Annette Hurley (SA, Australian Labor Party) Share this | Hansard source

In considering the Australian Business Investment Partnership Bill 2009, I think the crucial question is: why do we need to establish ABIP? The global recession has resulted in a concern that foreign banks may want to concentrate their lending on their home markets. Many in Europe and in the United States are under pressure, and that may lead to a withdrawal of funding from the Australian commercial property projects, even when they are still commercially viable.

The Senate Economics Committee, during its inquiry into the ABIP bills, heard evidence that an increasing number of foreign banks may be less willing to refinance existing syndicated debts. This was called into question by some coalition and Independent members of the committee, but I think that anyone who has been out there talking to business, ranging from small business to large business, has found that they are very concerned about the ability to roll over borrowed funds. Anyone who does not believe that is the case is not out there talking to business.

The National Australia Bank estimated that over $70 billion of commercial property debt would require refinance in the next two years—that is, within the next two years when this bill is proposed to be operating. Of that $70 billion, $50 billion is syndicated debt, which is precisely the target of this legislation. The Property Council of Australia noted that $30 billion, or 18 per cent of Australia’s commercial property debt, is provided by foreign banks—a significant and important percentage. Furthermore, a survey of the Property Council’s members indicated that there was already evidence that some foreign banks were withdrawing from our market. Should such a market failure occur—or, indeed, continue to occur—it would lead to unnecessary economic disruption and job losses if local banks are unable to fill the gap.

In respect of economic disruption, Treasury evidence noted that a withdrawal financed from otherwise viable commercial property assets may force businesses to sell assets in a distressed sale, particularly if there is a sequence of such distressed sales. That would result in a fall in prices below underlying value. This is a very real concern. If these distressed or fire sales occur, it could artificially depress the commercial property prices more generally—that is, beyond the major syndicated commercial property that we are looking at with these bills, and that would further dampen economic activity.

One industry participant argued that without ABIP to transition the commercial property sector through these liquidity problems, we will go back to the very boom and bust economies that economic policy is trying to smooth out. That is precisely the issue here. The government is trying to take anticipatory measures so that we will not get those boom and bust cycles that will exacerbate the economic problems that we are seeing at the moment. The participant also argued that it would create an inflationary pressure that could be avoided by a sensible transitionary approach. ABIP is not designed to interfere with natural market outcomes or to hold up prices but to protect against undue and distorting over-correction of the market. There is no doubt that the Australian market has seen this before. Property markets can go well below the underlying asset values, and that is what the government is trying to avoid.