THE OTAGO DAILY TIMES TUESAY, AUGUST 19, 1947. AUSTRALIAN BANKING

Otago Daily Times, Issue 26543, 19 August 1947, Page 4

THE OTAGO DAILY TIMES TUESAY, AUGUST 19, 1947. AUSTRALIAN BANKING

Referring to the intention of the Australian Government to compel local bodies to trade with the Commonwealth Bank to the exclusion of the private trading banks, the Sydney Morning Herald describes the move as “ a glaring instance of party political considerations over-riding those of justice and efficiency.” The section of the Federal Banking Act which the Government attempted to invoke was declared invalid by the High Court. The sequel is to be seen in the announcement now made that the Government intends to nationalise all private banks in Australia. This has caused a sensation in banking circles. The judgment was carried by a large majority and it was thought that Mr Chifley would not attempt to take the matter on appeal to the Privy Council. He is now going further and is apparently determined to circumvent the law to gain his end. The comment of Professor Bland that “the decision has all the aspects of spiteful retaliation against the High Court ruling” appears to be only too well justified. In recent years there have been several attempts by the Government to increase its control over the nation’s credit, and Mr Chifley’s hostility to private banking has long been apparent. Nationalisation by a policy of gradualness has been his aim,' but the High Court’s adverse ruling has evidently driven him to discard the velvet glove. Contrary to the general trend of policy among central banks, the Commonwealth Bank of Australia Act of 1945 lays down that it shall be the duty of the bank to develop and expand its general banking business. The bank also has power of direct control over the credit operations of the commercial banks, similar to the practice in totalitarian countries such as Soviet Russia and Nazi Germany, where it was accompanied by full planning, regimentation and the control of general economic activities. It would appear that Australia may be compelled to follow in the same lines if Mr Chifley succeeds in his intention. To embark on such a course from mere motives of piqLe and without full deliberation and preparation must be to expose the country to the gravest dangers. The implications of full credit control such as the Government seeks are implicit, in the view of an American authority quoted in M. H. de Kock’s recent study of “ Central Banking ” that the principal factor in credit is a state of mind and credit cannot be controlled unless there is control of public opinion. There are, however, some difficulties in Mr Chifley’s way. He has first to get his legislation passed, and then it will in all probability be subjected to the severest legal tests in the courts. It is clear that Mr Chifley has made one of the most important decisions of his career, and the future developments will be watched with interest by financial .circles throughout the world.