I have been asked to advise as to whether it would be constitutional to provide:

1. that trading banks shall not trade with certain authorities, e.g. municipal corporations or states; and
2. that all banking business of such authorities shall be conducted exclusively with the Commonwealth Bank.

The answer to the question depends upon the extent of the power contained in paragraph (xiii) of section 51 of the Constitution, under which the Commonwealth Parliament has power to make laws with respect to banking, other than State banking; also State banking extending beyond the limits of the State concerned, the incorporation of banks and the issue of paper money.

It appears to be clear that the power with respect to ‘banking’ is wide enough to authorise the Commonwealth Parliament to give to a Commonwealth authority the exclusive right of carrying on the business of banking other than State banking, or to prohibit any person from carrying on such business. In relation to other powers, the Commonwealth Parliament has already given exclusive rights to Commonwealth authorities and imposed restrictions on other persons. By the Post and Telegraph Act 1901–1934 (section 80) the Postmaster-General is given the exclusive privilege of erecting and maintaining telegraph lines and of transmitting telegrams and other communications by telegraph within the Commonwealth, and by section 128 it is made an offence for a person to maintain or use certain telegraph lines unless authorised under the Act. By section 4 of the Wireless Telegraphy Act 1905–1936 the Minister administering the Act is given the exclusive privilege of establishing, erecting, maintaining and using stations and appliances for the purpose of transmitting and receiving messages by wireless telegraphy, and by section 6 it is made unlawful for any person to do any of those things unless authorised by or under the Act. By section 98 of the Post and Telegraph Act it is made unlawful for any person, for hire or reward, to send or convey a letter otherwise than by post or to take charge of a letter for such conveyance.

The validity of those provisions has not been challenged in the courts, but in Carbines v. Powell (36 C.L.R. 88) reference is made by three of the Justices of the High Court to the fact that the Wireless Telegraphy Act confers upon the Minister the exclusive privilege of establishing, erecting, maintaining and using stations and appliances for the purpose of transmitting and receiving messages by wireless telegraphy, and, by reason of the absence of any question as to the power to grant such an exclusive privilege, the provision was obviously accepted as being within the power conferred by the Constitution to legislate with respect to postal, telegraphic, telephonic and other like services.

Further, in The King v. Brislan Ex parte Williams (54 C.L.R. 262), Latham C.J., in dealing with the power of the Parliament to make laws with respect to telephonic services (section 5l(v) of the Constitution), says at p. 276:

Under a power to legislate with respect to telephonic services a Parliament may pass laws to provide and install telephone apparatus, and to determine rules in accordance with which any such apparatus may be used. On the other hand, the Parliament need not make any such provision at all. If it does not make such provision, it may give complete control to a Minister in charge of a department, or it may ‘farm it out’. A Parliament which disapproved of telephones might, so far as legal powers are concerned, repeal all statutes dealing with telephone and prohibit the existence of any telephone service, just as it might (in the exercise of powers under sec. 51) prohibit the existence of any defence force or of light-houses or copyrights or patents. It might also allow any persons to install and use telephones without any governmental authority of any kind.

This, with respect, is a clear pronouncement as to the powers of the Commonwealth Parliament as to the subject-matter in question and I see no reason why the views expressed by the learned Chief Justice should not apply with equal force to other subject-matters, including that of banking.

While the Courts have not been called upon to make any declaration as to the restrictive provisions specified above, it appears to me that these provisions are incidental to the exercise of the post and telegraphs power and are, therefore, authorised by the Constitution.

In my opinion, the Parliament could prohibit trading banks from carrying on any banking business and a fortiori it could, therefore, prohibit them from carrying on banking business of a particular kind or for specified persons. This could be done either by a direct prohibition, or, if it were proposed that the particular business to be prohibited should be carried on by the Commonwealth Bank, by giving that authority the exclusive privilege of doing so.

With regard to the question as to whether a valid provision could be made that all banking business of municipal authorities or States shall be conducted exclusively with the Commonwealth Bank, I am inclined to the view that such a provision would be incidental to the execution of a provision prohibiting the trading banks from conducting such business. But, even if this view is wrong, it would appear that, if the functions of the trading banks were limited by the exclusion of business of the bodies in question, this would operate so as to attract that business to the Commonwealth Bank, unless there were in existence State banks which could conduct the business. By reason of the exception as to State banking in paragraph (xiii) of section 51 of the Constitution, the Parliament could not, in my opinion, impose any restrictions on State banking not extending beyond the limits of the State concerned.

In my opinion the question asked should be answered:

1. as to that portion contained in paragraph (a)—Yes;
2. as to that portion contained in paragraph (b)—Yes except in so far as a State bank might conduct the business.⁽¹⁾

[Vol. 36, p. 331]

(1) Section 48 of the Banking Act 1945, which, without the written consent of the Commonwealth Treasurer, prohibited a private bank from conducting any banking business for a State or a State authority, was found invalid by the High Court in Melbourne Corporation v Commonwealth (1947) 74 CLR 31.