Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

I rise to debate the Export Finance and Insurance Corporation Amendment (Finance) Bill 2013. According to its official website, EFIC:

… provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their business overseas.

It is, in fact, the Australian government's export credit agency, and assists export trade, or overseas investments, where the private market is unable to do so. Specifically, EFIC works:

… directly with exporters or with their banks to provide loans, guarantees, bonds and insurance products…

which are otherwise not provided by the private sector. The bill will amend the financial arrangements of EFIC to provide for the payment of a special dividend of $200 million and any adjustments to EFIC's callable capital that may be necessary in the future. The coalition does not oppose this bill.

According to the government, the bill follows recommendations and findings of the 2012 Productivity Commission inquiry report into EFIC's operations. The Productivity Commission found that, where EFIC retains capital above its minimum requirements, this surplus capital has an opportunity cost that is borne by the taxpayer. The commission recommended that legislation be amended to allow the minister to direct EFIC to return surplus capital to the government. Of course, the Productivity Commission report is just a thin excuse. It is a smokescreen for what is actually going on here in terms of this government's real agenda. In fact, this bill essentially has nothing to do with EFIC as such but everything to do with $200 million that is being extracted from it.

The reality is that, despite 100 or more promises from the Prime Minister and the Treasurer that this Labor government would deliver a surplus in 2012-13 and subsequent budgets, they have reneged on those solemn promises. The Prime Minister said that failure was not an option in terms of delivering a surplus in 2012-13. There were no ifs or buts. They would return to a surplus in 2012-13. So the government is desperately casting around for every dollar it can find and EFIC is one of its convenient cash cows. Labor has seriously mislead Australians on its management of the budget and the economy. This represents a massive breach of faith with the Australian community. After four of Australia's biggest surpluses under the previous coalition government, Labor has given Australia the four worst deficits in our history. Now Labor is heading for yet another substantial deficit after promising until it was blue in the face that this would be the year the budget would return to surplus.

The Business Council of Australia warns of a $60 billion budget black hole over the forward estimates alone, while beyond this period the Australian Financial Review estimates a Labor black hole of $120 billion as a result of unfunded spending promises. The Business Council analysis also found that around $15 billion in so-called government savings were in fact timing shifts—in other words, money shuffles. This comes after macroeconomics analysis for the Minerals Council of Australia put the budget structural deficit at an alarming $66 billion in 2011-12, with the problem enduring as far as the eye can see until at least 2025-26. Every hollow log, including EFIC, is being raided. Nonetheless, front-line services are also being struck down. The Mid-Year Economic and Fiscal Outlook in October last year slashed $1.6 billion out of health funding. In the same MYEFO, education was cut by $3.9 billion. In fact, after five years of Labor's so-called 'education revolution' and billions of dollars wasted on overpriced school halls, Australian literacy and numeracy results are actually going backwards. Labor's mining tax adds to the black hole with $15 billion of expenditure linked to it that is not covered in offsetting revenue. Analysis by Deloitte Access Economics shows that Labor added almost $50 billion to the budget in new spending programs just as its massive stimulus splurge was being unwound.

It must be remembered that this is on top of a total stimulus spend amounting to a staggering $87 billion as confirmed by Treasury. The Gillard government is now spending over $90 billion—or about 35 per cent—more compared to the last year of the Howard government, despite inflation of just 14 per cent over the entire period. Over the past four budgets the government has effectively spent $172 billion more than has come in as revenue. Despite the government's spin about spending restraint, real expenditure is set to grow again next year at 4.4 per cent while the terms of trade decline.

The coalition has been sounding the alarm about the structural deficit for several years now. It is the key indicator of a government living way beyond its means. No wonder the government is raiding every nook and cranny of the Public Service. I am surprised that EFIC has been untouched by this government up until now. Labor's budget surplus promise is a fraud. Labor's spending priorities are a mess. Labor's plans for more and new taxing are disastrous. The Labor government is a mess.

The coalition has real plans and real solutions to ensure that we can impose fiscal restraint and proper budget management after five disastrous years of Labor. We will build a stronger, more productive and diverse economy with lower taxes, more efficient government and more productive businesses that will deliver more jobs, higher real incomes and better services for Australians and their families. I point out again, we do not oppose this bill. However EFIC and its clients in the business community have to deal with an incompetent Labor government and have them to thank for this raid on their finances.

Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Link to this | Hansard source

I note that there were no Labor speakers fronting up to try to defend this Export Finance and Insurance Corporation Amendment (Finance) Bill 2013. Presumably, the minister may say something at the end, but no self-respecting member of parliament—

Honourable Members:

Honourable members interjecting—

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for Wide Bay has the call.

Warren Truss (Wide Bay, National Party, Leader of the Nationals) Share this | Link to this | Hansard source

not even, I would have thought, from the government side—would not be embarrassed about this piece of legislation. As we have just heard from the shadow minister for foreign affairs and trade, this is simply a raid on an important financial institution that supports Australian exporters, to prop up the government's hopeless budgetary situation. At the very time our country is building bigger and bigger trade deficits and our manufacturing industry is suffering significant job losses, this government is restricting the capacity of one of the institutions designed to help Australian industries in difficult export markets to win market share, and that makes absolutely no economic sense.

The Export Finance and Insurance Corporation is Australia's export credit agency. EFIC's mandate is to support the growth of Australian business internationally particularly in the market gap where private sector capacity is insufficient or unavailable or unwilling. The Export Finance and Insurance Corporation Amendment (Finance) Bill 2013 will amend the financial arrangements for the Export Finance and Insurance Corporation to provide for the payment of special dividends and any adjustments to EFIC's callable capital that may be necessary in the future. The bill implements a 2012 budget measure and follows some of the findings from the 2012 Productivity Commission inquiry into EFIC's operations. The Productivity Commission in that report found that when EFIC retains capital above its minimum requirements any surplus capital has an opportunity cost that has to be borne by the taxpayer. It recommended that the Export Finance and Insurance Corporation be amended to allow the minister to direct EFIC to return surplus capital to the government, and so this legislation deals with that issue.

Besides allowing for the extraction of $200 million for the current financial year, these amendments provide for an ongoing ministerial direction with respect to EFIC dividends, so we can expect that in the future EFIC will be raided again and again by this government and, in the process, that will clearly limit its capacity to do its job. We need to be frank about the motives for the bill. It is about helping to shore up the government's large budget problems.

The need to reap these dividends is because the Gillard government has been an economic disaster across the board. Labor is the highest spending government in Australian history. This government has inflicted 27 new or increased taxes since coming to office and still it is out trying to find new ways to raise money. It comes in one door and is trucked out the back. The need for the new cash flows comes despite the fact that the Gillard government will reap $70 billion more in revenue this year than in the last budget of the Howard government. Clearly Labor does not have a revenue problem, it has a spending problem. And what is particularly annoying about its spending problem is that so much of it has arisen as a result of waste and mismanagement.

The amendments that are introduced in this bill highlight the government's complete mismanagement of the Australian budget. The Australian Industry Group's Australian Performance of Manufacturing Index this month shows manufacturing in decline for the 12th straight month. Around 110,000 jobs have been lost in Australian manufacturing since 2008. This was the government that talked about 'jobs, jobs, jobs'. Well, it is 'jobs lost, jobs lost, jobs lost'. That has been their mantra. They as a party talk about being supportive of the workers, but they have stood idly by while 110,000 jobs have been lost in the manufacturing sector and, of course, many others in other places.

One of the things that we need to do to help support our manufacturing industry is to give them opportunities in the export sector. This bill reduces those opportunities. The ABS Accounts of Australian Business, including entries and exits from June 2008 to June 2011, reveals that 800,000 small businesses have exited the marketplace since Labor's election. And that was only up to 2011; it is probably more than a million by now. Recent Dun and Bradstreet research shows that small business bankruptcies have jumped by 48 per cent, and small business start-ups have fallen by 95 per cent, over the last 12 months.

The mining tax is a complete flop, raising just $126 million of the promised $2 billion in revenue. But in the true Labor tradition it is actually worse than that. Once you deduct the administrative costs and the company tax offset, the mining tax raised less than $40 million. And what about the carbon tax—again, making it harder for Australian exporters. IBISWorld research says the carbon tax is costing Australian farmers alone $3.2 billion in 2012-13, and that slug will ramp up to $3.7 billion in 2014-15. So, on top of a high Aussie dollar and flat commodity prices, this is the worst possible time to be inflicting a tax of that nature on our farmers, let alone a tax that is not imposed on farmers in any other part of the earth. It is little understood that one in six Australian jobs still hinges on the farm sector, which ripples through the economy to transport, processing, packaging and all the way to the retail end. Today Australia's businesses pay a $23 per tonne penalty for carbon emissions, and that will go up to $24.15 in only a few months time on 1 July. Our businesses and our families are locked into this high carbon price for three years. There are yet more examples of the blatant revenue raising that the Labor government have put in place in order to try and cover up the fact that they cannot control Australia's budget. We have been here before. Labor's legacy has seen this kind of wreckage in state and commonwealth governments now over decades.

