Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Hansard source

The Australian Business Investment Partnership Bill 2009 and related bill deal with the establishment of Ruddbank. The Ruddbank is to be established under the Corporations Act. It is going to have shareholders in the form of the four major banks and the Commonwealth. The government will provide $2 billion and the major banks will provide $500 million each. Ruddbank will only be able to enter into new refinancing arrangements for commercial property assets for two years—a two-year prospect. The Ruddbank will be able to issue up to $26 billion of government guaranteed debt to create up to $30 billion of loanable capital. The Ruddbank will provide financing, it says, on fully commercial terms for commercial property that meets the Ruddbank’s lending criteria, determined by its shareholders, and where the underlying assets and the income streams from those assets are financially viable. Ruddbank will focus on completed commercial property investments and completed development projects with secured precommitments, but it is not confined to that. It says its focus will be that, but there is an open-ended blank cheque for it to extend to have sufficient flexibility to provide financing in other areas of commercial lending, which is incredibly vague and opens up the prospects for what this new Ruddbank might be involved in to literally anything.

It is the classic example of this government: it will go to any policy port during this economic storm, as the Prime Minister likes to describe it. It is prepared to do anything on these matters rather than focus on doing the right thing, on doing what needs to be done during the course of this economic crisis. The government’s philosophy is: ‘We need to kick up the dust. People need to see that we are doing something. We need to do something, anything. Any idea that is thrown at us, we will do it.’ It will not take the time to properly consider whether it is the right thing to do and whether it is going to have consequences that will cause all sorts of havoc within our economy, as we have seen with many of this government’s decisions. It will do anything rather than the right thing.

The common theme in all of the various ‘anything will do’ proposals from the government is at the core of every single prospect: they all involve transferring risk to the taxpayer and increasing our debt. They are going to put the government credit card out there and put on that credit card risk that would normally be looked after in other places. We saw that with the unlimited bank guarantee. We saw that in their rush to do anything—not the right thing but anything—when they came up with the unlimited bank guarantee, as it was first known. We saw the havoc that that caused in financial markets, the government not having thought it through and not having even bothered to get the Reserve Bank governor on the phone. There was far too much time to be spent rolling up sleeves for photo opportunities in the cabinet room on that Saturday or Sunday, whenever it was, back in October. As a result of that, we saw the funds of 270,000 investors frozen in their investment trusts and we saw all sorts of other consequences of money moving all over the place until eventually the government had to listen to what the opposition said. Sadly, they did not listen enough, because they did not take the cap on the guarantee down far enough. Nevertheless, with the unlimited bank guarantee we saw the government taking a rushed and bungled decision to put their credit card out there to be a receptacle for risk in the marketplace.

The other thing we have seen more recently is that they are not just prepared to take on these assets and debts from the com-mer-cial property sector as part of their own book in government; they are also doing it for the states. They have put the credit card out there on the table. Through this and other measures, the government have shown a preparedness to say to the New South Wales, Western Australian, Victorian or South Australian state governments—all of which had gov-ernment owned banks that got into a bit of difficulty, to put it mildly—that there is nothing to stop them using federal taxpayer credit guarantees to underwrite their performance. We are really on a very slippery slope now when it comes to the current government and debt. Their appetite for debt knows no limit and they are just getting started. We have a budget coming in a few weeks time and I am sure we will see more debt. We will see more debt and more of a defi-cit in that budget because they are a govern-ment addicted to debt, and debt will continue to grow as long as they remain in office.

Prior to coming to this place, many years ago I spent almost six years working for what is now known as the Property Council. From my time there I have a good knowledge of the policy areas affecting the commercial property sector and I have a great deal of sympathy for the sector. But my sympathies must first go to the taxpayers of Australia when I consider these measures. I am not surprised that the property sector, in particular, or the banking sector would be supportive of this proposal. If you were the beneficiary of this proposal, wouldn’t you be supportive of it, in terms of the sectional interest that is being looked after in this bill?

In Ruddbank we have a number of key themes, which the Leader of the Opposition and the shadow Treasurer have touched on. The one that concerns me most is that this is a vehicle to transfer property losses, lending losses, of foreign banks to Australian taxpayers at the face value of what those loans are in those syndicates. We are going to say to a foreign bank: ‘We will buy you out. If you are thinking of going, now is a good time to go because we will buy you out at face value. The other shareholders in Ruddbank will not be interested in a price any less than that because they will have to write down their own positions in each of those syndicates. So we will take you out, taxpayer funded. We will say to you and to banks all over the globe: we will buy you out at face value, and the people who are going to do it are mums and dads, self-funded retirees and pensioners and others right across this country. We are going to bail you out of the Australian market so you can go back home and, just to add insult to injury, we will pay for that privilege through this proposal.’ From that simple measure we are going to see losses, effectively—potential losses—for these foreign banks transferred onto the government’s taxpayer funded credit card and borne by Australians. I do not know who thought that up but I think that proposition would be offensive to most, if not all, Australians around the country.

