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

I rise to speak on Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013. This is the second bill dealing with the Export Finance and Insurance Corporation, EFIC, that has come before parliament this year. As I noted in my speech regarding the previous bill, according to its official website, EFIC provides finance and insurance solutions to help Australian exporters overcome the financial barriers they face when growing their businesses overseas. It is 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 not otherwise able to be provided by the private sector.

The previous bill sought to 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 future. The coalition did not oppose the bill at that time because we knew that this was just another aspect to Labor's failings when it comes to the management of its budget. It was part of the government's raid for every dollar of cash it could raise, and in fact it was surprising that EFIC had been untouched up until that time. This $200 million raid on EFIC came about because the government's finances are in a mess, and on Tuesday night we saw one of the most dishonest budgets presented since Federation. Labor's budget surplus promise is farcical, no-one believes it—I do not why they even bother to say it. The budget has plans for more and new taxes.

Kirsten Livermore (Capricornia, Australian Labor Party) Share this | Link to this | Hansard source

I think that this can be dealt with in the reply from the opposition leader tonight and I will draw the deputy opposition leader back to the bill.

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

I am explaining why EFIC is now $200 million shorter than it had been. And this budget exposes the budget crisis that has engulfed Labor and has caused them to make this call on EFIC's reserves. This government stands for higher debt and more deficits and more taxes, and if the Treasurer had a shred of integrity, he would have stood aside as he is unable to manage the nation's finances. He said he was going to take his medicine, and if he wants to take his medicine—

Honourable members interjecting—

Kirsten Livermore (Capricornia, Australian Labor Party) Share this | Link to this | Hansard source

Order! There will be no interjections and the Deputy Leader of the Opposition will not invite interjections. Please return to the bill.

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

If the Treasurer says that he wants to take his medicine he should be held accountable for the mess that the government's finances are in.

On this present bill, we will not oppose it. Like the previous bill, it follows recommendations and findings of the 2012 Productivity Commission inquiry report into Australia's export credit arrangements. It will principally permit the provision of increased services to small and medium-sized businesses and will permit more of EFIC's resources—reduced resources because of the $200 million raid on its callable reserves—to be directed to Australian small and medium-sized enterprises that face genuine barriers to accessing finance for export operations.

EFIC will also be given a limited expansion of its guarantee powers so that it can better support Australian businesses and their integration into the global value chains. The bill also seeks to ensure that EFIC does not have a competitive advantage over other businesses in the private sector. In summary, the bill implements the Productivity Commission's recommendations that EFIC should be subjected to the government's competitive neutrality principles. Consistent with the recommendations of the Productivity Commission and the 2003 Uhrig review, the bill will also remove the requirement to have a government member on EFIC's board of directors, and we welcome that, because this will increase the board's independence from government. It is expected that the market-failure test and the requirement to focus on small and medium-sized enterprises will reorient EFIC's operations on its commercial account towards supporting commercially viable—and I stress they must be commercially viable—export focused small and medium enterprises seeking to access export finance.

The government notes that the bill is required to ensure EFIC's support in domestic supply chains can only be provided when it involves a contract that is integral to final exports of capital and non-capital goods and services. The government also states that the bill is required to broaden EFIC's guarantee powers to enable EFIC to guarantee loans of foreign based subsidiaries of Australian based small and medium enterprises, where the purpose of the guarantee is to support 'Australian export trade' and where the SME certifies that the guarantee will not result in a net reduction in the number of its employees in Australia during the term of EFIC's guarantee. This will require a new definition of 'Australian export trade' in the bill to ensure that EFIC support is linked to benefits to Australia including through increased exports, access to new markets or increased dividend flows to Australia.

The coalition does not see any particular alarm bells ringing with these changes, and we will always support changes that will enhance EFIC's services to small and medium sized businesses. But I take the opportunity of noting that, like virtually everything this government does, there is always an alternative backstory. In the last EFIC bill, as I pointed out, Labor raided the coffers of EFIC, stripping $200 million out of the agency. Even with this raid the budget figures show that the government will breach the $300 billion debt ceiling limit it proposed by legislation during the forward estimates period. Small businesses have every reason to be disgusted with the way they have been abandoned by this government, as evidenced in Tuesday night's budget.

