RECEPTION OF BILL

Evening Post, Volume CXVI, Issue 96, 20 October 1933, Page 5

RECEPTION OF BILL

MINISTER'S EXPLANATION

BOMBARDMENT OF QUESTIONS

The principal changes mado in the Bill since its circulation last session were outlined by the Minister of Finance (the Bt. Hon. J. G. Coates) to the accompaniment of a bombardment of interjections and questions.

Mr. J. A. Lee (Labour, Auckland East) asked whether the bank would operate immediately in the event of private individuals failing to subscribe capital. "If the bank is to take over exchange liability," he added, "I could not understand any private subscriber wishing to take over a white elephant of that-nature." The Minister: Is it a white elephant, ten million sterling assets'? I would say, "Think again." Mr. A. J. Stallworthy (Independent, Eden): What is it costing the taxpayers of the country?

The Minister:. Will you calm yourself? The country has a very tangible asset, and it is worth its face value in sterling, and more, of course, in New Zealand currency.

Mr. Coates said there had been no major changes in the working of t£o Reserve Bank, but there had been some alterations in its powers and in the constitution of the board of directors. Provision would be made by consent of the Government for the issue of bank notes of a denomination of less than 10s.

Mr. H...T. Armstrong (Labour, Christchurch East): So you aro cutting out tho silver? -' :

THE ISSUE OF NOTES.

There was a further burst of ques: tioning and comment when the Minister indicated that the word "solo" had been eliminated from the clause giving the Reserve Bank tho right of note issue.

Mr. J. O'Brien (Labour, Westland): And let the other fellows "have a go" if they like?

■ Mr. P.. Fraser (Labour, Wellington Central): What is the object of it?

The Minister: It just gives the right of issue so long as the board

Mr. O'Brien: And give tho" other fellows "a go"?

Mr. W. E. Parry (Labour, Auckland Central): That is rather significant.

"There are no traps in it," retorted the .Minister of Finance.

Captain H. M. Rushworth (Country Party, Bay of Islands): Were there any traps in the original Bill?

The Minister: None whatever. We think the new Bill is an improvement.

There was a further outcry from Labour members when the Minister intimated that another alteration ensured that gold held by banks on account of others would not be taken over by the Reserve Bank. Any profits derived by the Reserve Bank from the sale of gold transferred to it by any trading bank would be credited to the Public Account. In the previous Bill, in the event of non-agreement between the Governor of the Reserve Bank and the trading banks as to the apportionment of such profits, the question was to be referred to arbitration. That provision had now been omitted. "The simplest way of explaining this," said the Minister, "is to say that the gold is taken over by the Crown at book value." Mr. H. G. R. Mason (Labour, Auckland Suburbs): Faco value? The Minister: No, book value. Mr. Lee: At what date? The Minister: Today. Mr. W. J. Jordan (Labour, Manukau): What I while the exchange is on? Mr. Langstone: It means £8 3s 9d an ounce. (Government laughter.) Mr. R. A. Wright (Government, Wellington Suburbs): What d^ss the book value mean? Mr. Lee: The bookmaker value. (Laughter.) BOOK VALUE AND MARKET VALUE. The Minister explained that there was a difference between book value and market value. What he meant, and what the Bill provided for, was £3 17s 10J an ounce. "Is there any protection against the Government coercing tho banks in raising or lowering the rate of exchange?" asked Mr. Stallworthy, when tho Minister was explaining the functions of tho bank in relation to exchange policy. The Minister: That will bo governed by the directorate. Questioned as to tho salaries of the Governor and Deputy Governor, the Minister said that the amounts wore not specified in the Bill. Mr. R. Semple (Labour, Wellington East): It will be above relief workers' rates, I take it. The Minister, after describing tho constitution of tho directorate, declared that it was proposed to make it truly national. Mr. Lee: How does it, when 80,000 farmers have two members on the board? The Prime Minister (the Rt. Hon. G. W. Forbes): Is it not the principal industry of tho country? ALLOTMENT OF SHARES.

The Minister of Financo emphasised that the general purpose of the institu-

tion was the improvement of the general economic and financial position of the country. Mr. Armstrong: Will it give the workers more spending power? Mr. Coates: We hope so.

