Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I move opposition amendment (1) on sheet 5821:

Page 3 (after line 2), at the end of the bill, add:

7  Public Register of Government Borrowings

        (1)    The Australian Office of Financial Management must establish and update each month a register to be known as the Public Register of Government Borrowings.

        (2)    The register is to be maintained by electronic means.

        (3)    The register is to be made available for inspection on the Australian Office of Financial Management’s website.

        (4)    The register must be in a form prescribed by the regulations and must record the beneficial ownership, by country, of:

             (a)    all securities on issue by the Commonwealth of Australia; and

             (b)    any Commonwealth of Australia guaranteed issuance by any Australian State or Territory.

        (5)    As soon as practicable after the end of each quarter the Australian Office of Financial Management must publish on its website the register containing the details that were current as at the end of the quarter.

        (6)    The Australian Office of Financial Management must include in the Register each quarter a statement of the Office’s opinion as to the domicile of the beneficial owner of securities if nominal ownership is registered in a country other than the actual domicile of the beneficial owner.

        (7)    In this section:

quarter means a period of 3 months beginning on 1 January, 1 April, 1 July or 1 October.

8  Regulations

                 The Governor-General may make regulations prescribing matters:

required or permitted by this Act to be prescribed; or

necessary or convenient to be prescribed for carrying out or giving effect to this Act.

The basis for the amendment is to seek greater transparency in relation to the beneficial ownership of bond investment in Australia. Our inquiries indicate that both the United States and New Zealand have been able to maintain registers that provide information on the public record to people who wish to ascertain it.

Before addressing exactly what we are seeking in the establishment of a public register of government borrowings, I might mention that what we know is that by the admission of the Treasurer more than 65 per cent of all Australian government bonds are borrowed by people and interests offshore. That, of course, is consistent. It is not surprising, because Australia is a net exporter of capital, but we in the opposition have a concern that our borrowings are now on a scale that Australia has not done before. We are borrowing at a magnitude at which we have never previously borrowed. It is not the private sector at risk but taxpayers more generally, particularly if the buyers are governments offshore. We believe that it is in the interest of transparency—and, indeed, in the interest of the nation and the interest of taxpayers—that we know who is lending all this money to the Australian government. We are not saying that we have a view that there is any underlying inappropriate investor. We have absolutely no reason to believe that. But we think there is a mutual interest—indeed, a national interest—in more transparency.

We think that the establishment of a register and more public information, even if you were able to identify by regions the beneficial owners or the buyers of bonds, given that a lot of bonds are bought on behalf of nominees for ultimately beneficial owners, would enable much better targeting for the government. The government is going to be out in the market, issuing an extraordinary amount of debt, and we have seen instances—yesterday was one—where, for example, it was very difficult for the Queensland government to get their issue away in competition with the Commonwealth. It is not a good thing commercially for governments to be falling over their feet in the sequencing of how the bond issues proceed, and we thought that it would provide much better information for officials assisting the government to be able to properly place future bond issuances. We think that on two grounds there is a clear public interest in greater transparency, but it is also very difficult to see that there would be any risk to anyone by having greater information about who is actually lending all this money to the Australian government.

In the last 12 months, we saw the Chinese government, for example, naturally and understandably express concerns about the risk of their massive investment in the United States, particularly in US sovereign bonds. There is a risk not only to Chinese wealth from the devaluation of the US dollar but also to Australians if those bonds become far more expensive or if they are mispriced in the interests and protection of the Chinese investors. We think it is appropriate for us to find out what is happening in Australia. We need to know, for example, the extent to which major superannuation or fund management firms from, say, Japan are the investors. Is it countries that have investment vehicles domiciled in Bermuda? Is it just general investors from the United Kingdom? We think we need to find out and are interested to know who the major holder of Australian government bonds is. It may be the Chinese government. In saying all this, I want to stress that it is not our contention that any of this investment is inappropriate. The basis for our concern is that we think that there needs to be much greater transparency and that it has not been beyond the wit and capacity of other countries—I mentioned the United States and New Zealand—to provide much more information than the absolute wall of silence that we are greeted with when we actually seek this information from the Australian Bureau of Statistics or the Australian Office of Financial Management.

