Bob Baldwin (Paterson, Liberal Party, Shadow Minister for Defence Science and Personnel) Share this | Hansard source

I rise today to speak on the Car Dealership Financing Guarantee Appropriation Bill 2009. I am going to spend a couple of moments reflecting on comments from the member for Oxley in his contribution to this debate. The member stated how expeditiously this government had acted on this matter. Well, it is true that this package was introduced on 1 January this year but it is now 28 May. What we have had is—let us be very sure about this—the government guarantee of taxpayers’ money to industry, and yet they have had five months to bring this legislation to the House. That means that this legislation and the actions of this minister have been very, very tardy indeed.

There is no doubt that, with the falling volume of sales, some financial institutions have got very nervous about the motor vehicle market, in particular the withdrawal of GE Money Motor Solutions—a subsidiary of GE Money, which is a division of GE Capital—and GMAC Australia from the automotive and motorcycle finance business of Australia. It created a huge problem. But this problem was exacerbated by this government. This came about directly because of the actions of the Rudd Labor government. When they rushed in and provided that unlimited deposit guarantee, a lot of money was stripped from financial institutions and locked into the banks. So we have seen not market driven per se but government driven readily available finance shifted into the banking sector because people wanted this ironclad, gold plated guarantee by the government—and by that I mean now the taxpayers—through the banks.

This special purpose funding vehicle was initially set at $2 billion, and the current estimates are that the exposure will be more in the vicinity of $550 million, and will operate for about 12 months. It is funded by the big four banks but it is guaranteed by the Commonwealth to provide finance to dealers unable to secure commercial finance. I should clarify at this point that this finance is not for consumers to buy motor vehicles. This finance is purely restricted to the financing of floor stock. I have had discussions with motor vehicle dealers in my area and, without going into individual names, a most interesting comment came from one of the dealers who said, ‘We are paying far too high an interest rate, which means we are making very little profit.’ This guaranteed finance is two per cent above the market rate. He said, ‘If we do not sell the car within 30 to 40 days, the interest starts to rack up significantly at a rate we cannot afford.’ As such, this year they have taken to having no new stock on the floor and to only ordering it in when there is a direct request from customers to purchase a vehicle. I am talking about a motor vehicle dealer in a regional and rural area. This is not the magic mile of motors where you have an endless stream of motor vehicle dealers and lots of floor stock; this is a small country area with a relatively small turnover in motor vehicles and where the cost of providing floor stock for display can be very expensive. Make no bones about it: these motor vehicle dealers need to be extra competitive in their pricing because of the deals that are offered by the magic miles of motors in the major cities.

It is important, though, that this funding was put into place; otherwise, we would have had a collapse of the motor vehicle industry. I will look at some of the figures for motor vehicle sales from the Federal Chamber of Automotive Industries. The new vehicle sales figures for April 2009, released on 5 May 2009, showed that 63,965 passenger motor vehicles, SUVs and commercial vehicles were sold in April 2009—a fall of 23.9 per cent when compared with the same month in 2008. The year-to-date total is 276,935 new vehicles sold—a fall of 20.3 per cent compared with the same period last year—suggesting annual sales of 840,000 in 2009 compared with 1,012,164 in 2008. So not only are sales dropping but also it means the floor stock is sitting on the dealers’ floors for much longer and that, in turn, means greater cost to the dealers. This has occurred, as I said, in part because of the government’s mismanagement of the economy by rushing in to provide unlimited deposit guarantees to the banks. We have already heard that some of the financial institutions, not GE Money or GMAC necessarily but some of the smaller financial institutions, have actually locked up their capital and are not allowing people to withdraw or shift their money to the banks because they would face a severe liquidity problem.

These are the issues we have to deal with, but this is no different from Ruddbank. The Ruddbank was set up for failed overseas financial institutions. The Ruddbank was set up to hold finance for toxic assets—in other words, huge office blocks and facilities in major cities—but it was not available to small to medium enterprises. This was put together with the banks with a government contribution—and, again, that government contribution comes from the taxpayers of Australia. Do those small to medium enterprises that pay their tax and fund the Ruddbank and fund OzCar—this special purpose financing vehicle—have this sort of money? Let me tell you what is happening right now out in the business community. One sector of the building and construction industry is flying along brilliantly because of the first home owner grants—and I think that is a worthy contribution. But it is one sector. Many builders cannot access the capital to actually enter into that market. What is happening is that you are getting a narrowing confine of people able to actually work in the construction industry because of the lack of access to capital and finance. So where is this government’s guarantee of finance to that sector of the industry? The other thing that the First Home Owner Grant scheme has done is to inflate the market in the first home owners finance sector.

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