The Bill, added the Minister, provided that no trustee should exercise control of more than 500 shares, which was in accordance with the general aim of spreading the shareholding interest as widely as possible. The shares were of £5 each. Mr. Armstrong: One will be enough for me. The Minister: From what I know, of the hon. gentleman, he will be the first

in. The method of allocating shares, said Mr. Coates, would be that followed in connection with loans, where ono share each was allotted to every applicant. The Minister of Finance would make the allotment according to that method, because the ideal would be to have 100,000 shareholders of £5 each..

PLEA FOR STATE CONTROL.

I "I don't agree that thero should bo 'shareholder control of this bank," said Mr. W. J. Poison (Government, Stratford). "I believo that the control should be in the hands of the State." There was a peculiar psychology about Great Britain due to the influence of tradition upon the British people of the Bank of England, which had maintained shareholder control. New Zealand had had State control in many institutions, and he was satisfied that State control was sound in connection with the bank. At the same time, he was anxious to help the Government as far as possible to put a Central Bank Bill through, provided it was a Bill based on service to the people and not of any profit to anybody. The farming community was opposed to share capital. He was prepared to agree to certain capital, provided the control of the State was paramount and not interfered with.

When the Bill reached the Committee stage, said Mr. Poison, he intended to move an amendment giving the State predominance in the directors, and also making the appointment of the governor a State appointment, instead of an appointment by the shareholders.

"I am not going to agree to allow tho control to pass out of tho bauds of the State," said.Mr. Poison. The farming community of New Zealand had had conferences, committee meetings, and discussions about tho question, and they were unanimously in favour of the State mainaining control of its institution. Mr. Poison referred to State-controlled banks in other countries, and said that though it was not a central bank, the Commonwealth Bank of Australia, was an example of a State-controlled institution which had stood up to all sorts of influences. It had stood up to the most powerful Treasurer Australia had ever had, Mr. E. G. Theodore, who had proposed a fiduciary issue. Mr. Poison said that State control was recognised as sound in many leading countries. In New Zealand there were tho Post Office Savings Bank, the State Advances Office, and many other interests run by the State. There was tho Bank of New Zealand —a State-controlled institution. Were they'afraid that any of those institutions would act unfairly; that the interests of the State would be neglected; that anything would happen that would bo unsound financially or in any other way? "We know that that is not the case, and that a board appointed by the State m this country could tie trusted to do its job in regard to a Central Bank just as a board appointed by a central Government in the' Commonwealth," he said. "With the groatest desire to help the Government, I still fool that it is necessary that an amendment should bo made." INTERNAL PRICES. Mr. O'Brien said that if the bank was to be a purely State-controlled concern it would'have quite a lot'of friends. It was to be hoped, also', that an effort would be made to stabilise internal commodity prices. Mr. F. Langstone (Labour, Wainiarin'o) said that the proposals for central banks had originated from an international conference of bankers. There was.no need for a Central Bank in. the Dominion and the proposal had not been raised until the visit of Sir OttoNiemeyer. The Government was going to put £1,000,000 into the bank free of interest and the cost of this money would not be less than £50,000 per annum. The bank was just a piece of financial embroidery. There was no money market in the Dominion and this did away with the necessity for the bank.' A NEW RECRUIT. Mr. R. A. Wright (Government, Wellington Suburbs) said that he agreed that there had been no request for the Central Bank before the arrival of Sir Otto Niemeyer. He wished to congratulate the Opposition on its new recruit, Mr. Poison, who had gone over for State control, lock, stock, and barrel.

The proposal was an unsound one, because it was being used as a smoke screen to cover up the cost of the high exchange rate. The bank was to carry the baby.

The Minister of finance had stated definitely that the Central Bank would take over the accumulated surpluses in London, for which the banks were finding £1,000,000 per month. "The Central Bank is a splendid smoke screen," said Mr. Wright, "but ultimately the whole position will, be brought to light, because it cannot be hidden indefinitely. The Government states that it is not necessary to explain to members of Parliament what has been done in connection with the exchange rate. We havenot been told anything concerning tho arrangements between tho Government and the banks, but now we are asked to deal with a Central Bank Bill. Who is going to pay the cost of establishing this bank? It is an extra institution and will require a staff and a board of directors. The Minister of Finance has made it clear that it will be controlled by the State, so there is no peed for an amendment in this direction. Mr. Parry: Are you in favour of this? _ _, Mr. Wright: No, lam not. The Government is to approve of the governor and deputy governor. Four of the direstors are to be appointed by .the shareholders and three by the Government, while a member of the Treasury will also sit on the board. This shows that the Government will dominate the bank.

