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 (Direct Lending and Other Measures) Bill 2014. At its heart this bill goes to what we in the coalition see as the role of government. It is about freeing the hands of our entrepreneurs—encouraging them to take risks, encouraging them to experiment with new products, and encouraging them to experiment and strive for new markets—because that is what creates the wealth in our nation. In contrast, those on the other side of the chamber are more fixated on central planning where you have a lot of bureaucrats handling the levers of the economy.

The other thing this goes to is our understanding that you have to create the wealth of this country through hard work and through entrepreneurial activity. The welfare of our nation is not a fixed pie, as so many members of the opposition seem to think, so that the size is fixed and you just argue about how to cut it to redistribute the pie. The coalition believe it is about growing the size of the pie. We also need to remember that if we engage in policies that harm our small business community especially, put red tape in their way, burn them with mandating the use of inefficient forms of electricity generation that costs them more, those things can cause the size of the pie to shrink. So we need to make sure that we are doing everything possible to increase the size of the economic pie.

Two hundred years of economic history have shown that the best way to do this is to encourage risk and to provide opportunity because it is the provision of opportunity that creates the innovation that we need to create new goods and services, to create new forms of communication and new methods of transport, to create new medicines. These all help to increase our prosperity.

A fortnight ago we had the 25th anniversary of the fall of the Berlin Wall. One of the reasons the Berlin Wall came down was the failure of central planning, where bureaucrats trying to run the economy took away hope, reward and opportunity. Countries locked behind the Iron Curtain simply did not create the new goods and the new markets to build prosperity. Their economies collapsed, as did their societies, and eventually the Berlin Wall came down.

This bill is all about encouraging our entrepreneurs in export markets. Ultimately, 98 per cent of the world's GDP occurs beyond our shores. When we talk about hope, reward and opportunity, it is not just within the Australian landscape; we need opportunities for Australian exporters to sell their goods to the world. Exporters can do that. In Australia, we produce good products. This bill is part of a suite of measures to encourage people to take the risk in overseas markets. We scrapped the carbon tax at the start because it acted as a reverse tariff. So if you were doing any type of manufacturing work in Australia you would pay the carbon tax, but if you were producing those same goods offshore, you did not pay the tax. That put our manufacturers, our own people, at a competitive disadvantage in the export market field.

The other thing we are doing is free trade agreements. We have seen them with South Korea, with Japan and with China. These absolutely remarkable achievements will create so more opportunities for Australian entrepreneurs to sell goods to those markets, creating wealth and prosperity in this nation. Recently, we had a visit from the Indian Prime Minister. Our free trade agreement with India is a work in progress, another market which our entrepreneurs can target, to find just a little niche to market to more than 1.2 billion Indian people.

One of the issues exporters often have is how they to finance exports. It is great to bring an export order back home in your pocket but often the thing is how you are going to finance it. This is something I can speak about from practical experience. Before I came to this place, I was working in a small family business and I was responsible for a lot of the export orders. I travelled to places like Singapore and Thailand. I did work in Indonesia. I travelled extensively through the Middle East. I did work in the United Arab Emirates, Egypt, Saudi, Oman, Kuwait, Lebanon and even the USA and Canada. You would bundle your samples up under your arm, you would take them on the plane and go to sit in a boardroom to try to get export orders.

As an Australian company, everywhere I went I found that representing an Australian company I was given a great deal of respect. Often the hardest part of the job was not getting the order. It was coming back and organising the production and the finance for that production. That is what Efic does. It helps those small businesses by providing extra opportunity for them to get the finance that they need.

We have an overly concentrated banking sector here in Australia. That is great for bank profits; it is great for people that have shares in the banks. But for those small businesses that pay all of those high fees and charges, it is not so great. So Efic comes in to provide that export finance, where our banks are unable to provide it. It also provides insurance, because when you export there are always the questions of: how you are going to get paid? What guarantee of payment do you have? What are the risks of not getting paid? You often do not have access to Australian court systems when you are dealing overseas. Yes, you can negotiate to obtain a letter of credit, but the questions are: what is the strength of the bank that provides that letter of credit? What are the terms of that letter of credit? What documents do you need to provide? There are many risks in our exporters not getting paid.

Another thing Efic provides is insurance premiums. You can actually go to Efic and say, 'I've got this risk; it's a commercial risk. What's the premium given that I will not get paid?' For a small premium, you take that risk, so if something goes wrong—if there is a political risk or an insolvency risk—you can actually insure against that through Efic. That, again, encourages our entrepreneurs.

An important thing to note is that our financing of Efic through government is not a leg-up, handout or subsidy to our business community; Efic actually returns a profit. Last year it returned a profit of $22 million; it is actually funding itself and returning a profit to the taxpayer for the money that is invested as well as providing these valuable services to our exporters.

In the last budget, this government put another $200 million equity injection into Efic. That will help Efic loan more, provide more funds and become a stronger organisation to get out there and help promote and educate businesses in Australia to have a go at those markets.

Moving on to what this bill does: previously Efic could only fund the export of capital goods. If a business that produced non-capital goods and had an export order and went to Efic, Efic would say, 'Sorry, we can't help you.' This bill changes that. We are opening it up where it can be all goods—capital or non-capital. If you are an Australian business that can go offshore, get an export order, produce the goods in the country and have difficulty with financing the production—as often some things can take 12 months to produce, and it can be 12 months or longer until you actually get paid for the goods you produce—Efic will now give you that working capital. That service is now available, because of the changes that we are making to both capital and non-capital goods.

This is one of the things that we need to do. We went into the last election with the words: hope, reward and opportunity. We want to extend that; we want to encourage the entrepreneurs in our country, we want to encourage those small business people to get out there and have a crack in those export markets. Yes, there are risks. We know a lot of the time companies might have to change their product, or their product may not fit in certain markets. But with 98 per cent of the world's economy beyond our shores, that is the message we want to give to the exporters—those wealth creators that create the wealth for this nation and help expand the size of the pie.

Why are things like this important? We hear a lot of whingeing from the other side about cuts to this and cuts to that, and how unfair it is. Ultimately, the wealth that we create is driven by the entrepreneurs of this country. The more opportunity we can give to them, the greater we free up their hands to get out there and have a go. The more wealth we can create, the more money will flow into the government coffers, which means the more we can spend on many of those much-needed social programs. That is what this is all about.

We can never forget the current financial situation that we are in. Often we talk about debt, deficit, surpluses and balanced budgets, but I think perhaps an easier way to talk about it is that for the last six years the previous government were running this country at a loss. Every year, as the government, they were losing money.

In the last budget—2013-14—where all the parameters were set by the previous Labor government, we actually lost $48½ billion. This was the sixth loss in a year. For every single year they were simply running the country at a loss. What that 'running the country at a loss' means is we have had to borrow the money to cover the loss. There is no problem borrowing money—we are a wealthy country and we can borrow that money. But what it creates is an obligation to pay the interest.

Because the country has been running at a loss for six years, the obligation we have to pay that interest is now $13.5 billion every year. That is just the interest. It is not paying one cent of the principal. It is over $1 billion every single month we as the Commonwealth government now have to find. We have to take that money and pay about 70 per cent of it overseas—out of the country—to pay the debt on the six years of loss. That is why bills like this are so important.