In this amendment we are asking that some best endeavours be made here and that the Australian Office of Financial Management establish and update each month a register to be known as the public register of government borrowings, that it be maintained electronically and that it be made available for inspection on the AOFM website. It will contain and record the beneficial ownership by country of all securities on issue by the Commonwealth and any Commonwealth of Australia guaranteed issuance by any Australian state or territory, that being potentially much more relevant as a result of the legislation we are supporting. As soon as practicable, the Australian Office of Financial Management will publish on its website the register containing the details that were current as of the end of the quarter. The details included in the register each quarter are also to have a statement of the office’s opinion as to the domicile of the beneficial owner of securities if nominees are involved and if nominal ownership is registered in a country other than the actual domicile of the beneficial owner.

We think that that is achievable. It is doable. It is eminently reasonable. It does not pose a risk to anyone and, indeed, it has the great advantage of shining a bit of light on who owns all this investment in Australia. We think that that is overwhelmingly information that is in the public interest. For those reasons we move the amendment.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The government will not be supporting the amendment moved by the opposition, and I will outline the reasons why. Firstly, as to process, this amendment was circulated in the Senate chamber only some five minutes ago. I understand it was foreshadowed in the House of Representatives debate, but the amendment did not turn up. The government and I understand Treasury offered to provide a briefing to the opposition because they expressed an interest and concern in regard to the issue on which they have now produced an amendment, but I am advised they did not take up the offer. If they had, at least the advice I am provided with could have been outlined to them.

The government already maintains a register of all holders of Commonwealth government securities, CGS, and the Reserve Bank of Australia provides this service. The ABS releases the data that it can, based on the legislative and governance framework it operates within and confidentiality assurances provided to the companies it surveys. Senator Coonan referred to a wall of silence, which I think was a touch misleading. There are legislative requirements on the ABS in terms of data collection and the public provision of the identities of individuals who provide that data. Secrecy provisions and confidentiality provisions apply not just in this area but right across the ABS in respect of the surveys that take place. Those arrangements for confidentiality and the secrecy provisions have existed for many years and go back under previous federal governments. Let us assume the secrecy provisions were varied in terms of the ABS. What would be the response of industry which ABS surveys? I would be surprised if it did not have somewhat less accurate information, to the extent it is accurate in terms of the detail that the opposition is seeking. I will come to the issue of the level of detail and accuracy of data that is provided to the ABS, even if it were publicly released.

Senator Coonan mentioned that the US release this data. However, the opposition amendment goes far beyond that which is released in the US, as I am advised. Further, this does not necessarily, by the opposition’s own admission, show the true owners of the bonds. If you go to the release of the information in the US, it does not give you the true owners of the bonds but shows the custodians. There are probably about 15 to 20 custodian entities in Australia. I am not sure of the precise number, but there would be a relatively small number that operate in Australia. If you provided, for example, information on custodians, you would not know who the true owners are, because the custodians are exercising an authority on behalf of literally thousands of investors both from in Australia and certainly from overseas. So the US release of data of custodian entities is not comparable, and the level of detail sought via this amendment is not provided in the US. In fact, the US Federal Reserve Board has said in respect of the register that Senator Coonan has referred to:

… the involvement of chains of intermediaries in the custody or management of securities frequently makes accurate identification of the actual owners of U.S. securities impossible.

So, according to US Federal Reserve Board, it is impossible to find the actual owners of the securities on this register in the US.

