Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Financial Services) Share this | Hansard source

Labor will support the Australian Business Growth Fund Bill 2019 subject to the amendment moved by the shadow Treasurer in the House but will refer it to a Senate inquiry. The reason for that is there are many unanswered questions and issues regarding the operation and governance of the company that is established by this bill that will be important in deciding whether or not the government should be investing $100 million of taxpayers' funds into a company that is essentially a partnership between the government and some big Australian banks.

This particular bill authorises the government to invest up to $100 million in a Corporations Act company that will soon become the Australian Business Growth Fund. The bill allows the Commonwealth to make arrangements relating to the operations of the fund but won't allow the Commonwealth to control the fund. The fund is intended to increase access to finance for small-to-medium businesses through equity funding by the government and partnering financial institutions such as banks and superannuation funds.

The fund is based on a model proposed in 2018 by the small business ombudsman, Kate Carnell, which was informed by similar funds that exist in the UK and Canada. The bill does not contain much detail on the operational and governance arrangements of the fund, and that is why Labor sees fit to refer this to a Senate inquiry, to try and get more information out of the government about how this fund is going to operate and, importantly, how the government arrangements will work. According to the government, the fund will provide long-term equity capital investments of between $5 million and $15 million to eligible Australian businesses where they have generated annual revenue between $2 million and $100 million and can demonstrate three years of growth and profitability. It can only have an investment stake of between 10 and 40 per cent of eligible businesses, with SME owners maintaining the controlling interests.

In addition to the government's commitment, each of the four major banks have agreed to commit $100 million to the fund, and Macquarie Group and HSBC will each contribute $20 million. The government aims to grow the fund from the current investment capacity of $540 million to $1 billion as it matures. The fund will not be a Commonwealth business enterprise or Commonwealth company; it will be a company incorporated under the Corporations Act, and the Commonwealth effectively will be a minority stakeholder in a private company.

The bill allows the Commonwealth to make arrangements relating to the operations of the fund but it must not control the fund. According to the Treasurer's office, the fund will have four independent directors, including a chair, with the Commonwealth and each of the banks appointing one director. The Commonwealth-appointed director is likely to be a senior Treasury official. The fact that this is a private company and not a GBE raises questions about how the Commonwealth and the banks will work together for that common purpose, and this is hard to know given the fund doesn't have a clear mandate.

These are the questions that we're asking the government to answer and to supply information about to the parliament before we can all make an informed decision about whether or not $100 million of taxpayers' funds should be invested in this company. We need to know about the investment mandate of the fund. Who will be on the board? What happens with profits that are generated by this particular fund? Will it offer dividends to shareholders? And what, importantly, do these banks get out of being involved in this particular fund? These are questions that the government has been unable to answer to date, despite attempts by some outside of parliament and by the opposition to get those questions answered. Yet they expect the parliament to sign off on a $100 million investment of taxpayers' dollars basically without doing their due diligence, without providing the necessary information for due diligence to be done to credit whether or not this is a wise investment.

Labor is correct to be sceptical about the operation of this fund, particularly given that there is a similar example of this that occurred in New South Wales with the establishment of the GO NSW Equity Fund. That is a fund that is currently being wound up because of problems and dubious investments that were made by the fund. According to media reports, one circumstance that related to an agricultural investment made by the fund was controversial because one of the investment advisers was a majority shareholder in an investment that was made by that particular fund. These are all of the issues that have to be sorted out before the parliament should properly sign-off $100 million worth of taxpayers' funds going into this particular investment.

It surprises me somewhat that the banks are making an investment in this. When the former CEO of Westpac appeared before an economics committee and was asked about this, he stated:

I'm not sure it's going to make a material change in the overall growth of the SME sector.

That was the view of the CEO of a bank that's making an investment in this, yet this government expects the parliament to just blindly sign-off on a $100 million investment without the necessary due diligence being done.

There are some concerns that the fund risks replacing other private sector investment into SMEs that would otherwise be able to attain equity finance, rather than providing finance to commercially viable business that are currently missing out. Concerns were also raised about the short time frame provided for public consultation in respect of the exposure draft of this bill, which was only four days. So that consultation period on a $100 million investment of taxpayer funds ran from 4 November to 8 November. That, and the fact that the submissions weren't made public, raised red flags for us on this side of the parliament about this particular fund. And, as I said earlier, the bill doesn't provide much detail around the fund's governance mandate or its operational arrangements. This should be explored as part of a Senate inquiry, particularly given this government's poor record when it comes to fund governance in other areas of government.

In conclusion, we will be supporting the passage of this bill through the House, but it is correct and it is right for the Labor Party to refer this to a Senate inquiry and to ask the government to provide the information, not only to the people who are potentially going to use this fund but also to the Australian public who, no doubt, want to see value for taxpayers' dollars in investments that are being made by the government in cooperation with the banks in establishing a company. On that basis, we request that this bill go to a Senate inquiry to sort out those issues and for a report to be given before it comes back to this place so that we can vote on it. This will ensure that the integrity of the fund is assured and, importantly, that its operational requirements and its governance are first-class and ensure that taxpayers get value for money.

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