Craig Thomson (Dobell, Australian Labor Party) Share this | Hansard source

I rise to support the International Monetary Agreements Amendment Bill 2009. I have to make some comments in relation to the contribution made by the member for O’Connor. It was interesting to hear his summation that, in some sense, part of the International Monetary Fund’s purpose is to support the Labor government of Australia. I do not think anyone has actually made that submission in this place before. I am sure that we are all very happy about that, but I somehow doubt whether that is in fact the case, and of course it is not. The fact is that the International Monetary Fund is made up of representatives from around the world. Just because there is consistent economic advice from those countries, which conflicts with the member for O’Connor’s views, he raises some sort of magical conspiracy theory that their purpose is to support a Labor government.

The member for O’Connor’s contribution continued to be interesting and highlighted the problem that the coalition have in terms of the economic crisis. They simply do not get what the problem is and what the solution is. He made complaints about the money in terms of the cash payments and said that they were going overseas. He said that they were providing money for China and Indonesia, which were the two examples that the member for O’Connor raised. Quite simply, you only need to look at the affect that the cash payments had on retail sales and the direct affect they had on employment, particularly in the retail sector, to understand in the short term how important those cash payments were to make sure that, in an industry very vulnerable to downturns, people continued to be employed. I know that because on the Central Coast retail is the biggest employer of labour and without those cash payments the unemployment figures would have been much, much more.

The member for O’Connor was incredibly confused in relation to the infrastructure spending, particularly on schools. He seemed to be, first of all, arguing that we should not have been spending money on schools and should not have been spending infrastructure money making our schools better. But he then spent the second half of his speech complaining about a particular school where we should have spent money but were not. So it was a highly confused contribution. On one hand he said we were spending too much money on schools, and on the other he said that there were schools that we should be spending money on. Quite clearly the member for O’Connor would prefer the position where he decides which schools money is spent on. I suppose it is kind of reminiscent of some of the problems with the Regional Partnerships programs when there was not a proper process to decide where money was spent. So it is little wonder that the member for O’Connor made those sorts of comments.

The proposed bill will simplify the process for Australia to accept amendments to the International Monetary Fund and World Bank agreements while retaining policy and parliamentary scrutiny. At a time when there is a world financial crisis we know just how important the role of the international community is in tackling and making sure that measures are put in place. No matter what Australia puts in place to cushion the blow from the international financial crisis, it still feels the effects. The whole world feels the effects of Lehman Brothers and the whole world feels the effects of what came out of the subprime market in the United States. That is why, increasingly, the world economy and the global institutions are going to play a much more important role than they did when they were first brought about in the late forties and early fifties.

The purpose of this bill is to amend the International Monetary Agreements Act, to alter the definition of the International Monetary Fund articles of agreement, the fund agreement, and the definition of the World Bank articles of agreement, the bank agreement, so that they include any amendments of the relevant articles of agreement that enter into force for Australia without the need for further legislative amendment when these amendments are made. These are both very important organisations, and I want to spend a little bit of time talking about them and the importance that they play.

Looking at the International Monetary Fund and what it does, the IMF’s main responsibilities are: promoting international monetary cooperation; facilitating the expansion and balanced growth of international trade; promoting exchange stability; assisting in the establishment of a multilateral system of payments; and making resources available with adequate safeguards to members experiencing balance of payments difficulties. The IMF is responsible for promoting the stability of the international monetary and financial system. Its job is to promote economic stability, help prevent crises, and help resolve them when they occur, thereby promoting growth and alleviating poverty. Its three main activities: surveillance, lending, and technical assistance, are intended to meet these goals.

The IMF works to promote global growth and economic stability, and thereby prevent economic crises, by encouraging countries to adopt sound economic policies. This process is known as surveillance. Surveillance comprises multilateral surveillance, under which the IMF assesses global and regional developments and publishes the World economic outlook and the Global financial stability report, and bilateral surveillance, which is the regular dialogue and policy advice that the IMF offers to its members. Usually, once a year, the IMF conducts an in-depth appraisal of each member country’s economic situation and policies, and advises on desirable policy adjustments. The overwhelming majority of countries opt for transparency and agree to publish IMF documents pertaining to their economies.

The IMF’s technical assistance and training help member countries strength their capacity to design and implement effective policies. Technical assistance is offered in several areas, including tax policy and administration, expenditure management, monetary and exchange rate policies, banking and financial system supervision and regulation, legislative frameworks, and statistics.

In the event that member countries experience crises, the IMF’s resources may be tapped to help finance balance of payments needs. Financial assistance is available to give member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditional on effective implementation of this program. To help support countries during the global economic crisis, the IMF is strengthening its lending capacity and has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries’ varying strengths and circumstances.

At the 2 April 2009 G20 summit, world leaders pledged to support growth in emerging markets and developing countries by boosting the IMF’s lending resources to $750 billion. IMF lending aims to give countries breathing room to implement adjustment policies and reforms that will restore conditions for strong and sustainable growth, employment and social investment. These policies will vary depending upon the country’s circumstances, including the causes of the problems. For instance, a country facing a sudden drop in the price of a key export may simply need financial assistance to tide it over until prices recover and to help ease the pain of an otherwise sudden and sharp adjustment.