Similarly, the proposed amendment would not provide reliable information on the ultimate beneficial owner of Australian government securities. Senator Coonan referred to jurisdictions such as the Cayman Islands. I am not sure what the total economy and population size of the Cayman Islands or Bermuda are, but I am advised those two jurisdictions hold 10 per cent of the ownership of world bonds. Ten per cent is an extraordinary figure given the very small size of their economies. I suggest that is for the reason that they are effectively tax minimisation, tax shelter centres. Who owns these bonds that are held very significantly by the Cayman Islands and Bermuda? The great difficulty is—and it is unfortunate, I would agree—we do not know. If you have this register that says, ‘This particular proportion of bonds issued by Australian governments is owned by an entity in the Cayman Islands or Bermuda,’ you cannot actually find out who owns the bonds. It is of extraordinarily limited use just being able to tell us the Cayman Islands and Bermuda own 10 per cent of the world’s bonds, because we do not actually know who the owners are behind them.

The opposition have asked the AOFM to carry this out. This would impose additional costs on the AOFM, as it does not currently provide the service. In turn, of course, the amendment asks the AOFM to provide this service for the states’ and territories’ securities, and that is not something it carries out at the moment. Treasury have advised that this reduction in confidentiality—to the extent you could actually have transparency, which is very limited—may also reduce demand for Australian bonds by wholesale and retail investors. That would obviously have some implications for the cost of borrowing. So the proposal, in turn, would impose additional costs on the taxpayer for information that would distort rather than provide additional clarity and information, if in fact it could be obtained, and in most cases it is actually very difficult, if not impossible, to obtain who the true owner is. So we do not see the necessity for this amendment.

As I have mentioned, the US register, as it is referred to, is not comparable to what the opposition is seeking here and just the practicalities of identifying true owners mean that it would be very difficult. I think it would be desirable to find the true ownership, but under current world financial arrangements it is impossible to identify accurately who the true owners are. I wish it were otherwise, but there is nothing we can do with this legislation via an amendment on disclosure, which is practically not going to work and would impose additional regulatory costs, to change this situation. So why take this approach if you cannot obtain the information? What would be imposed is the AOFM attempting to find the information, most of which it could not find or would be very limited, and that would have to be done at significant additional cost. They have got to do it for the state and territory governments. So those are the practical reasons.

I note that Senator Coonan says, ‘We want the AOFM to use best endeavours.’ I have outlined why best endeavours are not going to provide us with any significant level of detail, so best endeavours impose an additional cost on the AOFM to try and do a worldwide search for true bond ownership. Is that best endeavours, that we have AOFM officers scouring the world trying to find out the true owners of these bonds, taking a trip over to Bermuda and the Cayman Islands? Frankly, you would have to put the financial entities under some sort of surveillance to see who is going in or out. You would have to get AUSTRAC to be tracking through Bermuda, the Cayman Islands and Switzerland. It is just not possible; they do not allow that to happen. As I say, I wish it were otherwise. So this is an impractical suggestion that imposes additional costs for no outcome that we can see and that would not create any greater transparency. Comparisons with the US are not correct. As I have said, the US Federal Reserve Board has admitted that the actual owner identification of US securities is impossible. I do not have any brief on New Zealand. I will endeavour to obtain it. Again, we would be very surprised if what is being proposed by the opposition is in any way, shape or form being produced by the New Zealand government at the level of detail that is being sought here. So we do not support the amendment.

Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I have listened very carefully to Senator Sherry’s comments, and what we appear to be discussing here with this amendment is an agreement on the part of the government that this would be very desirable if in fact there could be greater transparency but it is just too difficult and not practical to do it. That seems to be the thrust of what Senator Sherry was saying, that the practical difficulties or the process difficulties would be the main inhibitors or main barriers to it as well as the fact that it is too difficult to do and it would not actually achieve the outcome being sought.

