Belinda Neal (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. How will the government support jobs in the commercial property sector? What has the community reaction been to recent announcements?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank the member for Robertson for her question. The Australian financial system does not have the same problem with toxic assets that the American and European financial systems do, but we are indirectly affected by that problem. In particular, there is a risk that foreign lenders in the Australian economy will withdraw their funding because of problems in their home markets, not because of problems with the businesses that they are lending to in Australia.

In order to protect the Australian economy and to protect jobs, the Australian government is putting in place a mechanism that is designed to ensure against that risk, and that is the Australian Business Investment Partnership, which involves an investment on behalf of the taxpayer of $2 billion, matched by an equivalent amount from the four major Australian banks. That will be there to ensure that we can invest, if and when necessary, in order to provide for circumstances where foreign banks that in normal circumstances would continue lending to Australian enterprises take their money in order to return to their home front.

This will offer liquidity support for major commercial property projects that are in existence or underway. It does involve some exposure to risk on the part of the taxpayer—we have been quite upfront about that—but there are a number of things in place designed to minimise that risk. First, as I indicated, it is a fifty-fifty partnership with the four major banks and lending can only occur if there is a unanimous decision of all five parties—the four banks and the federal government. Second, there will be some provision made at the outset for bad and doubtful debts. Third, there will be an arrangement to ensure that, where any lending occurs, the existing investments of the major banks have to also stay in place. Fourth, detailed prudent lending requirements will be put in place. Fifth, and most importantly, this facility will only be available for a two-year period, so any lending decision must occur within the next two years.

The reason we have to do this is that, if this risk is not protected against, there is a serious risk of fire sales, of a wave of negative impacts rippling through the commercial property sector. In order that we can protect against that, it is necessary to provide this facility in case foreign lenders decide to withdraw funding for what would otherwise be commercially viable businesses. This is an extraordinary measure. That is clear. But it is an extraordinary measure in the face of extraordinary circumstances.

There is one central reason that the government is undertaking this extraordinary measure and that is to sustain and protect jobs. There are something like 150,000 Australian jobs connected to the commercial property sector—white-collar jobs and blue-collar jobs. If we see a pattern of withdrawal of financing and fire sales, those jobs will be seriously under threat. The financing of the commercial property sector and the pricing of commercial properties are connected to much of the Australian economy, and the contagion that might follow from a major collapse of pricing in that sector would have very serious ramifications indeed.

I am asked about the community response, the wider response, to the government’s initiative. I would like to mention a few examples of this. The first is from the Governor of the Reserve Bank, who told the House of Representatives Standing Committee on Economics only a few weeks ago:

I do not have any problem with there being a plan in the top drawer to do that should it be needed.

Opposition Members:

Opposition members interjecting—

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

That was the Governor of the Reserve Bank, who attracts mirth and general derision from the opposition benches. The second response is from the Property Council:

The Property Council urges bi-partisan support for this legislation to inject stability and confidence into the economy.

ABIP is an essential mechanism to inject stability and confidence into commercial property lending.

                        …                   …                   …

This will protect the lending collateral for Australian small businesses, whose jobs and productivity will help lead us out of this economic slump.

Next is Master Builders Australia. Sneer at them as well, why don’t you, while you are on the way through. They said:

Master Builders Australia ... has called for bipartisan support for the early passing of the Australian Business Investment Partnership Limited Bill.

Ian Harper from Access Economics said:

In normal times, the Government ought have no business lending to property or to anything else, but these are extraordinary times.

                        …                   …                   …

If there is a major collapse in asset prices in the commercial property market, that could feed through into domestic housing.

Given the exposure of domestic banks to housing ... that is what we’re trying to avoid at all costs.

Predictably enough, there is one voice in the community reaction that does not go along with the Governor of the Reserve Bank, the Property Council, the Master Builders or indeed Access Economics. Once again, it is the Liberal and National opposition who have indicated their opposition to this very important measure to sustain employment and growth in the Australian economy. The Leader of the Opposition said in response to this:

The market should take its course.

In other words: ‘Let’s just take the risk that we will see widespread collapses in commercial property prices, that we’ll see thousands of jobs lost, that we’ll see a serious withdrawal of foreign funding from this sector and major negative ripple-on ramifications for the Australian economy.’ Yet again, that is the position of the opposition. The government does not believe that is the right approach. The right approach is to act. When the Australian economy is threatened, when jobs are threatened and when businesses are threatened, the Rudd government will take decisive action to protect those businesses and to protect those jobs.