If we are going to dig ourselves out of the hole that the previous Labor government got us into, if we are going to afford the things we need to do in the future—things such as the National Disability Insurance Scheme, and everyone in this parliament talks about how wonderful it is but no one has thought about how we will pay for it all, in full—we need to encourage the entrepreneurs of this nation. We need to encourage them to get out there and take those risks, to expand and to experiment. We want them to get out there and have a crack at those export markets.

That is exactly what this bill does. It opens up the Export Financial Insurance Corporation to enable it to loan for both capital and non-capital goods. Although it is only a small step, it is part of a suite of measures we are making to provide that hopeful and rewarding opportunity to the business people of Australia. They are the ones who create the wealth of this nation and that is what enables us to provide all those valuable social programs. I commend this bill to the House.

Gai Brodtmann (Canberra, Australian Labor Party, Shadow Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

I am pleased to have the opportunity to speak on this export finance and insurance corporation bill, as I believe it will provide benefits to small and medium businesses right around Australia. Members will be aware of my passion for micro and small business. Before entering parliament I ran my own small business for 10 years, so I understand the challenges that small-business owners face. Since entering parliament I have spent a great deal of my time talking to the small-business operators in my electorate of Canberra and advocating for their needs and interests.

Small businesses are the engine room of our economy and we need to develop the policy environment for them to thrive. Small businesses employ more than five million Australians and contribute almost 50 per cent of private-sector employment. That is why I am particularly pleased with the number of amendments that are in this bill on that front. By broadening Efic's ability to lend in all-goods export transactions, not only capital-goods transactions, there is the potential to see this country's export potential grow significantly.

The Export Finance and Insurance Corporation is a statutory body that offers trade finance and insurance services to support Australian exporters. The export credit agency operates on a commercial basis and partners with businesses and banks to provide finances to SMEs that are exporters, companies in an export supply chain, companies looking to expand their business overseas and companies operating in emerging and frontier markets.

Efic provides financial services to companies that have been unable to secure adequate finance from the private sector. It fills a gap in the market. It provides SMEs with an opportunity, a chance that conservative Australian banks just cannot do. It will often take a risk on an SME where a bank would not. This kind of risk is crucial in getting SMEs off the ground and ultimately helps lead to innovation in this country.

Labor's record with the Export Finance Insurance Corporation goes back to its establishment. In 1991, the Hawke Labor government passed the original Export Finance and Insurance Corporation Bill to re-establish the EFIC known as the Export Finance and Insurance Corporation. This original bill established the EFIC as an independent statutory corporation separate from Austrade, offering competitive export credit facilities for Australian exporters. It is pleasing to see that the Export Finance and Insurance Corporation still operates today under the minister's statement of expectations issued by Labor's former minister for trade, Dr Craig Emerson.

There are a number of amendments in this act which will help Australian businesses flourish and I support them wholeheartedly. This bill gives EFIC the ability to lend in all goods export transactions not only capital goods transactions, as I said before. This will expand EFIC's capacity to support Australian businesses, particularly SMEs, as the vast majority of Australian exporters are not capital goods. To implement this measure, it requires deleting the word 'capital' from the definition of an eligible export transaction in the EFIC act. According to data from the Australian Bureau of Statistics, only five per cent of Australian exports are actually capital goods yet under the current EFIC act, EFIC can lend directly in support of capital goods but not all goods. This means EFIC cannot lend for exports for many of the products for which Australia is famous—that is, goods like food and wine. It can, however, support the export of cows but not milk. From a business point of view, this just does not make sense. As I mentioned earlier, allowing EFIC to lend for the other 95 per cent of exports significantly improves Australia's export potential. This is particularly good for small business, particularly good for jobs and particularly good for Australia.

The second substantial amendment effected by this bill is the widening of the competitive neutrality provisions as recommended by the Productivity Commission. Currently such provisions only apply to short-term insurance contracts. This is outdated as EFIC now lists only medium-sized insurance as a product. In its 2012 inquiry report, the Productivity Commission recommended that EFIC should pay a tax equivalent charge and a debt neutrality fee in order to ensure that the EFIC's activity on the commercial account complies with competitive neutrality arrangements. This bill implements this recommendation.

Labor welcomes measures that make it easier for Australian businesses to export their goods internationally and that is why we welcome this bill. Labor is committed to expanding Australia's international trade opportunities to generate jobs and growth for the future and this bill is consistent with that objective.

I want to touch briefly on my experience of EFIC. In my former life I worked with the Department of Foreign Affairs and Trade as a diplomat. I worked on the Middle East desk couple of years. During that time, I worked on Iran and was involved in the normalisation of the relationship with Iran. I commend Tim Fischer, who actually drove the change to that policy. It was a significant change to our policy. We had diplomatic relationships with Iran and had not severed those after 1980, but the relationship was not terribly strong. There had been no exchanges, no business trips, no ministerial visits.

Tim Fischer saw the opportunities that Iran offered, particularly for sugar exporters and for a range of other resources in addition to just services and products. I was involved first up in the normalisation of the relationship and, secondly, in the first ministerial visit to Iran in 10 years. Tim Fischer was the minister at the time and led a business delegation to Tehran. As I said, there was a broad range of people that were involved in that delegation. There were people from BHP, there were people from CSR Sugar. We had people who wanted to export tiles into Iran and people who were looking at exporting gems into Iran. A very broad range of potential exporters took part in that delegation. It was a historic delegation. It was a significant delegation and Efic was there alongside these potential exporters to identify potential opportunities for them to engage in trade with Iran.

The beauty about Efic, too, was the fact that because they understand government and work closely with them they were involved in the discussion that I was also involved in, which was led by BHP, where we engaged in a negotiation on a banking and finance agreement with Iran. They were involved in those discussions. They took about two days to get going and to finalise. Again, it was a major outcome of that visit—not just the symbolic gesture that was shown by actually having a minister there for the first time in 10 years but also the fact that we had this significant business delegation and produced a range of agreements, most importantly, this banking and finance agreement, which in a way provided the framework for exporters to engage in trade and export opportunities with Iran for the future.

In terms of the relationship with Iran, the environment was very different from what it is today. At that stage Khatami had just been elected and Iran was looking to engage in greater liberalisation and was also opening up to the world. There are gestures being shown at the moment that they are also keen to engage more openly with the rest of the world and, in a way, liberalise. But at that stage there was this real sense of energy and momentum for change and a real will for change in that country. It was completely appropriate for the then minister, Tim Fischer, to have a vision for what the relationship could be with Iran at that stage, to engage in that ministerial visit, to take that business delegation to Iran and to engage in negotiating those agreements. It was a very different environment to what we see at the moment, but I do once again applaud the former minister for actually having the vision for that relationship and realising it through that ministerial visit.

Labor especially welcomes measures that benefit small businesses and I personally welcome these measures. As I said to you before, prior to this life I was a diplomat and then after that I had my own small business for 10 years, which was a wonderful experience. I am always looking for mechanisms to improve opportunities for small business and particularly to provide the right policy settings for businesses, both micro and small and medium, to thrive.

