KIWIBANK - CAN AUSTRALIA CATCH THE FIRE?

by Larry Noyes

New Zealand continues to demonstrate how a Government bank can improve its fortunes - and much of our press hides it from Australian readers.

That country is using Post Offices as a base for branches of Kiwibank. There appears to be no reason why Australia should not do the same; our Post Offices are already transacting business other than mail.

Political will is lacking. Labor delivered up the Commonwealth Bank, which had traditionally undercut private banks in interest rates etc, as part of the curse of Keating. It has shown no inclination to return to representing the bank-battered underdog against the banking buccaneers or rejuvenation of the spirit of Ben Chifley, a wholehearted sponsor of government banking. Nor have the Liberals shown any return to policies adopted by Bob Menzies, another upholder of a competitive Commonwealth Bank.

Meanwhile, country towns are dying, with farmers bankrupted under the burden of repaying loans.

Labor Trailblazer

I speak as the author of a biography of King O'Malley (see Heritage. No. 96 2001). That Labor trailblazer of the early 1900's launched the Commonwealth Bank, on the basis that economic woes weren't "the will of Allah". They were for want of banks operating on a Christian basis, he said.

New Zealand lost its government bank, the Post Office Savings bank, when the privatization spree was at its height in both New Zealand and Australia in the late 1980s. A Labor rebel of those years, Jim Anderton*, continued to oppose that undermining of the public interest.

In a more favourable political climate in recent years, he and a small band of supporters - the Progressives - have combined with the Labor Government led by Helen Clarke, to found Kiwibank.

Media blackout

Australians are all too unaware of this bank. The extensive business pages of The Age, and perhaps the Fairfax Press generally, fail to carry stories about Kiwibank. The Australian has had a few, but long ago.

The rural weeklies took a stand during the time when

Keating, the Bankstown Bonaparte, was quietly taking the Commonwealth Bank to its final one-third privatization in 1996. They came to ban publication of letters opposing that privatization. I had been writing such letters regularly for years. The New South Wales Land published one or two, and then none. Queensland Country Life and the Victorian-based Stock and Land continued to air my warnings. Then the ban extended. It looked suspiciously like editors got directions from the top. The independent West Australian weekly, Countryman, gave encouraging support for such letters.

Rural crisis

Yet the rural world was, and is, reeling. By 2000, Jeremy Lee, Toowoomba based analyst and lecturer, was reporting, "About 70 percent of farmers are in trouble economically. . The situation is terrible; many country towns are dying, their hospitals and schools closing. The number of farmers is at an historic low; down to 80,000 where there were about 250,000 in the mid 1960s. Even with a good season and good crops, most of their money goes in servicing debts." He said that the last Labor politicians he recognised favourably had a chapter in his book, What Will We Tell Our Children? on banks, and it was really good

Labor leaders go soft

The writer recalls Dr.Cairns, speaking before a party branch in his Melbourne suburb of St Albans, reporting he could not get "leaders" to support his policies in the Whitlam Government of the early 1970s. Whitlam had a wishy-washy record with the Commonwealth bank. One minister, Clyde Cameron, reports his shock at failing to get Caucus support to stop Sir Brian Massey-Greene being reappointed to the bank board. Massey-Greene was a big-time businessman, one of several "barons of big business" Cameron assailed as board members. In 1911-12 his father, Walter Greene, later known as Massey-Greene, had been a senator when King O'Malley was winning the "people's bank". He consistently spoke against the bank's creation. Cameron says his opposition only held up Massey-Greene's appointment temporarily:" Thanks to the Hawke government, Sir Brian actually became chairman of the bank's board; and remained...until replaced by' Morrish Alexander Besley, another business tycoon." .

Cuckoos In the Nest

My research revealed that, while Besley was a director of nine companies, none were in the finance field.

John Ralph, appointed to the board in 1985 when Labor was in power, was then a director of Elders IXL Ltd., whose subsidiaries included Elders Finance and Investment Company - a foe of any interest-cutting Commonwealth Bank.

Ralph quietly slipped into the Commonwealth bank chairmanship in 1999, by which time Howard and his Coalition were in authority, and the bank already privatized.

When O’Malley won Fisher Government support for the new Commonwealth Bank in 1911, it was legislated for one-man bank administration. He was behind the historic appointment of Denison Miller as its first administrator. Fisher, against a board, said that members would have had to be drawn from men in finance jobs, with vested interests. The man appointed, Denison - later Sir Denison Miller, set about using the bank in a nation-building role in the years before his death in 1923 "See Heritage No. 97, 2001). ' .

