Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

Just before lunch, I was speaking on this bill and I was reminding the Senate how incompetent the Labor Party is in managing any economy. I was drawing from the budget last night which has told Australians that there will be a record net debt incurred by this government of $188 billion, which will have to be repaid by someone. I think the public thinks that these are just figures that politicians and newspapers talk about, but actually they have to be repaid by someone. It will be not only this generation but this generation’s children and grandchildren who will have to pay off Labor’s financial profligacy in running up this $188 billion debt.

In this budget alone there is a $58 billion deficit. That is just incredible when you think that the last coalition budget left a surplus of some $20 billion. The Labor Party have turned that $20 billion around by $58 billion in less than 18 months. Two-thirds of that debt is due to spending decisions made by the Rudd government—by Mr Rudd and Mr Swan—in the last 18 months. So they cannot blame everyone else, as they are prone to do. It is all somebody else’s fault, they will tell you. But it is spending decisions of theirs that have run up two-thirds of that debt that we will all have to pay off.

Every year we as a nation, we taxpayers, will have to pay some $8 billion in interest payments on Mr Rudd’s debt. How many schools, hospitals and roads does that mean will not be built because we are spending the money on paying off Mr Rudd interest bill? In his own budget papers Mr Rudd even acknowledges that unemployment will increase to one million of our fellow Australians. This is getting back to the Keating and Hawke days when unemployment was in the double-digit percentage figures. One million of our fellow Australians will be unemployed.

I was saying, before we had to adjourn at lunchtime, that with a record like that and the record of the state Labor governments, with every one having real financial problems—and they were having financial problems before the global financial crisis, I might say—why would we as a parliament be giving the Labor Party more opportunities to waste our money with this bill before the chamber at the present time? I was saying just as we adjourned that Mr Rudd had a thought on the run, which is usually the case. He thought of a way he could get a headline the next day. He announced that he would enter into the banking business in conjunction with the four big banks by propping them up in relation to any foreign investments that might retire from Australia for various reasons. But that reason was shot down by no less than the Reserve Bank of Australia who, as I quoted just before lunch, had said that that was not happening at the present time and that there was little sign of it happening. As I asked then, why are we bothering with this?

I can say that one of the reasons there will be a dearth of investment in Australia from foreign banks and foreign investors in the future will be this crazy emissions trading scheme that Senator Wong and Mr Rudd have proposed. We are not quite sure what the latest iteration of the emissions trading scheme is; it seems to change daily. I cannot help but feel sorry for Senator Penny Wong for the humiliation she has suffered in having her grand plan for a carbon pollution reduction scheme overturned by Mr Rudd, who is not quite taking it back—although it is getting along those lines—to the scheme proposed by Mr Howard in the last government. I would venture to wager that, by the time Mr Rudd has finished, for all his pious words before the election and for all his toadying up to the Greens to get their second preference support in the last federal election and for all of those promises he made, he will end up with a scheme very much the same as Mr Howard was proposing in the last government.

The reason there will be a dearth of investment in Australia is because companies in the aluminium, coal and cement areas are all multinational companies that can invest anywhere in the world, and many of them have other plants, mines and facilities elsewhere in the world. They will simply not invest in Australia because to invest in Australia will mean that you have to have an extra tax, an extra burden, on your coalmining, aluminium and cement operations that many other countries do not have—like our big competitors in the export of coal, such as Colombia, Indonesia and South Africa. These are countries which are not going to have emissions trading schemes.

