Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Can the minister update the Senate on the current global market situation and how the government and Australia’s independent regulators are responding to these major events?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Thank you to Senator Polly for her question. As I am sure those in the chamber would be aware, I have from time to time provided some regular updates about events in our global markets that have been very fast moving. Indeed, there is a change every 24 hours given the current circumstances of the US subprime meltdown and the financial crisis that has impacted right around the world.

In recent times, several large, brand name US investment banks have disappeared or have been swallowed up, and the investment model on which they operate has been discredited. The US banking system and the financial system are in very poor shape, and the upheaval has been causing havoc on world financial markets, particularly stock markets. We operate in a global financial economy. Unfortunately we are not immune to these impacts in Australia, as we have seen with the lack of stability on our stock market in particular.

But it is fair to say that we are weathering the storm better than most of our comparable peers, and particularly the United States. In the IMF article IV report card on Australia released this year, which my colleague Senator Conroy referred to earlier, our strengths are set out very clearly. The IMF said that Australia’s strength is the result of responsible economic management. The report said:

Looking ahead, Directors considered that the sound macroeconomic framework should permit Australia to weather the global downturn and contain inflationary pressures.

The IMF also confirmed that our ‘banking sector is sound with stable profits, high capitalisation and few nonperforming loans’. The report said that Australian banks have weathered the global financial turmoil reasonably well and that the four large banks that account for two-thirds of bank assets continued to report strong profits through early 2008, together with adequate capital. This is of course in stark contrast to many banks in the United States. The IMF has also commended the Labor government on the long-term reform agenda. It concluded that its successful implementation will improve the economy’s flexibility and expand its productive capacity. The Labor government welcome the IMF’s assessment, but we are not resting on our laurels. We on this side of the chamber understand the need for responsible economic management in times of heightened global uncertainty.

I would like to take this opportunity to inform the Senate of another example of this government taking action to protect and strengthen our financial markets in these uncertain times. Yesterday I released the draft of the Corporations Amendment (Short Selling) Bill 2008. The bill is being released and is intended to establish a comprehensive disclosure regime for covered short selling. Should our independent regulator—

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Yes, funny that!

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

The amendment will actually amend the Corporations Act 2001, which was passed by the previous government. Unfortunately, the previous Liberal government left a gap when it came to the disclosure of covered short selling. Unfortunately, this has become a matter of major importance given current events on the markets. So, as I have said on many occasions, despite the ill-informed views of the opposition and the ill-informed interjections that we have just heard from Senator Abetz, the government has no intention of putting in place a permanent legislative ban on— (Time expired)

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister inform the Senate of any ongoing alternative approaches to dealing with these globally critical issues?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

As I have said, this government intends to correct the gap and close it in respect of the disclosure of covered short selling and the Corporations Act 2001. It is a very important change in terms of disclosure in the context of current markets. What we do need to see also from the Liberal opposition, particularly during these uncertain financial times, is a responsible approach to the budget. They should cease their raid on the budget. We need a healthy budget surplus in these uncertain financial times. We need an important buffer, an important cushion, in these uncertain financial times. The Liberal opposition should stop attacking our budget and should stop criticising the independent financial regulator, ASIC, in respect of the actions it has taken—an independent regulator that they created with commissioners that they appointed and with powers that they gave to their independent regulator. (Time expired)

Chris Ellison (WA, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Does he remember saying yesterday in the Senate:

What I have said on many occasions is that the government would not legislate to control short selling.

I refer the minister also to the first line of his press release, issued yesterday, which said:

Senator Nick Sherry, Minister for Superannuation and Corporate Law, has today released the Government’s draft legislation to require the disclosure of covered short sale transactions on Australian financial markets.

In view of the conflicting statements, I ask the minister: did he mislead the Senate with his answer yesterday or did he simply not know that he was about to release draft legislation doing the exact opposite of what he had said in the Senate?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Unfortunately, there was obviously no-one listening on the opposite side to the answer that I have just given or, indeed, to the answer I gave yesterday on this matter. As I said yesterday in response to a question, I have said on many occasions in speeches, publicly, at various meetings over the last six months, the government has no intention of legislatively banning covered short selling in this country.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

You said ‘controlling’.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

We have no intention of banning it.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Abetz interjecting—

John Hogg (President) Share this | Link to this | Hansard source

Order! Interjections are disorderly.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

We know what controlling means.