AN IMPROVEMENT, BUT—

Mr. W. J. Broadfoot (Government, Waitomo) said that the Bill was an improvement on tho previous Bill, but he thought that further amendments wore necessaiy. Ho,was not enamoured of the provisiou for private capital for tho bank, and considered that the preponderance of tho shareholders should be appointed by the. State. Mr. Armstrong said that the banK would completely divorce New Zealand's control over her banking system. It would be far better if the Government reformed the Bank of New Zealand. Mr. F. Lye (Government, Waikato) said that there was still room for. definite improvement in the BilL He was opposed to the control of the bank by shareholders or privato interests. The interests of the State should be paramount. Mr. Semple said that thero had been no mandate for the Bill from the electors. It was not asked for by the farmers' organisations and the commercial and business people had not made a. request for the institution. The Bill was being introduced on the reprs-

sentations of the international'money trust, which was being given greater power over the credit facilities of the Dominion. In bringing ,in the Bill the Minister of Finahco had a great responsibility, and it was to bo hoped that he realised that fact. There was an urgentneed at the'present time to raise the purchasing power of the people in order to rid the country of the widespread penury and want, but that was not going to bo achieved by the proposed bank. THE FARMERS' VIEWPOINT. Mr. J. Hargest (Government, Inver4argi.ll) said he understood that the Bill would stabilise exchange and currency, control loan operations, and provide a curb in times of inflation and a stimulus in times of deflation. It was necessary to spread the roots of the shareholder capital as widely as possible. He certainly questioned Mr. Poison when he said he represented a solid body of farmers opposed to the bank. Ho had had only one telegram in opposition from a small centro in Southland, and nono of his former friends with whom he had communicated opposed tho Bill. Mr. Lee said his opposition to the Bill was the same as the opposition President Bosevelt had to fostering the dollar to sterling. The preseat House, could not more pledge tho House that was to follow it than it could return to tho Stone Age. Tho House that would be elected would determine that tho currency system of tho nation should be such as to reflect tho ago of mass production. Captain Eushworth, referring to the statement made by the Minister of Finance that it was tho Crown's prerogative to issue currency, said it was difficult to reconcile that with the right given to a small group of shareholders to manufacture and issue money. The member for Invercargill had made out a case in favour of the Government holding the whole of the shares in the bank as trustees of the nation. He was anxious to learn where the demand for the bank originated. Had any member received a demand for tho Bill from any responsible person or organisation in, the Dominion? Had it been advocated by the chambers of commerce or the Farmers' Union? Mr. Stallworthy complained ot the lack of Government frankness, and said that tho House was entitled to know the whole of tho details of the scheme. Mr. Poison had stated that tho Farmers' Union opposed tho setting up of ,a Eeservo Bank, yet he had stated that he would support tho Government. GOVERNMENT ASKED FOR BILL. "Who has asked for tho Bill1?" said Mr. Coates in reply. " The groatcst organisation in the country has asked for it—tho Government." Mr. Semple: Who inspired them? Mr. Coates: Tho Government, who should bo in a position to judge and decide on the question of tho welfare of the people as a whole. It would be impossible to meet the full requirements of the peoplo ' satisfactorily unless this machinery was created, said Mr. Coates. . As to the method of control, that was a matter for quiet and deliberate consideration. Replying to criticism that the farmers did not desire the Bill, Mr. Coates said that the member for the Bay of Islands (Captain Bushworth) and tho member for Eden (Mr. Stalhvorthy) had taken a very active part in opposition to the Bill. Why should tho.hon. gentlemen sail under false colours! Mr. Coates said that it had been stated that members had lost their heads over monetary matters. A. member: No, kings had lost their heads. Mr. Semple (to Mr. Coates): You will loso your.seat. Mr. Coates: I was talking about my head. (Laughter.) The Minister said that it had been asked how tho Bill was going to stabilise commodities. It was entirely a matter for New Zealand as to what monetary policy she \vould_ adopt. Parliament at all times must control the monetary policy. The only difference ho saw in the control was just tho method of carrying it out. The intention and design of the bank was to promote tlie economic welfare of tho country. ■

Mr. *D. G. Sullivan (Labour, Avon): Why not a straiglitout State institution?

