Philip Ruddock (Berowra, Liberal Party, Attorney-General) Share this | Hansard source

in reply—I do intend to respond to those members who have participated in the debate. I hope they will read it later, now having left, because some of the points made indicate a degree of misunderstanding on their part and sometimes advice from only one quarter rather than a balanced view. I thank the member for Wills, the member for Reid and the member for Fisher for their comments, and I welcome the fact that these two measures will be supported by the opposition. I think they have come to a view that these measures, being the subject of very wide consultation, represent a balanced approach to dealing with the issues in relation to debt administration and the regime that we operate for debt agreements. It is important that the debt agreement arrangements continue as a viable means of dealing with unmanageable debt. Society will inevitably always have some people who have not been able to manage their affairs in a way that addresses their dealing adequately with obligations that they may have incurred.

These particular measures are designed to address the lack of confidence on the part of creditors in the effectiveness of the system and to protect debtors by assisting them to assess whether a debt agreement is the right option in all the circumstances. That is, of course, the issue that financial counsellors are interested in. They are also aimed at addressing the high failure rate which has resulted from a significant number of unsustainable agreements being made where debtors are not properly informed or creditors cannot rely on the quality or accuracy of the information given to them.

The amendments will ensure that debt agreement administrators operate at high standards by introducing a registration system based on ability, knowledge and qualification. It will also ensure that administrators are paid for results rather than activity by requiring them to be paid proportionally over the life of an agreement rather than in priority to creditors. They will provide an incentive for administrators to see that agreements are completed and encourage them to focus on proposals that are likely to succeed rather than those that are likely to be accepted by creditors. To encourage creditors to a view that a debt agreement is a simple one-off offer to creditors which represents the best offer a debtor can make, the amendments will require creditors to receive payments proportionately rather than trying to do better than other creditors. The Bankruptcy Legislation Amendment (Debt Agreements) Bill 2007 will also include a number of other amendments which improve, clarify and streamline the operation of the act and reduce uncertainty.

The separate measure, the Bankruptcy (Estate Charges) Amendment Bill 2007, which has not been the subject of any expensive debate, extends the realisations charge and the interest charge to debt agreements and ensures that the cost of regulating the scheme is properly recovered from creditors, as it would be if they were in bankruptcy. At the moment, those in bankruptcy arrangements are subsidising the debt agreements. That is essentially what is happening. This will ensure that it operates across the totality of the scheme. As I said, there was extensive consultation in relation to these matters. I assure the member for Reid that financial counsellors were actively involved in those consultations, but the sorts of comments he was making reflect something of a more narrow view that financial counsellors come to because they tend to deal with the cases that fail rather than the cases where the debt administrations work. It ought to be seen that they are only seeing a proportion—sometimes a small proportion—of the client load.

We saw it as being important to get the balance right—to get creditors, debtors, debt administrators and financial counsellors all on board in supporting these measures. The member for Wills read from the Financial Review some comments by Fox Symes. My understanding is that the comments had been floated in the Financial Review earlier, before the consultations had concluded, and that Fox Symes have made it publicly known that they are happy with the result—that is, the compromises that have been made.

The interesting debate is the one that is off the measures. I hope you will not call me to order, Madam Deputy Speaker, for dealing with matters that have already been allowed to proceed. There are some clear distortions in the views that have been put, particularly the comment that insolvency has allegedly increased. It is important to recognise that this is an area, like many areas of economic activity, where there are fluctuations. Bankruptcies are not at record levels. If new bankruptcies continue at the current rate, we may see a return to the levels of 1997-98 or 2001-02, but the figures are still well below the historical peak, which was experienced in 1998-99. So you do see fluctuations, but the current bankruptcy figures are not at record levels and it is expected that the figures will still be well below the historic peak.

Total personal insolvency activity under the Bankruptcy Act—that is, comprising bankruptcies and debt agreements and personal insolvency agreements—did see an increase in the last December quarter as compared with the December quarter 2005. However, the insolvency activity decreased slightly compared to the September quarter. So again you see fluctuations rather than trends. The latest figures reflect the fact that only a small proportion of Australians become insolvent. We are dealing with a figure of 0.14 per cent of the Australian population. Bankruptcy activity is usually indicative of personal circumstances rather than general economic conditions—for example, individuals overextending themselves financially, relationship breakdowns, changes in individual employment circumstances. They typically relate to credit cards and other unsecured forms of debt, rather than secured debt on housing. I note that Treasury advised that bankruptcy figures should be considered in the context of the strength of the Australian economy and household balance sheets generally. Despite the severe drought, the Australian economy is still expected to grow by 2½ per cent in 2006-07, before accelerating to 3.75 per cent in 2007-08.

Reference was made by the member for Reid to unemployment as being a contributing factor to debt agreements, yet the unemployment rate is at a 30-year low of 0.4 per cent, and real wages have grown by 17.9 per cent since this government first came to office. For every dollar of debt, households have over $6 in total assets and almost $2 in financial assets. The unemployment figures that were cited today by the member for Reid were in the context of New South Wales and a financial organisation in New South Wales. When the member for Wills spoke about housing repossession rates, again he was speaking about New South Wales.

I ask myself: why New South Wales? I can tell you why it is New South Wales. It is because New South Wales is the one part of the Australian economy that is holding Australia back. If you want to look at where the unemployment levels are out of kilter with the rest of Australia, it is in New South Wales. A higher proportion of people in New South Wales are unemployed these days than in Victoria and South Australia. The comment may be, ‘Well, maybe it is with Queensland and Western Australia that these comparisons are being made, and they have got a resource boom, so you cannot really look at those.’ But the other states have also been outperforming New South Wales. On the issue of repossessions in relation to housing, I despair for those young people trying to buy housing in New South Wales, where something like $150,000 of the cost for which they are going to have to go out and borrow money is being paid to the state government and state instrumentalities. It is $150,000 of the cost, and we expect young people to be able to go out and saddle themselves up with debt to be able to meet those rapacious charges that are being made by the New South Wales government? They are out of sync with what is happening everywhere else in Australia.

It is particularly instructive that members come in and make these sorts of allegations and use data in relation to New South Wales, because it demonstrates the point that I have been making around New South Wales lately. The way in which the state government in New South Wales is administering its responsibilities has been dragging the Australian economy back. It is the one state where the data suggests that it could even go into technical recession. It is a pity that the members who use this data did not wait to hear the response.

I commend the bill. I welcome the support for it. It is obviously quite unexceptional; otherwise they would have tried to find a way around berating me even for this. Often you have to go to these other sorts of issues and use distortions and the like to try and get your arguments across. Let it be understood that these measures are unexceptional, they have been the subject of very extensive consultation and are very appropriate reforms to ensure that a system that has served us reasonably well to date will serve us better into the future.

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