Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Regional Development and Northern Australia) Share this | Hansard source

I am fascinated, in speaking in favour of this bill, the Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Bill 2008, because I have listened intently to the observations of the opposition. In the concluding moments of the member for Bowman’s speech, I became convinced he is actually a showman, not the member for Bowman. To speak of an attitude by the opposition, because they believe somehow that the Prime Minister was being a little overbearing in the way in which the government pursued the urgency and the need to create certainty in our economy, is a little surprising. We find ourselves here today supporting a bill—on both sides of our parliament—which provides a standing appropriation for the guarantee scheme, and it will be in place by 28 November 2008. In the unlikely event that claims are made under the scheme, this bill will ensure timely payment of those claims. This provides certainty for Australian and international investors in wholesale funding instruments provided by authorised deposit-taking institutions—ADIs—such as banks, building societies and credit unions. It also provides certainty in relation to large deposits—that is, over $1 million—with ADIs. The bill also creates a borrowing power that enables claims to be paid under the guarantee scheme if there are insufficient funds in the consolidated revenue fund at the time those claims need to be paid.

The guarantee scheme is in place because we have increasing uncertainty regarding the stability of international financial markets. The government committed to swift and decisive action in support of the Australian economy and Australian families. On 12 October 2008, the Prime Minister announced that the government will guarantee deposits in Australian owned banks, locally incorporated subsidiaries of foreign banks, credit unions and building societies for a period of three years. The deposit guarantee means that the first $1 million deposited with an Australian incorporated bank, credit union or building society will be guaranteed free of charge. Large deposits in excess of $1 million deposited with an Australian incorporated bank, building society or credit union can pay a fee to be eligible for the guarantee. The government has also made the same commitment to support short-term and long-term wholesale funding for Australian incorporated banks, building societies and credit unions and short-term funding for foreign bank branches. This ensures that vital Australian institutions are given the best possible chance when competing in international markets.

This is particularly important given that many international competitors have the benefit of similar government guarantees. The Australian government guarantee scheme for large deposits and wholesale funding will be administered by the Reserve Bank of Australia. The Treasury, the Reserve Bank and the Australian Prudential Regulation Authority will cooperate closely to ensure the guarantee scheme is administered effectively. To access the guarantee scheme, eligible institutions will need to apply. The scheme is entirely voluntary and it is up to institutions to determine which of their deposits and which of their wholesale funding liabilities need to be covered by the government scheme. To ensure public and business confidence, the government will ensure the scheme is administered with full transparency and full accountability. In this light, the government will publish regular reports on the guarantee scheme’s website. The government will also provide six-month reports to the parliament on the guarantee scheme’s operation.

Over the past month we have heard many comments from those opposite. The Deputy Leader of the Opposition spoke at length on her claims that the government botched this policy—did that in this place tonight. If indeed it is botched, I find it very interesting that the Leader of the Opposition initially provided support for the scheme and those opposite will continue to support it, as they should. On 13 October 2008, the Leader of the Opposition stated:

The Opposition welcomes the decision taken by the Prime Minister today to provide a guarantee for all deposits in Australian … institutions, banks, credit unions, building societies and so forth.

It was a positive statement to make. Over the course of the last five weeks, we have all seen the Leader of the Opposition and various shadow ministers dancing around that commitment—at times working as hard as they possibly could to undermine public confidence in our banking system. You might well wonder why members opposite would want to do that. I know in my electorate of Brand, people have asked me that question: why would it be that the Leader of the Opposition, who one would think knows so much about the banking system, would be working so hard to create the maximum level of uncertainty? The answer to that is actually quite obvious: it is because he does know about the banking system that he is working so hard to create uncertainty.

In the newspapers today we see significant and insightful commentary that comes to us from a number of outlets about the position taken by the Leader of the Opposition. In an editorial in one of the nation’s most significant newspapers, the Courier-Mail, we see:

Political capital is hard to earn. And right now Opposition Leader Malcolm Turnbull risks burning through this scarce commodity faster than the US banking system is burning cash.

The editorial is, of course, about the position of the opposition leader with regard to the banking guarantee. The editorial is, of course, an insightful comment on the way in which the Leader of the Opposition seeks to do no more than build his own political position at the expense of the stability and certainty in the Australian banking system. Why is that the case? It was indeed the Leader of the Opposition who spent his time over the last few weeks gallivanting around the countryside telling everyone that we must actually have this bill—that we must have an act to create an appropriation to support the guarantee—because he knew that if he did he would create uncertainty amongst banks. He knew, because of his background and his knowledge of risk registers, the way in which banks understand risk and the way in which risk is transmitted around the world, that if he did that he could get a bit of a win—at least in banking terms.

Today’s newspapers suggest a completely different and thoughtful response from the media in Australia. The Financial Review states:

The Big Four banks have told Opposition Leader Malcolm Turnbull his attacks on the bank deposit guarantee have been unhelpful and have urged him to back speedy passage of legislation to ensure funding for the guarantee.

… banking sources say senior executives of the Big Four contacted Mr Turnbull on Friday and yesterday to express concern that his attacks on the government’s handling of the guarantee were undermining the finalisation of the measures and its eventual effectiveness.

What an indictment of the Leader of the Opposition. What a condemnation of a man who would argue that his principal qualification to be in this place at this time as Leader of the Opposition is his knowledge of the banking system. For the nation’s premier financial newspaper to be so damning—and so precisely damning—of the opposition leader’s tactics, actions and words is indeed a revelation. The article continued:

One source said that “the basic point made to Malcolm was that he might be scoring a lot of political hits on the government but they have been entirely counterproductive from our point of view”.

What is ‘our point of view’? ‘Our point of view’ is the stability and integrity of our national banking system. The article went on to say:

… Mr Turnbull has been the increasing pressure on the government over the guarantee and recently released private advice from ratings agency Standard & Poor’s, which said that a government guarantee must be “unconditional, irrevocable, and timely” to attract the AAA rating, saying the advice showed a standing appropriation was essential.

There we have it: the Leader of the Opposition took a rating advice from a ratings agency and carried it around the countryside, arguing that this guarantee should be in place. He argued that it was rushed and that it was bungled—arguments that were only ever designed to prop up a political position and not designed to create certainty in our banking system.

The editorial in today’s Courier-Mail went on to say:

The bank guarantee was not about popular politics—

and it is not. The banking guarantee is a tough piece of legislation. It takes character and courage to draft legislation like this. It takes understanding of our banking system. It takes an understanding of what is happening around the world in banking systems. You have to stare in the face of 30 banks around the world that are in trouble or have gone. You have to know what it is like to be in Washington and New York, as the Prime Minister and the Treasurer have been in recent days, talking with people who are creating policy and dealing with this crisis, not on a day-to-day basis but on a minute-to-minute basis. The editorial in the Courier-Mail says:

The bank guarantee was not about popular politics, it was all about restoring confidence in a time of crisis. And quickly. And at the time the initial decision was made it had the full support of the Reserve Bank and the Treasury.

As indeed has every single action taken by this government, by the Prime Minister, by the Treasurer and by the cabinet.

I commend this bill to the House as an outstanding piece of legislation designed to support our banking system at a time of need.

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