Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Sustainable Development and Cities) Share this | Hansard source

I can see the ads for Ruddbank now: ‘Frontier financing—first in frontier lending, the Ruddbank will go where no-one else is prepared to go.’ That is what the ads will say: ‘Ruddbank—first in frontier financing, prepared to go where no-one else is prepared to go.’ That is really what we are talking about this evening—a proposition to create something that is designed to look like a bank but is not. You hear Labor members talk about all the safeguards, the governance arrangements and the prudential framework—all of which tries to make it sound like a bank, but it will not be regulated like a bank. It is a proposition where the Australian government and, through them, the Australian taxpayer will own 50 per cent, and the large banks will own 50 per cent. They will own 50 per cent for the princely contribution of 1⅔ per cent of the potential exposure and full value of the financing vehicle that is being discussed tonight.

This is a bad idea. It is a bad idea that has been badly designed. It is the heavy hand of government intervention actually looking for a problem to solve. It is a commercial risk hospital pass to the Australian taxpayer. The announcement was poor on 24 January 2008, because it sought to describe a crisis or a problem or an emerging threat that did not actually exist. There has been no evidence provided to substantiate the claim that there will be a mass exodus of foreign banks in the commercial property sector—none whatsoever. In fact, the Reserve Bank of Australia has said there has been little sign of foreign bank withdrawal. So the whole premise for the legislation we are discussing tonight, the Australian Business Investment Partnership Bill 2009 and cognate bill, is unproven. It is completely speculative in the worst possible character—one that may bring about a self-fulfilling prophecy. The premise itself is challenged by the Reserve Bank of Australia.

It was bad policy, poorly designed policy, seeking to try and provide an exit strategy for foreign banks in the commercial property sector, not in return for some better gain for the Australian public or some improved condition in the commercial property sector—no, just to let them get out, to let them go. This is Kevin Rudd being the foreign commercial bank concierge—he is carrying their bags to the airport while they take off with 100 per cent of their investment, regardless of what the asset was that they were investing in. Free of any obligation, free of any need to consider a market adjustment, they can take off with their cash and go home. What we are left with is then the Australian taxpayer, at the behest of the four big banks, who are so convinced that these investments are worthwhile that they will not lend to them. This is like, ‘Have we got a great proposition for you!’ This is such a viable commercially attractive proposition that the four big banks will not pick it up. There is no requirement on them to pick it up. But so attractive are these projects that they will be laid off to an Australian government guaranteed taxpayer backed funding vehicle—the Ruddbank.

What have we learnt from tonight’s contributions from the Labor members opposite? What we have learnt is that what is actually before us bears very little resemblance to what Labor members of parliament think we are discussing tonight. This is not about the original announcement that was made on 24 January 2009. The proposition has morphed into something much greater than that. It has morphed into things that we Victorians would more familiarly recognise as Tricontinental mark 2.

This law is drafted in such a way that it offers very little in terms of actual delivery of some of the comforting words that you hear from the Labor members opposite. In fact, it will turbocharge the very financial disease the Ruddbank is designed to inoculate against. It actually provides a financial supervirus that induces the departure of these foreign commercial banks investing in commercial property. It is creating a very speculative environment that will actually bring about the problem it is supposed to remedy, and this is what worries the opposition.

This is why we stand against this proposition. This is why—when it induces the departure of those foreign banks in the commercial property sector and then leaves the risk with the Australian taxpayer, and when it can now go beyond the original proposition, which was for the commercial property sector, into a whole range of nebulous and wildly described provisions in the legislation—we are here asking: why should the Australian public bail out banks? Why should the Australian public pay $75 a year in stealth bank fees for every man, woman and child in Australia? That is the cost of the interest bill alone for the debt that the Rudd government is putting us into in the name of this so-called Australian Business Investment Partnership. It is $28 billion of debt. There is a $2 billion contribution, of half a billion dollars each, from the four big banks—1⅔ per cent of the total lending vehicle for a 50 per cent say—and then there is a proposition that allows them to have not a golden share but a golden speck. For a 1⅔ per cent commitment to this project, those large Australian banks will get first cut at any resources that come out of this lending facility. So you can see how troubling this is.

But let us go further. Let us look at what the legislation will do. It is designed to deceive investors and to create the illusion that commercial property, and potentially other investments, are of a value that they are not actually able to bring about in the marketplace. The fear here is that, as the foreign commercial bank leaves a commercial property project or something similar, it will be paid out 100c in the dollar on its investment, regardless of whether the value of the investment has declined so that it, as other investors should, would take its share of the pain of that reduced value. It is masking that point. It is artificially propping up those values. It is designed to deceive—to make it seem as though there is 100c in the dollar of value still within those projects regardless of what the economic circumstances might mean for the actual value of that project.

It permits collusion between the major banks. It actually says that collusive behaviour is not something that this Ruddbank needs to be concerned with. It does not even do what that shambolic National Broadband Network tender does. That tender said to competitors in the telecommunications industry, ‘Provide your material about your broadband network and we will work out how to make a bid for further investment in that marketplace, but don’t use that commercial information for any other purpose; don’t gain a broader commercial advantage out of the disclosure of different competitors’ activities.’ There is not even that safeguard in here. There is not even a proposition that says that, once the Ruddbank board sits around and decides whether the taxpayer should stump up the money, they cannot go and use the material that was before them for some other purpose—maybe to offer to the person seeking the finance an attractive deal on what might be the most secure part of a portfolio of assets, while the part that is the dud is shunted off in a hospital pass to this Ruddbank and left as the exposure of the Australian taxpayer.

