Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

The coalition supports the International Monetary Agreements Amendment Bill 2009. The bill proposes amendments to the IMA Act to simplify the way Australia implements amendments to the articles of agreement of the IMF and the World Bank. It will make the amendments to the articles of agreement automatic and, some would say, more effective, in that it will not add to the legislative timetable in the future. There are no direct financial implications for Australia and it does not in any way alter the government’s domestic legal powers. The coalition supports the IMF, and the World Bank for that matter.

The IMF’s goal is to ensure the stability of the international monetary and financial system. That is particularly important at this juncture. Australia joined the IMF, I think, back in 1947. The IMF and the IBRD, the International Bank for Reconstruction and Development, were the two organisations conceived during the United Nations Monetary and Financial Conference, known as the Brenton Woods conference, which was held in New Hampshire in the United States in July 1944. The IMF and the bank agreement came into force in December 1945, the end of World War II, and both organisations continue today, although obviously the role is quite different. The IMF was set up to manage a system of fixed exchange rates that essentially prevailed until the 1970s and was seen as necessary after World War II and obviously, before that, due to the lingering impact of the Great Depression.

What happens is that, from time to time, the agreements will change and all the paid-up members of the IMF must accept the proposed changes. The current proposed changes require a piece of legislation in this place. In my maiden speech I committed to parliamentary democracy, so it does grate a little that the coalition would be in a position where it is supporting legislation that empowers international agreements to automatically flow through to Australia. It is something that I am uncomfortable with and I would hope the government is uncomfortable with as well. In no way would we want to diminish the role of this place in determining the appropriate level of scrutiny necessary for new international agreements or amendments to existing agreements.

As the Parliamentary Library identified in its very handy note, the bill will reduce the parliamentary scrutiny of proposed amendments. Unless Australia monitors the amendments, it may not, as it currently stands, meet its international agreement and that is why it requires legislation here. The fact that there will be less parliamentary scrutiny of any amendments to the IMA Act is of concern. I would suggest that there is a way forward for the government, and hopefully further scrutiny in the other place, and that is to look at ways to provide constant updates to legislation as changes go through in the various agreements that underpin the International Monetary Fund and the IBRD.

By way of background, the IMF’s main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises and works with its member countries to promote growth and, I would hope, alleviate poverty. It has three main tools at its disposal to carry out its mandate. The first is surveillance, which has actually been very useful throughout the recent global financial crisis. Having said that, the IMF always seem to be playing catch-up, but that is not unusual, one would suggest, in a world where there are rapidly changing economies as a result of the global financial crisis that rely heavily on the contribution of domestic treasuries. Obviously not all departments of finance, as they are usually known globally, or treasuries are of the same quality as that of Australia, even though from time to time we might have differences with the Treasury—after all it is an arm of the government, as Dr Ken Henry correctly identified. So surveillance is a very important tool.

The second one is technical assistance, which plays a very significant role as well, and that includes training. I know that has been a large contributor to improvements in financial reporting and accountability in many Third World countries. The third area of activity is in relation to lending. The IMF often indicates a willingness to provide funding support where there is a breakdown. Thankfully, from time to time, the IMF is not required to contribute.

One of the most endearing features of the IMF is that the voting power of members is closely linked to the amount they contribute to the global economy. The voting power of individual countries is closely linked to that as well. Quota largely determines a member’s voting power in IMF decisions, and further reform is flagged to improve that. Look at the case of the United States, the world’s largest economy. The United States had well over 16 per cent of the votes and Palau has 0.01 per cent of the votes, and that is appropriate. There is a direct link: the amount of financing a member can obtain is based on the quota. If it is seen as a lender of last resort, which is not really the case, but if the IMF is seen to be undertaking initiatives which are going to prop up the economic stability of a country or a region then it is vitally important to have funding mechanisms closely linked to the size of the economy.

Without going into any further details of the bill, and the second reading speaker went into quite a few of those details, the coalition reiterates that we support the bill. We believe that it is a piece of administration that has common sense in this current environment where there seems to be a lot of legislation going through this place without any appropriate scrutiny. Given that we are affected by any changes in the IMF automatically, the only encouragement I would give to the Treasurer and the government is to ask them to consider amendments that would allow the agreements to be constantly updated even though the parliament is not changing the legislation.

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