David Bradbury (Lindsay, Australian Labor Party) Share this | Hansard source

I rise in support of the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills that are before the House. Before commencing my comments on the substantive items contained within these bills I will address the comments just made by the member for North Sydney. We have heard about bipartisanship. In fact, one allegation being made is that the Leader of the Opposition has been prepared to walk both sides of the street. We just saw the member for North Sydney not even prepared to cross the street to come onto our side. If his support of this package and the range of measures that this government has acted so decisively on were any more qualified, it would have been outright opposition. Shame on him. At this time of global economic crisis we have someone on the other side failing to really enter into the spirit of bipartisanship that the Leader of the Opposition has promised.

The member for North Sydney expressed outrage that the $10.4 billion stimulus package would be made without there being any more substantive evidence presented to the Australian people. I have to ask: where was the member for North Sydney when the $10 billion water package was announced under the former government? That package did not even go to cabinet. I can understand why he—one of the cabinet members who were shown the great discourtesy of not having seen any details of that proposal before it was announced publicly—might not want to reflect upon that, but to come into this place and criticise this government for not showing the parliament the courtesy of complete access to the information necessary in order to make decisions on this bill is beyond the pale. This Prime Minister has shown the member for North Sydney more courtesy than the former Prime Minister showed him as a cabinet colleague.

Let me turn my attention to the substantive elements of these bills. The crisis we have seen emanating over the last year that has reached a more dangerous and difficult phase in recent weeks is both a crisis of confidence and a crisis of liquidity. Liquidity is a problem and the crisis in liquidity cannot be resolved until the crisis in confidence is addressed. What we have seen in recent times in financial markets and stock markets across the globe—the decline in equities and increased spreads in credit markets around the world—is largely reflecting that lack of liquidity and lack of confidence.

On Sunday the Prime Minister announced a three-point plan to address some of these elements of confidence and liquidity. In those three points we saw the announcement of guaranteed deposits. This built upon the earlier announcement by this government on the establishment of a financial claims scheme with a cap of $20,000. It was increased to an unlimited amount of money to ensure that Australians right across this country know that their funds are safe. I did not get any sense that there was an impending run on the banks, but that is the importance of acting decisively and heading off the uncertainty and fear that could occur as events move so fast right across the globe. It was decisive action that sent a very clear message to all Australian deposit holders and general insurance policy holders that their funds and policies would be safe.

We heard from previous speakers that there has been a belief in the community that a guarantee of this sort already existed, and I think that is probably right. So as the spotlight inevitably began to shine on this issue the only way for this government to ensure confidence in our banking system, to ensure that each individual, corporation and entity that has funds on deposit with banks has the certainty that their funds will be protected, was to make sure that there would be a guarantee. This legislation goes a long way towards achieving that.

I mentioned that this was one point in the three-point plan. I see this as being like a triple bypass. We had some clogged arteries and the lack of liquidity throughout our financial system needed to be unclogged. In the three-point plan the first measure is the guarantee on deposits. The second measure relates to a guarantee on wholesale term funding for authorised deposit-taking institutions, including Australian banks, credit unions and building societies and Australian owned subsidiaries of foreign banks. I will come back to the second measure in a minute because that is the critical one that addresses the issue of confidence that has stymied liquidity, particularly in interbank lending.

The third measure is providing those financial institutions outside of the net of the authorised deposit-taking institutions with some assistance to ensure that they remain viable, competitive and able to participate actively in the marketplace to ensure competition. Those non-bank lenders, in particular the non-ADIs, the mortgage originators—those who have traditionally relied to a much greater extent on securitisation markets—have found their business model, their access to funds and their ability to continue to compete and provide competitive pressure against the authorised deposit-taking institutions under threat. The measure in the package announced by the Prime Minister on Sunday in relation to the injection of funds into the residential mortgage-backed securities market specifically for non-ADIs will go a long way towards ensuring the liquidity within that securitised market for the non-bank lenders and ensure that they remain viable and able to put competitive pressure on the banks.

These measures are significant. They are critical. We have seen events across the globe in recent weeks that shake the very foundations of the market economy. There is no question about that. The events that we have seen, including direct equity injections and investments into banks by governments in some of our major OECD trading partners—

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