Stuart Robert (Fadden, Liberal Party) Share this | Hansard source

I rise to consign the Australian Business Investment Partnership Bill 2009 and the Australian Business Investment Partnership (Consequential Amendment) Bill 2009 to the dustbin of history, to which they indeed belong. It would be nice to propose amendments, but these bills are so egregious in their thought, intent and principles that no amendment would suffice.

Let me tell the nation a quick story. I look at these bills and I see a bunch of banks with large exposure to commercial property—property that may well be losing its value. If they have exposure to unlisted property trusts or mezzanine finance firms, they know that syndicated loans form a large proportion of this property exposure. They know if one part of that syndicate pulls out at less than 100c in the dollar they are left wearing a range of exposure. I think they just went to Mr Dumb-Money Rudd himself and said: ‘How about a Ruddbank? How about a bank where the Commonwealth wears all the risk—where we are the beneficiaries and wear no risk and this bank helps us prop up commercial property prices on our balance sheets?’ A thinking government would simply laugh. Mr Dumb-Money has said yes; hence we have the spawning of this mongrel runt called the Ruddbank.

The Commonwealth will provide $2 billion and the four big banks will provide $500 million each. There is a contingency within this legislation for the Commonwealth to provide a further $26 billion, so the Commonwealth may provide $28 billion of funds for this, while the four big banks will provide only $500 million each. The Commonwealth money will all be borrowed from the international monetary markets through the raising of bonds and we will wear the liability for it—and this is supposedly a good idea.

When the Prime Minister issued his press release to explain his intent, it was about refinancing existing commercial property syndicated loans on commercial terms when the withdrawal of funding by a participant syndicate threatens a loan. The partnership will focus on completed commercial property investors. There are not a lot of jobs in completed commercial property investments and partially completed development projects. It will be structured to provide financing in other areas of commercial lending should the need arise and the government and the four big banks jointly agree. Yet the Reserve Bank’s February 2009 statement on monetary policy said:

Over recent months there has been some speculation that many foreign-owned banks will withdraw from the Australian market and that this will create a significant funding shortfall for businesses. While there is a risk that some foreign lenders will scale back their Australian operations, particularly if offshore financial markets deteriorate further, at this stage there is little sign of this, with most of the large foreign-owned banks planning to maintain their lending activities in the Australian market.

The Reserve Bank’s statement says there is no indication of foreign money pulling out, which is the basis of this foolish Ruddbank in the first place. So, if the foreign banks are not pulling out from their syndicated loans, what is the point of this ridiculous venture that will put $28 billion of taxpayers’ money at risk?

We know there is approximately $60 billion of foreign debt in commercial syndicated loans. So let us look at what will happen when the ‘Mr Dumb-Money’ Ruddbank is set up. The problems may actually be compounded. While the intent, albeit misguided, is to discourage foreign banks from exiting Australia, the proposal actually encourages any foreign bank that wishes to exit by allowing that bank to be paid out 100 per cent at face value. Right now, foreign banks can say: ‘This asset’s looking a little toxic. Its commercial value is going out. Mr Dumb-Money has stumped up a bank but we can get 100 per cent. We’re outta here.’ Rather than staying in there with the pressure the rest of the syndicate put on them to hold their money in, this will actually accentuate the flight of foreign currency from Australia. In an article in the Australian on 27 January, Henry Ergas stated:

In the short run, the scheme seems likely to induce developers to play off their existing foreign lenders against the safety net the scheme provides. This could accelerate the very withdrawal of foreign lenders the scheme is intended to guard against, while allowing developers to secure some free kicks on the basis of what amounts to taxpayer-funded insurance.

Ruddbank exposes the Australian people to a liability of up to $28 billion in what may well be toxic commercial assets, yet the Commonwealth only has a 50 per cent shareholding in the company. Does the Prime Minister really think it is a good bet to say to the four big banks: ‘You put in $500 million each. We’ll put in up to $28 billion. We’ll hold all the risk—so we’re holding 95 per cent of the funds and a hundred per cent of the risk—but we’ll only hold 50 per cent of the shares’?

There is a good reason. It is clear that no-one in the Labor Party has run a business. If this is the basis of their business acumen, may I suggest they get a big, fat, red ‘Fail’. It is no coincidence, with the Labor Party being the political arm of the union movement. They do not run businesses; as union thugs, they simply stomp all over them. This will add $28 billion in borrowed money to the $200 billion in borrowed money that the Rudd government is planning over the forward estimates.

Ruddbank is a response to a problem the government created. Large amounts of syndicated debt must be replaced in 2009 not just in commercial property but across corporations in general. One of the reasons for refinancing is that companies are being crowded out of debt markets by banks operating with a Rudd government unlimited guarantee, and one problem always accentuates and causes another. The major banks are already beneficiaries of the government’s bank guarantee. They run big, profitable companies, and with the benefit of the guarantee the balance sheets of four of the most secure banks in the world are well placed to handle any shortfall.

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