Sure, we all have to do our bit to reduce emissions, but this scheme proposed by Senator Wong and Mr Rudd will not reduce emissions one iota. It will just mean that those highly emitting industries will move away from Australia’s fairly tight regulations to countries where there are no regulations at all. So you will not save the world from any emissions; in fact, you will increase the emissions from other countries which do not have Australia’s good regulations. At the same time, you will be exporting the jobs of Australian workers—those working families that Mr Rudd was so keen to look after before the last election. But he gets into power and he sends their jobs to Indonesia, South Africa and Columbia and he plans in this budget for one million people to be out of work. And it will get worse with this crazy emissions trading scheme, unless good common sense prevails and Mr Rudd accepts and acknowledges the error of his ways. In spite of Senator Wong’s objection, he has already half admitted that. But we can only hope that, in the end, he will do what is right for Australia and say, ‘Let’s reduce our emissions when others are doing it, so we are not exporting emissions offshore and we are not exporting the jobs offshore of hardworking Australian families and their providers.

When it comes to financial management, this particular piece of legislation is as crazy as anything else that the Labor Party touches. It has been said of this bill that it will have a counterproductive effect on what Mr Rudd is proposing. In fact, Mr Peter Verwer, from the Property Council of Australia, pointed out, ‘The security of a taxpayer funded safety net will allow foreign banks to exit at full value of their investment. It is the strongest argument against this bill.’ He further said:

… we do not have the technical answer as to how we can make sure foreign banks do not try and use ABIP as their escape card from Australia.

So it is having the exact reverse effect. Madam Acting Deputy President, if time permitted, and unfortunately it does not, I could list many other reason why this piece of legislation before us is as crazy as the budget we saw last night. It does nothing for Australia. It helps a few of the Labor Party’s mates in big business. They have mates in big business, in big unions and in the state governments, but they are using the money of other working Australians to prop up these crazy schemes and to bring forward the sort of budget we saw last night. This bill deserves no support from this chamber and it certainly will not be supported by the coalition.

Scott Ryan (Victoria, Liberal Party) Share this | Link to this | Hansard source

I rise tonight to join with my colleagues and oppose the Australian Business Investment Partnership (Consequential Amendment) Bill 2009 and related bill, known these days as the Ruddbank, joining the Ruddnet, all funded by the Rudd debt. This is a reckless proposal that represents a significant backward step for our nation. One would think that 1949 would have taught the Labor Party that government and banking do not mix. But they are not quick learners. They should have also learnt from Victoria, South Australia and Western Australia in the early 1990s that government going into banking, particularly commercial banking, especially if it involves the Labor Party, leads some to benefit at the expense of many, to the cost of Australian taxpayers now and into the future. It is nothing less than a recipe for economic disaster. Indeed, unlike in other nations, the Australian government have not been required to step into bank management over the past 18 months. This is the direct result of the actions of the former coalition government that ensured our banks did not get themselves into the trouble that we have seen develop overseas.

This was the result of two specific actions. The first was the regulatory regime put in place by the former coalition government that ensured our banks and other authorised deposit-taking institutions did not overextend themselves as they have in other countries. Similarly, the strong economy delivered by the previous government and, in particular, the elimination of government debt, ensured that there was confidence in the markets for Australian debt. Australian taxpayers today are billions of dollars better off due to these measures. But there are myriad problems with this bill and, indeed, with this proposal in general.

Firstly, this bill is simply the result of government mismanagement. The fact that corporations may have trouble refinancing in the short and medium term is the direct result of this government’s unprecedented borrowing spree. It is no surprise that a government borrowing more than $2 billion a week is crowding out the debt markets. Despite this government believing that it can suspend the basic principles of economics, a government wading into debt markets and soaking up record amounts of liquidity and unprecedented amounts of debt must directly impact the ability of other, non-government bodies to refinance and gain access to the debt markets.

Similarly, the impact on property lenders of the ill-thought-out unlimited bank guarantee put in place by this government has been well outlined elsewhere. In essence, this reckless measure is attempting to fix a problem that the government itself is partly responsible for creating. The alleged threat of foreign banks exiting the Australian market—yet another example of this government intentionally running a scare campaign to justify its own desires to intervene in Australian life—has been repudiated by the Reserve Bank, as was outlined by my colleague Senator Macdonald.