Labor is at war with small business and it is obvious that Labor never seems to appreciate the fact that small business employs around half of all employees in Australia today. The Treasurer might talk about his budget being about jobs and growth, but he forecast a rise in unemployment and a fall in the rate of economic growth, and small business bears the brunt of that. It will take a change of government for small business to have a government on its side. However, the small changes in this bill may provide some support for small and medium-sized enterprises that are seeking to enter export markets. The coalition will not oppose the bill.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to speak on the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013. EFIC is a very important part of our economy assisting small businesses in their efforts to export to the world market. I agree with the principles of this bill. However, I am concerned by some of the detail. I do not oppose the bill, but some of the detail will need to be looked at very closely in practice to see how it works and to ensure that it does benefit small business. I have experience in this area as I have worked with EFIC to look for export finance and insurance for overseas projects and overseas contracts.

The government in the explanatory memorandum sets out the purpose of this bill as giving 'new powers to the Export Finance and Insurance Corporation to better support Australian small and medium-sized businesses participating in global and regional value chains'. And don't small businesses need that assistance at the moment! The only way our small businesses can compete on the international playing field is if they have some type of competitive advantage. This government, with all its policies, seems to want to take away that competitive advantage. We have seen with the implementation of the carbon tax that the government is simply putting Australian exporters at a competitive disadvantage and making it harder for them to export to overseas markets.

We have heard the government try and pretend that all other nations are having a carbon tax and that many other nations are putting on a carbon tax. The facts are that Australian exporters have to pay the world's highest carbon tax, which simply puts them at a competitive disadvantage. We are putting lead in our exporters' saddlebags, forcing them to compete on export markets overseas but placing them at a competitive disadvantage. That is the background. That is why anything we can do to assist our small and medium sized exporters is very important.

The specific concern I have about this bill is changing what is known as the market gap test to the market failure test. In the explanatory memorandum it notes that the government accepts that competitive neutrality principles should apply to EFIC to ensure that it does not have a net competitive advantage over other business or potential competitors. What that means for small business is that EFIC does not have a competitive advantage over our four major banks, because the reality is that when our small businesses want to seek finance to assist them with their exports, here in Australia they only have a choice of the four big banks.

When we talk about market failure and failure in markets, one thing that is often thrown up about small business when they ask for improvements in competition laws or they suggest that competition is not working is that competition harms competitors. If that is true, how is it possible that all four of our big banks are at the moment substantially increasing their profits at the same time? It simply defies the logic that competition harms competitors. So what we see is the Reserve Bank interest rates, the decline we have seen in the Reserve Bank cash rate, simply not being passed on to the interest rates that small business is paying. Why is that? Why are small businesses in Australia being denied those interest rate decreases that the RBA has mandated? Why are they not being passed on to small business? Again that places Australian small business at a competitive disadvantage. If a small business in Australia is working on a tender in the Middle East, in America, in Europe or somewhere in Asia and they are competing against firms from those countries, those companies have access to finance from their banking systems at much lower rates than Australian exporters do from our banking system here. Why is that? I suggest there are three reasons. Firstly, under this government there has been such a blowout in the risk and such a deterioration in the conditions for small business that the banks are factoring that in and charging small business high rates. The alternative is that the banks are simply gouging small businesses with higher interest rates. The third explanation is a combination of the above. Therefore I have great concern over the wording of this bill when it talks about a market failure test for small businesses seeking finance, especially for their export activities. There is already a very strong case that market failure exists at the moment for a small business seeking finance.