I want to address those points, but first of all I should just put on record that this has been a matter where it having been foreshadowed that the opposition was interested in getting greater transparency in moving an amendment to this bill, it is very unfortunate indeed that there has not been an opportunity to have a meeting of minds or a briefing or a discussion. Senator Sherry did mention that the government had offered a briefing. The great pity about that was that the briefing was offered for four o’clock this afternoon, which is not very helpful to anyone getting a better understanding of the government’s position in relation to this bill. It was introduced yesterday and came to the Senate this morning and the amendment was circulated in the way it had been drafted without the benefit of this briefing. That is the amendment that we are moving and the amendment that I am still speaking to.

Senator Sherry did mention the fact that the legislative requirement on data is also a register. The problem with that is that he talked at great length about the ABS surveys and the information compiled and the data made available by surveys. This is not in fact what we are talking about here. We are talking about what can be done to identify and compile an actual register of actual owners. We do know that more information is available in other jurisdictions. Whether or not it is different to this particular amendment that is being put up by the opposition is immaterial because we do know that you can in fact get better information available if this information is compiled in a more effective way. It is passing strange indeed that no-one appears to know, at least so the minister said, who the owners of all of this investment in Australia are. The difficulty we have is that the Reserve Bank must be writing out interest cheques to someone; the interest does not go into the ether. It does appear that much more information and better information should be able to be made available and that much more information is made about if not the actual owners then certainly the regions, the countries from which these investors come. We think it is entirely reasonable to want that as part of the arrangements that are being agreed to as part of this bill.

Senator Sherry also mentioned the fact that there can be other jurisdictions that own vast percentages of bonds—the Caymans or the Bahamas. I mentioned the Bahamas. In fact, we do not know that detail either. We think it is entirely appropriate that the details of the jurisdictions of even the nominees who may be purchasing bonds on behalf of beneficial owners should be available. We do not even know that in Australia, and we think that is certainly something that is reasonable to ask for.

The government seems to be advancing a slightly conflicting argument in opposing the amendment. On the one hand the minister says it would be desirable if we knew who the owners of the bonds are, but then he talks about the fact that another barrier would be a reduction in confidentiality. But if we do not know who they are, we do not know how their confidentiality is in any way going to be impacted and how that would somehow or other impede investment in Australia.

All this money floating around the world belongs to someone. We think that in Australia it is entirely appropriate that more information be made available about who the investors in the Australian bond market are and who is lending all this money to the Australian government. I want to say again, because I do not want to be taken out of context, that we are not suggesting that any investors in Australia are investing inappropriately. That is not the purpose of the amendment that we are seeking to advance here. But there will be borrowing on a scale that we have not seen in Australia before. We know it is going to be in the order of $315 billion, and it would be extraordinary if it does not go higher than that. So we believe we would not be doing our job if we did not hold the government to account to do a lot better than they are currently doing to identify to the Australian public more information about who is investing in Australia. We note that having more information available in the United States does not seem to have seriously curtailed investment in US bonds. This investment is no doubt legitimate—and we certainly hope it is. It is a nonsense to suggest that it would in any way deter any investor if more information of a statistical nature were available to identify where the money is coming from.

It is not beyond the wit of authorities to devise a system with better information about buying bonds. I refer to the Reserve Bank’s website, which has some helpful information that they want everyone to know. It says that from 2 September 2007 all new stockholders must complete an identification reference form—that sounds like something you could ask for, doesn’t it? It also says that, following the introduction of the Anti-Money Laundering And Counter-Terrorism Financing Act 2006, attorneys acting on behalf of stockholders should also complete the identification reference form—what would there be, for example, to prevent an identification reference form from being completed in relation to the application to buy bonds? It goes on to say that the purchase form and the identification reference form, together with certified copies of identity documents, should be lodged in person at either the Sydney or Canberra office of the Reserve Bank of Australia—so there we have the information being lodged. Alternatively, the documents can be posted to the registry of a prescribed stock that has been mentioned. The registry is already there to provide assistance. There is a mechanism which enables identification for a particular purpose. The Reserve Bank seems to be right across how you would identify someone who wants to buy Australian government bonds. So we simply are not persuaded by the minister’s arguments. In fact, we do not think that any of the arguments hold much water. It is entirely appropriate to have a bit of sunlight shone on who are the investors in Australian bonds and we will continue to press for our amendment.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I have been listening carefully to the argument here. This amendment from the opposition is a constructive amendment. It seeks information that Australians should have available to them. I say to the minister if 10 per cent of the investment in Australian bonds is coming from tax havens like the Cayman Islands and Bermuda, should we not know that? I think we absolutely should. If memory serves me correctly, a very senior treasury official in China called on the United States a couple of months back to take measures to guarantee that investment from China in the United States was safe. We are in a situation where we are seeing a big inflow of investment from overseas and the likelihood of it increasing—as Senator Coonan has outlined—and there is also the potential for governments and entities overseas to seek assurances like that which we saw from the Chinese government to the United States quite recently. So I think a bit of scrutiny about where the investment is coming from is very much in order.