This is colourfully recounted in Jack Lang's book, The Great Bust: He had one chapter, King O'Malley's Dream, and also tells how Miller "demonstrated his vigour" in providing low-interest loans for government projects.'

Miller used the Commonwealth Bank to provide finance for Australia's World War One commitment, and to enable BHP to establish port works at Newcastle and factory backup for the new steel city. He aided farmers and gained the support of an otherwise critical New South Wales Labor Party, which had been talking of nationalizing steel.

The First Knife

After Miller died in 1923, James Kell continued as one-man administrator. But the first of several steps to undermine the Commonwealth Bank through the years took place under the Bruce-Page government.

A Board was appointed to run the bank.

Economist D.J Amos, in his much publicised booklet, The Commonwealth Bank saw the board as "financial magnates (controlling) the destiny of the people's bank, although they might themselves be shareholders in private banks, and in spite of the fact that such institutions. . . . were normally lenders of money at interest on a very large scale.

Later, on 28 March 1950, Chifley told Parliament, "A great deal of the misery, suffering and starvation (of the Depression) would have been avoided ... if there had been wise financial and economic administration." Nobody appointed to the old board failed to have very conservative views, he said.

The inability of the Scullin Labor Government to counter the directions of the bank board, led by Sir Robert Gibson, is a dark chapter in Australian history.

Chifley reversed that in the 1940s. He legislated for government to determine banking policy.

He also had a run-in with Sir Claude Reading, bank board chairman early in the Curtin government in the 1940s, when he was Treasurer.

L.P. Crisp reports graphically in his Ben Chifley (1961), that Chifley had had issued an edict on interest rates. Reading had urgent phone talks with a private bank leader, and with Chifley.He had returned to the bank board, after one talk with Chifley, "white with indignation." But, as the author put it, Reading was put in no doubt about who was in charge.

In the Hawke-Keating era, someone such as "Richo" (Graham Richardson), would have helped keep the people poor, by slipping his friends among the contestants. Cameron, still was and now is still in his retirement, a lone Labor voice opposing privatization.

Keating the Crafty

King Keating the Crafty seized on the failure of the State Bank of Victoria to launch the first shock privatisation of the Commonwealth Bank in 1990.

This was in the face of the attitude of the 1988 Labor Conference in Hobart against its privatization.

In the Sydney Morning Herald, Alan Ramsay - a journalistic foe of Keating - reported on September 1, 1990, that Keating went as far in Caucus as to make the bank privatization a "non-negotiable" condition of the Government deal with Victoria. How shockingly brazen! Ramsay wrote: "Keating would allow the Commonwealth Bank to join the bidding for the (State Bank of Victoria) only if it could sell 30 % of itself to pay for the deal. This element was non negotiable."

The New South Wales Right tightened its ranks. The Financial Review reported on September 17, a fortnight later, that "a meeting of ALP members in NSW yesterday broke down in chaos as the chairman former NSW State Minister, Mr Terry Sheehan twice refused a vote to be taken on a resolution criticising the Federal Government over the partial privatization of the Commonwealth Bank.

The report quoted ALP members as saying an informal vote taken on the prepared resolution was carried by 247 votes to 68. The State Council of the party in Brisbane on September 15 reaffirmed its opposition to asset sales and criticised the Government for not consulting more widely in the party. Protests were also raised in Melbourne.

Bank of Victoria goes to the wall

A little-recognised loss was that of the State Bank of Victoria, which disappeared, just as did the State banks In South Australia and West Australia during those years of delivering banks run by governments into the hands of what O'Malley'" called "money mongers". This Bank had been more powerful than the Commonwealth Bank within Victoria. It was reported to be 2 ½ times bigger through more generous housing loans.

The national office of the ALP in Canberra came to play a part, played by Party Secretary, Bob Hogg.

The Hawke-Keating government failed to put the bank privatization to the National Executive. The national office wrote members Australia-wide, reporting a "Special Conference on Privatisation", which was a show of party democracy

I was in the party at the time, and recall Hogg reporting to Telopea branch in Canberra once, that he found Keating "a very persuasive man"on the phone.

Forestalling Labor opposition

The missive to members listed the pros and cons of privatization, which then included airline and telecommunication privatization as well. They were listed for discussion at the conference. The Commonwealth Bank was covered, but only as if it was determined policy, not for the conference.

Came the conference on September 24, 1990. The deal was swallowed - no debate on the bank. It was left to Victorian rebel, Pete Steedman, to lead against privatization, but the party's bank was not discussed. The fate of the bank, which Clyde Cameron has stated was probably the greatest measure taken by Labor governments to protect Australians from exploitation, was not even discussed!