This proposal also creates a significant moral hazard. It effectively underwrites that very action which the government claims it is trying to address. It rewards those seeking to withdraw with the full value of their investments and it may even accelerate that very problem. Why should taxpayers underwrite those financiers who wish to exit with a government-backed guarantee so that they can exit investments at no cost, with the cost borne by the Australian taxpayer? There is simply no justification to underwrite corporate and banking balance sheets, whether domestic or foreign, with the resources of Australian taxpayers now and into the future.

There are also many issues of governance with this bill. There has been no sufficient explanation of why Ruddbank should be exempted from the competition provisions of the Trade Practices Act. While there are many specific problems, including how this may lead to anticompetitive actions or prevent a ban on anticompetitive action by the Ruddbank, there is a more general principle at stake here. Why should this body, alone in the market in which it operates, be exempt from the legal provisions that impact on and restrict the actions of everyone else? It is a very poor principle to exempt one organisation in a market from general laws that apply to every other person in that market, especially so when a body operates with a government mandate and a government guarantee of its funding.

As a taxpayer it is legitimate to ask in whose interests the directors of Ruddbank will act. Will it be the banks who appoint them? Will it be the government who appoints its own member? This lack of independent board members leads us to ask whom they represent—taxpayers and shareholders or the bodies who appoint them. Furthermore—and this is particularly important—does the government appointee represent the government or the taxpayers? We have had no answer to that question. While this difference may be too subtle for this government to notice with its reckless squandering of taxpayer funds now and in the future, it is a critical question for those who are underwriting this bank—the current and future taxpayers of Australia. Without sufficient checks and balances, this bill represents a massive opportunity for political patronage.

It is fair to say that the ALP and property developers need no introduction and, if the government were serious about allaying concerns about political patronage, it would put in place provisions to prevent this happening. It would pledge that it will not be used to support those who make donations to the Labor Party—but I am not going to lay awake tonight awaiting that promise. There is also no guarantee whatsoever that this bank—and it is a bank in the common meaning of the term, despite its typically Orwellian title of ‘partnership’—will ever be wound up. There is no specific commitment or time line from the government in this regard. It is not unreasonable, therefore, to assume that this betrays the lack of commitment to ever winding this body up.

In regard to the specific provisions of this bill, there is no detail about what the so-called test of ‘financial viability’ entails. It is not defined and it strikes me as a paradox. Apparently, along with government, people who represent organisations which have presumably declined an opportunity to participate in a financial venture will sit around a table and deem something to be financially viable when no-one else will—indeed, when their own organisations have likely refused such an opportunity. It is like heading to the casino with someone else’s money, but that is no surprise with this government.

This leads me to my in-principle objection to this bill. It is simply wrong to gamble with the money of taxpayers, both those of today and those long into the future, in commercial arrangements such as this. Taxpayers’ money should not be put at risk to support a specific, government nominated industry. As I mentioned earlier, it is a sad sign of the lack of memory in this government. Just as they have forgotten the pain caused by the excesses of Whitlam, they have also forgotten the pain of Victorians and South Australians due to the reckless actions of banks under John Cain, Joan Kirner and John Bannon. The government simply should not be in the business of banking and it should specifically not be in such a volatile sector as the commercial property market. The Treasurer’s office admitted the risk of undertaking this in a report when it said:

The commercial property sector can be particularly vulnerable in a downturn in the economic cycle.

All the best wishes in the world cannot protect such an entity from making bad decisions. Such decisions should be undertaken by those best positioned to do so, those who will bear the risk and the reward of the activity in question. I doubt whether the managers of Tricontinental and the state banks of Victoria and South Australia thought they were making bad decisions at the time. Some will say comparing this to those banks is alarmist, but the final cost to taxpayers in those states of those ventures came to over $6 billion and the end of a century of a stable banking business focused on depositors and home lending. It is the figure that is alarmist, although to this government $6 billion is merely trifling these days. It is clear the Labor Party has not learnt these lessons and the cost of those poor decisions was borne by the taxpayers of Victoria and South Australia for years. Indeed, it is still borne today through the opportunity cost of services not delivered, roads, hospitals and schools never built. We have private banks for a reason. They risk shareholders’ money. To those who raise the issue of the government guarantees, I hasten to add that those measures protect depositors and lenders, not shareholders, and those measures are—many of us hope—temporary ones.

