Steven Ciobo (Moncrieff, Liberal Party, Minister for Trade, Tourism and Investment) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I am delighted to introduce this bill, which includes two important amendments to the Export Finance and Insurance Corporation Act 1991.

The first amendment in this bill will ensure that Commonwealth departments and agencies can benefit from the Australian Government's Export Finance and Insurance Corporation's, or Efic's, financing expertise.

Following Efic's provision of services to the Northern Australia Infrastructure Facility, we know there is latent demand within the Commonwealth Public Service to leverage Efic's specialist expertise around financing. However, in its current form, the act does not allow Efic to share its expertise within the Australian government.

This amendment unlocks the potential for Efic to provide assistance to Commonwealth entities and companies in the operation and administration of financing programs, when required. Access to Efic's services will be subject to ministerial approval to ensure there are checks and balances. This amendment is in line with government policy to reduce duplication across government and the implementation of our Smaller Government agenda.

The second amendment to the EFIC Act will enable Efic to better support small and medium sized enterprises in seizing export opportunities abroad.

SMEs are the engine room of the Australian economy. The majority of Australian exporters are SMEs. Despite this, SMEs traditionally find it more difficult to secure export finance, especially when their target market is an emerging or frontier one.

This is where Efic plays a valuable role. Efic helps Australian SMEs bridge the finance gap when their bank is unable to assist—enabling them to tap into new overseas markets for their products and services and grow their exports. This is great news: more exports means more economic growth, more job opportunities and a better standard of living for all Australians.

However, the ways in which our innovative SMEs are engaging overseas are changing rapidly. As such, so too must our legislation in order for Efic to continue to effectively fulfil its purpose of helping Australian businesses achieve export success.

This amendment before us will enhance Efic's capacity to provide loans to SMEs by replacing the current definition of 'eligible export transaction', which currently applies to Efic loans, with the broader definition of 'Australian export trade', which applies to Efic guarantees. This latter definition rightly focuses on the benefit flowing back to Australia from the export activity—like export earnings—rather than details of where the goods are assembled, where investments are made, or who the buyer is.

In 2015 the EFIC Act was amended to enable Efic to lend directly to SMEs. This amendment builds on that by ensuring Efic can effectively support a wider range of innovative SMEs—particularly SMEs involved in global supply chains, SMEs investing overseas to expand their sales, or SMEs looking to provide services directly to retail customers.

Like the 2015 amendment, this will also have a real dollar impact on Australian exporters. SMEs that apply for and receive a loan, rather than a guarantee, could save up to an estimated $12,000 per application. For a small business launching into a new market, this could be the difference between an opportunity taken and an opportunity lost.

Consider the recent case of a Sydney based IT company. Following on from the success of their marketing platform here in Australia, an opportunity arose to expand into North America. However, in order to succeed, the company assessed that it would need to set up a physical sales office in Dallas.

Unable to obtain the finance from its bank to establish the office, the company approached Efic for support. Under the existing act, Efic could only provide a guarantee to the company's bank, which then issued the funding. While the bank was supportive, having two financiers involved in the transaction caused significant delays. We all know the old business adage that time is money. Unfortunately for this company, the delay took place at a time of volatility in the Australian dollar, which saw the cost of establishing its overseas office increase significantly.

This amendment also responds to the fact that technology is placing more Australian SMEs within direct reach of their overseas consumers. This was simply not possible 25 years ago when the act was drafted. We need to ensure the act responds to the modern-day reality of Australian services companies selling directly to households in China, the United States or indeed anywhere in the world. By extending Efic's lending flexibility to cover this emerging opportunity, more Australian SME services companies—such as providers of information technology, consulting, education and tourism providers—will now be able to access finance to export and seize the opportunities replete in the global marketplace.

It is important to note that this proposed amendment does not bring Efic into direct competition with private financiers nor in any way impinge upon Efic's overall function to facilitate and encourage exports. Likewise, it will not discourage private sector participation in the market as Efic will continue to operate only in the market gap, where other financiers cannot help.

The amendments contained within this bill are minor, but their impact on important parts of the economy will be major. This bill will benefit small, often family-owned, exporters, as they engage in new and innovative ways of exploring business opportunities overseas. It will ensure Efic remains agile to respond to their developing needs. It will also cut the red tape that restricts Commonwealth entities and companies leveraging Efic's financing expertise when required. I commend the bill to the House.

Debate adjourned.