I want to take this opportunity to sing the praises of a number of Canberra businesses which have achieved great things on the export front. In October the ACT Chief Minister held her export awards and a number of businesses won those awards. Some of them you know. Aspen Medical—we all know of Aspen Medical—have just won the Ebola contract. That business went from being a kitchen table business 10 to 12 years ago to being an absolute multinational, international civilian and military outfit that is winning awards all over Australia and contracts all over the world. They are a class outfit. Glenn Keys and his team do an extraordinary job. They are based in my electorate here in Canberra and, as I said, they are exporting to the world. Every time I see Glenn he has another clutch of awards under his arm that he has won. He is an extraordinary individual with a great vision and he is always a great contributor to the Canberra community. So it is not surprising that, once again, Aspen Medical won the health and biotechnology award.

I want to sing the praises of another company—that is, Canberra-based technology company Seeing Machines. They were crowned ACT Exporter of the Year. Again, this is an extraordinary company. In Canberra we have these very specialised businesses that usually provide services, but they have a real cutting edge and they really do us proud. Seeing Machines develops state-of-the-art fatigue and distraction monitoring technology. They developed the driver safety system, which is already being used by mining, commercial road transport and automotive industries worldwide. The company was founded in 1999. It now has 95 employees across Canberra, San Francisco, Arizona and Tuscany, with export sales accounting for 53 per cent of its revenue. It was recognised as Exporter of the Year just a month after the company announced a collaboration deal with Samsung that aims to bring face- and eye-tracking technology to the consumer electronics market.

I also want to make mention of another company, Intelledox, who have also done some great work in terms of linking up with South Asia and also exporting to Singapore. They are an outfit that recently made a significant donation to the ANU. They digitalise processes through mobile-ready smart web forms. They are involved in document automation, data transformation and business integration. They are essentially a data management outfit that have done some great work here in Canberra in the Public Service and right across Australia, and now they are exporting to Singapore. They were founded in 1992 and they are headquartered here and have offices in Singapore, New York, London and Toronto, as well as global partners throughout the world. They have been awarded Telstra ACT Business of the Year, they were listed on Anthill Magazine's 2013 Smart 100 list and they were named a BRW Fast 100 company in 2010 and 2011. Again, they are another class outfit from Canberra that is exporting to the world with particularly creative and innovative solutions.

In closing, I want to touch on Labor's record on small business, because it is a very good one and it is a very proud one. We supported and established a range of programs to assist small businesses to expand their trade and export opportunities. The Export Market Development Grants scheme is a terrific example of this. The scheme provides assistance to aspiring and current exporters, and the grants are a key measure in supporting Australia's small and medium-sized business who want to develop export markets. As I said, as a former small business owner myself, I know that deciding to export involves a great deal of risk—it is a real leap of faith. The research, promotion and travel required to identify the markets and build the relationships to begin exporting is incredibly costly. This scheme reimburses a significant amount of eligible export promotion expenses.

Labor, as we know, also increased the small business instant asset write-off threshold from $1,000 to $6,500. In our 2012 budget, we announced that we would provide tax relief for business by allowing them to carry back tax losses of up to $1 million so they could receive a refund against tax already paid. And it was Labor that commissioned the first Small Business Commissioner in this country. Labor is committed to expanding Australia's international trading opportunities to generate jobs and growth for the future, and this bill is consistent with that objective.

Matt Williams (Hindmarsh, Liberal Party) Share this | Link to this | Hansard source

It has been pleasing to hear the member for Hughes initially, and just then my good colleague the member for Canberra, talk about the important role that Efic plays and the gap in the market that it fills. This is where government certainly does have a role. Even more pleasing to hear was the number of companies that the member for Canberra referred to that are exporting their goods and services around the world—in particular, a couple of very successful medical companies. This is where this country needs to go with greater exports and more companies creating more employment, significantly, for our country. It is these exporters that are taking advantage of some of the fastest growing markets around the world. It is so important that we help them flourish and encourage them along their journey. Sometimes their journey can be tough, and that is where a body like Efic comes into play and has an important role. From my own experiences working in trade and investment overseas in Europe, when we were trying to assist some SMEs to get into new markets they did need some assistance from specialists in the field—not that I was the only specialist. There were others, whether it be Austrade or other Australian businessmen already located there, who were able to pass on their expertise and advice to help them enter those markets. Often it is the SMEs too, and this is where Efic really has a significant role to play where the banks are not willing to finance some of their operations. SMEs are the engine room of our economy. They are so important to growing our markets and taking advantage of the opportunities overseas. In terms of those opportunities overseas, I will speak a bit later about the free trade agreements.

A classic in terms of SMEs is the South Australian economy, where around 98 per cent of all enterprises operating are SMEs, and around 90 per cent of those employ fewer than 19 people. When you think about it, these are real microbusinesses, but they are so important in the fabric of our economy. On the weekend I was promoting the Shop Small campaign, which I think is a good initiative. I went around to a few local businesses in Torrensville—the Master of Bread bakery, who were very hospitable and offered some of their fine products, as well as the Little Canton restaurant. At both places the operators are very passionate, dedicated businesspeople who are having a real crack and hoping to make a go. The Little Canton restaurant has been there for a number of years.

In terms of the hard work required, these businesses take risks. They put their houses on the line. We as a government—and all governments for that matter, whether they be state or federal—need to do what we can to assist them to create the best environment. That is why such a measure is important. It broadens the scope for a body like Efic to provide financing. As we have heard before in this place, it reduces regulation and red tape—over $2 billion of savings—which, combined with the repeal of the carbon tax, is giving small businesses a great start to get on and do what they do best.

This is a common-sense reform to broaden the Export Finance and Insurance Corporation's capacity—we have backed this, and I was pleased to hear that Labor are also supporting it in terms of the merits of the bill—because it prioritises an area that can be improved to help the export potential of SMEs, and it allows Efic to focus on helping small and medium-sized Australian companies to seize the opportunities. The main area where it does this is through lending directly to exporters of non-capital goods. The Minister for Small Business, the Minister for Trade and Investment and the Minister for Agriculture—the three combined—must be congratulated for driving some of these changes through.

Prior to these changes, Efic could only lend directly for the export of capital goods that are used in the production of other goods and not an end product. What do we mean by this? As some of my colleagues have pointed out, a classic anomaly is in the area of dairy, which is a significantly growing area for the Australian agricultural sector. We have seen how dairy has been such a boon for the New Zealand economy, with it quadrupling in recent years. This change in the legislation means that Efic can apply both to cows and to milk. This goes broader than just that one example, obviously. This restriction had applied to all other goods, including pharmaceuticals, food and fibre, medical products and consumer goods such as wine.

In these instances Efic provides a financial guarantee to the bank, which will then do the actual lending. It was clear that there was a need to extend the ability of Efic to lend to enterprises that export non-capital goods and not confine them to just a credit guarantee, which at the end of the day equated to extra costs. Again I say that this is a common-sense reform that directly benefits the Australian economy and SMEs.

In terms of the free trade agreements, the recent Japan-Australia Economic Partnership Agreement means that beef exporters will no longer have to pay $70 for a certificate of origin for each shipment. It also means that 97 per cent of our exports to Japan get preferential or duty-free access. These are just a couple of examples. When combined with what we are doing with China and South Korea, there are significant opportunities for our exporters and our SMEs to take advantage of some great foundations and some areas of growth in the economy that can help grow prosperity and, importantly, jobs.

