dominion, Volume 24, Issue 188, 7 May 1931, Page 9

SHIPMENT OF GOLD

Proposal in Australia

BANKER’S OPPOSITION

Reduction of the Reserve

BAD EFFECT IN LONDON

By Telegraph—Press Assn.—Copyright (Rec. May 6, 11.30 p.m.) /

Canberra, Slay 6.

An event unique in the annals of the Federal Parliament occurred to-day when Sir Robert Gibson, chairman of the Commonwealth Bank Board, appeared at the bar of the Senate to give the Bank Board’s view of the Commonwealth Bank Bill under which the Ministry seeks to ship large quantities of gold overseas.

Members of the Ministry and the House of Representatives crowded the Senate to hear Sir Robert Gibson s statement. He said that the board was in continuous communication with the Bank of England, which had no direct financial relations with the Governments of Australia. , He confidently believed that the bank would do anything in Its power to help Australia, either by influencing the market in London in her favour, or by helping his board.

Commonwealth Debts.

The amount of gold held in Australia as a reserve against the note issue, preceded Sir Robert Gibson, was £15,150,000. The total unfunded debts owed by the Australian Governments in London was £38,075,000, of which sum £5,000,000 was due to the Westminster Bank, £5,000,000 to the bill market, £2,950,000 to the Australian trading banks, and £25,125,000 to the Commonwealth Bank. From inquiries made in London it would be very difficult to discount Australian bills falling due at an early date, or, if it could be done, it would be at a comparatively high rate of interest.

Would- Create Uneasiness.

Sir Robert emphasised that the Commonwealth could make no further shipments of gold to London without reducing the statutory reserve. The fact that the note issue $ would be inadequately supported would create uneasiness and a loss of faith. The value of the Australian note would depend entirely upon the confidence of the people and the ability of the people to redeem the notes in some form or another. , The country had had an instance of what loss of faith meant quite recently, although In that case the Government Savings Bank- was backed by ample reserves.

There was the same lack of faith in the fiduciary issues. On the other hand, the gold reserve had a psychological value, and created confidence in the mind of the people and In those who handled the notes.

Alternative to Default.

Sir Robert Gibson added that £5,000,000 worth of Bills were falling due on June 30, and there was a danger of default. He read a letter to the Treasurer, Mr. E. G. Theodore, in which he stated that the Commonwealth Bank already had shipped £5,000,000 worth of gold to meet the needs of the Government prior to March 30.

He thought that if the country must default, it would be preferable to default to Australia and not to the people overseas. Senator Barnes asked: Would you say that a better alternative would be a further shipment of gold? Sir Robert Gibson: Undoubtedly.

REPLY TO THEODORE

Bank Pay-out Suggestion

WOULD MEAN INFLATION

Sydney, May 6.

Replying to Mr. E. G. Theodore’s remarks about the banks, Mr. A. C. Davidson, general manager of the Bank of New South Wales, said that if, as suggested, the banks paid out £100,009,000, they could do it either by credit extensions or drawing on the Commonwealth Bank for notes. The effect, however, would be sheer inflation. -If it were done, the purchasing power of the £1 note would be reduced to 6/8, and the burden would fall most heavily on the wageearners.