Page 3571 - Week 12 - Thursday, 20 September 1990
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Would you admit that anything physically possible and desirable can be made financially possible?
Mr Towers said, "Certainly". He went on to say:
The limit of the possibilities depends on men and materials.
He was asked the question:
And where you have an abundance of men and materials you have no difficulty in putting forth the medium of exchange that is necessary to put the men and materials to work in defence of the realm.
Mr Towers replied, "That is right". The next question was:
Well then, why is it, where we have a problem of internal deterioration, that we cannot use the same technique? In any event, you will agree with me on this, that so long as the investment of public funds is confined to something that improves the economic life of the nation that will not of itself produce inflationary conditions?
Mr Towers said, "Yes, I agree with that". I would ask the question, "Why are not politicians in Australia and this Assembly aware of these facts of financial life?". During the period of 1935 to 1937 there was a royal commission into the monetary and banking system of Australia. A portion of paragraph 504 of the commission's report says:
Because of this power, too, the Commonwealth Bank ... can lend to the Government and to others in a variety of ways, and it can even make money available to governments and to others free of any charge.
The royal commissioner, Mr Justice Napier, was asked for an interpretation of this section. He replied through the secretary of the commission, Mr W.T. Harris, who said:
The statement in the paragraph mentioned (504) is to the effect that as a matter of power, the Commonwealth Bank can make moneys available to governments or to others on such terms as it chooses, even by way of a loan without interest, or even without requiring either interest or repayment of principal.
Indeed, this was the power used under the Constitution by the Commonwealth - the common wealth - Bank of Australia at the start of this century, after its founding in 1912, to fund the First World War to the tune of $700m and the national shipping line and the national railway line. This principle now applies to our central bank, the Reserve Bank of Australia.
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