When it comes to the principles of competitive neutrality, they are principles we should support, providing those markets are competitive. However, we have seen hypocrisy from the government in this respect, especially with what is known as the Community Energy Efficiency Program, because that program does not follow the principles of competitive neutrality. It is a program that is only available to government run local councils but it is not available to the small business community. One example of that is in the area of private swimming pools and swimming lessons. If a council owns a swimming pool at which it teaches kids to swim, it is entitled to seek to offset some of the higher electricity costs caused through the carbon tax by seeking a grant through the Community Energy Efficiency Program, but a small business competing against that locally run government institute cannot obtain that same grant. So here we have the government in this bill talking about the importance of competitive neutrality principles but doing the opposite in other directions.

As I said previously, the coalition does not oppose this bill, but we must see how these changes affect it in principle. We must keep a very close eye on them because we do not want to see situations arise in this country where this government does a single thing more to place Australian small businesses at a greater competitive disadvantage than they already are with all the government's mistaken policies.

Kelvin Thomson (Wills, Australian Labor Party, Parliamentary Secretary for Trade) Share this | Link to this | Hansard source

I thank members for their participation in this debate and I thank the opposition for its support of the legislation before us, the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013.

I wish to comment on the remarks made by the member for Hughes concerning the carbon price. He ran out the tired old chestnut of the world's highest carbon tax.

In fact it is not a tax. It is a price on carbon and I am simply referring to the expression which you used, which is manifestly incorrect. In fact, the government has moved to link the carbon price with the carbon price being applied by close to 50 European countries. We will have exactly the same price as those 50 European countries, so it is simply absurd to run out the tired old chestnut that we are applying the world's highest carbon price.

It is manifestly untrue. Small- and medium-sized enterprises are indeed the engine room of job creation in this country and they will be the big winners following passage of this bill. In September 2011 the government commissioned the Productivity Commission to review Australia's export credit arrangements. Our response to the Productivity Commission's review, which was announced earlier this year, set out some adjustments to the mandate, the powers and the governance and financial arrangements of the Export Finance and Insurance Corporation. This bill implements those changes.

The new mandate for the Export Finance and Insurance Corporation will ensure that more of its resources are devoted to small- and medium-sized enterprises which face financial barriers to exporting. The bill also gives the EFIC new powers to enable it to better support Australian businesses participating in global and regional value change. Increasing participation in regional value change will result in increased specialisation and productivity as Australian companies move up the value chain focussing more on high value-added activities.

This bill forms part of a commitment in the Australia in the Asian Century white paper to direct more of EFIC's resources to small- and medium-sized enterprises looking to expand into Asia and other emerging and frontier markets. EFIC already plays a valuable role in assisting exporters but these reforms will help it to keep pace with changes in the global economy, particularly through EFIC's improved ability to support Australian companies to integrate into regional value change.

While EFIC's new focus will be on helping small- and medium-sized enterprises with their overseas endeavours, EFIC's mandate will not preclude it from supporting larger firms should they too face market failures, particularly when doing business in emerging and frontier markets. Through the introduction of a tax equivalent payment and debt neutrality charge or guarantee fee, the bill will also ensure that EFIC does not have a net competitive advantage over other businesses in the private sector. The bill will also remove the government member from EFIC's board. That will increase the board's independence from government.

The amendments in this bill will reorient EFIC's operations towards those small- and medium-sized exporters who face genuine market failures in accessing finance, particularly those businesses operating in frontier and emerging markets.

In getting around Australia in recent times I have been able to talk to a lot of small- and medium-sized enterprises who are doing well in terms of finding markets to which to export their products. They have been able to locate niche areas where quality counts for a great deal, where Australian branding counts for a great deal and is well received overseas, and they are doing well. You tend not to hear those stories. The stories that tend to make it onto the front pages of the media are about businesses closing their doors or laying off workers. Indeed, members of parliament often do not hear the good news stories because the businesses that are doing well do not have any cause to darken our doors, whereas those who are struggling may well seek to make contact with us. I can assure members here and people throughout the community more broadly that there are many Australian businesses that are doing extremely well with niche products, with high-end technology, with innovation and with good design, and they are taking advantage of Australia's reputation for quality and reliability.

The bill demonstrates our strong commitment to delivering on the Australia in the Asian century white paper objectives, improving support to Australian businesses so that they can take advantage of the changes and opportunities occurring in our region. 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.