Australian Cabinet Decides to Nationalise Private Banking Companies

Otago Daily Times, Issue 26542, 18 August 1947, Page 5

Australian Cabinet Decides to Nationalise Private Banking Companies

Rec. 10 p.m. CANBERRA, Aug. 17. The Federal Cabinet has decided to nationalise all the private banks of Australia and will act to prevent any financial panic. The decision will probably cost the Commonwealth between £80,000,000 and £100,000,000 for compensation to about 70,000 shareholders in nine private banking companies. Tomorrow, the Commonwealth Government will begin drafting a Bill to give effect to its decision and will probably take over the banks in about six months time. After Cabinet had debated the matter for only one hour, the Prime Minister, Mr J. B. Chifley, announced the decision in a 42-word statement, which gave no reason for the pending legislation. He said it would give shareholders, depositors, borrowers and staffs of private banks proper protection. The decision is regarded as the Government’s answer to the finding of the High Court last Wednesday which declared invalid Section 48 of the Banking Act,

The only banks which will remain outside the nationalisation scheme are the State banks, which comprise the Rural Bank in New South Wales, the State Savings Bank in Victoria, the State Bank and Savings Bank in South Australia, the Rural and Industrial Bank in West Australia, and the Agricultural Bank in Tasmania. The Commonwealth Government has no power to nationalise any of these banks, but it has power under section 51 of the Constitution to ask the Federal Parliament to pass legislation enabling it to nationalise private banks. The Government has not yet decided on the form of nationalisation, which might be either to purchase the banks and then buy out the shareholders, or to extend the control of the Commonwealth Bank so that private banks will’become its branches. It is believed certain that when the nationalisation scheme comes into operation the Government will amalgamate many existing branches of the banks. There are 18 private trading banks in Australia, including a number of minor concerns, and carrying deposits amounting to £696,857,000. Of this, £232,188,000 is interest-bearing and £464,669,000 non-interest bearing. Deposits in State savings banks at the end of last June totalled £660,645.000. To forestall financial panic, the Government is expected to advise shareholders not to make quick sales of their shares and depositors not to make rash withdrawals, and to assure banking staffs, totalling 20,000, that employment will be continued and all accruing rights preserved. The Government is convinced that the proposed legislation will stand any court test, and will take any case to the Privy Council in the event of adverse High Court judgments. Ministers claim that the entire economic policy of the Government would have been disrupted by the High Court ruling last Wednesday. It is claimed that nationalisation will enable Mr Chifley to carry out his basic economic policy by controlling credit investments and business expansion throughout the Commonwealth The decision came as a surprise . to private banks, which are likely to contest the issue in what may be Australia’s biggest legal battle, “This will mean that• everyones financial affairs will be subject to Government inspection and control,” declared the Associated Banks’ chairman, Mr J. L. McConnan. “Although a Government bank has been established for 35 years,” he said, “ a great mass of people still prefer to conduct their business with, the trading banks. The bald fact is that 1,250,000 Australians prefer to entrust the conduct of their financial affairs to the trading banks. The answer to the announced intention of the Government presumably rests with these Australians.” “The decision has all the aspects of spiteful retaliation against the High Court ruling,” said Professor. F. A. Bland, professor of public administration of Sydney University. “Nationalisation of private banks will mean the end of private enterprise and the beginning of complete Socialism. Advances for the development of industries will depend on the whim of party politics.” The Federal Opposition Leader, Mr R. G. Mcnzies, said that the proposal was outrageous, and that “ there is no justification from the point of view of public interest because the Government cannot contend that trading banks are not serving a useful purpose for hundreds of thousands of people.”