I have heard many stories in my electorate where businesses have found it increasingly difficult to do business. We are making it easier. We are fostering a better environment and letting business get on with what they do best. I commend this bill to the House.

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

I also rise to speak on the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. I agree with what the member for Hindmarsh said about the importance of Efic to our economy and to our businesses. I want to commend the member for Canberra for a characteristically interesting speech about her time working in small business and also working for the Department of Foreign Affairs and Trade.

The original Efic bill was a proud legacy of the Hawke government in 1991. In that bill, they did build on the corporation which is an independent statutory corporation that is separate from Austrade, offering competitive export credit facilities for Australian exporters. Its purpose is to assist Australian companies, as the member for Hindmarsh said, and enable them to win business, to grow internationally and to achieve export success.

As our export credit agency, the corporation operates on a commercial basis and partners with banks to provide financial solutions for businesses that are exporters, Australian companies with export supply chain and Australian companies operating in emerging and frontier markets. They are all very important aspirations. In performing that role, as others have said when they spoke before me, it does give our companies the leg up that some need in the financial world in order to compete. That is particularly in our own region of Asia.

The reason that Labor is supporting the bill before the parliament today is because there are changes that can be made to make sure that Efic keeps up with changes in the composition of our exports and other changes. The Australian Bureau of Statistics says that only five per cent of our exports right now are capital goods. Members would be aware that Efic, as it stands, can only directly assist capital exporters. That does exclude 95 per cent of our exporters, who are people who want to do business in Asia and beyond and who want to export things like wine and products that are not necessarily the capital goods—so that 95 per cent of our export composition.

We do need to make sure that our trade arrangements—Efic and also our broader trade arrangements—keep up with the changes in our economy and the changes in the global economy. This bill certainly does that. The other problem with Efic as it stands that the bill seeks to rectify is that it does lock out from direct assistance a lot of the small and medium enterprises that we do want to be encouraging in our economy. It is important this bill fixes that problem up.

As the member for Canberra mentioned, on this side of the House we do have are proud record of supporting small business. We had in government things like a variety of tax concessions for the two million small businesses, who employ something like five million Australians; we had the tax-loss carry back; we had the instant asset write-off and we had the special depreciation rules for motor vehicles. Unfortunately, these have been scrapped by those opposite. That is an unfortunate development for small businesses in particular. We do want those small businesses and medium businesses to be able to access Efic finance, which is what this bill is all about today.

In terms of the bill itself, it will create amendments to that original Efic act from the Hawke government in 1991. It will give Efic the ability to lend, as I said, in all goods export transactions, not just capital goods transactions. In that way, the most substantial change that the amendment to the act makes is to remove capital from capital goods and the definition of eligible export transactions and make all the consequential amendments that flow from that. It allows direct lending to those exporters of goods, not just capital goods.

Other speakers have mentioned that as it stands right now if you are excluded from direct Efic assistance on the basis that you are a goods exporter and not a capital goods exporter, you previously or until now had to go through all sorts of rigmarole to tee up guarantees and all sorts of arrangements in order to access some assistance. That would be a burden for SMEs in our economy. It is important that they are now eligible for direct assistance after the passage of this bill. As I said before, that brings those other 95 per cent of exporters into the net of people who can be assisted by Efic.

We support the changes. We did have some more ambitious changes on the table when the government changed. Those have now lapsed unfortunately. We did have slightly higher horizons for changes to Efic but in the absence of those, which have lapsed, disappointingly, we do support the changes brought forward by the government for a lot of the reasons that the member for Hindmarsh and the member for Canberra mentioned earlier. In the absence of those three tax concession measures that were dumped by the current government but that existed under the previous government, we are looking for any way we can to help small- and medium-size businesses compete, particularly in our export markets.

So what we hope to see as a consequence of the passage of this bill is more businesses benefiting from the good work that Efic does. We want to see more small- and medium-sized enterprises prosper from that good work and we want to make sure that Australian businesses, not just big businesses and not just exporters of capital goods but all of Australian businesses, can benefit from Efic we want to see them eligible, we want to see them competing and we want to see them succeeding.

Eric Hutchinson (Lyons, Liberal Party) Share this | Link to this | Hansard source

I join the member for Rankin and in acknowledging that I too enjoyed the member for Canberra's contribution to this debate on the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 and her experience that she has had in this area of trade and, indeed, in small businesses. To be brutally honest, to look at the track record of the previous government in terms of small business, it is rather disingenuous when you consider that during six years they had five ministers for small business, start-ups of small businesses in Australia fell through the floor and small business failures under the previous administration increased enormously. Why? Because the burden and the costs on small businesses were going up. The regulatory burden was going up. Taxes were going up. The things that we said when we came to government were indeed about trying to reduce that regulatory burden, trying to reduce the cost of particularly taxes. We have removed the carbon tax, which, most small business in this country were simply unable to pass on. They were not considered as export exposed industries and this hurt enormously.

I note the comments in respect of this Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 before the House, particularly around the notion of competitive neutrality. It is indeed important because this is a government participating in a space where there is other competition. But it has been acknowledged on both sides that it is very worthwhile work that work Efic does. I have had experience of this myself. It is important that that competitive neutrality is indeed adhered to. I acknowledge that part of the changes that are being moved.

Australia is indeed an exporting nation and $300 billion worth of goods were exported out of this country. We should be doing as a government everything we can to help businesses to help themselves. That is indeed what these amendments are intended to do. They are designed to suit support small businesses, medium enterprises and larger businesses as well to do what they do best—that is, get on with business, create markets, explore markets and open markets. Sometimes they need some assistance in funding those opportunities or, as has been mentioned, getting insurance with certain customers, which of course comes at a cost.

I think of my experiences in a previous life within the wool textile industry. I worked for an exporting business in Melbourne. Efic enabled businesses. We had internal provisions around who and who we could not deal with. Without being able to access Efic insurance cover, we would not have been able to do business with many of the customers that were indeed good customers. That was a cost of doing business. It was the cost of risk. But once that Efic insurance cover is approved and once that Efic finance facility is in place it is, indeed, bankable. It is something that you can take to your bank and use as collateral, which then allows you to expand your business. Certainly within the wool-exporting business in this country, access to capital is indeed an enormous challenge from time to time. As has been mentioned, it just simply did not make sense that in this country the five per cent of goods that were eligible for finance under the Efic scheme were capital goods and 95 per cent were something other than capital goods.

The changes made within this bill to reflect the reality of the situation will benefit us enormously. As the member for Canberra mentioned, we could previously get cover for cows but not milk. It does not make any sense at all. These are practical changes that we have seen within this bill. I think of some of the exporters in my home state and indeed in my electorate, meat exporters in the form of JBS Australia, which are based in Longford. I think of the 2013 Regional Exporter of the Year, Tasmanian Quality Meats, which are based in Cressy, also within my electorate. They are currently growing that business enormously. As I said, they were the Australian Regional Exporter of the Year. They particularly have a focus at the moment on the Middle East but I know they have plans, particularly off the back of some of the free trade agreements that we have been able to secure as government since coming to power in 2013. There are opportunities that exist for their business to grow, with the appropriate accreditation and the like, but to grow the opportunities that present in places such as China are, indeed, enormous.

