Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Hansard source

I can certainly assure the member for Isaacs that the opposition is acting in the best interests of all Australians. We have seen a crisis of confidence in markets, and it is confidence that binds our markets. It underwrites our financial dealings, and financial markets are the lifeblood of world commerce. Average Australians have sat at home watching their television sets and seeing a world financial market in turmoil and they have been attempting to make sense of that turmoil. Over the months they have listened in earnest to explanations of the subprime market and the ensuing international network of loans and will have drawn the conclusion that the great financial edifice that is the world financial system was built on foundations of sand.

The crisis we now face goes back, as we know, to the subprime crisis in the US. To be precise, it was based on loans advanced without sufficient security, without reference to the capacity of borrowers to repay in accordance with the terms of the bank loans advanced and based on the illusion that capital values would continue to rise and rise. It was based on the calculations of financiers who realised they could make a killing without doing anything more than skilfully repackaging debts. As a result of this crisis, the financial security and hard work of everyday citizens of the world has been imperilled by those who have made financial fortunes.

Those people looking on have seen President Bush fight to get his $700 billion bailout package for the financial sector passed by congress. They have seen President Bush spending $250 billion on what amounts to a part-nationalisation of American banks and the UK injecting ₤37 billion into three of its banks. They have seen Iceland turn to Russia for a loan equal to half their country’s GDP. A country that built its economy on a Thatcherite deregulation of its financial sector has now nationalised its major banks. They have seen the former chief executive of the bankrupt Lehman Brothers, Richard Fuld, failing to justify the $500 million he earned since 2000, all for taking that company into financial collapse. They could be forgiven for thinking that the world has been turned on its head. It is therefore not surprising that people look to their own modest finances and ask the question how secure are they. The package of measures that the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008 represent will provide a reasonable degree of security. I welcome the package and the speed with which it has been prepared and introduced to this House.

If anyone doubts the wisdom of extending the guarantee, given the strength of Australian banks, let me remind them of the German finance minister, Peer Steinbruck, who said on September 25:

America was the source…and the focus of the crisis.

Within days, his government was forced to step in to save the country’s second-largest property lender, Hypo Real Estate. No sooner had the Governor of the Bank of France, Christian Noyer, declared ‘There is no drama in front of us’ than five European banks had to be bailed out in seven days. This is not to say that our banks are in danger of collapse—they are not—but it illustrates the importance of well-supported confidence-building measures. The lesson might be that, when it comes to a financial crisis, we should judge governments by their actions and not by their words, whatever the temptation to talk up their own economy in an attempt to maintain confidence. To those who doubt whether it is necessary to guarantee all deposits, let me say this is no time for half-measures. The Nobel Prize winning economist Paul Krugman studied the Japanese crash of 1991. He came to the conclusion that the government took only incremental steps to boost the economy and, as a result, ended up with a mountain of debt worth more than the national income as the economy collapsed. As I said, this is about trust, and we need bold measures in place to secure that trust, even if we never have to use them.

Turning to the details of these three bills, I commend the simplicity of these measures. This will, in itself, help restore trust. If an authorised deposit-taking institution, or ADI, goes into liquidation, the Australian Prudential Regulation Authority will appropriate funds to pay depositors. Depositors will receive their deposits and accrued interest within a week of liquidation. Depositors do not need to become a party to the liquidation, nor will they lose their right to make other claims on the institution. The Financial Claims Scheme (ADIs) Levy Bill allows the Commonwealth to recoup any shortfall in meeting depositors’ claims by means of a levy on the remaining banks, the Commonwealth covering the shortfall in the first instance to ensure that depositors receive their funds. The Financial Claims Scheme (General Insurers) Levy Bill provides similar provisions to cover the event of a failure of a general insurer.

Deposits, as I indicated earlier, are less investments than savings. You make a deposit with a bank in the knowledge that you will get that amount back. On top of that, you will get back a return which has been agreed with the bank. They are not a form of speculation. They are, for most Australians, a way of securing money at a modest return. There are no promises of bonuses, dividends or potentially huge returns on the bank deposits of average Australians. They appeal to people who do not have money to risk and who just want to keep their savings safe. The need for safety and security in banking deposits is fundamental to the peace of mind of everyday Australians and fundamental to commerce in this country. I commend the bills to the House.

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