The Ruddbank gambles with taxpayers’ money in an extraordinary fashion. While the government and four major banks each contribute $2 billion in capital, it is authorised to borrow a further $26 billion. But the risk is all with taxpayers with these borrowings while any upside is shared between the partners. No wonder the banks think it is a good idea for them and their shareholders—heads I win, tails you lose. It is extraordinary that a government would propose to risk that amount of taxpayers’ funds with a business partner, but that business partner shares none of the risk. To do this in a vain attempt to artificially hold up asset prices is futile. The government can no more hold up asset prices than it can change the direction of the wind. It has not worked and it will not work in the future.

Most alarmingly, this proposal is not limited to commercial property, as is often stated by the government as bad an idea as that is. There is no detail around what other spheres of activity the Ruddbank may venture into. The bill could see loans to state governments, companies and projects in other fields completely unrelated to commercial property. I fear that this is yet another example and another means by which a headline debt figure is artificially lowered through moving it into off-balance-sheet corporate entities away from the government budget but still carrying risk for taxpayers. Labor is well practised at this art through its behaviour across Australia in the eighties and over this past decade at the state level.

This bill represents a retrograde step. It is a very simple issue that many of us thought resolved over a decade ago—that governments should not be in the business of banking. It is a bad idea, poorly executed by an incompetent government. The coalition will defend the interests of taxpayers across Australia in rejecting this bill.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I rise tonight to endorse the comments of my colleague Senator Ryan on the Australian Business Investment Partnership Bill 2009 and the Australian Business Investment Partnership (Consequential Amendment) Bill 2009 and to be specific in a number of areas. The first area is the government moving itself into a contingent liability on a very specific sector of a market. Having had some experience in banking, I think it is peculiar that you would say, ‘I only want to expose myself to one sector of the market, that is the commercial property market, and I am only going to expose it to the extent that other people do not want to take those deals on board, and then I will use the government to underwrite it.’ That is strange.

We have heard in reports that people have said that the foreign banks will leave, so I have been following that through. The Royal Bank of Scotland was said to be leaving. I have a letter from the Royal Bank of Scotland saying it has no intention of leaving. Apparently we have no foreign banks who want to leave. So why are we doing this? It becomes another contingent liability that sits on board for all the Australian people and they are just mounting up. You have this ridiculous debt building up. It is heading towards $300 billion. In fact, if we go through the forward estimates, the total liabilities are now half a trillion dollars. That is exceptional for Australia—it is bizarre—and then you are adding to that these contingent liabilities. You are underwriting the subprefecture debt of the states of $150-plus billion. The possible contingent liability, though I think it would be as safe as houses, would be $600 to $800 billion of the commercial banks.

Now we have the proposition of potentially another $28 billion contingent liability. If you keep taking on contingent liabilities, what happens in the end? If you guarantee every child in the district, in the end one of the children goes bad and you actually have to pay the money. People say that is extraordinary, but it is not. We have had the Tricontinentals and we have had the experience of the Bank of SA, so these things do happen. First and foremost, why are you taking on a contingent liability which, with greater foresight, there is no need for? If there were foreign banks leaving you could mount a case, but that is not happening. In fact, the only one you could cite is the Royal Bank of Scotland, and I have a letter from them saying they are miffed that the insinuation was put that they were leaving, because they are not. They are hanging around and there is a market place out there willing to deal with this, so you should at least keep a spread on this.

