Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Hansard source

I rise today to support the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. This side of politics has long supported the Export Finance and Insurance Corporation and its mandate to provide finance to export businesses in circumstances where private sector finance is not available. We remain committed to expanding Australia's international trading opportunities because that is the way to ensure that we generate jobs, growth, high wages and better living conditions for Australians.

The legislation before the chamber reflects but does not directly replicate the Efic amendment bill introduced by the Labor government into the last parliament. While not as ambitious nor, in our view, as effective as the previous bill it does contain some broadly similar provisions. I want to traverse some of the content of the legislation.

The bill contains a number of minor technical amendments and two substantive changes. The latter include the widening of Efic's direct lending function to all goods, not just capital goods, and the widening of the competitive neutrality provisions as recommended by the Productivity Commission.

The government is seemingly ignorant of its potential economic impact, stating in the explanatory memorandum that the amendments 'will have no direct financial impact'. I would have hoped that there would be an anticipated increase in Efic loan activity as a result of the changes proposed in the bill.

In addition, the government has published no assessment of the impact of these changes on Efic's risk profile or profitability and, in turn, how this will impact on the government's capital and other funding arrangements with Efic.

This failure was not overlooked by the Senate Foreign Affairs, Defence and Trade Legislation Committee in its report on the bill. That report noted as follows:

While the Explanatory Memorandum states that the bill "will have no direct financial impact", it may have indirect implications for the Commonwealth in two ways:

It would have been preferable for the government to consider some of the indirect financial implications of the changes proposed in the bill. These financial impacts are relevant in the context of the need to manage the operations of Efic and provide taxpayers with a dividend from its operational activity.

I turn now to the capital and non-capital goods change. This is the first substantive change in the bill, which changes the definition of an 'eligible transaction' by replacing the words 'capital goods' with 'goods,' and by repealing the definition of 'capital goods'. It is a change which will enable Efic to provide direct loans in relation to non-capital goods as well as capital goods, a change described colloquially as funding for the milk and not just the cow. Given that only about four per cent of Australian exports are capital goods, the opening up of the remaining 96 per cent of non-capital exports as eligible transactions has the obvious potential to expand the ability of Efic to support Australia's export businesses.

In relation to competitive neutrality, that is encompassed in the second substantial amendment, which expands this provision in the EFIC Act to encompass all of Efic's operations. It is an amendment recommended by the Productivity Commission and was included in Labor's previous bill. As a government corporation, Efic is currently exempt from a number of Commonwealth and state taxes. This bill removes the competitive advantage this government entity has in relation to private sector, privately owned businesses. It is a change intended to generate competition between public and private businesses. Once the bill is enacted, the Minister for Trade and Investment will be able to specify a number of payments that Efic must make to achieve this competitive neutrality. Such payments may be made by way of a debt neutrality charge, guaranteed fees and/or tax equivalent payments. Again, as a result of this, one would anticipate increased cash flow from Efic to the Commonwealth.

The government has promised to renew its focus on small to medium enterprises with export potential, with the laudable objective of boosting jobs and growth. However, the government has not elected to pursue this objective through legislation. Rather, the focus is reflected in a new ministerial statement of expectations issued to Efic. Until November 2014, more than a year into the life of this government, Efic operated under the ministerial statement of expectations issued by the former trade minister, Dr Craig Emerson. The new statement of expectations was issued on 13 November last year, with Efic's required response, in the form of a statement of intent, not being finalised until last week. In this revised statement, the minister has directed Efic to focus on SMEs seeking to expand their opportunities in overseas markets.

By way of contrast, the policy objective of enhancing the support to small and medium enterprise was sought to be given effect under the previous government by way of legislating a requirement for Efic to focus on SMEs. This provision was included in the lapsed bill that the previous government put into the parliament. It was a legislative proposal consistent with Labor's record of support for Australia's small and medium-sized businesses. One might recall that this government has presided, since it came to government, over a tax increase for Australia's SMEs.

In the export sphere, Labor established Efic itself, as well as the EMDG scheme—that is, the Export Market Development Grants scheme—and the Asian century business engagement grants. Regrettably, what we have seen from the government is an approach to small business characterised by cuts and tax hikes. Since coming to office, the government has removed the tax concessions for small business introduced by the Labor government; it has axed critical skills and training programs; and it has abandoned Labor's plan for harnessing the opportunities presented by the Asian century. That is not much of a record, and it is useful, whenever the coalition champion themselves as the supporters of small business, to recall that in government their actions speak louder than their words, and their actions demonstrate a lack of support for small and medium enterprise in this country.

I also want to turn to the National Commission of Audit. I suspect you will not hear much about the National Commission of Audit in this debate. This, of course, was the political audit commissioned by the Treasurer and the Minister for Finance, the membership of which was hand-picked by the Prime Minister's office. It had some interesting things to say about the sorts of cuts that this government was contemplating. Relevant to what is before the chamber, recommendation 33 of the phase 1 report of the National Commission of Audit said this:

As the benefits of exporting accrue primarily to the business undertaking the activity, the Commission considers that there is scope to reduce current Commonwealth assistance for exporters by:

a. abolishing the Export Finance and Insurance Corporation, ceasing funding for Export Market Development Grants, tourism industry grants and the Asian Business Engagement Plan, halving funding for Tourism Australia and significantly reducing the activities of the Australian Trade Commission—

which we would know as Austrade.

The second part of that recommendation was:

b. moving any residual functions of Tourism Australia and Austrade into a commercial arm of the Department of Foreign Affairs and Trade, with the existing loan book of the Export Finance and Insurance Corporation also transferred to the Department of Foreign Affairs and Trade to investigate options to on-sell or wind up the loans.

In other words, the Commission of Audit report by persons handpicked by the Prime Minister's office recommended the entire abolition of Efic, the ending of funding of the Export Market Development Grants, as well as a massive restructure and downgrading of Australia's government export and trade infrastructure. One would have thought that, at a time at which Australia is seeking to continue to diversify its economy and encourage growth in the non-resources sector, the last thing we would need is to lessen those government frameworks that help businesses find their way into overseas markets.

How did the government respond to this attack on Efic, the attack on the Export Market Development Grants and the attack on Austrade? Did it dismiss this ideological assault on support for exporters out of hand? Did it defend the work of Efic and Austrade? Well, unsurprisingly, it did not. On budget night, the Treasurer and the Minister for Finance issued a response to the National Commission of Audit. In relation to recommendation 33, it simply says this:

Reforms to Assistance to Exporters will be considered following the 2014-15 Budget.

In other words, they left it on the table.

So this government is now putting into this chamber a bill seeking to reform how Efic operates, a bill that seeks to give effect to the Labor government's policy position of better focusing Efic on SMEs. No doubt the minister will trumpet the passage of this legislation, which the opposition supports, as a demonstration of this government's commitment to increasing exports, all the while refusing to rule out the recommendation from the government's own Commission of Audit that Efic be abolished, as well as Export Market Development Grants and a complete restructure and downgrading of Austrade and the support for our exports.

I say to Australian business: I think Australians know that you cannot trust this government when it comes to Medicare. Nor can you trust them when it comes to superannuation. Nor when it comes to higher education—I am sure my colleague Senator Carr will say much more about that today. I would say this: you cannot trust this government when it comes to export assistance for business, because it simply does not believe in the institutions and programs that provide support to the Australian business community now. The axe this government placed in the hands of the National Commission of Audit is still hanging over Efic, despite this bill being before the chamber. But, as I said at the outset, the opposition supports the legislation before the chamber, reflecting in large part the policy approach taken by Dr Craig Emerson and the Labor government.