Strange bedfellows

One is left to speculate on Bob Hogg’s part in this. He was the subject of an interesting article in the Good Weekend section of such Fairfax papers as The Age and Sydney Morning Herald on September 26, 1998.

It said that the young political activist had denounced the bourgeoisie - but at 61 "he was now a member of it". Writer Richard Guilliatt noted Hogg was "sitting in a curious place. (He is) sitting around a table with those arch capitalists from the Business Council of Australia and discovering they have a lot of ideas in common". The article went on to say that in 1993 the former "crusading socialist" became a John Singleton Group executive. "Singo’s history appalled many in the ALP". He had founded the right-wing Workers Party, attacked Whitlam and devised Liberal advertising campaigns. "Financially the job certainly solved Hogg's post-ALP blues: in the past year he has cashed in more than $200,000 worth of stock options and is sitting on another parcel worth nearly $350,000 (at the time of going to press). Hogg had resigned from the Singleton board a month earlier.

Ironically, Hogg was quoted as calling Alan Bond "a two-bob crook". Those who knew of Hogg’s missive on the Commonwealth Bank could understand the article's reference to Hogg, in softening an ALP Conference opposition to uranium' mining. He devised a "tortuously-worded policy".

The Final sell-off

Keating took the Commonwealth Bank on to two further one-third privatizations, ending with his fortunate political exit in 1996.

Meanwhile, the rural world continued under the dark cloud of unsympathetic banks. Farmers continued to go to the wall. The electorate kicked out Labor.

The Liberal John Howard, who, as Treasurer, had apparently opposed Malcolm Fraser’s efforts to force interest rates down during the Coalition Government ending in1983, took the stage.

No relief from the banking buccaneers

The sizzling undercurrent was evidenced in Queensland. A National MHR, Bob Katter, who had opposed losing the Commonwealth Bank in Parliament, as it represented "a mechanism for controlling the economy", was upheld by the wide rural electorate of Kennedy he represented. He stood as an independent eventually, and remains a "pestiferous" rebel in Parliament.

Among Coalition ranks, Howard, whose silence allowed Labor to privatize the bank, is at variance with the Liberals' much-lauded founder Bob Menzies, who is seen in the Trial Balance memoirs of Nugget Coombs, Commonwealth Bank Governor, as a keen protector of the beleagured Coombs and his role in leading a competitive bank. Nor is John Anderson, Deputy PM and National leader, any modem day representation of his party's Dr. Earle Page, a founder of the farmers' party. In the 1920s as Federal Treasurer, Page conferred with the retired King O'Malley and, to O'Malley's eternal appreciation, strengthened functions of the bank Labor had created a decade earlier.

How O'Malley would turn over in his grave today! When he was fighting off a privatization bid launched by the nonLabor Government in 1938, he issued a booklet, warning "all true Australians" of what the bank meant to a stable Australia.

That privatization was beaten off. The Labor Opposition led by Curtin and Chifley was opposed - they were true Labor men in those days.

In 1939, O'Malley, then 81 years old, had grim words of warning for Australians. "I call on all true Australians to swear by the tombs of their ancestors that they would never elect to Parliament men whose secret mission is to destroy the Commonwealth Bank," he wrote. That bank has in fact been destroyed.

New Zealand example

The course today is to take some action, like New Zealand, to recover the situation. A new bank is needed; the agricultural and business world are still the long-suffering victims of what O'Malley called "the kingdom of Boodledum."

The use of Post Offices as a base, like New Zealand, is one possibility. Another is to act like Bob Menzies did in 1944, when be gathered together diverse non-Labor political groups to fund the Liberal Party.Labor could consider gathering together public-serving banks like the Bendigo Bank and, to a lesser extent, St. George, plus the new "workers bank", Members Equity. That little-known bank is owned by 43 super Industry Superannuation Funds and has real money behind it.

Its Chief Executive, AnthonyWansleker, has said that since obtaining a banking licence in 2001, its customer base has grown 30% to 40 % each year.

Then there are the States - where Labor is in government throughout Australia. Now denuded under privatization of their own Government-owned banks, they could either throw in with the Federal Bank, or start up their own.

Farmers are still going through the slough of despair, and need rescuing.!

Larry Noye is a Victorian author Reprinted from Heritage, Vol 28 No 107, Summer 2004.

* Editor’s Note: Jim Anderton was leader of the NZ Alliance Party when he moved the motion to re-establish the NZ "people’s" bank , naming it the Kiwi Bank. The motion was successful because Alliance, formed from progressive minor parties like New Labour; the Maori Motuheke Party; Liberals(small ‘l’) and Democrats held the balance of power. Later Jim Anderton split from the Alliance Party.