The reality is that we need to be doing what we can in these difficult times to try and give our industry whatever opportunities we possibly can. We need to be supporting those in manufacturing who are hanging in there in spite of the increased taxes and lack of competitiveness that have been imposed upon them by this Labor government through its taxation policies, its workplace relations policies and the inconsistency of its approach to support for industry. Under Labor, economic management has descended from sound and responsible decision-making into utter chaos. Stripping $200 million away from EFIC simply reduces its capacity to support Australian exporters at a time when they need it. I know EFIC has always had its critics. Dry-as-a-bone economists, Treasury officials and academics have opposed the very existence of an organisation like EFIC. Perhaps it is not surprising that the Productivity Commission also is a critic and has provided the fig leaf that the government is using for this legislation to strip $200 million away from EFIC's reserves.

Labor is doing this at a time when our trade balance is in crisis also—when our trade deficits continue to rise. The Australian dollar is high. Europe, the US and a range of other countries are maintaining and, in some cases, increasing the subsidies that they are offering to their exporters. Others manipulate their currencies so as to give them a trading advantage. Australian manufacturers and Australian exporters have to carry a huge burden: not only the extra costs that are associated with doing business in this country but also now a government that does not seem to be willing to support them in their efforts.

At the very time when our exporters need more help, Labor is taking money away from them. We are discussing this EFIC legislation in the Federation Chamber today, but downstairs in the other chamber Labor is also attacking the EMDG scheme and taking money away from the export market development grants. There seems to be a consistent disregard for the vital role that our exporters can play in restoring the national economy and making our country work more successfully in the future.

EFIC is a very modest export finance and insurance organisation. It helps small businesses to access markets by supporting their transactions. It is not a mainstream banker; in fact, its charter prevents it from acting in any competitive way with the banks. They take on the business that the bankers will not touch, whether that is because of higher risks or nonconventional lending requirements. The fact that this $200 million is being usurped is in some way a tribute to its success—the fact that there is actually $200 million available is a remarkable tribute to its good management. They operate in a very difficult financial environment; they are facing competition and challenges from huge organisations run competitively by other countries, and over quite a number of years they have managed to accumulate this $200 million that the government is raiding through this legislation.

The point that I just referred to is an important one. Countries like the US, European countries and China back their exporters with billions of dollars worth of export finance. Many deals are consummated between some of these major exporting countries and smaller, poorer nations on the basis of the very, very generous financial terms that are provided to those countries. We can never match the scale of those kinds of operations, but we can help. We actually can help and, unfortunately, the very organisation that has been established for that purpose—EFIC—is going to be less financially capable in the future because of the money being taken away from it in this legislation.

It is important that we do whatever we possibly can to support our exporters. I think EFIC has played a key role in enabling many small businesses and smaller exporters to find a way into an overseas market where previously that may not have been possible. I think we need to be helping and supporting organisations like EFIC to do their job. It seems that Labor does not even want to try, and instead just sees these organisations as yet another milking cow to prop up their extravagant spending.

Craig Emerson (Rankin, Australian Labor Party, Minister for Trade and Competitiveness) Share this | Link to this | Hansard source

As part of my summing up I want to respond to the comments of the shadow trade minister and also to the Leader of the Nationals.

The criticism of this government is that, firstly, we do not support EFIC. Of course, we do. The Productivity Commission did a thorough review and we have accepted a number of those recommendations and rejected others. I do think it is poor form for the Deputy Leader of the Opposition to attack the Productivity Commission for its work. The Leader of the Nationals did the same thing. The Productivity Commission does its very best based on objective evidence. For the alternative government to attack this institution for suggesting that perhaps $200 million could be better used, that its opportunity cost is significant and made a recommendation in this direction, I think is unedifying on the part of the coalition. But I suppose that is its approach to economics, just as its approach has been to assert that this government is a high-taxing government and damaging Australia's competitiveness.

