BANKING CONTROL

Hauraki Plains Gazette, Volume 47, Issue 2670, 15 September 1937, Page 3

BANKING CONTROL

AUSTRALIAN CAMPAIGN THE LABOUR PARTY’S POLICY OPPOSITION TO PROPOSALS. A campaign is at present being waged in Australia over the question of political control of the Commonwealth Bank. Nearly two years ago the Federal Government appointed a Royal Commission to inquire into the Australian monetary and banking systems. The commission recently presented its reports, the most important recommendations being that the Commonwealth Bank be given a “reserved” emergency to be exercised on the consent of the Federal Treasurer, to requisition part of the London funds of the trading banks and to insist on their keeping certain minimum reserve deposits with itself.

The Labour Party, which has always favoured nationalisation of banking, has seized upon the commissioner’s recommendations and has stated that if successful at the forthcoming Federal elections it will reconstruct the Commonwealth Bank.

Opposition to the proposals (both of the commission and the Labour Party) has been keen, the chief ground of attack usually being that the Commonwealth Bank, and through it the whole banking system, would be delivered over to political control. The Bank of New South Wales has brought out a circular, on the commission’s report, raising the objection that if implemented, the recommendations would destroy certain statutory safeguards usually possessed by a central bank.

The Bank of New South Wales takes the stand that rigid control may be expedient in the American system of small unit banks, but that it is unnecessary in the British system of large banks with multiple branches. A central bank has potent methods of ensuring that its policy be carried out without the necessity of directly coercing banks as big as those in Australia. Of these methods the Bank of New South Wales says that the Commonwealth Bank can make more

efficient use of two; open market operations, that is, the buying and selling of Government securities so as to affect the cash reserves of the trading banks, and the efficient management of Treasury bill finance, which can have a similar effect. “The request for powers of compulsion over London funds and over minimum deposits, unless it is a concealed method of introducing . authoritarian control of finance, which is repugnant to, British traditions, is an indirect admission of weakness in the present system of

management,” states the bank, adding that improvement in the technique of control is preferable to additional crude coercive powers.

The bank believes that the position of the Commonwealth Bank would be endangered by a provision that it might take emergency action with the consent of the treasurer, because no safeguard of Parliamentary ratification within a certain time is provided for. Objection is raised not to Parliamentary control, but to control by a Minister whose actions do not have in the usual course of events to be reviewed by Parliament. If the treasurer is not compelled to review his whole political position before he exercises his powers as he must if he has later to report to Parliament, the safeguards for Australia’s central bank against arbitrary political action will be weakened.”