I was in South Korea a couple of years ago looking at the 30-kilometre long Saemangeum sea dyke that was being built into the sea by one of the Hyundai chaebols. It destroyed extensive mudflats and, as a result, one-tenth of the migratory birds from Australia going to Siberia and Alaska each year. In talking with people involved there was clear concern then in Korea about the outflow of money, particularly going to the United States. I think it is actually good for the countries of origin of the money to know where their money is going to. I suspect that some of those countries have a much better register of where the flow is than we do as the recipients. It is very reasonable in an open and transparent democracy that we do get more information. So the Greens will be supporting this amendment.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I support this legislation. I had a brief but constructive discussion with South Australian Treasurer, Kevin Foley, about this. I see the need for this legislation, but I also see the need for the transparency provisions that have been moved by the opposition in relation to this.

I understand the government’s arguments, but I do not accept that this is unworkable. I think that it is not unprecedented in other jurisdictions to have transparency mechanisms such as this, and I believe that this enhances the legislation and that Australians have a right to know in broad terms where the money is coming from. I think it is in our interest to know that and to have that level of transparency and accountability.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I have just a couple of responses. In terms of process, Senator Coonan, my advice is that the offer was made to bring forward the initial 4 o’clock this afternoon briefing.

I have some further information on New Zealand, where apparently they have some transparency. Apparently the New Zealand register, which is publicly available, reveals that most of the bond issuance comes from the Benelux countries, which are the Netherlands, Belgium and Luxembourg. It is clearly not right that the owners of the bonds come through those jurisdictions. Clearly—while ownership is not clear—those three countries are being used as a cover without revealing the true owners of the bonds. To suggest that in the case of New Zealand most of the owners of those bonds come from those three countries is just clearly not right—but that is what the publicly available information does. There are clearly lots of individuals and entities—financial and otherwise, right around the globe—who are using those three countries as the jurisdictions which the publicly available custodian data is being channelled through. To the extent that Senator Coonan believes New Zealand is useful, that is the extent of the use. But it does not identify who the true owner is.

Senator Coonan has suggested that she would like to know what proportion is coming from China. I do not think it would be too hard if you were from China and you wanted to buy bonds. You would not do it directly in Australia if you did not want it known that you were a Chinese-based institution. You would simply go to the Benelux countries in this case and purchase them through a custodian in the Benelux countries. You would not know, in fact, that the investment was coming from China, or anywhere else for that matter, if that was what your intention was. We do not believe the amendment is practical.

It is not just the practicality issue, it is the cost issue. The amendment requires significant additional work by the AOFM and that involves expense. Senator Coonan said ‘best endeavours’. What does ‘best endeavours’ mean for the AOFM in any practical way in identifying who the real owners of the bonds are? The die is cast on this amendment; I am not going to make any further contribution. For an opposition to move an amendment that is not practical, but will cost extra money in order to try and obtain the information that we know is largely unobtainable and to then express concern about debt I just think is a touch hypocritical.

