COMMONWEALTH NOTE ISSUE.

Dominion, Volume 3, Issue 880, 28 July 1910, Page 5

COMMONWEALTH NOTE ISSUE.

THE MEASURE INTRODUCED. GOLD RESERVE OF 25 PER CENT. APPLICATION OF PROFITS. Jy.Tclcgraph—Prees Association—Copyright. Melbourno, July 27. • In the Federal House of Representatives the Australian Notes Bill was introduced and read a first time. ■ The measure provides thai six months after proclamation banks shall be forbidden to issue or circulate notes issued by any State, and such shall not be legal tender. ' A separate Bill' will be introduced imposing a prohibitive tax on notes by banks until arrangements have been made for printing notes.

The Federal Treasurer may issue forms of State or bank notes, with, alterations deemed necessary. Moneys derived from the issue may be held by the Treasurer in gold, or be used in redeeming notes, or be oxpended as Parliament directs.

The Treasurer may invest moneys derived on deposit in a bank or in securities.

Securities may be sold or disposed of by the Treasurer, the Interest to be paid into the Federal Consolidated Revenue.

The gold reserve is to lie equal to onefourth the value of the notes up to seven millions, and equal to the value of tho [notes above that amount.' The Treasurer must not pledge the notes 'or deposit them with any bank as security for money. Banks will not be compelled to pay in notes more than twenty-five pounds in one payment. A statement is to be prepared each month showing the number of notes issued and the reserve held. Power is given to the Treasurer to issue Treasury for any amount not to exceed. the amount of the notes in circulation. Treasury bills may be disposed of within or beyond the Commonwealth, the money raised to be applied to the redemption of the notes. .. WHAT THE PROPOSAL MEANS. SOME INTERESTING FIGURES. In a recent article on the projected Commonwealth ■ Note issued, the Mel-: bourne "Age" said:—Assuming Australia can easily .absorb ,£4,009,009 in . a note isSuo, and that at present a 2 per cent, tax on the bant notes brings in <££0,000 a year to the States, what is there to jain by the Commonwealth substituting a Federal note issue of and keeping £1,000,000 in gold as a reservo? It is olear that it would moan a loan of c£3,000,000 to the Federation free of interest. If the. money be valued at 3 per cent., that means an annual gain of ,£1)0,000 on the £3,000,000 which is not eovcred by gold. It would really amount, to taking ,£BO,OOO a year from the States, and paying .£90,000 to the Federation in giving the Commonwealth a ,£3,090,0D0 loan for nothing. That is the way .in which it presents itself to the financial mind, taking a simple commercial view of the subject. But that, of course, is confessedly a surface , view.

It does not take cognisance of many phases of the whole financial question. It is not at all certain that .£4,000,000 would be the limit of a federal Note Currency. The bank in circulation last year amounted to .£3,510.(J0U. These were dis-. tributed as follow:— New. South Wales ,£1,659,826.. Victoria . 857,827 Que-onsliind . None. South Australia ....; 523,462 ... .Western Australia 310,760 Tasmania ............. 158,754 Commonwealth .£3,510,629 In addition, Queensland had a State issue of £1,554,000, making over .£,1,000,001). New South \Vule» hud i 11,659,000 worth of bank notes in circulation. But it was estimated that that State, eighteen years ago, when its trade was much siuallei than'it is now, could have absorbed a ,£3,000,000 note issue if the conditions were such as would prevail with a National Bank of Issue. Mr. Archibald Forsyth said to the Commission: "If State notes were issued to' cover our internal currency, and if they were issued down to a denomination as low as the present denomination of gold; namely, 10s., 1 should think there might be' absorbed and kept in circulation (in New South Wales alone) something like .£3,000,000, without undergoing any depreciation." That was when Now Soutli Wales had a population of 1,000,000. In other words, that witness estimated the note currency under such conditions would extend to .£3 per head. If that were accurate, the Commonwealth might now require a note issne of .£12,000,000. ■ That, however, is a matter which could be tested only by experience. It was understood that sufficient safeguards would be inserted in the Bill to prevent a careless or inpecunious Treasurer from handling money obtained for notes. Apart from one-fourth reserve in order to make good deficiencies in the general revenue, the money may bo used to tide over a temporary difficulty, but the Government has no intention of spending the money upon. the building of a "Commonwealth navy, Federal capital, or the construction of the transcontinental railway. The intention is to invest the money and to pay the interest annually into the consolidated revenue.