The truth is the highest-taxing government in Australia's history is the previous coalition government. By any standard, that is a fact, as reflected in budget paper No. 1. In fact, in the period from about 2001 to 2007 taxation as a share of gross domestic product was higher than at any time since and higher than any time previously. So if you are looking for gold medals, the gold medal for the highest-taxing government in Australia's history hangs around those members of parliament who were members of the previous coalition government.

It is hypocrisy for the coalition now to claim that this government is a high-taxing government when in fact their policy prescriptions, to the extent that we have been able to squeeze them out of the coalition, are in fact for higher taxes. I refer, for example, to the fact that the coalition has announced that to pay for its gold-plated paid parental leave scheme there will be a 1½ per cent increase in company tax for larger companies. That is an indisputable fact. That is a tax rise. It has been a quite feeble attempt on the part of the coalition to assert that a 1½ per cent increase in the company tax rate for larger businesses is not a tax rise but a 'levy'. This is the oldest trick in the book—to call a tax rise a 'levy' and say it is okay. Ask the major companies if it is okay, if it does affect the competitiveness, if it does affect their returns and they will indicate to you that obviously it does affect their returns.

The Leader of the Opposition has said that these large companies will do the right thing and they will absorb this tax rise and not pass it on to the men and women of Australia in the form of higher prices. He is asserting that the banks and the major retailers will do the right thing and absorb the coalition's 1½ percentage point tax rise. I am not sure from which planet they are formulating these policies, but it is certainly not planet Earth.

There are further proposals to increase tax on some of the most vulnerable people in Australia, and that is through reversing the trebling of the tax-free threshold from $6,000-$18,200. The shadow Treasurer the other day confirmed that this indeed was coalition policy, being directly repudiated by the Leader of the Opposition. But he said during his press conference that this was just $3 per person—completely false. It is around $300 for low-income earners. So embarrassed was the shadow Treasurer in having made that statement that he expunged it from his transcript. It was so clearly wrong—so ridiculous—and, true to form, the coalition just removes these sorts of mistakes from their transcripts. But what is unmistakable is that the coalition would take that tax-free threshold back from $18,200 to $6,000, bringing back, dragging back, into the tax system more than one million Australians. That is indisputably a tax rise.

The coalition has also said that in respect of superannuation for low-income earners it would reinstate the 15 per cent superannuation contributions tax. That is a tax rise. No matter what language they use to seek to disguise the reality, it is a tax rise. Of course, the party that pretends to be the champion of small business has revealed that in respect of the small business tax breaks, where small businesses can claim for immediate deduction any assets valued up to $6,500, that, too, would be scrapped. So everywhere you look you see the coalition behaving to form—that is, it was the highest-taxing government in Australia's history and it plans to be the highest-taxing government in Australia's history if it were re-elected. We do not accept the criticism from them that the decision in this legislation to take $200 million from the EFIC fund would be damaging to EFIC. We have, in fact, received advice from the Productivity Commission that the relevant prudential ratios would be preserved.

I sum up by saying that the Export Finance and Insurance Corporation Amendment (Finance) Bill 2013 makes changes to the financial arrangements of the Export Finance and Insurance Corporation. The 2012 Productivity Commission report on Australia's export credit arrangements recommended, amongst other things, that the EFIC Act be amended to allow the government to direct EFIC to return surplus capital to the Commonwealth. The Productivity Commission found that EFIC held capital well above its minimum prudential requirement, and this surplus capital has an opportunity cost that is borne by the taxpayer. The amendments in this bill give effect to the 2012 budget measure which directed EFIC to pay a $200 million special dividend from EFIC's retained profits, as well as accepting the Productivity Commission's recommendation. The bill also provides for a mechanism to adjust EFIC's core capital should the government consider it is necessary for EFIC to meet its future prudential benchmarks.

Next week I plan to introduce a second EFIC amendment bill to implement further elements of the government's response to the Productivity Commission report. The government's broader response to the Productivity Commission report was announced in January and includes a new mandate for EFIC to ensure more of its resources are devoted to small- and medium-sized enterprises which face financial barriers to exporting. The forthcoming bill will also give effect to EFIC's new powers to enable it to better support Australian businesses participating in global and regional project teams.

Supporting Australian small- and medium-sized enterprises in their exporting endeavours, including through participation in global value chains, is an Asian century white paper objective upon which we are delivering. The measures in this bill, which will ensure greater flexibility in EFIC's financial arrangements, will help support EFIC's continued sound operation into the future, and I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.