It tries to look like a bank, but it is not one. It does not have the safeguards, but it says it will lend to creditworthy, viable projects. If they are so creditworthy and viable, why are they going to the Ruddbank? Maybe they are going there because the banks might argue that they themselves do not have the funds to lend. That is interesting, because the banks have a government guarantee backing them. They should be able to attract money. We heard one of the earlier speakers talk about how it is hard to get finance for projects that are not backed by some assets. Then we were told by the member for Makin that these are as safe as houses—that these are assets that have some recoverable asset value to them and therefore are not a big risk. If they are so safe, why are they going to the Ruddbank? They talked about the property ups and downs. If there are ups and downs in asset values, isn’t it in our interest to see that adjustment take place sooner rather than later so that our economy can move onto a sustainable, productive footing and look forward to the future, rather than carrying these deceitful asset values into the future and wondering just what is going on in the marketplace?

This is a really disturbing proposition. It is designed to deceive. It induces the departure that it is supposed to be stopping, it creates a bank that is not actually a bank, it permits collusion and it has very little hurt money in it from the major banks, who will each put in $500 million—1⅔ per cent of the total value that this legislation seeks to provide in a finance facility. You can see why the banks would like it. You can see why those involved in commercial property would like it. It is very much in their interests. But the parliament is supposed to concern itself with what is in the national interest, and, if you look at that proposition, it fails that test comprehensively. It is not contained to refinancing viable existing commercial properties; it has moved on from that. It does not look anything like the 24 January 2009 announcement. It impedes the market adjusting to asset values. We have heard about the property price bubble and how unhelpful that has been in this global economic circumstance we find ourselves in, yet this is actually designed to perpetuate that bubble by maintaining a value base for assets that might not be justified if they were genuinely exposed to the marketplace.

If you are wondering why this is even more confusing, just read some of the explanatory memorandum material that the government has produced to support its proposition. It says that this intervention is crucially needed because:

The highly leveraged nature of the commercial property sector makes this sector particularly vulnerable to liquidity constraints.

I seem to recall that highly geared, highly leveraged activity is what brought us to where we are now. I thought that was the proposition. Isn’t that what the Rudd government has been telling us?

And then we look for guidance about how we might measure this proposition. I encourage people to look at Kevin’s plan to save the world. This is his seven-point plan to solve the global financial crisis. Not content with saving Australia, or trying to look like it, our own dear leader has come up with a seven-point plan to save the world. If you look through that seven-point plan, where he describes what everyone else should be doing, he talks about weak and systemically significant strains in the financial institutions and how they should be subject to a ‘stress test’—a reality check of the asset values. That is his proposition for the rest of the world, yet in this parliament tonight we are talking about a proposition that is designed to artificially inflate asset values, so it has failed the Rudd save-the-world plan.

He goes on to talk about ‘toxic assets’ on bank balances that ‘must be neutralised’. These are not toxic assets; this is real property that has a value. The issue is: what is that value, and should there be some adjustment? Again, he fails his own save-the-world test by foisting this proposition on the Australian people and the Australian parliament. The fourth prong of his seven-point plan is that ‘the prices of bad assets should be derived from a transparent and simple formula that is consistent across jurisdictions’. I do not think some dodgy Ruddbank to artificially prop up values meets that call that our Prime Minister, our dear leader, is making on the rest of the world. His own plan fails his own blueprint for saving the global economy.

Where does that leave us? It leaves us with a deeply troubling proposition. I heard the member for Corio talk about the Edgewater project in Geelong, saying that it is a very attractive project and that maintaining high values is in everyone’s interests. It will not be in the interests of the tenants occupying those retail spaces downstairs who are paying artificially high rents to prop up artificially high values.

I heard the member for Makin talk about how strong this is when there is a 50 per cent funding commitment from the commercial banks. No, there is a 50 per cent start-up commitment, but for the whole value of the $30 billion facility the banks have stumped up one and two-thirds of a per cent. He talked about the assets being safe as houses, but properties will have their ups and downs. They should be safe as houses in that these assets have a residual value, but this is designed not to allow property values to go up and down. Then he talked about infrastructure.

Isn’t it interesting: now we start to see what this is really on about. I imagine that after this debate Labor members of parliament will run around their electorates rekindling some nostalgic idea that we need a government backed development bank and this is it—that there is somehow discounted finance available to help build the country. I am sure that will be the spin they will put on it. We know that is not what this is about. The member for Wakefield and the member for Makin talked about developments of a residential kind that would not get going without this facility, yet I seem to recall one of them also saying that that is not what this is designed to do.

And then they called on the lessons of the global Depression. That is the first time I have heard a Labor member talk about some comparative analysis between where we are now and the global Depression. They had a very poor lesson out of history. They talked about a contraction and asset values being adjusted where the available funds went into savings and were not available for commercial finance. That is what this is designed to do. With government guaranteed deposits in banks, with the government itself out there crowding out the finance market on its debt binge, with $75 for every man, woman and child in bank fees by stealth to pay for the interest on this debt facility—and that is at the current bond rate for 269 tender—you wonder why people are wondering where the money is for commercial finance.

Where will the money come from for the small businesses that are being told that they are being re-rated for risk and now their cost of funds is going up, in some cases by 1.4 per cent and beyond? Where will the money come from for those businesses that had an overdraft facility to help buy supplies to help them continue with their work and that are now told by the banks, ‘You haven’t fully exercised that; let’s call it in and refinance it’? Where will the money come from for the farming community to rebuild, to plant in the fields, to restock? They will not have a commercial property to wave around to make them more attractive.

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