Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

We are indeed in uncharted waters in terms of the financial crisis that is gripping the world. What the Australian public has been looking for, and what the Rudd government has delivered, are bold and decisive actions on a number of points. The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills before the parliament today are part of that. On 12 October the Prime Minister announced three strategies to help protect Australians and the deposits of Australians and inject confidence back into the financial system. Those three measures that were announced on 12 October were the uncapped guarantee on deposits for the next three years; a guarantee of wholesale term-funding of Australian incorporated banks and other authorised deposit-taking institutions, and this guarantee must be applied by the borrowing institution and is subject to the payment of a fee; and also the authorisation for the Australian Office of Financial Management to purchase additional RMBSs for a total of $8 billion. It was then followed up two days later with a $10.4 billion package to help stimulate the economy. All of these measures need to be taken together when we are considering the legislation today and looking at the decisive action that this government has taken.

I was out in my electorate over the weekend and there was considerable concern from the public who were coming up to talk to me about their issues. The majority of people who were coming to talk to me were worried about their deposits. They were worried about what was going to happen to them. They had had them for many years in banks and they were looking to see what the government could do in relation to this issue. Now this is something that the government has been mindful of for some time. In fact, in June this year we announced the intention for this legislation—at that stage to be capped at $20,000, but there was an intention by this government to make sure that there was some guarantee for deposits. The events that have gripped the world’s financial markets saw a need for us to take those guarantees further, and that is what this legislation is about.

The other point about the approach that this government has taken is that it makes sure that we are working internationally with other governments. This is an international crisis and there needs to be cooperation and coordination with banks and governments around the world to work it out. Again, this government was decisive in doing that. The Treasurer was on a plane straight over to the United States to participate in very important meetings to make sure that we were part of the international solution to these particular problems.

It was only a couple of weeks ago that the Prime Minister was in New York and those opposite were mocking the fact that he was taking the financial meltdown so seriously that he needed to be in the United States. Two weeks later and we do not hear a squeak out of them about the action that the Prime Minister took in making sure that he was over there, across these issues and talking to government and financial institutions about the effects that this would have on the global community.

This legislation is about trying to make sure that confidence in the Australian financial system is restored. It is there because it is so important for the operation of our system that people do not fear—and in the case of Australia there is no need to fear—that their bank deposits are not safe. Indeed, it is still the case that our banks are strong, well capitalised and some of the safest banks in the world. But we need to make sure that we take strong and decisive measures to restore confidence, and the bills that are before the House go to that.

It is important and welcomed that the opposition, in a show of bipartisanship, are in fact supporting these bills. But I must say that the public sitting in the gallery today during question time would shake their heads if you said that both sides of the House were cooperating and that there was bipartisanship on the measures that were announced on 12 October and on the further measures that were announced on 14 October. Quite simply, what we saw today in question time was the opposition behaving—as they have behaved all this year—totally inconsistently. They speak about bipartisanship but then waste question time doing exactly the opposite. It is pleasing that they are going to support these bills, and we hope that the kind of display that we saw in question time today will be something of the past.

I will now go to some of the specifics of the legislation that is before us. The guarantee will cover all deposits in Australian owned banks, Australian subsidiaries of foreign owned banks, building societies and credit unions. The regulators advise that Australian deposits covered by the guarantee on deposits are estimated to be in the order of $800 billion. Deposit-taking institutions are required to hold sufficient capital against their deposit liabilities, and depositor preference means that depositors already have first call on an institution’s assets in the event that it fails. This means that it is highly unlikely that depositors’ funds would not be recovered through the liquidation or failure of an institution.

Because of regulation, the supervision of APRA and the way in which our banks have been operating, it is highly unlikely that an institution in Australia would fail. But, in the unlikely event that that does occur, what this legislation is about is making sure that, rather than waiting for those funds to be recovered from a failed bank, the government will step in and cover those deposits in the first instance so that depositors have access to their money. The government does not expect that it will be called upon to pay for these guarantees. As I said, our banks are strong and well capitalised. Deposit-taking institutions are required to hold capital against their deposit liabilities and, as I have said, depositor preference means that depositors have first call.

In terms of the wholesale-funding guarantee, the Prime Minister recently announced that the Australian government would guarantee, by application, wholesale term funding by banks. Other governments have done this with their banks, which in many cases have poorer credit ratings than our banks. We have had to act domestically to ensure that our banking institutions are not disadvantaged in accessing global wholesale capital markets. As the Prime Minister has said, these measures are necessary to help unclog the arteries of the global financial system.

By offering the wholesale-funding guarantee, the government is ensuring that Australian banks, credit unions and building societies are not placed at a commercial disadvantage in international credit markets. A guarantee will only be applied to individual transactions following application from an eligible institution and the receipt of a fee. Our banking system is one of the strongest in the world and the likelihood of the guarantee being drawn upon is very, very low.

We are in unprecedented times in relation to the actions that governments need to take. We have seen from the Rudd government decisive action, bold action, a plan that goes to the heart of the issues that are plaguing the global community. The government is making sure that the financial sector in Australia is in the best possible situation it can be to meet those challenges as they flow through the economy.

I would like in particular to talk about the $10.4 billion that was announced yesterday in relation to the economic package to stimulate the economy. This is further decisive action by the government that makes sure that we are stimulating growth in the economy. It makes sure that those people who are hurting and have found the current economic times the hardest to deal with are given, in relation to pensioners, carers and low- and middle-income families, a cash injection so that they can have access to money that they need. That money will also provide a much-needed stimulus to the economy to ensure that Australia, unlike many of our OECD counterparts, unlike those countries that are close to recession or in recession, continues to maintain the strong growth that we have had in the past and expect to continue to have.

This government has acted decisively; it has acted boldly. The legislation that is before the House is part of that. It is about providing confidence to the financial sector. It is a series of bills that should be supported. It is good that we have some bipartisanship in relation to these bills from the other side of the House. I urge those opposite to make a more positive contribution in relation to the bold and decisive initiatives that the Prime Minister has announced. I commend these bills to the House.

See this speech in context