Robert Oakeshott (Lyne, Independent) Share this | Hansard source

I rise to speak on the Australian Business Investment Partnership Bill 2009 and cognate bill. Whilst acknowledging the substantial problem that not only the national economy but the world faces, I express concerns that this response has enormous problems attached to it, so much so that, as much as I have looked for a reason to support this legislation, I cannot do so on behalf of the communities of the mid-North Coast or in what I consider to be the best interests of the country.

Without doubt Australia faces a significant problem when you look at the actual dollar figures. As a relatively new member of this chamber getting used to the ‘billion’ word, the collapse in the global investment market of $152 trillion is really confronting, as I think it is for all of us, as the size of the problem that confronts policymakers in response to the issues in play. However, I do not think this response satisfies some fundamental principles and some pillar principles that we would expect in a response that we want to be adequate. I think the concerns raised by previous speakers about the speculative nature and the unsustainable nature of the commercial property sector are real concerns. To put it in layman’s terms, I think it would be very hard for the man on the street to understand—as it is for me to understand—why we should be allowing the white shoe brigade, for want of a better term, the opportunity to buy more white shoes through basically a grant from government in an incursion into property lending and finance.

Commercial property development, particularly over the last decade, has been boosted by its speculative nature and by high gearing, which we have heard referred to by other speakers. It was a bubble that at some point was bound to burst. It is obviously disappointing that the timing is now. However, if it is unsustainable in its foundations—as we have seen in the recent high gearing in various structures and from companies trying to invest in this field and get money from various investors—people will get their fingers burnt. Many people in my area have. The speculative nature of high-risk investments—by the very logic of the words used—is high risk. What goes with that in investment is the principle of ‘buyer beware’. As hard as that is, it is a reality of high-risk investments that you roll the dice when you invest in areas such as speculative commercial property.

So it is of concern that this bank—for want of a better term—is being developed to bail out those who have been speculating for over a decade and those who have been living high on the hog over the good times. Now that we see the crunch come, they are going, cap in hand, to government. This Australian situation would be akin to US car company bosses flying in, cap in hand, to the President of the United States and asking for money. Here we have the commercial property sector, cap in hand, after some very good years, now asking for a bailout from government. I think the type of business we are being asked tonight to essentially bail out has reached levels of unsustainability. The gearings were getting stupid and getting to a point that was clearly unsustainable. Therefore, it is extremely uncomfortable for me to be put in a position to be trying for some reason to bail out these high-risk speculative investors.

And I do not buy the argument—which I think was put by the Prime Minister himself—about the flow-on impacts for the small-business community. I would just like to report from the mid-North Coast that, while certainly there are impacts on the ground in regard to what we are seeing with the global financial crisis, those impacts are nowhere near what is being reported in national media—the crisis of confidence that there might be in various other sectors or locations. The small-business community on the mid-North Coast is holding up pretty well. Yes, there are some issues. But, essentially, we are defending our territory pretty well, and the local economy is still kicking along. I do not, therefore, buy the argument, from my region’s perspective, that the commercial property sector is critical to the future of small business. In fact, I think what we have seen emerge on the mid-North Coast, as a high-growth community, is concern about speculative property development and concern that it was going over and above the expectations and wants for growth within our region.

So, on the question of small business and on the question of confidence, I think there will be more confidence if we see a re-aligning of the moons in regard to more highly geared speculative property development. I would have greater confidence in the small-business community, and in commercial property development generally, if the high-risk, highly geared speculative arm were brought into line—as it should have been, sometime long ago. Unfortunately, it has been allowed to run and it has got out of control. And we are now seeing a correction in the market—which I do not think needs government intervention to try to prop up an unsustainable model for the future of the commercial property sector and the various equities and debt options that are attached to it.

Specifically with regard to the response, the detail of the bill leaves a lot to be desired. We are yet to have clear detail about who exactly the directors are, their status as independent directors and the actual directorship model that would be in place with regard to ABIP. I think the objectives are too loose on the detail. The first objective is relatively clear, in that it is:

… to refinance loans for commercial property when finance is not available from other lenders and the assets would otherwise be financially viable.

Whilst that has a speculative element to it, which I have already referred to, at least as an objective it is relatively clear. The second objective, however, I think should spark the concern of this chamber. From a policy response point of view, we should be demanding more detailed work from government with regard to the development of a response to the problem. The second objective is:

… to provide finance in other areas of commercial lending through financing arrangements of a kind unanimously agreed by the shareholders.

I think, for us to make decisions we would want to see a little bit more detailed work with regard to that second objective. The flow-on from that is the question about the limits on lending. I do not think those limits are clearly defined in this legislation—and that has been picked up by others. There is a question left as to exactly what those limits on lending are and whether the statement of the shareholders agreement actually covers that or whether there are still questions left wanting.