I do not know why we have this exemption under section 51(1) of the Trade Practices Act. Why this one entity, which probably has more reason than most to be covered by the Trade Practices Act, is all of a sudden exempted from the Trade Practices Act is a peculiarity in the extreme. You have the four major competitors in what is more and more a centralised market working together in the same room, saying: ‘We can keep an eye on all these deals as they come in and get knowledge of where the strong and weak areas of the market are. Then we can take that information on the regional banks’—like the Bank of Queensland—‘and the overseas banks and use it against them.’ If these deals go into this Labor inspired Ruddbank, the Australia Business Investment Partnership, at some point they will have to come out, and do not think for one moment that the person who is sitting in the assessment process who has an allegiance, an alliance—a future—with one of the majors will not take that information back to where he came from and say, ‘Touch that deal; don’t touch that deal.’ These are the issues that jump off the page and make you question why we are going down this path. It seems highly ill conceived.

In the short run there are no foreign banks leaving us. In the long run you are picking up a contingent liability and giving someone, for no apparent reason, an exemption under section 51(1) of the Trade Practices Act, and then we have the specific exemption of the government’s nominee under the Trade Practices Act. What sort of oversight have we got on this? This will set up another one of those government appointed mandarins. You say, ‘He will be beyond reproach,’ but it just does not happen. They come under political pressure. A politically appointed person is subject to political pressure. I think we have to be a little bit more honest about this and acknowledge that people have in the back of their mind, no matter what their appointment, the fact that they are an appointee of the government and therefore do not try to upset the government too much. Every time you go to Senate estimates you see that in fine form. People go out of their way to keep the government of the day happy, and it always surprises me how quickly they can change their allegiances.

Suncorp, for instance, are getting out of the commercial property market at this point in time. Why? Probably because they are in trouble in the commercial property market. I do not know why, but they have made a strategic decision to get out, so Mr Rudd is putting the Australian people in. Who benefits from this? Why don’t we have the small business farming bank? Maybe they have a good reason to have a bank of their own. Then we could have the fishermen of the gulf bank, and then we could have the local Greek cafe bank. Why do we just pick one sector of the market and say: we are going to do something extraordinary for these people—and we are talking tens of billions of dollars extraordinary!

You have to ask: who are the beneficiaries of this? Which group of people is likely to benefit from this? The answer is the people who can use this to bargain with domestic banks and foreign banks and say: you will give us a deal or I can go somewhere else—and they would be the large property developers, quite obviously. If you follow the smell you will get to who inspired this little pearl. Obviously you also have the major shopping developers who are midway through programs, as well as the major commercial property developers who, in most instances, have highly unionised workforces. So it becomes a nexus of beliefs and structure. That is fine, but do not use the nation’s money for it and say, ‘The sky’s falling; therefore I’m going to set up a bank.’

We do have a major financial issue before us at the moment, but Mr Rudd has shown this peculiarity over the last 18 months or so to use it as the bullbar on a whole plethora of ridiculous ideas, and we have to pull this up. Day by day we have got ourselves as a nation into more and more of an immense financial pickle, and it is because of the current management structure that we have. That is how we ended up here. Of course there would be an element of debt and we would probably be heading towards a deficit, but not on the trajectory that the Labor Party has us on.

At Senate estimates back in February, Mr Hyden from the Australian Office of Financial Management said that we would have the $200 billion facility for our nation fully drawn by 2012-13. It will be basically fully drawn, I would say, within the next eight to nine months, so we are out by about two years. Because this is so recent, you cannot blame anybody else for this but yourselves. In the budget you brought forward nothing that actually deals with the issue in a substantive way. It is a budget that clearly fails to grasp the nettle. You say you believe the circumstances are dire, but there is nothing in the budget to suggest that you are going to take action to deal with them, and so this becomes yet another straw to add on.