John Hogg (President) Share this | Link to this | Hansard source

Order, Senator Abetz! There is a time to debate these things at the end of question time, if you like. You continually interject. It is disorderly.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

There is a clear distinction—and I would have thought that even the opposition could understand this—between a legislative ban, which we do not support, and legislative amendments to disclose covered short selling. As I have just explained—and, unfortunately, given that question, I have to explain it again—there is a very important distinction between the government saying, and as I have said on many occasions: we will not legislatively ban short selling.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Mr President, I rise on a point of order on relevance. We know that the minister may have on many occasions said that the government would not ban short selling, but on page 17 of yesterday’s Hansard the minister is quoted as saying:

... the government would not legislate to control short selling.

We are not talking about the word ‘banning’; we are talking about controlling and that is substantially different. I would invite you, Mr President, to ask Senator Sherry to be relevant to the question that was actually asked, not the one that he was hoping he might be asked.

John Hogg (President) Share this | Link to this | Hansard source

On the point of order, there is no point of order. As you know, Senator Abetz, I cannot direct the minister how to answer the question or what to say in answering the question. I can draw the minister’s attention to the question that was asked and to being relevant to the question.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I would argue that, notwithstanding the intervention by Senator Abetz, the intention of the legislation that I released yesterday is to disclose covered short selling.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

It’s a control mechanism.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

The control of short selling in this country is exercised by the independent regulator, ASIC. ASIC has the ability and has exercised that, and it is a power that your government gave ASIC to control and ban—to control the way in which it is utilised in the market and to ban it if it wished. ASIC has chosen to impose an interim temporary ban on short selling. It is controlling it. What I have indicated through my press release yesterday and in previous comments is that this government are going to act on a gap left in the Corporations Act by the previous Liberal government in respect of the disclosure of covered short selling and the transactions in the Australian financial markets. We want open disclosure of these transactions in order to ensure a fair, transparent and competitive market.

The Corporations Amendment (Short Selling) Bill which I have released for a four-week exposure period is in preparation for possible future removal by ASIC, the independent regulator, of the current halt on most types of covered short selling—ban or control, however the opposition wants to have it—that was put in place. It is ASIC that has put in place an interim temporary ban and controls on covered short selling in this country.

In recent days our key regulators, both the independent regulator, ASIC, and I might say, the ASX when it comes to naked short selling, on Friday evening put prohibitions, temporary bans—interim controls, if you like—on covered short selling. That has been carried out independently. That is something that I have said time and time again is not within this government’s power, and we have no intention of legislating in respect of it. What we do intend to legislate on is the disclosure. I had already outlined this yesterday. I outlined it in an earlier question. Unfortunately there is a lot of conversation and debate about short sales and the opposition are just showing that they believe a short sale is a summer sale at David Jones. (Time expired)

Honourable Senators:

Honourable senators interjecting—

John Hogg (President) Share this | Link to this | Hansard source

When there is quiet, Senator Ellison, I will give you the call. Order! Senator Ellison.

Chris Ellison (WA, Liberal Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. The minister has mentioned the short-selling ban imposed by ASIC over the past few days. Does he support those actions, and does ASIC still have his confidence as a result of those actions?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

This may be your last question, so all the best to you, Senator Ellison.

Opposition Senators:

Opposition senators interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I am just extending a courtesy—

John Hogg (President) Share this | Link to this | Hansard source

Senator Sherry, address the issue.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

and I am happy to extend a courtesy to a colleague who is leaving after a long period of service. As I have indicated on many occasions, both publicly and here, ASIC and the ASX acted in respect of naked short selling on Friday. Then, in terms of the international developments by other regulators around the world, they proceeded to a full ban on covered short selling. It is an interim ban, and ASIC will reassess that ban in 30 days in respect of non-financial stocks on the ASX. I have welcomed that ban. Given market circumstances, the turmoil and the uncertainty we have seen, I welcome that ban, that prohibition, that control, if you like. This government will ensure, quite properly, that we will close the gap in respect of disclosure. (Time expired)