The second theme is about collusion amongst the banks, which has been given the green light under these bills in terms of the Trade Practices Act. This means that a proposal from the four big banks will only get to Ruddbank if they are unable to source finance elsewhere. And who are the major sources of finance in this country? The four big banks. So the commercial property owner or lender, or whoever is involved in the matter, will go to those banks and say, ‘Can you extend your facility on these?’ And they will say, ‘Oh no, we cannot do that.’ Where are the projects that the banks reject—in true John West style—going to end up? They are going to end up at Ruddbank. Ruddbank is going to have the opportunity to invest in all of those projects which could not leap the hurdles of the private banking market. Yet the government say they are going to do it for projects that are apparently ‘financially viable and on commercial terms’. So the projects that cannot clear their own hurdles will actually be referred to a board, which the government will be a member of, that basically will take up the hospital passes from other lenders and other banks. Again: who is paying for it? Who is going to underwrite these debts if and when they go bad? Who will be the ones to suffer? It will be the mums and dads, our children, self-funded retirees and all the people forgotten by the government, who have been left to their own devices. It will be small businesses. It will be all those who have been denied while these sorts of systems have been set up to enable the government to once again do what they have always wanted to do as good socialists—that is, to set up a national bank owned by the government.

The third theme of it, which totally offends me, is that the government wants to add another $26 billion to the taxpayer funded Rudd credit card—as if $200 billion worth of debt was not enough. Frankly, the Australian people are already going to suffer an enormous burden of debt as a result of the actions of this government, and now it wants to add more and more. And, as I said, the budget is still to come.

In making their rationale for this bill, the government and those others who have supported this bill have said this. I read in today’s—or yesterday’s—Financial Review that the Minister for Finance and Deregulation said that 150,000 jobs would be at stake if this measure did not proceed. When the Prime Minister first talked about this, he talked about 50,000 jobs being at stake. It is not uncommon for this government to talk up the book when it comes to impacts on employment. Usually it talks up how many jobs it is going to create, like the 75,000 that were supposed to be created by the cash splash back in December. Now it is saying, ‘It’s not 50,000; it’s 150,000.’ That is the total number of people employed in the commercial property industry. Is the government seriously suggesting, through the Minister for Finance and Deregulation, that every single job—that is, the job of every single person who works in the commercial property industry—is at risk if this proposal does not go forward? That is a nonsense proposition. As usual, the government is overclaiming and overdramatising the circumstances to suit its political arguments and its own political ends.

Secondly, the government maintain that this is going to keep a whole raft of construction projects going. The truth that they refuse to utter in this place or anywhere else is that a minuscule proportion—that is, minuscule if any, but I grant it may be minuscule—of the projects and assets that will be subject to this proposal, those that are subject to syndicated loans which involve foreign banks, involve actual construction projects. These are existing assets that have a history and that have tenants. People come in and out of them every day. People do the cleaning, do the painting, do the maintenance and service the tenants. They do all of these things on a daily basis, and not one of those things is going to change as a result of this measure because they are existing assets. They are shopping centres that exist; they are office buildings that exist. In terms of construction projects it is fractional at best. The government’s claim that this is going to somehow support construction is hollow. They will know that supporters of this will also know it is a hollow claim. They know that this is about existing assets. I am quite sure they would like to see the argument on this proposal made on what they believe the merits of it are—that is, to keep property prices up. The government knew that this argument was not saleable to the Australian people, so they had to confect this argument about construction jobs—when virtually no construction jobs are involved or at risk regardless of whether this proposal goes one way or the other.

The third point I would make about that is this: the new projects that the government say are going to be abandoned because of a lack of availability of credit we know are being abandoned because of the economic circumstances that just plainly exist. The fundamentals for these projects to go ahead in the vast majority of cases are not currently in play. That is a sensible commercial judgment. The decisions to go and build these assets should be made on sound commercial bases. I remember my time in the tourism industry. They used to say that only the third owner of the asset ever made any money. The developer and others would go through the process. Fortunately in the tourism industry they have learnt many lessons over the last 20 years, and that prospect is no longer the case. But major investment decisions should be made on the basis of the investment horizon and the prospect that tenants or others are going to use the buildings, not on the basis of propped-up prices. That type of activity can distort markets and lead to very dangerous decisions. It can see developments proceed when they should possibly be left for another time, a time when economic circumstances will support them and the jobs they will create.

