Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

The Car Dealership Financing Guarantee Appropriation Bill 2009 is an important component of the government’s response to the fallout from the global financial crisis. The bill is essential to support the operations of the Special Purpose Vehicle, the SPV, that has been established to facilitate liquidity for commercially viable car dealerships and it will in turn provide support for hundreds of small businesses and thousands upon thousands of jobs in this sector.

On 5 December last year, the Prime Minister and the Treasurer announced that the SPV would be established, with the support of Australia’s leading banks, to provide liquidity to car dealer financiers who have encountered financing difficulties as a result of the global financial crisis. The SPV, otherwise known as OzCar, was to provide critical wholesale floor plan financing to commercially viable car dealerships that were financed by GE Money Motor Solutions or GMAC, both of whom at that point had announced their intention to exit the Australian dealer floor plan financing market.

As flagged in December, the Treasurer announced on 13 May 2009 that the OzCar facility will provide for the rolling of Ford Credit into the facility in light of the serious funding pressures confronting Ford Credit. This will support the availability of critical wholesale floor plan finance to car dealerships, helping them to stay in business over the next 12 months.

The government has taken the action, and I might indicate that it is being supported by the Liberal-National Party, to ensure that commercially viable car dealerships will have continuing access to finance. In the absence of the finance, the car dealers may be forced to close. If the car dealers cannot obtain finance they may be forced to close. That would put at risk thousands of jobs in the Australian car industry. According to the Motor Trades Association of Australia, the MTAA, which is the representative organisation for car dealerships, there would be up to 75,000 jobs at risk. This government believes in being prepared. It believes in decisive action in the face of the global financial and economic crisis. It believes it is appropriate to be prepared for eventualities that may occur as a fallout from the world financial crisis. The government is simply not prepared to allow tens of thousands of jobs to be lost in the car dealership sector of the motor industry.

At this stage it would be useful to briefly describe how Ozcar will actually operate and, subsequently, the importance of this appropriation bill that has been the subject of debate today. In order to provide liquidity to commercially viable car dealerships, the Ozcar SPV will raise funds by selling securities to the four major banks: ANZ, Commonwealth, NAB and Westpac. The SPV will finance eligible financiers who on-lend the funds for wholesale floor plan finance to car dealerships. Given the very difficult and tight global capital markets, the support of the four banks is essential to secure buyers of Ozcar securities and hence facilitate liquidity.

Ozcar can raise funds only if it is able to sell securities. The government is supporting the Ozcar SPV by putting in place a Commonwealth guarantee on various securities issued by the SPV. This guarantee is required because the participating banks have agreed to provide liquidity to the Ozcar SPV only through the purchase of securities on the basis that non-AAA rated securities will be Commonwealth guaranteed. This legislation provides for an appropriation to support this guarantee. Whilst the government guarantee was executed on behalf of the Commonwealth on 23 December last year, an appropriation is required to provide comfort to the purchasers of Ozcar securities that the Commonwealth will meet any payments required under the guarantee.

The SPV does not require any capital contribution by the Commonwealth and will not have a direct impact on the budget bottom line—other than in the very unlikely event that the guarantee is called upon. The SPV will be open for 12 months and there will be an orderly six-month wind-down after that. So there is a sunset provision. It is expected that, once Ozcar facilities wind down, those dealers who relied on the SPV for financing would be able to secure alternative finance in the expectation of improved global and domestic capital markets. This situation will need to be reviewed if there is no marked improvement or if the market further deteriorates.

The contributions from Liberal-National Party senators opposite covered a wide range of issues other than the actual guaranteed appropriation which we are dealing with, and I respect their right to range far and wide about a whole range of issues that they claim are relevant. I am not going to take the time of the Senate to respond, but I will make a couple of points about some of the claims that have been made by Liberal-National Party senators. With respect to the last contribution, from Senator Macdonald, Senator Macdonald rose to speak without observing the due courtesies of the chamber, which are to notify, on a list that is provided, that you intend to speak on a piece of legislation. He has breached the conventions and the courtesies that this chamber operates on. I make that observation.

But I think it is a little worse than that in terms of Senator Macdonald’s contribution, because we have had extensive discussion, debate and motions today and finally reached agreement on how the chamber would proceed in terms of the legislation before us. No less than the Leader of the Opposition in the Senate, Senator Minchin, indicated that certain pieces of legislation would be dealt with, and there was a commitment to that. I respect Senator Minchin; I have always believed that he is someone who, when he gives his word, keeps it—on behalf of the opposition. And what do we have? We have Senator Macdonald getting up here to speak in contravention of the normal courtesies in the chamber—on top of Senator Minchin having given assurances that the legislation would be dealt with in a considered and orderly fashion. That is the way Senator Macdonald wants to behave; that is a reflection on him.

Senator Abetz made a wide-ranging contribution, and there are two particular sets of issues I want to go to. Senator Abetz’s basic argument on this appropriation bill—and firstly he was supporting it—was that this appropriation was necessary because ‘the world financial crisis has been exacerbated by various acts of economic stupidity and economically irresponsible decisions of this government.’ I strongly refute that. I strongly reject that argument. It is amazing that there is almost no-one in Australia, or indeed the world, who believes that the issues that we are dealing with here—including this guarantee appropriation in the case of car dealer finance—has been brought on by the actions of this Labor government, other than some members of the Liberal-National Party opposition.

The fact that we are dealing with extraordinary pieces of legislation for extraordinary times is a consequence of the world financial crisis, which had its genesis in the United States. Unfortunately, that financial crisis led last year to the almost total seizing up—to use a car term, I suppose—or collapse of world financial markets. Confidence in banks was collapsing, particularly in Europe, the UK and the US, and interbank lending was grinding to a halt. In that context, a range of governments were placing guarantees on bank deposits, bank transactions and interbank lending, and the Rudd Labor government acted decisively to provide a guarantee. As I say, they are extraordinary circumstances.