26th July, 1928


My dear P.M.,

Mr. F. C. Goodenough, the Chairman of Barclay's Bank, and Sir Charles Nathan [1] dined with me in this last week. The primary idea of the dinner was to give Nathan an opportunity of confidential discussion with Mr. Goodenough of the plan for the development of North Australia. This meeting followed on several conversations between Mr. Goodenough and myself at Sir Charles Nathan's request. I may say that Tilden Smith [2] banks with Barclay's Bank and is well known to Mr. Goodenough.

No doubt Sir Charles Nathan is keeping you informed of the progress of his negotiations with regard to the North Australia development scheme. [3] You may, however, be interested to have a brief account of the matters discussed at this meeting.

Mr. Goodenough said that he saw considerable possibilities in the proposals, but he was insistent that T.S. was not the right man around whom such an enterprise should be built. He reiterated the statement that he was not a 'good name' in the City. He was a bold plunger; he was honest, clever; he had shown great ingenuity in getting out of difficult 'lock up' positions; he had personal resources of something over a million. But he did not inspire complete confidence in the City; he was a bad 'life'-high blood pressure-and he was a difficult man to get on with. He had a dominant personality that made him very impatient and intolerant of suggestions or criticism from others, however well informed or interested. And he knew nothing of land development or of the pastoral business.

He said that it sounded like work suitable for a Chartered Company, but he realised that owing to the fact that a great deal of the land was already alienated, it might not be possible to give the Company the necessary administrative and quasi-sovereign powers. There might also be domestic political opposition to the formation of an imperium in imperio. It was suggested also that a Chartered Company smelled of the Crown Colony.

Mr. Goodenough was unwilling seriously at that moment to suggest any alternative to Tilden Smith, but he promised to do so if Sir Charles Nathan desired it when he had had opportunity to think it over.

Mr. Goodenough has clear and well-defined views as to Australian Government financing in London.

He admitted that he knew nothing of Australia and comparatively little, except vague hearsay, of the potentialities of the country or of the state of development that we have reached. The useful point of view that he could bring to bear was that of an experienced City man with his ears open to the criticism that he heard. This criticism was impossible to get away from. Rightly or wrongly, it was voiced daily by countless men in the City in the interminable discussions and conversations that go on with regard to the securities that are on offer in the City. The plus and minus sum total of these comments affects the market value of paper securities. The City is the critical lender and we are the borrower. He might have repeated the old tag about the borrower being the courtier and the lender the King.

The too consistent borrowing on the part of Australia was rather getting on the nerves of the 'market'. Whether our security was good or not so good was really not in question. The point was that we were tending to glut the market with our loans, and if we persisted we would undoubtedly suffer. He inferred that this situation would come about in spite of any propaganda that we might institute to prove the value of our securities.

His main solution was that we should keep off the money market, as a Government at least, for twelve months. A minor suggestion was that we should vary our loan offerings from being the inevitable 'Commonwealth Loan' for an unspecified purpose, to Loans definitely hypothecated for particular purposes, i.e. Railway Loans, Land Development Loans, etc., specifying in each prospectus the exact purpose of the Loan and the potentialities of the district or public utility that was to be developed.

He kept on repeating the statement that it was no use saying that the London money market was 'wrong' in being critical. It was our place to satisfy the lender that we were right.

If we came on the market for a regular 20 millions a year, we must expect to have to pay progressively more for our money. This would mean a greater burden for debt service, possibly higher taxation in Australia-and the vicious circle.

He had the impression that there was a lack of soundness in our methods of conducting ourselves, in that we were trying to maintain an impossibly high standard of living and wages, and were bolstering up this position with loan money.

From several sources that I have subsequently sounded I find that Mr. Goodenough's comments are very widely held in responsible quarters in the City. In less responsible quarters more pungent comments are heard.

In the 'New Statesman' of July 21st, the following comment appeared:-

Australia has again tapped the London market for another eight millions. I cannot understand why the Press refrain from pointing out what a menace this continued Australian borrowing is to successful conversion operations of our own debt. So long as Australia comes every few weeks, offering full trustee stocks to yield over 5 per cent. (this issue is a 5 per cent at 98, and it will be quoted at a discount until it is planted on to the widows and orphans), it will be impossible to persuade the big investors and trustees generally to be content with 4 or even 4 1/2 per cent on British Government loans.

I enclose herewith copy of a letter from my friend in the City which may be of interest to you and your Treasury people. [4]

I am, Yours sincerely, R.G. CASEY

1 See note 1 to Letter 141.

2 Tilden Smith was a financier with strong South African Nationalist Party connections.

3 See note 2 to Letter 141.

4 Dated 19 July and unsigned (but probably from Thomas Hastie-see Letter 129), it too was critical of what it saw as amateurish Australian conduct of loan raising. A copy of the letter is on file AA:A1420.