Michael Sukkar (Deakin, Liberal Party, Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill will give Australia's export credit agency, Export Finance Australia, a new equity investment power and the ability to provide standalone overseas infrastructure guarantees. These initiatives will support infrastructure development in the Indo-Pacific and export-linked projects in Australia, as well as provide enhanced support for the financing activities of the Australian Infrastructure Financing Facility for the Pacific.

The amendments will bolster Export Finance Australia's ability to support Australia's national interests and priorities. They will complement its existing suite of financing powers comprised of loans, guarantees, bonds and insurance.

This bill enables Export Finance Australia to support the development of export-linked sectors of economic significance in Australia when other financing tools, both public and private, are either unavailable or inadequate in the circumstances.

This could include the development of critical minerals projects with an export focus. The ability to consider equity investments in critical minerals projects would better position Export Finance Australia to offer financially appropriate support. This will help position the government to better support the development of this crucial sector.

This bill gives Export Finance Australia more flexibility to support important infrastructure investments, as well, in the Indo-Pacific.

As outlined in the government's 2017 Foreign policy white paper, Australia is committed to working with regional partners to build an Indo-Pacific that is safe, secure, and prosperous.

This bill enhances Export Finance Australia's ability to finance regional infrastructure. In 2019, the government provided Export Finance Australia with the power to support overseas infrastructure projects in our region that benefit Australia or Australians. In broadening its financing powers to include equity, Export Finance Australia will be able to make investments in a greater range of infrastructure projects, and at an earlier stage of development.

Importantly, the equity power will also be made available to the Australian Infrastructure Financing Facility for the Pacific, further supporting Australia's Pacific Step-up.

Export Finance Australia will only make equity investments in certain circumstances.

When projects have strong commercial prospects, they should be funded commercially. Equity investments will be reserved for exceptional circumstances.

Following the passage of this bill, the government will instruct Export Finance Australia to ensure equity investments are only considered for significant transactions that support Australia's national interests. This will ensure Export Finance Australia is not crowding out private market finance but instead filling a gap in the market.

Debt solutions like loans, guarantees and bonds will continue to be the mainstay of Export Finance Australia's support to Australian exporters and for infrastructure development in the region.

This bill aligns Export Finance Australia with its international and domestic peers.

The ability to make equity investments will bring Export Finance Australia's capabilities in line with those of export credit agencies in other major economies, including the United States, China, Japan, Canada and South Korea. These countries are already making equity investments in our region to support their development and commercial objectives.

In addition, other Australian government financing agencies, like the Northern Australia Infrastructure Facility and Clean Energy Finance Corporation, are already able, in their instances, to make equity investments.

This bill enables Export Finance Australia to provide standalone guarantees.

The ability to provide a guarantee to an overseas infrastructure project without also needing to provide a loan to that project will better support the lending activities of both Export Finance Australia and the Australian Infrastructure Financing Facility for the Pacific. It will allow greater efficiency and flexibility to support overseas infrastructure development, particularly in the Pacific, where transactions in local currencies delivered by local lenders—and guaranteed by Export Finance Australia—may be most appropriate.

Importantly, the bill maintains Export Finance Australia's risk controls and commercially appropriate risk appetite.

Export Finance Australia will continue to conduct rigorous due diligence for equity investments in the same manner as other transactions. This includes robust environmental and social risk assessments.

Export Finance Australia has strong governance arrangements and financial management capabilities, as well as a proven track record of successfully implementing new mandates and functions. Export Finance Australia will establish new mechanisms and internal guidelines to ensure its new equity investment power is effectively implemented.

Export Finance Australia has an excellent track record of providing finance and sound commercial judgement, as evidenced by its historical write-off rate on its commercial account of less than one per cent. In 2019-20 Export Finance Australia supported 136 Australian businesses with $1.1 billion in support, enabling $2.45 billion of export contracts which supported just under 10,000 jobs in Australia.

Conclusion

This bill will boost Export Finance Australia's important role in supporting Australia's economic growth and facilitating stronger links between Australian businesses and the Indo-Pacific region.

Debate adjourned.