I conclude on the issue of government debt because Senator Coonan has made some comments about that. I want to make this point: the predominant reason the Australian government has budget deficits in the next six years or so—I do not have the precise projections in front of me—is the collapse in revenue because of the world financial and economic crisis. The collapse in revenue over the forward estimates is estimated to be, I think, $210 billion plus. That collapse in revenue has occurred, and would have occurred whether we were in government or you were in government. You would be in deficit and issuing bonds just as we are because of the world financial and economic crisis.

Then we get claims from the Liberal opposition that they would deliver a lower budget deficit. Tell us where you would cut spending going forward? Senator Coonan is the shadow finance minister and I know she heads the ERC; I look forward to this list of cuts—presumably in billions of dollars to government programs—to be released by the opposition, the alternative government, in the next 18 months. Where is it? You want a lower budget deficit—show us your cuts! As the alternative government and as a responsible opposition I would have thought it incumbent on you to show us where you will cut billions of dollars. It would be tens of billions of dollars if you wanted to move the budget to a surplus in the current circumstances. Show us where you would cut. Let’s see the evidence of fiscal responsibility from the Liberal opposition about where they would cut, given the financial and economic circumstances we are faced with. We will not be supporting the amendment.

Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I wanted to make some comments in response to Senator Sherry because he did open up on some issues about debt. I was referring, of course, to peak debt, a maximum figure, the gross debt figure that we finally got out of the Treasurer at a media interview in Adelaide, if my memory serves me correctly. My point was that it is unlikely in the current circumstances that it will only be $315 billion gross debt because we know that some very significant cost and debt simply was not included in the budget. I refer of course to the $43 billion broadband rollout, the farcical broadband plan, that certainly is not in the budget. It is on some sort of never-never, with the hope that some private sector investment will magically drop through the ceiling—but it will require the government to guarantee it; there is no doubt about that. We voted against Ruddbank yesterday, because it would have also potentially risked another $26 billion debt to the taxpayer.

I did not seek to make this point; Senator Sherry raised the matter. I will also say that, yes, there has been a collapse of revenue but if the Labor government thinks it can get away with the charade that they have not done anything about increasing debt, that will not wash. There is $124 billion of new spending—$124 billion in new spending since this Labor government hit the treasury bench. It is not a bad figure, is it? That is about two-thirds of the net debt in the budget of $188 billion—and that we now know is more in the order of the $203 billion, which I think is the figure we finally got out of the Treasurer, although he had great trouble saying the ‘billion’ word.

I do not appreciate being lectured about debt just because we wish to have some transparency in relation to who are the investors in this country. It is a reasonable proposition being put forward by the opposition, and we think it is entirely reasonable to have the information. If nominees own all these bonds and they are all in other countries, the Caymans and whatever other countries might be tax havens, it is important that Australian taxpayers know that. I do not believe anybody knows at this stage—somebody might, though I do not believe Senator Sherry knows; I certainly do not know—who are the beneficial owners of these investments, but I would like to know at least if they are all nominees and they are all in tax havens. I think it is a relevant piece of information. I will not go on at tedious length, and I am not going to continue to make political points about this because I do not think it is called for in this debate. It is a reasonable amendment, and I am grateful for the support of the Greens and Senator Xenophon for its passage.

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

This really concerns me, and I just want to know: what is the total amount of subprefecture debt—the debt of the states? What is it currently? Where are we kicking off from with this?

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I do not have that up-to-date accurate information.

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

As a little old bush accountant, do we have any range, any sort of rough idea about what the debt is? Is it $100 billion, is it $150 billion, is it $200 billion? Do we have any sort of vague idea how much we are underwriting here? This is real money owed to real people, and they will really want it paid back if the states cannot pay it back.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I can provide some information. I am advised that there is approximately $120 billion in state and territory bonds on issue—that is not net debt, though.

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

I had $150 billion, to be honest. So we are saying it is $120 billion, and is it heading up or heading down or static? Did they pay off some in the budget papers the other day?

