You can almost hear the ghost of Prime Minister Ben Chifley applauding Bill Shorten’s calls for a Royal Commission into Australian banking.
Yet while Chifley might approve Shorten’s efforts he would probably think they do not go far enough. In 1947 Chifley, the train driver turned politician, led a Labor Government that legislated to nationalise Australia’s banks. In doing he triggered one of the largest public relations campaigns in Australian history, one that finally led to the defeat of his Government.
Compared to Chifley, Bill Shorten’s calls for an inquiry into banking practice are positively modest. Chifley’s ambitions were to eliminate private banks altogether.
Bank nationalisation had been in the Labor party platform since 1921. The Great Depression had left a legacy of distrust of banks within Labor ranks because of the banks’ perceived inability or unwillingness to safeguard the interests of ordinary Australians when times were tough.
In 1936 Chifley was appointed a member of the Royal Commission on Monetary and Banking Systems which studied the country’s financial institutions in detail. He concluded in a minority report “the best service to the community can be given only by a banking system entirely under national control.”
During the Second World War the Labor Government introduced banking controls to help manage the economy. The banks accepted these temporary wartime measures and planned to resume normal business once hostilities ended. But Prime Minister and Treasurer Chifley had concerns about the banks’ willingness to support Australia’s postwar recovery. The Party wanted to nationalise Australia’s nine private banks and set up the Commonwealth Bank as the sole banking organisation in Australia. Everyone was to bank Commonwealth, a move which would give Ministers a powerful lever to manage the economy.
On 16 August 1947 Chifley’s Cabinet met and issued a 42-word press release announcing the nationalisation plan. The release was short on detail but its impact was enormous. It surprised the banks and the public because there had been almost no prior preparation of the public mood or industry consultation. It was as if a public relations firebomb detonated over the economy. And while Labor’s banking legislation eventually passed through Parliament the community reaction was swift and hostile.
The private banks set aside traditional rivalries to finance a national public relations strategy which, to that point, was the most ambitious and expensive communications effort seen in Australia. This included joining forces with the Liberal party under the leadership of Sir Robert Menzies who vigorously opposed Chifley’s move. The banks and Menzies argued Chifley had no mandate for such sweeping changes and the matter could only be decided by an election or a referendum. The populist message was that Labor had engineered a socialist attack on the Australian way of life.
In the late 1940s few people knew the term ‘public relations’ yet Australians soon felt its full force as the battle for the banks began.
Thousands of volunteers pressed the No case in towns and suburbs across the country while the banks quietly funded protests, lobbyists and numerous petitions to Parliament. In an early example of content marketing bank staff created an enormous stream of critical comment and shared it with the media, industry associations, community groups and customers. They also engaged Australia’s then infant public relations industry to pioneer advertising, media relations and direct mail tactics that have since become staples in modern elections. For its part Labor’s response was ineffective and for two years Australians witnessed one of the fiercest ever assaults on an elected Government.
Eventually the High Court and the Privy Council struck down Chifley’s plans but not before the court of public opinion had taken its toll on Government’s standing. Despite their legal victory and community support the banks pressed on, determined to kill off nationalisation. They supported the Liberal Party campaign for the 1949 Election at which Labor lost office.
As 1950s began Chifley had lost, the banks had won and an Australian PR industry was born.
Today it is hard to imagine the public having sympathy for the banks. Recent revelations of dodgy financial advice, stonewalling insurance claims and rigging interest rates have tarnished their reputations. The public is concerned and the latest Fairfax/Ipsos survey shows most voters support a royal commission. But should Bill Shorten get his inquiry it would be surprising if the banks did not turn their large public relations machines once more against Labor.
This article first appeared in the 21 April print edition of the Canberra Times and: