Citizens Electoral Council of Australia

Media Release Thursday, 4 December 2014

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

The National Bank infrastructure solution

The standoff between the Abbott government and the Victorian state government over funds for infrastructure is a farce. The $3 billion in dispute is a pittance compared to the infrastructure investment Australia needs to address the so-called “infrastructure deficit”, from decades of under-investment, estimated to be more than $700 billion.

It is therefore time for elected leaders in all three tiers of government to stand up and demand the only solution that can meet this immense need—a government-owned-and-run national bank. Councillors and MPs must reject the snake oil of “user-pays” and “private” investment, whose purpose is to generate private profit, not productivity for the public good. Only a National Bank can provide honest financing, free from private vested interests, to enable governments to embark on the full range of infrastructure projects that are needed; without a National Bank, the only projects built will be those that can be turned into cash cows, such as toll roads.

CEC’s Infrastructure Road to Recovery

In 2002 the Citizens Electoral Council collaborated with the late Emeritus Professor of Engineering at Monash University, Lance Endersbee AO, a veteran of iconic civil engineering projects including the Snowy Mountains Scheme, the Tasmanian Hydro projects, and numerous World Bank projects in Asia, to produce a blueprint for Australian economic development, the Infrastructure Road to Recovery. The blueprint laid out plans for an Asian Express fast-freight railway from Melbourne to Darwin; an Australian Ring Railway encircling the continent using cutting-edge magnetic-levitation technology; 18 major water diversion projects similar in scope to the Snowy scheme; high-speed shipping to interface with rail and connect northern Australia to the huge ports of Asia; and infrastructure to develop nuclear power, desalinate sea water, treat soil salinity, and advance space exploration.

These project ideas are premised on Australia once again having its own National Bank, as we had in the original Commonwealth Bank. Such a National Bank has the power to create the credit for such crucial public investments. Ignorant people regard this power as controversial, but in the five years since the September 2008 eruption of the global financial crisis, the world’s major central banks—the U.S. Federal Reserve, the Bank of England, the European Central Bank, and the Bank of Japan—have electronically created, out of nothing, trillions of dollars, pounds, euro and yen ($4 trillion from the Fed alone), known as quantitative easing (QE). The central banks have used this money to buy private bank securities in order to bail out the private banks that caused the crisis. By contrast, a National Bank controlled by the government, rather than the private interests that control central banks, can direct the credit it creates into productive areas that benefit the public, i.e. infrastructure.

The Commonwealth Bank precedent

The story of the Commonwealth Bank in both world wars shows what is possible with a National Bank. In WWI, the Commonwealth Bank enabled Australia to finance its pressing needs, without any foreign investment: it raised Ł250 million for the war effort through loans from the public, without the excessive fees that would have been charged by the private London banks; it financed the emergency purchase of ships for the Commonwealth Shipping Line to maintain trade during the war; it financed payments to farmers so they could maintain production for the war effort; it financed the construction of housing for returned soldiers, and offered home loans to soldiers at 5 per cent for their purchase.

Funding local council infrastructure

The Commonwealth Bank was especially helpful to municipal and shire councils for loans to build infrastructure. Between 1911 and 1923 it advanced credit of almost Ł10 million to 60 local councils to develop infrastructure intended to increase local productivity. This included: electricity for street lighting and power in the St George County Council and Sutherland Shire; a hydro-electric scheme on the Nymboida River for light and power to Grafton; road construction in the Merredin Shire in WA for soldier-settler farmers to transport their wheat, part of a combined Ł3 million extended to local councils for roads, bridges and drainage; a massive expansion in electricity generation for Newcastle, to provide power for the BHP steelworks and the increased population; sewage systems for Ballarat, Bendigo and Geelong; Melbourne’s upgrade to electric trams; and an electric plant for Perth, among many other things.

WWII

In WWII, the Commonwealth Bank was able to be even more effective, by using its power to create credit, which was effected through the purchase of Treasury Bills, a mechanism for using the government’s debt to the bank as the basis for new credit. In the nine years prior to 1942, the Commonwealth Bank’s net creation of credit using T-Bills was only Ł5 million, and over that time annual government expenditure hovered around Ł80 million. But when Labor’s John Curtin and Ben Chifley took office in late 1941, with the Japanese landed in Papua New Guinea and about to bomb Darwin, they turned on the Commonwealth Bank’s tap (see table). This newly-created credit was loaned to the government to finance the incredible economic mobilisation that was crucial to victory in the Pacific, and transformed Australia’s economy from an agrarian backwater, into a high-tech, heavy industry powerhouse with advanced manufacturing and a world-class machine tool sector.

Commonwealth Bank new credit Government expenditure

1942     Ł59 million Ł413 million

1943     Ł173 million Ł661 million

1944     Ł77 million Ł677 million

1945     Ł68 million Ł599 million

Following the war, the private banks and their stooges in the Liberal Party ganged up to stop Chifley’s plans to similarly use Commonwealth Bank credit for peaceful reconstruction, on projects such as the Snowy Mountains Scheme. Whitlam government Treasurer Jim Cairns told the CEC in a 2003 interview that following Chifley’s defeat in that bitter fight, the ALP shied away from ever again using national credit (and was the main reason the Whitlam government resorted to foreign loans). [Click here for a pdf copy of an excerpt from the CEC’s April 2004 New Citizen, entitled National Banking—the Cornerstone of Sovereignty, containing the interview with Jim Cairns.]

Post-2008 it is the private banks which stand exposed for the gambling-addicted predators they are. It is time for the political cowardice to end: Australia’s elected representatives must fulfil their responsibilities to their constituents and restore the government’s power to deploy public credit for the nation’s pressing infrastructure needs.

Click here for a free literature pack of two of the CEC’s most historic New Citizen special reports: 2002’s The Infrastructure Road to Recovery; and 2004’s Defeat the Synarchy—Fight for a National Bank.

SPECIAL ANNOUNCEMENT: The ALP, Liberals and Greens are ganging up to make it harder for other parties to contest elections, by tripling the membership requirement. If you support the CEC’s ideas, it is time to act by joining as an Associate Member for one year, so the CEC can remain registered. Click here to join the CEC as a member.

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