I think also of the seafood exporters, the well-known salmon producers that, as I say, are very much part of the Tasmanian brand. Huon Aquaculture; Tassal and Petuna Seafoods all have operations of some kind or another within my electorate. I think of some of the more innovative seafood businesses, such as Seafoods Tasmania, in dealing with what is a consequence of international trade in terms of sea urchins that are now, unfortunately, very prevalent off the east coast of Tasmania. There have been numerous efforts to find ways of dealing with this invasive species, all of which have failed. It has now turned into a commercial opportunity. The work that Seafoods Tasmania do at Goshen, a small town just north of St Helens in my electorate, involves harvesting those sea urchins. Those of you who enjoy sushi will know this as izumi if you are in Japan. The work that they are doing there to turn that into an export product, both into China, Hong Kong, Singapore and also Japan is tremendous.

Last year one of the recipients of support from Efic was a Tasmania-based shipbuilding company, Incat. They make outstanding catamarans that sail all around the world. They receive some Efic support to fund a liquid natural gas powered ferry, the first in the world. This is outstanding work. Another business in the north-west of the state, Specialised Vehicle Solutions, have also received support from Efic in the past 12 months.

Exporting is not an easy business. I go back to my former life within the wool industry. Many of the retail businesses around get paid in cash and that is wonderful. But very rarely in the business I was involved in did you ever see cash. It was done on terms; it would be for 30 days if you were really, really lucky. More often than not, it was done on 90 day terms. I remember back in the late eighties, and some might say the heady days of the wool industry, it was a common practice to have terms when doing business in the Soviet Union—as it was at the time—of 180 days, and in some cases 360 days. The notion of cash and therefore the capacity to be able to fund exports and business, is indeed a challenge—particularly, for smaller businesses that are growing and finding their way. There is no question that this is a real challenge for many of them.

These are businesses indeed. I note the member for Hughes's contribution in this debate. These people are indeed the wealth creators of our nation, and we should be doing everything we can to support them. It is through the work that they do, the people they employ and the taxes they ultimately pay that allows this nation is able to—if we manage the books properly—pay for the services that the people of Australia rightly expect their government to provide. It is not a magic pudding though and therefore governments should—like households and small businesses—learn to live within their means.

This is unfortunately and tragically the great failure of the six years that we had under the previous Labor government. They simply could not live within their means. This is the legacy that we have inherited; this is the challenge that we are dealing with. Yes, some of the decisions that we have been asked to make have been difficult decisions—nobody disputes that for one second—but they are challenges that we are up for. They are challenges that the people of Australia truly expect us to get on with. This is our lot in life.

I welcome these changes. An additional $200 million of capital is, indeed, timely. Taking a look at the role of Efic, I remind all who may take an interest in this space, it is competing in an area where there are other providers of these services; we should always remember that. The competitive neutrality is acknowledged within the changes in this bill. We should always be mindful—and that process should be reviewed from time to time—that we are not getting into a space where the private sector and others can provide these services appropriately. But, as it stands at the moment, we fully support the work that Efic does and the roles that they play to support, capitalise, fund and provide opportunities for small, medium and large businesses in this country selling Australian produce around the world.

The changes around increasing this to include non-capital goods is common sense. Our job is to also communicate that to businesses that are looking to expand their operations. Part of the role that we play as parliamentarians is to make sure that businesses that are looking to grow their business, create more jobs and export products out of this country are aware of the opportunities that they have under the Efic Corporation. Thank you very much for the opportunity to participate in this debate.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the coalition government's continued commitment to small and medium businesses in Australia, as evidenced by the intent of the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. While this coalition government continues to make great progress in the freeing up of markets under our trade agreement framework, which has seen many new markets opened up for Australian businesses, there still needs to be more in the way of support for business to truly expand internationally.

This is the role of the Export Finance and Insurance Corporation, Efic. They have been doing a good job of helping exporters to secure finance, insurance, risk assessments and the advice that they need. However, direct lending has only been available to those exporters who compete in the capital goods markets. To understand why this is such a problem, we need to define what is a capital good. The Oxford English Dictionary defines capital goods as 'goods that are used in producing other goods, rather than being bought by consumers'. That is straightforward enough but very limiting, as Australia does not produce many capital goods. This can create some confusion. As colleagues have said before me, if a cow is exported to be a producer of milk, but not meat, it can be considered a capital good. However, cattle exported for meat are considered a consumer good. That is why the amendments proposed in this bill are so important for businesses who deal in consumer goods, those goods bought by the end consumer, not by producers.

Let us consider an example. If Poppy's Chocolate, based in the member for Forde's electorate, were to export machinery for making chocolate to Japan, they would be able to access direct funding for this venture. However, if they wanted to sell their primary product—that is, the eating chocolate—to Japan, they would not qualify for direct funding from Efic. While I am all for businesses diversifying and innovating, this should not be at the cost of their primary business. Why should we not support those businesses selling consumer goods to expand their operations to take advantage of the many new trade agreements negotiated by the coalition government? Australia produces some fine consumer goods, and the rest of the world clamours for them in certain markets. Not that many years ago, there was in fact a Vegemite shortage in Japan. Tim Tams gained a cult following in the USA following the Sydney 2000 Olympics. Asia has an insatiable appetite for ice cream that Australian producers could help fill if they could just get their goods into those markets.

On this side of the House, we understand that business occasionally needs a helping hand in order to expand. I was disappointed that the member for Rankin claimed that Labor had 'higher horizons' for Efic and wanted to help Efic, yet, when the member for Rankin was part of the then Labor Treasurer's team, they produced a shameful record with Efic. Labor gutted Efic, ripping $200 million of equity out of Efic as a one-off special dividend in the 2012 budget when they were indulging in a desperate search for their delusional surplus, scratching down the back of the couch looking for the loose change to try to prop up the surplus they claimed several times but never delivered. In its 2013 annual report, Efic noted that this caused 'material breaches' of prudential guidelines.

The coalition has reversed that raid on Efic's capital base, restoring $200 million of new equity capital to Efic in the 2014 budget. Once again, the coalition are demonstrating our genuine support for small business and small business exporters. Larger businesses mean more employees, which means fewer people out of work and a broader tax base—or, to put it simply for those opposite: less outgoings and more incomings for the government to pay for health, education, roads and infrastructure without needing to continually increase the limit on the nation's credit card.

The coalition government understand how business works. We do not see business as a milch cow, an unlimited supply of money to be taxed. We understand the drive, ambition and dedication it takes to put your house on the line to fund your dream. We appreciate that business owners are usually the last ones paid if there is anything left over after they have paid their employees and their creditors. So we are offering them a hand up, with a simple change to the goods that qualify for direct funding from Efic.

I know that Labor would prefer we did not give business a helping hand because that is not what they do. Rather than support businesses to build a stronger economy, they would tax them to the point of breaking. But the coalition is a government that fosters trade and supports local companies to take advantage of the opportunities the many new and upcoming trade agreements will bring to Australian businesses. The coalition government is here to help. With this change, thousands of small and medium enterprises will be able to take on the world. Surely, that is a goal worth pursuing.

Once again, the people of Australia are faced with a stark contrast: a coalition that fosters business and creates jobs and growth or the antithesis of our beliefs, the 'tear business down' mentality of Labor. This bill makes a small but very meaningful change to the operation of Efic, and I commend the bill to the House.