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I am advised that that the current stock is $120 billion.

Question agreed to.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I wish to move the Australian Greens amendment circulated but seek leave to amend the amendment by removing the word ‘no’ before the phrase ‘prudent or feasible alternatives’ at the end of the amendment.

Leave granted.

I move:

(1)    Page 3 (after line 2), at the end of the bill, add:

7  Scheme Rules requirements

                 Scheme Rules must include provisions that limit the Deed of Guarantee so that it cannot be applied to borrowings relating to projects that will have a significant negative environmental impact or result in significant greenhouse gas emissions locally or internationally, and for which there are prudent or feasible alternatives.

This amendment simply provides for this parliament, which has environmental responsibility for the national and global climate, the assurance that this guarantee is not going to extend to unnecessary and massively polluting projects put forward by the states, which do not have that responsibility.

You will note that I am not saying that the polluting projects cannot proceed; I am saying that there must be no feasible or prudent alternative. I cited the Bass Coast desalination plant in Victoria, which the state Labor government is intending to proceed with as a public-private partnership. Two overseas companies-based companies will be involved there. I raise the issue: why should we be, effectively, underwriting potential borrowings by the Victorian government to put into this project when it is manifestly unnecessary? There are prudent and feasible alternatives. The Brumby government ought to be into a project to collect the rainwater falling over Melbourne and to ensure that there is much better stormwater reticulation and wastewater recycling. That aside, we are looking here at a single project which could produce a million tonnes—plus or minus a small amount—of greenhouse gases per annum.

Across the way in Tasmania is Gunns’ pulp mill. The state government there says that it is not going to offer further financing. There is an election next year, and after that election the current state Labor government in Tasmania could well be potentially disposed to breaking its promise on not having further financing of Gunns’ pulp mill—as it broke its promise at the last election that the Ralphs Bay mega canal development would not proceed. Straight after the election it went into negotiations with Walker Brothers for that very destructive and unpopular development on the eastern shore in Hobart.

Let us have a little bit of quality control here, and let us make sure that this guarantee is not extending to maverick state government projects which will have massive pollution consequences and where there are better alternatives. It is a very reasonable guarantee; it is very unspecified, but it is a very reasonable guarantee for this parliament to be putting to a federal government which effectively wants to put a blank cheque, in terms of guarantee, across to state and territory governments around the Commonwealth. We have a responsibility to be more prudent than that.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The government will be opposing the amendment. Senator Brown, you sound so reasonable about what I would consider and argue is such an unreasonable amendment in terms of the application of it. The amendment says:

Scheme Rules must include provisions that limit the Deed of Guarantee so that it cannot be applied to borrowings relating to projects that will have a significant negative environmental impact or result in significant greenhouse gas emissions locally or internationally, and for which there are prudent or feasible alternatives.

That is what it says. We are not supporting the amendment. I argued that the previous amendment from the Liberal opposition was impractical. If this amendment were to pass and if there were to be a serious attempt to follow what you suggest in this amendment, the AOFM, presumably—which is not equipped but presumably it would have to go and equip itself—would have to examine every project that a state government seeks borrowings for in order to fund. That would be for every project. I just do not see how that is practical in any sense.

Secondly, you have legitimate concerns. I do not necessarily agree with you, but you have concerns about a range of proposed state government investments. You mentioned the desalination plant proposed to be built in Victoria. I do not know the detail of Victorian legislation, but I am sure that the desalination plant project will be subject to state environmental legislation and other legislation—planning legislation at Victorian state level—in its assessment and that it will be subject to whatever relevant federal legislation that may apply. The desalination plant would be subject to assessment under a whole range of other legislation—state and possibly federal. So why would we add a further assessment process of a particular project, in this case the desalination plant, by, presumably, the AOFM? Why would we add another layer of examination of these issues? Once all of the assessments have been gone through at the state level for this project, it would then be over to the AOFM to carry out further assessments before it said to the state government, ‘You can be covered by a deed of guarantee.’ If in fact they did need to borrow to carry out the project, there would be a whole range of new assessments.

