John Williams (NSW, National Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Conroy. Following my question to Senator Conroy on 13 October, in which I asked whether the government would underwrite debenture-issuing companies and similar institutions under ASIC regulations, will the government accept responsibility for the freezing of funds held by companies such as AXA, Challenger and others?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

Thank you, Senator, for that question. The government’s deposit guarantee scheme covers off around $800 billion in deposits and provides additional stability to the entire Australian financial system. The scheme covers 100 per cent of individuals’ and businesses’ cash deposits. Obviously, it is not possible or desirable to provide cover for all investments that individuals or companies might make. The government has provided a guarantee as to cash deposits that are held by APRA-regulated bodies. However, there are a broad range of other high-quality financial institutions that provide good, high-quality investment products. The government’s announcement of a guarantee should not impact on the willingness of individuals to invest in these products.

More generally, the government’s deposit guarantee and guarantee of wholesale funding will support confidence in the financial system in general and contribute to the eventual recovery in financial markets. The likelihood of any government expenditure arising from these guarantees is both remote and difficult to estimate. ADIs are subject to prudential regulation by APRA which is designed to ensure that their financial promises are met. In the unlikely event that a guarantee is called upon, the government is likely to be able to recover any such expenditure through a claim on the relevant institution. So these guarantees are fully disclosed as a contingent liability—

Helen Coonan (NSW, Liberal Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

Mr President, I raise a point of order. It is all very interesting to hear the editorial about what was intended to be achieved by the deposit guarantee—of course it has been an abysmal failure—but the question was all about whether the government would accept responsibility for the freezing of funds such as those held by AXA.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Mr President, on the point of order: Senator Conroy was directly on the subject matter of the question asked of him, which went to the government’s guarantee—who it applied to and who it did not apply to. It is perfectly in order for the senator to canvass those issues in directly answering the question.

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

There is no point of order. I cannot instruct the minister how to answer the question. The question has been asked and the minister must remain relevant to the question. He has two minutes and 12 seconds to respond.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

As I was saying, in addition to the guarantees of bank deposits and wholesale funding, the government is working to address the liquidity concerns that have seen a number of investment funds freeze redemptions over recent months. Treasury has established task forces dealing with each category of market-linked investment institution in what is a complex sector involving highly diverse and risk differentiated investment products.

The government has asked David Murray to help facilitate larger and more liquid institutions, providing liquidity to various market linked investment vehicles. ASIC has put in place provisions to allow people to access funds in market linked investment funds in cases of hardship. APRA is preparing to fast-track applications by mortgage funds and other financial institutions seeking to attain the status of a prudentially regulated APRA institution, and the government has provided additional funds to facilitate this. In total the government has provided an additional $84 million over four years to ensure that our regulators continue to have the resources they need to maintain the strength of Australia’s financial system during the global financial crisis. The RBA has widened further the range of securities eligible for its repurchase operations—’repos’—to include high-quality commercial paper added to liquidity in this market.

So let us be clear: this government has set out to put in place measures to address the greatest financial crisis since the Great Depression and is working through with the regulators the impact on other institutions. This government has taken responsible and decisive action, unlike those opposite, who try and walk both sides of the street and pretend they are on board— (Time expired)

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Does the minister agree with the CEO of Westpac, Ms Gail Kelly, that a cap of $100,000 should apply to the government guarantee of bank deposits?

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

Thank you for that supplementary question. Let us be clear: the government are working through all of the issues that are arising from the government’s introduction of swift and decisive action to protect this country’s financial stability. That was the No. 1 priority: to ensure that this country was in a position to be able to protect deposits and to ensure that our financial system remained stable. Unlike those opposite, we are taking the financial situation very seriously. We are not trying to walk both sides of the street, pretending we are supporting the government on the one hand and yet constantly carping and working on criticising the government at every opportunity. We are working through these issues carefully and with consideration. We have put in place a range of measures, which I have just outlined— (Time expired)