Mr. Coates: We can arguo about that a little later on.

The Minister said that shareholder capital gave a direct representation to industry of every kind, particularly in New Zealand. There was a good and sound case to be mado out in favour of a proportion of share capital. Ho could not argue the case out on tho first reading. Mr. Parry: Do you intend to tako control of" the public credit?

Mr. Coates: All forms of credit. Mr. Parry: Tako full control?

"OUR INSTITUTION."

Mr. Coates said that it would bo handled where necessary on behalf of the Government.. Associations between the bank and the commercial banks were inevitable. It was obvious that there must be the closest association

with every move, but the go-between was. tho Beservo Bank for and on behalf of the State requirements. "This is our institution, and nobody else's institution," said the Minister.

Mr. A. M. Samuel (Government, Thames): Is it not to be linked up with tho general system of reserve banks?

Tho Minister said that it would be one bank, but it would not bo linked up in any sense at all, nor would ho agree that tho effect would be to bind the country to ar^. monetary system. Mr. Parry: What do you proposo to do with it?

Mr. A. S. Richards (Labour, Eoskill): Will it come under tho control of London?

The Minister: How is it associated with tho Bank of England, the Commonwealth Bank of Australia, or any other bank1} It is a New Zealand institution composed mainly of New Zealanders, if we can get a governor conversant with the principles of reserve banking. On the second reading I hopo to say what part we expect this bank to play in the economic life of the country, i Replying. to further quostions Mr. Coates said that the thing could not bo made binding up to ten years; nobody would dispute that. Parliament had tho right to say if a Bill should be amended. ... Mr. Stallworthy remarked that it could be very costly. Mr. Coates: I think I can show very definitely the results the country will receive from the passing of this legislation. Mr. Semple: Wo aro waiting very anxiously for that. Mr. Coates said that it would not have been introduced had it not been thought that, it was essential. Mr. Lee: You felt that about wage reductions. Mr. Sullivan: Is the Government policy fixed about shareholder capital ? Mr. Coates: We t>elieve shareholder capital is an advantage, particularly if it is well spread. The Minister said such a provision would call for meetings once a year, and there was a good case to be mado out for it. Mr. Stallworthy asked whether it was intended to import a governor. APOLOGY DESIRED. AVhen Mr. Coates resumed his seat Captain Rushworth said that ho had been misrepresented, and he suggested that tho Minister should apologise. Mr. Coates: I do not wish to misrepresent the hon. gentleman, but I should like to have the matter straightened out. Is it not. a fact that ho has advised.the farmers that they should oppose the Bill tooth and nail1? Is that not correct? He has been reported to have said that there would be a revolution if the Bill was introduced. Mr. Coates. said it was a little out of place for Captain Bushworth to quote the farmers in the north when he had been leading them. He (the Minister) had to take it for" granted that Captain Bushworth was opposed to the Bill, "If I am wrong, I will be the first to apologise," he said. "I wish to say that I criticised, and very severely criticised, tho old| Bill last session," said Captain. Rushworth. "The Minister has admitted that very substantial and fundamental changes havo been made, but he still accuses mo of sailing under false pretences. I will give him another opportunity to apologise." , "I understand tho Minister coupled 1117- name," remarked Mr. Stallwortlly amidst laughter. Mr. Stallworthy said that he had presided at a meeting addressed by Captain Rushworth. He had criticised the old Bill, but ho had never made representations to any farmers' organisations. He had been approached by his electors, but had taken up the position that he had not seen the Bill and was not going to commit himself. He expected the Minister to apologise, as it could not bo suggested that he was sailing undor false colours. He proposed to give the Bill his best .attention, but he was not pledged to oppose it or.support it. The^Bill was introduced and read a first time. ':