David Bradbury (Lindsay, Australian Labor Party, Assistant Treasurer ) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The bill amends the International Monetary Agreements Act 1947 to allow Australia to accept two amendments to the terms and conditions of the New Arrangements to Borrow (NAB) of the International Monetary Fund (IMF) adopted by the IMF executive board on 16 November 2011 and 21 December 2011.

The NAB is a voluntary set of credit arrangements between the IMF and a number of its members. Australia has been a participant in the NAB since its inception in 1998.

The purpose of the NAB is to act as the backstop to the normal quota based resources of the IMF, by providing the IMF with recourse to borrow from its members when supplementary resources are needed to forestall or cope with an impairment of the international monetary system, or to deal with a crisis that threatens the stability of the system.

In response to the turmoil of the global financial crisis, in April 2009, G20 leaders in London committed to increase the size of the NAB to give the IMF the resources it needs to play its role in crisis prevention and resolution. Australia played its part in this global effort, and when the expanded NAB, currently totalling 370 billion special drawing rights (SDR), which is around $530 billion, came into effect on 11 March 2011, Australia’s NAB credit line increased from 801 million special drawing rights, which is around $1.2 billion, to around 4.4 billion special drawing rights, which is around $6.3 billion.

This increase in the NAB, whilst a timely and necessary measure, raised the IMF’s reliance on voluntary borrowed resources to an unprecedented level. In order to reduce the IMF’s reliance on voluntary borrowed resources and to maintain the IMF as a quota based institution, members of the IMF agreed on 15 December 2010 to a doubling of IMF quota resources with a corresponding reduction in the size of NAB credit arrangements.

The increase in IMF quotas will come into effect when the necessary threshold of consents has been received by members. The quota increase will also enhance the legitimacy of the IMF by enabling a redistribution of quota and voting shares towards dynamically growing emerging economies, in particular those in the Asian region.

Accordingly, when Australia’s IMF quota increase comes into effect, our NAB commitment will be reduced from its current level of 4.37 billion special drawing rights to 2.22 billion special drawing rights, around $3.2 billion. The 2010 quota increase was included in the 2011-12 budget, and will take effect when the required threshold of consents from IMF members is met.

In addition to decreasing the size of the NAB, this bill will reflect agreed amendments to renew the NAB for a further five-year period, commencing on 17 November 2012, and to facilitate the NAB rollback while avoiding the risk of a temporary negative impact on IMF liquidity.

Debate adjourned.