Rick Wilson (O'Connor, Liberal Party) Share this | Link to this | Hansard source

I speak today in support of the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. This bill will amend the Efic Act to lift the restrictions on direct lending to allow Efic to provide loans to exporters of both capital and non-capital goods. It is unambiguously a good bill for small business.

Previously, we heard the member for Canberra waxing lyrically about Labor's proud record on small business and talking up its record on the Export Market Development Grants Scheme. In fact, Labor gutted the Export Market Development Grants Scheme. It took $25 million of funding out of that scheme, and the coalition has delivered on its election promise to put $50 million back into that scheme.

In terms of small business, Labor also presided over 500 job losses in the small to medium enterprise sector. It introduced a huge number of small business-unfriendly acts such as expanding the reach of the so-called unfair dismissal laws. It also introduced the carbon tax, which had a deleterious impact across a whole range of small and medium exporters.

But I go back to the bill. Currently, the Efic Act only allows for the lending of money to support the export of capital goods. Capital goods are defined as goods which are used to produce other goods, rather than the end product. They include machinery and goods used to manufacture products. Capital goods currently make up only five per cent of Australia's exports. Some suggest that capital goods producers may be better placed to fund their own export endeavours than those seeking to export non-capital goods. Non-capital goods, on the other hand, are end products or consumer goods.

Currently, when an exporter requires funds for the export of non-capital goods, Efic cannot lend to them directly but can facilitate a loan by providing a guarantee to the exporter's bank. This often results in duplication of paperwork, multiple or increased fees and extended loan-processing times. Small- to medium-sized enterprises, SMEs, are the main producers of non-capital goods and thus bear the brunt of these inefficiencies and extra costs.

Small to medium enterprises, by definition, are businesses employing less than100 people or with a turnover of less than $100 million. They make up the majority of the enterprises in my electorate of O'Connor. This bill, when passed, will permit Efic to lend directly to small to medium enterprises and will allow SMEs to capitalise on global trade opportunities. For the primary producers of my electorate of O'Connor, these legislative changes will have a significant impact.

Non-capital, or consumer goods, are largely the realm of rural and regional areas. These include beef, sheep meat, livestock, fibre, horticulture, wine, grains, flour, milk and dairy produce. These primary producers are usually SMEs who are often most hampered in their efforts to secure export finance through conventional lenders like the banks.

Banks are traditionally dependent upon security, which is often lacking in export contracts, particularly for first-time exporters or for those exporting to emerging markets. Many of my constituents relay stories of waiting times of over a year to have bank finance approved or, worse still, to have their finance knocked back. Many have received sound and helpful advice from Efic and welcome the opportunity these amendments will afford them to engage directly with Efic for the financial support of their export endeavours. This amendment bill, when passed, will enable Efic to lend for the other 95 per cent of exported goods and therefore improve SME export potential and advance regional and rural economies.

In my electorate, there are many SMEs kicking goals in export markets, and I am proud to announce that one of this year's big winners in the recent Western Australian Industry and Export Awards came from the horticultural food bowl of my electorate of Manjimup. I congratulate the Truffle & Wine Company on being awarded both the Premier's Award for Excellence and the Regional Exporter of the Year Award. They produce over five tonnes of premium tuber melanosporum, or black winter truffles, of which over 95 per cent are exported. They are keenly sought after by top chefs and Michelin-starred restaurants worldwide. The Truffle & Wine Company is the single largest producer of black winter truffles in the world and benefits from being able to supply counterseasonal produce to the lucrative and growing European and Asian markets.

I take this opportunity to thank Cassandra McCredden and Stuart Hutchinson for their hospitality on my recent visit to their Manjimup truffiere and I wish the team at the Truffle & Wine Company every success in the coming 52nd Australian Export Awards on 27th November.

I would like to further acknowledge O'Connor's burgeoning truffle industry with the Manjimup area alone having over 30 truffieres producing over 80 per cent of Australia's truffles. Truffle Producers of Western Australia's Chairman, Mark Horwood, maintains our WA product is lauded in Europe but the industry has so far been unable to crack the Chinese market. Mr Horwood believes that the recent China-Australia Free Trade Agreement will give the Australian produce the seal of approval that Chinese buyers need and anticipates that truffle production will treble in the next five years.

Another former winner of the WA export industry award for agribusiness is Ferngrove Vineyards in the Franklin River winegrowing region in my electorate. Ferngrove is a large exporter of premium wines to China and I do not doubt their business will also be further enhanced by last week's signing of the China-Australia Free Trade Agreement.

Local fertiliser manufacturers Australian Mineral Fertilisers recently shared with me their story of the financial barriers they faced when their small regional manufacturing plant tried to break into the lucrative export market. AMF are an innovative SME in the Great Southern region of WA. They produce high-performance, non-toxic fertilisers through the blending of essential minerals and specially coated soil microbes to create a powerful 'living' fertiliser for both domestic and export markets. AMF ultimately secured bank finance through a long and frustrating process, complicated by the low value of their landholding intended as security and the uncertainty of emerging markets that they sought to export into; yet their product is non-toxic, is certified organic and fetches a premium in an increasingly environmentally conscious consumer market. Surely, these are the sorts of producers we should be supporting. CEO and ex-local farmer Rob Edkins firmly believes in regional enterprise and seeks to continue to provide his small regional community with sustainable employment opportunities through expanding the export aspect of his Tenterden based business.

Last month, I was joined by the Minister for Small Business, the Hon. Bruce Billson, on a tour of Kalgoorlie drilling component manufacturer Harlsan Industries. Brothers and co-owners Harley and Dean Hollier received advice from Efic which assisted them in securing independent funding for the export of their RC drilling equipment. Together, they welcome any legislative changes that would simplify the funding of their exports into the developing markets of Africa, South America, Mongolia and South-East Asia.

Many other SMEs in my electorate have expressed the opinion that there appears to be considerable risk aversion and bias against lending by traditional institutions and that establishing markets in developing countries is not secure enough for most banks. Efic's 'capability based' approach supports loans based on an exporter's ability to meet their contract, rather than the traditional bank approach to lending to SMEs with the most tangible security. It therefore currently supports enterprises that can demonstrate the best business practice in the export of their capital goods. Expanding this approach to the producers of non-capital goods will only enhance the potential of SMEs to export our premium primary produce to the world.

Wellard Rural Exports is one of the world's leading livestock exporters and transports a large proportion of the cattle and sheep originating from my electorate to distant markets.

A division having been called in the House of Representatives—

Sitting suspended from 11:53 to 12:07

Recently, Efic assisted Wellard to facilitate the export of 2,000 quality dairy cattle to Sri Lanka as part of their commitment to help establish a 22,500-head high-production dairy herd in that country. To fulfil the initial contract, Wellard was required to arrange finance for the buyer. Sri Lanka was still dealing with the aftermath of civil war and found themselves with limited access to foreign capital. Given the general unwillingness of the private sector to fund exports into some emerging frontier markets, Efic stepped in to provide a guarantee to an international bank to provide a loan or buyer finance to the Sri Lankan government. The success of this first contract has led Wellard to winning more substantial contracts in Sri Lanka. Wellard similarly maintain, and I quote from a recent personal communication:

EFIC has been a very good supporter of the development of the live export industry … when developing the beef breeder and dairy heifer market in China."