So we do not believe that this is the appropriate place to impose such a significant guarantee. You refer to it being very general, reasonable and unspecified. The very nature of the generality means that it would impose very significant assessment requirements to carry out the meaning of the amendment, should it be passed. You referred, I think, to ‘a little bit of quality control’. It sounded so reasonable, Senator Brown, but this would have significant additional quality control assessment requirements over and above that which are currently required under state and federal law.

You may agree or disagree with current assessment processes on environmental impacts and greenhouse gas emissions that take place at the state government level and/or the federal government level, but, at least with respect to the federal parliament, there will be legislation that will deal with the issue of greenhouse gas emissions quite directly. The government believes that it is inappropriate to attempt to impose significant new compliance and assessment processes that will add to costs and time delays, as this particular mechanism would.

The guarantee being offered by the government is to provide certainty to investors. What you are suggesting would not provide certainty. It is to provide certainty to investors once a particular project has gone through the current state and/or federal legislative requirements for planning, environmental impact et cetera that exist in different laws. The guarantee allows the states and territories to access the credit market, maintaining the discipline by paying a market price for their securities. That is what this legislation is about. So the government will not support the amendment.

Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I listened very carefully to Senator Bob Brown’s reasons for moving this amendment and I must say I do understand—I think I understand—the genuine sentiments behind the amendment. It has been framed in such a way as to limit, hopefully, negative environmental impacts and to have some control over the guarantee being provided in circumstances where some assessment could be made that it would add to significant greenhouse gas emissions locally or internationally. I think that sooner or later we have to get our heads around infrastructure investment that is not going to have negative environmental impacts and get our heads around being mindful one way or another of what we do with greenhouse gas emissions. But I do not think that this amendment in this particular piece of legislation quite gets there. I agree with Senator Sherry’s comments that it would be extremely difficult to make this work. The kinds of assessments, procedures and barriers to timeliness that would be involved would, I think, be very significant. We do, of course, have to make sure that the sorts of infrastructure that will be beneficial to Australia and the economy more broadly will continue to be built. So, whilst I appreciate Senator Brown’s motivation in bringing forward this amendment, I agree that it imposes impractical requirements and compliance issues. In those circumstances the coalition will not support it.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I thank the government and the opposition for their comments. This is an extremely serious amendment. It is put forward very seriously. The absence of strictures in it is because we would expect it to be administered by the minister, who would take responsibility. I think that is at the heart of what we do here. We expect governments to take responsibility when handling vast amounts of public money—as is inherently the case with this bill, which is about guaranteeing state and territory borrowings of, potentially, billions of dollars. The responsibility for ensuring that there are no feasible or prudent alternatives to a greatly polluting project would rest with the state governments. If they wanted the guarantee they would have to provide that, and any minister worth their salt would say: ‘Well here is amendment (1)7 in this legislation. You fulfil the requirements if you want a guarantee for those borrowings.’

The term ‘prudent and feasible’ comes out of the previous national environment legislation. The impact of proposals requirements until 2000 or 1999 were that every matter that involved the Commonwealth had to be subject to an environmental impact assessment, if it was a significant matter, to see if there were prudent and feasible alternatives. So, far from being radical, this is established wording and relates to a very reasonable requirement being put back to the states if they want to borrow. Indeed, I wonder if this legislation would be before the chamber at all if it were not that seven out of the eight jurisdictions to benefit from it are Labor governments. I think there is a huge responsibility on government to be ensuring, where massive public guarantees are involved, that the projects are reasonable, in an age of climate change and enormous public concern about the environment. This is an important amendment to the degree that the Greens will not support this legislation without it.

Question negatived.

Bill, as amended, agreed to.

Bill reported with an amendment; report adopted.