Quite obviously, in any assessment of our nation’s credit position, all contingent liabilities have to be taken into account by the credit assessment agencies—they have to look at it—and, every time you take on a contingent liability from a source that is outside your control, you have faith in the fact that it will not come unstuck. If, for instance—since we have underwritten the banks—there becomes, by reason we do not know, some mechanism that starts to cast doubt on that, it would immediately go onto our bottom line. You cannot think that you have an infinite capacity to underwrite every issue, every nebulous cause that pops up. In the end, the underwriting itself would start to lose meaning. You can only create a contingent liability for so many things before your contingent underwriting of that issue is without effect. So taxpayers are at risk because of this and, in the long term, every person who borrows money in Australia is at risk, not exclusively because of this but, with the way the Labor Party does it, because of a whole basket of ridiculous decisions. It all adds up to a bad outcome for any person who is borrowing money because the underwriting of the government starts to call into question the quality of the credit and the capacity for it to keep its rating. If it starts losing its rating, the price of credit goes up and then it goes up for everybody across the board.

There are a few things you have to look at. At the very least there should be a continual review process on exactly where this is going with competition issues. There should be an expectation, tabled in both this chamber and the other place, of a report from the ACCC clearly spelling out exactly what the competition issues are and holding these people to account. There has been some musing about that but I have not seen it. Maybe it is going to turn up; I do not know. These are the sorts of things that should be there. I still would not support the legislation, but it is surprising that there is no ongoing contingent monitoring process. In the future how do we sell to other sectors that are just as relevant as the commercial property market what they are going to do for finance? They are just as worthwhile as anybody else.

What we really want to know is: where was the inception of this legislation? It was incredible. I think there were about four days between the Prime Minister talking about the issue and this legislation turning up. Did it come to the Prime Minister in his sleep one night or did he have discussions with a range of people to inspire the creation of this bank? Who were those people and what did they say? Maybe, in the past, you would have said that you should not ask those sorts of questions, but I ask all those questions of our Prime Minister now that I have heard that he had dinner with the fifth highest official of the Communist People’s Republic of China and the only way we found out about it was through the Chinese news. Since that event, we ask questions on everything about our dearly beloved Prime Minister. So where was the inception of this? You have to come clean; we have to know: who were the discussions with and where was the dinner party where this was conjured up?

It terrifies me that our nation walks towards half a trillion dollars in liabilities—those are your own budget figures, your own forward projections. When is the penny going to drop that we just cannot go on like this?

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

When there’s a change of government.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Yes. When is the penny going to drop that this money is actually somebody else’s money? We have heard about the netting off effect. Let me tell you some of the things against which they net off this debt. They net off the debt against HECS debt, for one. How reliable is that as something to net your debt off against? Are you going to rely on someone who has disappeared into the ether owing the government money and say, ‘Well, as to the money we owe on the bond market to people from the People’s Republic of China, Saudi Arabia and Japan and the smaller and smaller group of wonderful citizens who actually want to buy these bonds, we’re going to net off the very real debt to them against HECS debt.’ It just does not stand to reason. The only thing that is absolutely fundamental and real is that you issue a bond or a note and the world looks to you and says, ‘You will repay it or you’ll be the next Iceland or the next Ireland.’

As we head towards $300 billion of these out there—and we have said that, in exactly the same real form, there is $150 billion plus of subprefecture debt of the states, which is real money, owed to real people who have a real expectation of repayment—we are starting to get to some very scary numbers in the very immediate future. And then, if we start to look at a reasonable cost to funds—six to seven per cent—we are going to be looking at $27 billion just in interest—real money that has to be paid. You can net it off all you like but the fact is that, somewhere, you are going to be sending a cheque off for that money and, if you do not have that money, watch out. A position—and I think we are there—where we cannot repay the interest and we actually have to borrow more money to pay it is, if you are dealing with the bank, economic palliative care. As I said before, that is ‘goodnight Irene’; you cannot even pay your interest. What is more, when the proposition of that is coming forward, surely that is the time you come up with an extremely dynamic statement of an exit strategy, whether that is assets you are going to sell, whether that is absolutely fundamental change in the way your expenditure is going forward or whether that is a more efficient way to run government. If you do not have the courage to grasp the nettle and do that, if you believe you are just going to manage the debt, you are entirely misguided, because you will get to a point where the debt will manage you. It does not matter what you want—that is irrelevant—because how you deal with it will be forced upon you. People always believe that there is an out clause, and the out clause is quantitative easing. Of course, once you get into the process of quantitative easing and of printing the money, your money is worthless. You become a complete financial basket case.