EFIC also provided a credit facility to an Eastern European cattle importer to import Australian beef breeding cattle.

As a young farmer I had a considerable amount of income exposed to an Iraqi wheat debt incurred from the sale of wheat by the Australian Wheat Board to Iraq on credit terms over the period 1988-90. Efic agreed to insure between 70 and 80 per cent of any payment default on these wheat exports to Iraq, with the Australian Wheat Board bearing the remaining exposure. Following its invasion of Kuwait in 1990 and the subsequent imposition of United Nations economic sanctions, Iraq defaulted on payments. Efic subsequently paid credit insurance claims. After the fall of Saddam Hussein's regime, the international community decided to support Iraq's economic recovery. ln November 2004, the Paris Club of creditors agreed to provide Iraq with 80 per cent debt forgiveness. The remaining debt stock is scheduled to be repaid over the 17 years from 2011. To date, Iraq has paid all principal and interest instalments in full and on time. Efic receives these repayments from Iraq semi-annually, and passes the wheat growers' portion to Agrium Asia Pacific, or APPI, which now owns the Australian Wheat Board's assets. APPI then distributes the proceeds to the Australian farmers. Overall, wheat farmers are likely to recover about 84 per cent of the original contract value, comprising the Efic claim payment of around 80 per cent and the Paris Club recovery of 20 per cent of the remaining uninsured exposure.

Efic is managing this process with Iraq to ensure that Australian wheat farmers like me will receive their entitled share of repayments. I make note that Efic no longer provides short-term trade credit insurance, having sold this aspect of the business to the private sector in 2003. I thank the House for indulging me in recounting my personal story and use it to reiterate that Efic has already played an important role in maximising Australia's trade potential.

The changes proposed in this amendment bill will expand upon and enhance the ability of Efic to ensure that no Australian enterprise where they produce a capital product, such as a piece of mining or manufacturing equipment, or a non-capital good, such as O'Connor's renowned primary produce, will be denied the opportunity to grow their business overseas simply because they are unable to access finance. These new direct lending arrangements will remove the need for exporters of non-capital goods to obtain a guarantee from Efic before they can secure funds from a bank. This doubled the due diligence processing time and required duplication of documentation and considerable additional legal fees. This will become a real benefit to all exporters by reducing the time and paperwork required to access Efic support. This will ensure that Efic is able to provide products and services that will match the evolving needs of modern businesses.

This bill forms an integral part of Minister Robb's refocus on providing financial service to SMEs seeking to capitalise on global trade opportunities, so I give today's Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 my unreserved support.

Nickolas Varvaris (Barton, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 and thank the House for this opportunity. The bill will create amendments to the Export Finance and Insurance Corporation Act 1991 and by doing so will vastly improve the commercial opportunities of the many Australian export businesses right around the country. Today's bill is another piece of important legislation that has been analysed, reviewed and amended by this side of government. This legislation is crucial and an ongoing part of the coalition's plan to revive Australian's small- to medium-size enterprises, which employ the largest number of employees and make up the bulk of our economy.

The opportunity to speak on this bill today has coincided perfectly with the freshly inked trade agreements which have concluded with China, Korea and Japan. Existing tariffs on many popular exports such as agriculture, horticulture and seafood will phase out in the next few years, meaning billions of dollars can be added to our economy. In light of this historic agreement we must not let existing legislation hinder business opportunities and instead work in combination to achieve the optimum result for our export enterprises. Both the bill and the respective trade agreements will allow prospects of export trading with these countries to flourish. The timing could not have been better, and I am certain that many export businesses, from the traditional agriculture sector to retail goods, are breathing a sigh of relief knowing their future is viable under the coalition.

Today's bill enhances the capacity of the Export Finance and Insurance Corporation to back small- and medium-size businesses seeking to capitalise on opportunities for global trade. As our nation and our government supports and encourages entrepreneurs, we must do all that we can to ensure opportunities that are presented to businesses can be seized and accomplished without unnecessary obstacles.

Globalised and increasingly integrated trading means businesses often look beyond state borders to seek and relish new commercial opportunities. This could be a combination offering a niche product with domestic expertise that is best suited to other markets or a multinational cooperative with other communities that can benefit from our products or services. Whatever the reason may be, this government fully stands behind the plethora of aspiring entrepreneurs and businesses that want to create and compete. Furthermore, whenever prospects arise for such businesses to export their goods and services, our policies should allow for employment and growth opportunities, as these flow directly back into the Australian economy.

We are a small nation, but the goods and services that we provide are second to none, and these are not just limited to the resources sector. Australia's wide range of consumer goods, including pharmaceuticals, beef, sheep meat, livestock, horticulture products, wine, flour, fibre and cheese, coupled with increased international exposure from trade shows and tourism, means people are becoming increasingly aware of the exceptional quality and thus demand for these items. Statistics show that within the last two financial years there was an increase from 44,000 exports of goods and services to over 45,000. Whilst the biggest contributor of exported goods is still the mining sector, general use of service exporters is on the rise. It would be a real shame for Australian businesses to lose precious commercial opportunities to export our goods due to a lack of finance, excessive red tape and bureaucracy. The coalition has always been committed to strengthening the opportunities to support our small and medium-sized businesses, and this legislation today provides a vital pathway for that.

The Export Finance and Insurance Corporation plays a crucial role in assisting export business ventures, stepping in to provide insurance and financial backing where traditional lenders have declined assistance. Efic was established as Australia's credit agency and operates commercially, partnering with the banks to provide financial solutions to various Australian small and medium-sized exporters, and has been essential in helping exporters take advantage of potential contract opportunities that might otherwise have been impossible.

It is important not to underestimate how much Australian exporters contribute to our economy and to our GDP. Exports are worth approximately $1 out of every $5 in Australia's national income. The International Monetary Fund has previously stated in its World Economic Outlook that Australia's export volumes will continue to fuel our economy and potentially taper the negative effects of a downturn in mining investments. Since the global financial crisis, the general slump of economies and their interdependence means that we must allow policies to provide businesses the resilience to withstand change. While some industries are subject to cyclical change and subdued growth, others may experience growth and expansion. Nevertheless, none should have to suffer from unnecessary red tape and bureaucratic burden where none is needed. Enhanced efficiencies in various competitive export sectors can significantly increase sales potential and renew further investment in the Australian economy.

It is estimated that changes to the Export Finance and Insurance Corporation in terms of direct lending will help overcome some of the barriers exporters face. Currently, many Australian products that we excel in, such as those previously mentioned—pharmaceuticals, beef, sheep meat, livestock, horticultural products, wine, flour, fibres and cheese—are not considered capital goods, as they are classified as consumer goods. Yet the Export Finance and Insurance Corporation can only lend to exporters of capital goods. In reality, however, capital goods make up a mere five per cent of all Australian goods exported. So, whilst the Export Finance and Insurance Corporation can directly lend for exporting dairy cows, it cannot directly lend to those wishing to export milk.

In addition, exporters of non-capital goods have traditionally had to obtain a guarantee from the Export Finance and Insurance Corporation before securing funds from a bank, meaning additional time is spent on paperwork before any transaction actually occurs. In these scenarios, Efic provides a financial guarantee to the bank at the request of the exporter, and the bank then directly lends the finances. The application to Efic, as well as to the bank, means two separate lots of credit approvals, associated documentation, administration and legal fees.

