TREASURY BILLS

Evening Post, Volume CXXI, Issue 83, 7 April 1936, Page 8

TREASURY BILLS

AUSTRALIAN OFFER

FORMER MINISTER'S ATTACK

RESULTS OF ACTION

The' silence that Sir F. H. Stewart, | a Government supporter, and formerly Minister of Commerce, has maintained since his return from England some months ago, was broken in the House of Representatives, when during the debate on the centure motion launched by the Opposition he made a surprise attack on the Government for failing to give an explanation of the decision of the Commonwealth Bank to offer Treasury bills for sale on the open market, says the Melbourne "Age." His attitude was supported by another Government follower in Mr. J. N". Lawson (New South Wales), who likened the Bank Board's action "to a mystery drama in which the board had taken the role of the sphinx," and characterised the Treasurer as the Delphic, oracle, whose statements were capable of many interpretations. He added that the public and' Parliamentarians had taken the role of Alice in Wonderland, and were striving to unravel an unprecedented phenomena.

Sir F. H. Stewart said his concern was the possible industrial effects of the action of the Commonwealth Bank Board and the alleged motive and intent behind its action/ Before he left for England a year ago he was not unaware of a developing political psychology which, viewed with apprehension the march towards industrial progress in Australia. It was undoubtedly the continuance of that school of political thought that made the circumstances of his position as Parliamentary Under-Secretary for Re-em-ployment quite redundant. He was too busy a man to continue in any position once its worth no longer existed. Although unemployment had been reduced from 30 per cent, to 13.7 per cent, that was no reason to constitute an "attitude of complacency which was not justified .by circumstances. Certainly there was room for satisfaction, and the Lyons Government had a right to feel a measure of satisfaction for what it had done towards achieving that result, but he did not forget that 13.7 per. cent, of. unemployment meant that 251,000 of our Australian fellow-workers were debarred from industry. While this was so he was not prepared to listen to a suggestion that our industrial machine should be put into reverse gear. A POINTED QUESTION. "Although I do not believe in political control of banking," said Sir F. H. Stewart, "that does not mean that the banking institution should be regarded as something impeccable, and that we should take everything it does without complaint or criticism. What are the motives that actuated the board in issuing £1,000,000 of Treasury bills? The bank was not needing £1,000,000, as that would be very small change to it. My complaint, like that of other members, is that the only explanation made is the one by the Treasurer, but I cannot believe that the only reason for the issue is to determine the.reaction of the public to such a course. Does it need an experiment to ascertain whether investors desire a higher or lower rate of interest for their money? The Commonwealth Bank has Australia standing behind its stability. It is not an experiment to find out whether the investing public would prefer Commonwealth security at a greater rate of interest to what would be given by a trading bank. I cannot believe that this was the true explanation taken by the Commonwealth Bank. I think the Treasurer must have thought he was talking to a lot of schoolboys, and dull schoolboys at that." Sir F. H. Stewart said the cardinal principle of money-dendirig had been abrogated. A better rate of interest had been offered for better security. In general practice better security brought about a lower rate of interest. But for this Commonwealth security 1? per cent, interest was offered, although the trading Banks ■ had £30,000,000 of three months' deposits at 1J per cent, interest. Surely, if the investors were prepared to lend their money to the trading banks at 1£ per cent, interest they. would be willing to lend money at the same rate to the Commonwealth. They could, npt expect to achieve in Australia.the same low rate of interest for short-term loans as in London, which was the clearing, house for the world. Australia' was actually paying in liondon. 2.46 per cent.-for its short-term accommodation: that was about, the figure the; Imperial government got its long-term accommodation for. For th'e:eight1 weeks'ended January 31 last, the -Imperial. Treasury offered Treasury bills to the extent of £310,0*0,000, average weekly amount being between £30,000,000 and £45,000,000, and the rate of interest was from ,14s-6d per ' cent, down' -to , 10s. 4d per cent., which was the last rate at the end of January. Nevertheless an amount to the extent of £550,000,000 was offered, or nearly twice as much as/ was required. So while Australia 'was paying 2.45 per cent, interest, £249,000,000 was turned down 'by the ' Imperial Government, at- an interest ranging from 10s 4d to 14s 6d. : Mr. ;Beasley:> Where is' Mr. Bruce'in this matter? . , ... LOW INTEREST KATES. Sir F. H. Stewart continued: "Nothing has done more to improve conditions in Australia than the availability of money at low interest rates. Now we are asked to accept. Jihe dictum that interest rates must inevitably rise. I am not prepared to accept that dictum. I believe that our approach to the next depression will be at .that term where we have a turning point in the emolument that the investment of money returns. We have been told that the Government will watch the position. I hope that it will, iii view of what it means to those wljo are still suffering physical deprivation from continual unemployment. When we were elected we placed 'in the forefront of our policy efforts to relieve the industrial position, and the creation of a better employment position. I accept the Prime Mmister's statement yesterday regarding,; the general position, and as' long as ythe Government adheres to .that policy, with which*l went to the people, I shall support it. If the time does,-come, however, when I have to choose between loyalty to any political party and loyalty to- the mass of the ' population, I shall have no diffidence 'or hesitation in taking such steps as I think necessary, and I shall have even less hesitation in answering to my constituents for anything that implies." ■ • ; Mr. Beaslr/y (New South Wales) said the thrust toy the Minister of the Interior that /he had never seen a censure motion fall so flat as this one, was recoilyng on the Government with a vengearvce. It was obvious that-the Treasury ."bills were not issued to test the market at all, but to do something through the Commonwealth Bank Board vrhich the Government had failed tp do because of the composition of Ihe Government itself. It was useless 'to say that it was unaware of the rer/sons for the action. The Par-