I remind the chamber, in closing, of what I said earlier today. I remember very clearly when California had a deficit of $42 billion. They were financially illiquid, they could not pay their public servants, there was huge dislocation, there was a lack of capacity to pay the hospitals and a whole range of things. It all starting collapsing in on itself. Arnold Schwarzenegger made a statement along the lines that he had to remove the deficit, as it was like a rock on his chest and he could not breathe with it there. We are beyond their deficit and we do not have the dynamism of California, which, if it were its own country, would be the fifth biggest economy in the world.

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

Senator Conroy interjecting—

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

The seventh, sorry. It would be the seventh biggest economy in the world. We do not have Silicon Valley. We do not have Hollywood. We do not have diamonds in our economy. But we do not seem to understand the problems that we have got ourselves into.

My statement to Treasurer Swan and Prime Minister Rudd is: ‘For goodness sake, you must start to do something substantive to turn this around, because if you don’t it will go to the tipping point of no return, and do not think that that tipping point does not exist. We are getting very close to it.’ Even Dr Gruen of the Treasury was quizzed and quizzed and asked: ‘What is the point, when people, even in their wildest beliefs, never thought that the Labor Party would get to a position where they would be asking for beyond $200 billion?’ I asked: ‘How much debt can Australia have?’. The Treasury officers said, ‘We cannot really give the number to you.’ I asked: ‘Can we have a trillion dollars?’ They laughed and said, ‘Don’t be ridiculous. That would be outrageous.’ I said, ‘Let’s get to a rough number. What is the extent of debt that would mean that it is all over; it is all finished?’ They finally said, ‘About 80 per cent GDP.’ We are a $1.2 trillion economy, so we get to $900 billion in debt and it is all over. Let us start adding them up. You have $300 billion. You have underwritten the states for another $150 billion. You have the Ruddbank with a possible contingent liability of $38 billion. You have Broadband Connect, which is $42 billion, most of which you will have to get from the government in bonds. That is incredible. Within the term of one government—and we are not even to the end of it—you are halfway towards ‘lights out’ and we have not even got to the next election.

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

in reply—I thank honourable senators for their contributions to this debate—

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

Come on, Stephen, defend the indefensible!

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

and welcome Senator Brandis’s interjections and participation. The Australian Business Investment Partnership Bill 2009 and the Australian Business Investment Partnership (Consequential Amendment) Bill 2009 are an important component of the government’s efforts to help cushion Australia from the worst global financial and economic environment Australia has seen since the Great Depression. This environment is challenging on a wide variety of fronts. ABIP is a temporary contingency measure to address the risks that some financiers, particularly foreign banks, may reduce their level of financing of viable Australian businesses. We hope that foreign banks do not reduce their financing of Australian businesses, but we need to be prepared. That is why, on 24 January 2009, the Prime Minister and the Treasurer announced the government’s commitment to establish ABIP.

ABIP will provide stability and confidence to the commercial property sector and to the financial system and will help protect Australian jobs. The commercial property sector employs around 150,000 workers and is an important investment asset for superannuation funds and, through them, everyday Australians. The government has designed ABIP very carefully to ensure it meets a well-defined economic need, with appropriate safeguards to protect taxpayers. ABIP will have strong governance and accountability arrangements. The government will appoint the chair of ABIP and the Auditor-General will be ABIP’s auditor. I would add that the Treasurer recently announced the government appointment of Mr David Borthwick, a very senior former public servant and an exceptionally well-qualified individual, to be the government’s nominee and chair of the ABIP board. Mr Borthwick is highly experienced and exceptionally well qualified for the job, with a distinguished and highly relevant Public Service career.

