Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

I rise to speak in support of the government's International Monetary Agreements Amendment (Loans) Bill 2012. This bill makes three amendments to Australia's credit arrangements with the IMF. First, it reduces Australia's contingent liability under the new arrangements to borrow a line of credit. Second, it increases the maximum maturity of the IMF's drawings under the NIB from five years to 10 years. Third, it renews the NIB for a period of five years commencing 17 November 2012.

Australia has had a long association with the IMF, having been a member since 1947, two years after the IMF came into formal existence in 1945. The IMF was originally established to provide a mechanism for resolving the short-term economic difficulties of members so as to reduce shocks to the global economy. This, of course, followed the calamitous events of the Great Depression and the disruption of the Second World War.

Article 1 of the articles of agreement which created the IMF outlines the key mandates of the IMF, and chief amongst them is:

To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.

It is also tasked with promoting exchange rate stability by maintaining orderly exchange arrangements among members and avoiding competitive exchange rates' depreciation. It assists in:

… the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.

It provides confidence to members by:

… making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

It also aims

… to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.

The IMF's role and mandate has broadened following the global financial crisis, which is widely regarded as the biggest crisis to hit the global economy since the Great Depression. As outlined in the IMF's response to the global economic crisis, it has increased its crisis lending whilst overhauling its general lending framework. It has reformed policies toward low-income countries and quadrupled its concessional lending. It has also improved policy analysis and advice while contributing to the ongoing effort to draw lessons from the crisis for policy, regulation and reform of the global financial architecture, including through its work with the Group of 20 industrialised and emerging market economies. It has also undergone wide-ranging governance reforms to reflect the increasing importance of emerging market countries and to ensure that smaller developing countries will retain their influence in the IMF. Australia has three lines of credit with the IMF. The first is its usual quota contribution. This was doubled following a decision by IMF governors in December 2010 and the quota is shown on the government's balance sheet as a loan. The quota commitment increased from just over $4 billion to $8 billion in the 2011-12 financial year, as outlined in the 2012-13 budget.

The second is the new arrangements to borrow. This is a contingent liability of the government to be drawn down on request of the IMF. This is the line of credit which is addressed by this bill. The bill seeks to implement reforms to the IMF's crisis lending arrangements by enforcing the changes outlined in the 14th General Review of Quotas in December 2010. The rollback of the NAB line of credit is worth $3.2 billion; however, the reduction is conditional on the doubling of Australia's primary quota from $4.1 billion to $8.8 billion. As I have noted, this doubling in the quota is already provided for in the budget. This bill also seeks to lengthen the maturity of the NAB line of credit from five years to 10 years on the basis of assisting the IMF with funding issues as a result of rolling over the maturity on this line of credit.

The third line of credit is a US$7 billion contingent bilateral loan, which was agreed on 20 April 2012. This is noted on page 8.11 of Budget Paper No. 1. Of key importance: this loan has not yet been legislated by the parliament. We will have more to say on this third line of credit when the enabling legislation comes before the House. Australia sits within the top 20 member country contributions to the IMF, as a percentage of total special drawing rate holdings. Our contribution to the IMF is based on an assigned quota broadly in line with our economy's size and relative to the world economy.

Australia has always been a relatively generous country, helping our neighbours in our region in times of need. Not only do we meet what is required of us in terms of our international obligations; we also go above and beyond in helping our regional neighbours—something which we should all be proud of. Examples of this include the assistance we provided back in 2005 when then Prime Minister John Howard pledged $1 billion to Indonesia in aid in the wake of the Indian Ocean tsunami to help restore and rebuild their nation after the devastating consequence of this natural disaster.

As stated at the outset, the coalition will support the passage of this bill. Of course, there is an element of quid pro quo in the structuring of Australia's finances with the IMF given the changes put forward within this bill. The doubling of Australia's existing quotas with the IMF is partially offset by a reduction in the new arrangements to borrow a line of credit. The coalition will continue to monitor Australia's support to the IMF and the IMF's focus and priorities going forward as the global economy continues to evolve.