John Murphy (Lowe, Australian Labor Party) Share this | Hansard source

I rise this evening to speak in support of the International Monetary Agreements Amendment Bill 2009. The International Monetary Agreements Act was enacted to ‘approve of Australia becoming a member of the International Monetary Fund and the International Bank for Reconstruction and Development’. The objective of this bill is to simplify the process for Australia to accept agreed amendments to the articles of agreement of the IMF and the World Bank. In recent times the number of amendments to the International Monetary Fund articles of agreement, or fund agreement, and the World Bank articles of agreement, or bank agreement, have been agreed by members of the IMF and the World Bank. As you know, Mr Deputy Speaker, those amendments were supported by the Treasurer, the Hon. Wayne Swan, in his role as governor for Australia of the IMF and the World Bank.

These amendments include an increase in the number of basic votes allocated to each member of the IMF and World Bank; provisions for a second alternate executive director for large constituencies at the IMF; and an expansion in the IMF’s investment authority. The first two amendments are designed to improve the level of participation of low-income economies in both the IMF and the World Bank and therefore ensure that these institutions are more representative of these economies. Equally important are the amendments to expand the IMF’s investment authority, which will form part of a new income model to provide the fund with a more robust, stable and sustainable income base.

This bill is designed to ensure that any amendments to the respective articles of agreement of the IMF and the World Bank, including the three to which I have just referred, enter into force without the need for further legislative changes. As the fund and bank articles of agreement form schedules to the International Monetary Agreements Act, an IMA Amendment Bill is required to reflect amendments to the fund and bank agreements. As a result of this bill, separate amendments will no longer be required. This simplification will be achieved by amending the International Monetary Agreements Act to alter the definition of ‘fund agreement’ and the definition of ‘bank agreement’ to include any amendments of the relevant articles of agreement that enter into force for Australia. Indeed, given the current G20 reform agenda, which includes calls for reform of the IMF and World Bank, further amendments to both institutions are likely to occur in the future—both in the short term and long term.

Concerns have been expressed that this bill will weaken parliamentary scrutiny of proposed amendments to the agreements. However, as the agreements are effectively international treaties, any amendments will still be tabled in the parliament and considered by the Joint Standing Committee on Treaties.

Australia, as you know, Mr Deputy Speaker, has had a proud history as a member of the IMF and the World Bank since we first joined in 1947. In light of the current global financial crisis, it is reasonable to assume that we will play an increasingly active role to ensure that the financial market meltdown is not repeated. That is why I am of the view that our membership of the IMF and World Bank is more important now than it has ever been since we became a member in 1947.

The IMF and the World Bank have a critical role to play in the restoration of international economic stability. In April this year, the G20 summit in London ordered key measures to restore stability to global financial markets. These measures included a trebling of IMF financing to $750 billion. The IMF will also sell billions of dollars worth of gold reserves to help poor countries which have been significantly affected by the current economic crisis. Moreover, a new $100 billion credit line will be established for low-income countries through multi-country development banks. These measures are only the beginning of a broader global effort to restore stability to the international economy. Of course, they are not the be-all and end-all when it comes to tackling the economic crisis. That is why Australia must continue to play an important role as a member of the IMF and World Bank, and the Rudd government certainly acknowledges this fact.

Given the seriousness of the global financial crisis, we need to be in a position to respond quickly to changes introduced by both the IMF and the World Bank. For instance, further amendments may very well be needed to address the toxic debts which continue to plague financial markets and pose a risk to a global economic recovery. In fact, a recent editorial in the Australian Financial Review raised this very issue, stating:

The toxic debts on bank balance sheets remain to be dealt with. This will impair recovery … there can be no sustainable recovery without healthy lenders … the International Monetary Fund estimates there is $3 trillion of bad assets still sitting on bank balance sheets.

I, too, share the concerns conveyed in this editorial. Toxic assets are largely responsible for the instability which led to the global recession and we cannot adequately resolve this crisis unless they are completely removed from the market. Any delay in the implementation of measures to clean out toxic assets will simply add more uncertainty to our fragile markets.

The success of the government’s economic package was largely due to the swiftness of our response. Had we followed the advice of the then shadow Treasurer and done nothing, I highly doubt that we would be experiencing the positive levels of economic growth that we have achieved in the past two quarters. The national account figures released last week vindicate the Treasurer’s speedy response to the global economic crisis. The logic of swift action must be applied to measures proposed by the IMF and the World Bank to address the global financial crisis.

The importance of quickly enacting amendments to the IMF articles of agreement was exemplified at the G20 summit earlier this year. A key outcome of this summit was the $250 billion allocated to special drawing rights, SDRs, to supplement IMF members’ foreign exchange reserves and provide liquidity to the global economic system. However, nations which joined the IMF after 1981—which account for more than one-fifth of IMF members—have never received SDRs. In order to ensure that the SDRs would be allocated to these nations, the G20 summit called for the urgent ratification of what is known as the ‘fourth amendment’, which would allow members to participate in the SDR system on an equitable basis. Whilst the fourth amendment was first proposed over 10 years ago, it was not implemented until earlier this year because it needed to be passed through the parliaments of a number of IMF members, such as the United States. This is the kind of unnecessary delay that the bill we are debating here this evening aims to stop.

It is also important to highlight some of the measures currently being discussed by the World Bank to address the global financial crisis. Since the 1990s the World Bank has shifted its focus to supporting development and poverty reduction programs in developing economies—and rightly so. For example, the World Bank has called for developed countries to provide money to developing economies that cannot afford bailouts and cannot finance deficits. This includes the establishment of a global vulnerability fund which aims to help support development agencies such as aid agencies, United Nations agencies and non-government organisations. The growth of developing economies in past years was instrumental to the strong global economic performance that preceded the downturn of recent years. Sustainable growth in these economies will also drive the world’s economic recovery in the years to come, and for this reason is essential that we continue to support the World Bank’s efforts to provide economic development in developing countries.

In conclusion, this bill greatly simplifies the process of accepting amendments to the articles of agreement of both the IMF and the World Bank, with further amendments likely to be proposed in order to remove toxic assets from the market and prevent another financial market meltdown. It is important that we can respond promptly to any changes introduced by either body. Against that background, I commend this bill to the House.

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