The third reason for opposing this legislation is my concern about corporate governance. The government is taking an extraordinary step into the free market system that is the Australian welfare capitalist state. The Corporations Act in Australia is quite clear that, if you are a director of a company, you must act wholly and solely in the interests of the shareholders of that company. It is legally questionable as a response that this may not be able to achieve what government wants to achieve because the five directors who shall be appointed to this entity will have to operate wholly and solely in the interests of that entity. They cannot take into account global financial issues. They cannot take into account national economic issues. They cannot take into account particular issues for the commercial property sector. They as directors of the entity have to take decisions to operate purely in the best interests of this entity. It is no coincidence that four banks and the government are forming a partnership. Four plus one equals five. It is I think fair to assume that we will see five directors acting in the best interests of an entity that acts in the best interests of the four major banks and the government. Does that pass the test of the man or the woman on the street? I do not think it does. It will be an entity working in the best interests of the big banks and government.

As well, I am concerned about the consequential amendments bill. We have being formed a body that does not have to play by the rules that everyone else in Australian corporate law and financing law does. It is not required to get an Australian financial service licence under the Corporations Act. It is in breach of some standards that we as a parliament and as a nation have set for some time. The safe port in a storm rule would apply here. We have the Constitution of the nation and the rule of law, which we have developed over a long period of time. At times like this we should not go outside those foundation structures unless we have very clear and detailed rules and reasons why we would do that. This is loose on the detail. It is slipping outside the law and setting a standard for those who do have to follow the Corporations Law quite closely and clearly to operate in business in Australia. It is not the right message for this chamber to send—that is, that there is one rule for businesspeople outside of government and another rule for those inside government or inside the four major banks.

I also find the audit process unusual. Here we have government slipping into the territory of free market lending. I think it is an unusual merging and morphing of the government and non-government sectors for the entity to then come back and be audited by the Auditor-General. The exemptions to part IV of the Trade Practices Act and the issues of collusion and cartels, which have been raised by others, are very real issues of concern. Again, that is not the message to send from this chamber. I spoke a couple of weeks ago quite genuinely about how abhorrent cartel behaviour in Australia was and how happy I was that government legislation on upping the ante on cartel behaviour was being passed through this chamber. This is a disappointing message for this chamber to send. We have government on the one hand slapping business and coming down hard on the business community in creating a free market and in clamping down on cartel behaviour—which is good—but at the same time when this involves a government entity a different set of rules is applied. Again, that is a corporate governance concern.

The other corporate governance issue I would like to relate is this. I welcome the Prime Minister’s comments with regard to executive remuneration. A $2 billion injection into this public-private agreement between the government and non-government sectors begs the question: what skin in the game is coming on executive remuneration from the four bank entities? What sorts of commitments have government had with regard to those issues if there is going to be such a large commitment given to a bank bailout? How do we know that is not going to end up in the wrong pocket and slap everyone for the goodwill and good faith shown? I refer to the comments and frustrations of the US President on the US government’s bailout of AIG and the continuation of the payment of some high executive salaries paid. There is a lead example that should be of concern to us. I would be interested to know if some commitments have been achieved by the executive government with regard to executive remuneration and, if so, what those commitments have been. What skin is in the game with regard to the give from those four major banks?

Finally, I will go to some other issues of concern. I have raised several times in this House the lack of an accountability trail with regard to the public sector losses of the last 12 months on the back of the subprimes, the CDOs and the Lehman Brothers. That ball has continued to roll during the last 12 months and is predicted to roll for some time more.

I have yet to see one person shown to have been in breach of investment guidelines in regard to substantial amounts of taxpayers and ratepayers money in this country having been lost. Hundreds of millions of dollars of taxpayers and ratepayers money have been lost and still the public sector, at local, state and federal level, has not fingered one single person in regard to those losses. I continue to raise this question: either we have one person or many people in breach of public sector standards with regard to investment guidelines or, of more concern, we have some substantial problems with regard to investment guidelines we are setting in this country. It is one or the other. If no-one is going to be held to account for being in breach, I am left only to assume that this country has a structural issue and the investment standards for public sector dollars are incredibly weak.

I raise this issue again in this context because, once again, we are seeing bailouts happen. As a starting point we have some fundamental issues but I would hope that, in a parallel conversation to this, there is an accountability trail of the past 12 months—what on earth has gone wrong and why? I have yet to have that answer from government. I hope that if we are talking about national leadership then that answer comes soon.

I am opposed to this legislation. I certainly recognise the problem and the starting point for it. I think the response, however, is weak. I do not think it has worked through the conceptual details and the principles that are attached to such a substantial move into private sector financing. I think there are fundamental corporate governance issues. I think the commercial property sector has some issues of its own to address about the unsustainable nature of its core business over the last decade. I do not feel comfortable in fundamentally bailing out the white shoe brigade. I think this legislation specifically is too loose on the detail and, as I said, the accountability trail on public sector dollars still remains unanswered.

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