The Money Men by Chris Bowen (superbooks4u .txt) 📕

virtually complete control of the Australian banking system under the special wartime regulations’.16 Chifley had begun systematically implementing the recommendations of the banking royal commission, or variations of them.

To survive a postwar environment, Chifley now needed to enshrine his regulation changes in legislation. At this point, he was clearly satisfied that doing this would be enough to avoid a repetition of the poor private bank behaviour he had experienced as a very young child in the 1890s depression, and more directly in the early 1930s, and also would be enough to avoid the retreat into postwar depression that Chifley so feared. In this, he was steeled by the advice of the experts he had recruited and promoted, most notably Nugget Coombs, who told him that increasing the power of the Commonwealth Bank as a central bank would make bank nationalisation unnecessary.

Two Acts of parliament, the Commonwealth Bank Act 1945 and the Banking Act 1945, represented Chifley’s vision for the postwar banking environment. The Commonwealth Bank was given an explicit mandate as the central bank to achieve stability of the currency, maintenance of full employment, economic prosperity and the welfare of the people.

In the 1990s, the Reserve Bank of Australia, the successor to the Commonwealth Bank as central bank, adopted inflation targeting, and this was subsequently written into agreements between the bank and successive governments. But this was a means to an end, the end being the objectives that Chifley enshrined in legislation and that have been the central bank’s mandated task ever since.

Chifley’s proposed legislation was controversial. The private banks opposed both Bills, seeing them as the first steps on the road to bank nationalisation (the irony here is that if the Acts had been left undisturbed by the High Court, the bank nationalisation debate would never have occurred). Menzies, by now restored as leader of the opposition, also opposed them. He argued that the Commonwealth Bank should not have a powerful independent governor, but rather a board representing the interests of business. But Menzies could not stop the passage of the legislation, as the Government had a clear majority in both houses of parliament. Thus, Chifley engineered the most substantial steps taken until that time towards a sensibly powerful central bank to ensure financial and economic stability.

Building for the Peace

Prime minister Curtin showed how seriously his government took the task of postwar reconstruction by establishing a government department early in the war, in 1942, that was specifically dedicated to the task, then asking his treasurer to take on the additional responsibility of leading it. As minister for postwar reconstruction, Chifley equally showed the importance he attached to the project by appointing the economist in whom he had the most confidence, Coombs, as secretary of the new department.

Chifley had indicated the priority he placed on postwar reconstruction in his 1942 budget speech, making it clear that ‘Our postwar aim must be the physical development of our country linked up with expanded production and increased population. By these means, employment will be assured.’17

Curtin and Chifley were not alone in their concern to build better arrangements for the peace. In the United Kingdom, Liberal academic William Beveridge was writing influentially about the need to establish a welfare state and a commitment to full employment. And in May 1944, while Curtin was visiting London, the Churchill government, a Conservative–Labour–Liberal coalition, issued a white paper on moves to entrench postwar full employment. Curtin called the paper ‘an impressive document’ of ‘the most significant importance’.18 On his return to Australia, he promised to table an Australian version of the white paper in parliament.

The momentum for Keynesian interventions to avoid economic contraction was almost unstoppable. Keynes had in 1936 published his General Theory. It presented a post-facto theoretical justification for the sort of government spending that would inflate the economy and create jobs, which many Labor people had argued was necessary during the Depression. The success of Franklin Delano Roosevelt’s New Deal and the reduction in unemployment that accompanied massive Allied war expenditure provided empirical support for Keynes’ theory.

While Curtin, Chifley and Coombs had originally envisaged releasing an Australian paper after a few months’ work during the course of 1944, a substantial bureaucratic war between departments meant that its production was delayed until 1945. The main protagonists in the battle were the Department of Post-War Reconstruction and the Treasury itself. Under Coombs’ leadership, the Department of Post-War Reconstruction drafted a comprehensive paper that, among other things, not only committed the government to increasing government expenditure to avoid unemployment, but also noted that this might mean deliberate budget deficits and public expenditure that might not be productive but could be justified if they created jobs. The draft paper also proposed the establishment of a Central Planning Unit to implement the white paper’s recommendations. Treasury saw this last recommendation as a direct assault on its role within the government, but it also objected to the detailed nature of the paper and thought that it ran the risk of distracting from the war effort.

Significantly, Curtin and Chifley had decided that the postwar reconstruction portfolio would benefit from a separate minister so that Chifley could concentrate on his Treasury role. The new minister, John Dedman, was a passionate advocate of the comprehensive approach in Cabinet. Chifley, however, while not wavering in his support for a proactive approach to government action in the postwar world, supported Treasury’s arguments for a less prescriptive approach in the paper and cooperated in Treasury’s almost endless attempts to delay the paper’s production.

As a result, when the paper was finally released, after three full days of final Cabinet debate on its contents, it was just nineteen pages long compared with the 56-page original draft, and it was a lot vaguer in its commitments.

This does not, however, mean the white paper was in any way unimportant. This was the first time an Australian government had committed to full employment, and to pursuing this aim through policy interventions. As economic historian Greg Whitwell says: ‘For all its