4. In Australia a much greater proportion
 of credit business is done by
means of overdrafts than is the case in
(ireat Britain, and the bankers whom
ve saw were of opinion that it would
se advisable, if possible, to substitute
bills of exchange for bank overdrafts,
especially in connection with the
supply of credit facilities in the event
of the setting up of a reserve bank,
because part of the machinery of a
central bank is the acceptance and discounting
 of trade bills whereby trade
credits are automatically increased
when and in proportion as an expansion
 of trade may call for such action,
or automatically decreased when the
course of business naturally calls for a
diminution in the available credits.
The primary difficulty in effecting
such an alteration is the cost of
stamping the relative documents (bills
of exchange). In Victoria this is 4s.
per cent., and to reduce this (say to
is.) would greatly encourage the desirable
 practice of using bills of exchange
in substitution for overdrafts.
5. The question of establishing a
reserve bank was discussed at all our
meetings, and we found that, generally
speaking, the banking community is
in favour of such an establishment,
though there are some reservations as
to the expediency of making the Commonwealth
 Bank that reserve bank,
hecause the Commonwealth Bank at
present acts as an ordinary trading
hank, and, therefore, does not wholly
fulfil the following conditions of the
central bank, which, inter alia, Sir
Ernest Harvey in a recent article laid
“own as heing essential for such a
sody : —
‘ A central bank, in its management
 and policy, should be free
from Government control and the
influence of politics.
“The assets of the central bank
should be of the most liguid
character possible.
“ A central bank should be the
hanker of the trading banks.
‘““ A central bank should not
ordinarily compete with the
trading banks for general hanking
business.
‘A central bank should quote
publicly the rate at which it is

prepared to discount approved
bills.”’

6. A recent author, writing on cenral
 banks throughout the world, says:
‘In the case of Australia, where the
juestion of establishing a true central
rank is now under discussion, one of
ihe issues that will have to be faced is
‘hat the Commonwealth Bank of Ausralia
 is, under the present law, pernitted
 to engage in general banking
'usiness to an extent inconsistent with
‘he responsibilities of such an
wganization.” He also says: ‘Such
V vague provision as that in the law
egulating the Commonwealth Bank of
\ustralia, namely, that it may make
wdvances on any security that it thinks
ufficient, would be out of place
n the character of a true central
yank.”
7. We have no desire to intervene
n the question which the banks are
‘ully and scientifically considering,
yut because we are of opinion that the
stablishment of a bank of reserve
which at the same time would faciliate
 trade and add security) is desirible,
 we think it is a matter for consideration
 : —

(a) Whether if the Commonwealth
 Bank is to be (as it
naturally would be, and, indeed, is
proposed to be) the reserve bank,
the directors should not be appointed
 otherwise than by the
Fovernment.
(b) Whether its branches, in so
‘ar as they are ordinary trading
ranches, should not be entirely
livorced from the bank acting as
a reserve bank.
(¢) Whether in order to afford
proper opportunities for the issue
and negotiation of trade bills,
which facilitate the business of a
reserve bank, the stamp duties on
bills of exchange should not be
very much reduced.
8. It was suggested to us by the
vankers themselves that greater use
night be made of their financial
-esources if they were fully consulted
ome time before the issue of Governnent
 loans and securities in order that
they might the better take any neces
ary action to support such issues.