The government welcomes the amendment that allows Mr Borthwick to be supported through the addition of another government-appointed director. These are sensible and comprehensive measures to safeguard the interests of taxpayers while allowing the government to respond quickly and prudently to a potential threat to the Australian economy. ABIP will have prudent lending criteria requiring the underlying assets and the income streams from those assets to be financially viable. ABIP will have a limited life and will only be able to write loans for two years. ABIP will only provide financing if a borrower cannot obtain finance from other commercial providers. Careful consideration has also been given to ABIP’s financial structure, in particular, ensuring that taxpayers receive a guaranteed fee if ABIP ultimately issues any government guaranteed debt. All resolutions of the board are required to be unanimous, with the exception of enforcement resolutions, where an 80 per cent majority will be required, provided the government chair is part of the majority. We will required to table the company’s financial reports, directors’ reports and auditor’s report for each financial year in each house of the parliament as soon as practicable after receipt.

I would like to thank Senators Fielding and Xenophon and the Greens, led by Senator Bob Brown, for their contributions. Their contributions stand in stark contrast to the actions of those opposite, who have continued with their single-minded response to the worst global recession since the Great Depression. Because those opposite have only one response—to sit on their hands and wait and do nothing—the opposition could not even make themselves available to debate this important legislation in a timely manner. Just doing nothing is not a solution, and it will not support jobs in our economy. The government has demonstrated its willingness to respond positively to issues raised by senators to ensure this needed reform can be legislated in a way that is effective and robust. ABIP will having lending criteria no less prudent than the lending criteria for investment grade loans that the four major banks apply in the ordinary course of their business.

We have worked with Senator Fielding to ensure this is watertight. Senator Fielding has asked whether the bill can ensure that the terms of ABIP’s loans will not exceed three years. The government is willing to accept this limitation. The government understands the concerns that Senator Brown has raised—and has been raising for a number of years in this chamber—regarding executive salaries. The government understands the community and Senator Brown’s concerns about excessive executive pay. That is why we have commissioned a Productivity Commission inquiry into executive pay and it is also why we have cracked down on golden handshakes. The government will continue to work with Senator Brown on this issue and the ABIP bill and, more broadly, to broaden the mandate to the PC inquiry into executive pay as appropriate. The government has designed ABIP in such a way as to take account of competition issues, but we will support the amendments whereby the Australian Competition and Consumer Commission will be required to prepare a competition impact statement and competition exemption report on ABIP. We also commit to examine the issues Senator Xenophon has raised more broadly on the process for legislating exemptions under the TPA.

The government welcomes the amendment to allow the Export Finance and Insurance Corporation to provide ABIP with specialist assistance in meeting its objectives during its immediate set-up phase. EFIC offers an efficient and cost-effective solution with the systems, processes and infrastructure needed to meet ABIP’s immediate needs during its establishment phase.

I would also like to briefly respond to some questions raised in the debate. Senator Xenophon asked about the role of ASIC with respect to ABIP. ABIP will be an unlisted public company under the Corporations Act 2001. All such companies are regulated by ASIC under the act and must comply with requirements of the Corporations Act. Any breaches or complaints about ABIP in relation to its conduct under the Corporations Act will be handled by ASIC in the same way it deals with all other companies. But ABIP will not be singled out for supervision above and beyond existing requirements of the act. In response to Senator Xenophon, I can advise that the Auditor-General may access ABIP’s books at any time under existing provisions of the Corporations Act 2001. Pursuant to section 310 of the Corporations Act, the Auditor:

(a)

has a right of access at all reasonable times to the books of the company ...

And:

(b)

may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.A request under paragraph (b) must be a reasonable one.

I can also confirm that the constitution and shareholders agreement will be required to be made public when finalised and then at any time either of them are amended. Without ABIP, there will be no safety net for the commercial property sector and the jobs and businesses it supports in the event that viable Australian commercial property assets are threatened by withdrawal of financing. I commend this bill to the Senate.

Question put:

That these bills be now read a second time.