Also, we need to be mindful of the two other big things that are impacting on our economy and the investment horizon. The first of those is the emissions trading scheme of the Labor government. It is not just any emissions trading scheme but the Labor government’s emissions trading scheme. It will impact on the price of building materials and on all the other price inputs that go into building and maintaining these assets. The impact of that scheme will add costs that will make these projects less viable and even the existing assets, in terms of their returns, less viable. If the government want to talk about blockages to the performance of these investments and getting new projects going, they should scrap their current emissions trading scheme. They should scrap it because they know it is overworked, it is too complicated and it is going to add to costs while exporting emissions.

The second area is that of changes to the industrial relations laws. If anyone wanted to be serious about trying to create jobs in the construction industry, they would not go light on the Office of the Australian Building and Construction Commissioner, as the government are. They are going soft on that agency over time, as it gets whittled away under the current government. Secondly, they would not talk about doing things with unfair dismissal laws and confine them to businesses with just 15 employees by headcount. They would not do things about greenfields sites, which tie up these businesses in their new laws. They would not do things which provide unions with unfettered right of access to sites. They would not do all that if they were interested in these projects proceeding. They would be trying to take costs out of the system. They would not put costs into the system, as they are doing with the emissions trading scheme and the changes to industrial relations laws. They should be doing something about supporting construction in the commercial property industry or, for that matter, the housing industry. But, no, they have come up with the Ruddbank proposal to artificially prop up property prices.

There is a fundamental question here on the wisdom of governments becoming involved in manipulating the repricing of assets in the market. This is a very dangerous business. It is risky for governments generally to get involved directly in the banking business itself. The shadow Treasurer made many very good points about the risks of going down that path, making reference to Tricontinental under the State Bank of Victoria, the State Bank of South Australia and even the State Bank of New South Wales. They as a government had to do due diligence on it to find out what Nick Whitlam and the others had been up to while they were in charge of the taxpayer-backed bank.

I would argue that the government has already put in place a wholesale funding guarantee, which has been supported by the opposition. That wholesale funding guarantee was to enable our banks to actually step up should a foreign bank pull out of one of these syndicates. These banks, which account for one-third of the top 12 banks by capitalisation in the world, are apparently the ones that are not able to go out there and extend further credit and so on. Well, they are finding plenty of opportunities to extend credit—as they should, I would argue—particularly in the housing sector and particularly for first home buyers. They are out there aggressively in that market. These banks have been capitalised and they have been supported with things like the wholesale term funding guarantee to enable them to access credit. This should enable them to step up. But, no, they do not want to do that; they want to go back to the taxpayer and ask them to underwrite their proposal. On this the government has been the sucker who has been quite prepared to stump up again and say, ‘Yes, we’re happy to put the taxpayers’ credit card on the table for you once more.’

Finally, there are those who are left out by what I would say is the focus of the Ruddbank proposal. Most significantly, there is the small-business sector. I have no doubt that there are small businesses who are facing far bigger challenges than those of the big banks. I am sure there are small businesses, literally hundreds of thousands of them, who are going to face far more difficult circumstances in the times ahead and who are facing them now. This is where the jobs are. But are they supported by this proposal? Has the government gone and created a Ruddbank for small business in this country? No, it has not. Small business, like self-funded retirees, are the forgotten people of this government in this crisis. They have been completely dismissed through this process. The government is quite happy to turn up and put the taxpayer credit card down for the big banks and for the big property owners but it is not prepared to do that for small business.

The housing sector is also not covered by these syndicated loans. While there is much talk of 150,000 jobs in the commercial property industry, there are 700,000 jobs in the housing construction industry; and 95 per cent or more of those jobs are in the private housing industry, which is not touched by these measures. The last thing the government did for that sector of the industry was to bring in the first home owners grant. As we know, that runs out on 30 June this year, and there has been no indication from the government that they will be continuing it or whether they have any idea how they would pay for it. The government should be listening to the opposition’s view on how that can be done. In closing, the government should not be allowed to use the current economic circumstances to pursue their social agenda of nationalising banks and a whole range of social programs while dressing it up as an economic stimulus.

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