The coalition is committed to ensuring new direct lending arrangements that will remove the current restrictions in place for Australian exporters and the excessive red tape. When business compliance costs amount to approximately $1 billion per annum, this measure is vital to restoring faith to our regional, rural and general exporting sector. Mr Deputy Speaker Porter, you can imagine the potential monetary loss to the economy and to businesses. Changes to the Efic legislation will ensure regional and rural economies can thrive, with demand from emerging and developed international markets.

Fundamentally, the measure contained in this legislation supports our election commitment to helping Australian businesses by a reduction in compliance costs. Time and again, small businesses right around Australia speak of the compliance costs which make and break their enterprises, and we owe it to them to provide the right framework that would cultivate ongoing opportunities. Enabling Efic to facilitate more financial options for Australian exporters is an important start. Expanding the scope and power of Efic is not targeted at marginalising private sector contributions; rather, it is about helping commercially viable exporters overcome financial obstacles that would otherwise prevent them from reaching overseas markets. The coalition have always been the party that stood for encouraging and nurturing current and future entrepreneurs, and we believe the change proposed today is essential to building a stronger and successful economy.

Today's positive reforms follow on from this government's earlier enhancement for SME exporters in the 2014-15 budget, where an injection of $200 million was granted to Efic. This injection was much needed after a prior raid by the opposition. Restoration of Efic's finances means it can focus on this objective of helping and supporting Australian exporters, especially the small- to medium-sized enterprises, which make up the engine room of our economy.

Today's bill is so important to Australian export businesses because its implementation will ultimately increase Australia's reputation and competitiveness on the international stage. A recent survey of Australian export businesses by the Export Council of Australia revealed that the majority of difficulties experienced by exporters were regulatory compliance and access to finance respectively. As smaller companies rely more on international revenue from developed and emerging markets, increased or difficult bureaucracies would simply render them unfeasible. The survey further revealed that the majority of businesses, regardless of size, engage in a variety of business operations not limited to outsourcing, foreign investment, production and research and development. Australian exports amounted to over $310 billion in recent years. This demonstrates the potential of Australian businesses and, more importantly, how much more potential there is with the right policies in place.

As global trends point to trade liberalisation, encouraging consumers, stakeholders and businesses working together, the government must ensure that export businesses have the right backing and support to enable them to reach their full potential. As I have discussed before, the rewards for businesses have a flow-on effect to our society, by employing Australians and contributing to our overall economy. With our two significant trade partnerships with Japan and China, we can now expect further growth and opportunities.

The coalition has always been at the forefront of backing entrepreneurs. Expanding Efic will allow businesses which need capital to tap into current and emerging markets and to do so without red tape and bureaucracy. This side of government fully believes in and supports our exporters whether they are rural, regional or metropolitan based businesses. Australia's range of consumer goods and services deserve international reach for its outstanding quality and a chance to present these on an international scale should be fostered.

Today's bill is one step to forging a supportive path for exporters and continuing to strengthen our economy. The Export Finance and Insurance Corporation is often the vital link between small- to medium-sized enterprises through the provision of insurance and finance. By previously having their support limited to only those with capital goods, which is a mere five per cent of all Australian exports, it has seen some of Australian businesses simply unable to gain momentum or a foothold in emerging markets.

Today's measure will ensure that all businesses can have the opportunity to expand into international markets by streamlining financial processes and alleviating unnecessary red tape. I commend the bill to the House.

Andrew Robb (Goldstein, Liberal Party, Minister for Trade and Investment) Share this | Link to this | Hansard source

I rise to sum up the government's case for the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. The government is firmly committed to reducing red tape. This bill achieves that goal. Amendments to the Export Finance and Insurance Corporation Act benefit small and medium sized businesses while at the same time reducing business compliance costs by $1 billion per annum. The Export Finance and Insurance Corporation, Efic, helps ensure Australian small and medium sized businesses have access to the finance they need to grow their business overseas. As has been stated before, the goal of this bill is to increase Efic's capacity to finance small and medium sized businesses seeking to capitalise on global trade opportunities. These global trade opportunities benefit all and they are about to get a whole lot bigger with the commencement of free trade agreements with Korea, Japan and now China covering over 50 per cent of all exports from Australia.

Efic plays an important role in supplementing the provision of credit for exporters and we are repositioning it to best support exporters into the future. Efic has played a very strong role over many decades and is the one financial body in Australia that has expertise in assessing the risk in small and developing nations in our region. It often provides important opportunities for exporters to get those opportunities when they would not get finance from other financial institutions. They fill the gap. They fill the financial gap that exists for these sorts of lending, especially to small and medium businesses.

This builds on our restoration of $200 million in capital to Efic in the recent budget, reversing Labor's shameful act of economic vandalism when it ripped out a $200 million special dividend in 2013 and caused Efic to be placed into a position where they were not able to meet the prudential requirements that they had placed on themselves in order to act in a responsible manner. This was a highly irresponsible act and it gives the lie to a number of the contributions that we have heard from those opposite during this debate.

Efic is currently only able to provide direct lending for the export of capital goods—items used in the production of other goods—but cannot directly lend for the export of goods themselves. For instance, this means that presently, as other speakers have noted, Efic can provide direct lending for the export of cows but not for the export of milk. Efic can provide direct lending for the export of bull semen, a capital good, but not a steer that is destined to be a hamburger. This is an oversight from the outset of Efic, which makes no sense and has had quite a costly consequence over time. This means that 95 per cent of goods exported from Australia are currently denied direct lending support from Efic, as only five per cent of Australian goods are capital goods.

To implement this measure in this bill we are simply removing one word—that is, 'capital'—from the definition of an eligible export transaction in the Efic Act. If you like, it is one very small step for Efic but one giant leap for our SME exporters. By allowing direct lending arrangements, exporters of non-capital goods will no longer need to go through a two-step process of first obtaining a guarantee from Efic and then finding a bank willing to lend against that guarantee. These outdated arrangements double the due diligence processing time for export credits and require two sets of documentation and legal fees. Through these changes, these duplicated processes will go—a reduction, a serious reduction, in red tape and costs. Business will no longer need to pay a bank a fee of up to three per cent simply to have the bank accept a AAA-rated Efic guarantee. These changes will save businesses time and money.

We are also ensuring these changes do not bring Efic into direct competition with private sector financiers, by applying competitive neutrality principles. To achieve this, the bill provides for Efic to pay a debt neutrality charge and a tax-equivalent payment. This measure ensures competitive neutrality and reflects the recommendation on competitive neutrality in the 2012 Productivity Commission report on Australia's export credit arrangements. As stated, this bill expands Efic's powers to allow direct lending for export transactions involving all goods, not just capital goods, and provides for competitive neutrality principles to apply to Efic's operations. It is an important part of our efforts to reduce red tape. The bill helps to ensure that Australian small- and medium-sized businesses have access to the finance they need to grow their businesses overseas, which in turn supports job growth. It fits with our overarching theme of displacing big government from centre stage and replacing it with robust growth of the private sector.

I thank all of those on both sides of the House who have contributed to this debate, 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.