liament still asked and demanded that the facts relating to the .matter should be laid before it.

THE ALTERNATIVES

Either the members of the Government were unaware of what had happened,' or else they were refusing to make available information to the Parliament. For them to say that the Commonwealth Bank must be free from political control was nonsense. There was' always close consultation between them, and it would probably be found out later that the Commonwealth Bank Board had brought under the notice of the Government the position arising from the state of the London funds. The Government, like the Bruce-Page Government, which had also had this matter brought under its notice, was refusing to face up to its responsibility. -

Mr. Fairbairn (Victoria) rose in support of the Government, but early in his remarks he was vigorously interrupted by Sir F. H. Stewart, who interpolated, "'#ou can do what you like, but I am not going to be., a .party hack." .

Mr. • Fairbairn later attacked Mr. A. C. Davidson, of the Bank of . New South Wales, for his action immedi: ately following the announcement concerning the issue of Treasury bills. He said that this Mr. Davidson, who held himself up to be the- great apostle of (cheap money in Australia, knowing that higher interest rates were bound to come, took the first opportunity to use this action of the Commonwealth Bank as an excuse to gain a trading advantage over his rivals. That first move to precipitate higher interest rates was being completed by those who were saying in the House today that the era of cheap money was going. :.. •. GOVERNMENT'S DUTY. Mr.-. J. N. Lawson condemned the Bank Board for its failure to give an explanation for its action, and said its policy could make or break Governments' or countries. It .was the duty of the Government to concern itself very closely with the board's actions. The Parliament was answerable to the people of the country for the policy of the board, and that was why it had a direct representative on the board. It was also a reason why the Government should play a strong, but not a dominant, part in the policy of the board. It appeared that the Treasurer was not playing as strong a part as he should in determining the policy that the Bank Board should follow. By its unprecedented action, said Mr. Lawson, the board had created certain fears and anxiety in the minds of the investing and general public, and had created an atmosphere of mystery about banking policy generally. Its action called for an explanation. Yet where was that • explanation? There had been no attempt oh the part of any member of the. board to. allay anxiety or to give any explanation- of the motive that prompted its action, or what it was hoped to accomplish. That constituted a failure on the part of the board to play fairly with the general public, and it had been lacking in its duty both to the Commonwealth Parliament and the public of Australia.' ■ Mr. Scullin: Do.you know the real facts of the1 case? Mr. Lawson: I have made heroic efforts to fthd out the facts, but I defy anyone to ascertain them. It is not the action of the Bank Board that I condemn, but its failure to give an explanation for it.' ' EXPLANATION OWED. Mr. Sctillin: It is the duty, of the Bank Board to give that explanation to the Government. The failure to give the ! explanation lies at the door of the Government.

. Mr. Lawson said he was prepared to accept Mr. Scullin's statement, and he felt that some .explanation was due to the 'Parliament and the public. It was a .technical issue from whom the explanation should come. v

Mr. Curtin, Leader of the Opposition, in reply, said, his complaint was not against the Commonwealth Bank, which was compelled to take action owing to the depleted London funds. Of the five Ministers who had spoken, only one attempted to give a reason for the bank's action. That one Minister said the issue of the- Treasury bills was in the nature of an experiment to see how the public would react to a bill market. But what necessity existed for an experiment of this kind at this time? Interest ■rates were affected. What was the perspicacity of the Bank Board if it did not know that'this would happen? .-'■■. / "The Labour Party does not seek political control over the bank," added Mr. Curtin. "It has never suggested political interference between bank and client or in the functions of bank management. The determination of national policy, however, regarding monetary matters is certainly one that should be guided by the Government.'!

At 9.30 p.m. a vote was taken, and the censure motion was defeated on party lines by 41 votes to 25.