So, as you can see, the IMF is a very important organisation in the world’s financial affairs. And any statement or advice from the IMF is never taken lightly. Only at the end of last week the managing director of the IMF conveyed his thoughts about the situation in light of the global financial crisis. While those opposite continue to flounder for any policies as to what they might do in response to the world financial situation, the IMF is very clear about the effects of decisive action taken by governments, including this government, to that financial crisis. The IMF head, Mr Dominique Strauss-Kahn, in delivering the 2009 Bundesbank Lecture in Berlin, said stimulus measures adopted to combat the global crisis should be withdrawn only when the economic recovery has taken hold and unemployment is set to decline. And while Mr Strauss-Kahn acknowledged that the global economy appears to be emerging from the worst financial and economic crisis in the postwar period, he also emphasised that the recovery will be sluggish and that a jobless recovery remains a risk.

Given the fragility of the recovery, the IMF managing director warned that ‘policymakers should err on the side of caution as they decide when to exit their crisis policy response policies’. But we continue to see from those opposite the call to wind back the stimulus package. However, that should not come as a surprise to anyone in this House—they voted against it in the first place. They did not support the stimulus package. They did not support the strong and decisive action that this government took to shield the Australian economy—action that has been supported by the IMF. And what we see now from the opposition leader and the opposition is again another example of poor judgment. Now they are saying that we should wind back the stimulus package before it has had the full chance to impact and shield this economy. We only have to go back to the words of Mr Strauss-Kahn, where he says in terms of his view and the view of the IMF that these measures should be withdrawn only when economic recovery has taken hold and unemployment is set to decline. Unfortunately, that is not the situation we are in in Australia at this stage.

The World Bank, which is also subject to this bill, also plays a significant role around the world, especially in developing countries. The World Bank is a vital source of financial and technical assistance to developing countries around the world. Despite its name, the institution is not a bank in the common sense of the word. It is made up of two unique development institutions owned by 186 member countries—the International Bank for Reconstruction and Development and the International Development Association. Each institution plays a different but collaborative role to advance the vision of an inclusive and sustainable globalisation. The IBRD focuses on middle-income and creditworthy-poor countries, while the IDA focuses on the poorest countries in the world. Together they provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes, including investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. So it is clear to see why Australia’s involvement with the World Bank is absolutely important.

The World Bank’s work in more than 100 countries is challenging but its main objective is simple: to help reduce poverty. Over the past 20 years the proportion of people living in poverty in the developing world fell by half—from 40 per cent to 21 per cent. In the past few decades, life expectancy in developing countries has increased by 20 years, the number of children dying before the age of five has been reduced by half and adult illiteracy has also been halved to 25 per cent. But over a billion people still struggle to survive on a dollar a day. The World Bank is working with the help of countries like Australia to improve those people’s lives through the bank’s support for social services like health, nutrition, and education as well as for infrastructure and policies to improve governance and fight corruption.

One might ask what relationship there is between talking about the World Bank or the International Monetary Fund and discussing projects that are keeping Australians in jobs. We have seen in just nine or so months projects in Australia which have been completed and many, many more under our Building the Education Revolution and nation-building programs well underway. These programs, which are part of the Rudd government’s economic stimulus plan, have saved thousands of Australian jobs.

In my electorate of Dobell on the beautiful Central Coast of NSW I have been visiting some of the schools which are benefiting from the government’s economic stimulus package. The principal of one of those, Berkeley Vale Public School, told me that never in his teaching career had he dreamed of having such facilities as the infrastructure that is being provided under the Rudd government’s plan. As well as that, he was very pleased to note that the people working on his school were locals coming from the economy on the Central Coast. Berkeley Vale Public School will soon be replacing stuffy and cramped demountables with better-designed, roomier, permanent buildings to offer much better teaching and learning spaces. The school is also acquiring new high-tech interactive whiteboards which will open up a whole new world of education for the students and teachers. You can see that Australia’s stimulus measures have been and are continuing to provide the results we need, and the advice from such global institutions as the IMF is that the stimulus measures should not be withdrawn until the economic recovery has taken hold.

I go back to the bill and what it means. The International Monetary Agreements Act 1947 established Australia’s membership in the International Monetary Fund and the International Bank for Reconstruction and Development and made provisions which allow Australia to meet obligations that may arise by virtue of our membership in these institutions. The funded bank articles of the agreement respectively form schedule 1 and schedule 2 of the IMA Act. The purpose of this bill is to amend the IMA 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 without the need for further legislative amendment when these amendments are made at the fund and bank. The proposed bill will simplify the process for Australia to accept amendments to the fund and bank agreements that have recently been agreed to by members as well as any future amendments, while retaining policy and parliamentary scrutiny.

Currently, an IMA amendment act is required to change the IMA Act to reflect amendments to the fund and bank agreements. However, this legislative process is largely an administrative task. The Treasurer, as Australia’s governor of the IMF and World Bank, is required to vote on any proposed changes to the articles of agreement of either institution. The agreements constitute international treaties for Australia and, as such, irrespective of the requirements for legislation, any amendments to the treaties will still require tabling in the parliament and consideration by the Joint Standing Committee on Treaties. Amendments to the fund and bank agreements have recently been approved by the boards of governors of the IMF and World Bank. These amendments introduce no substantive changes to Australia’s obligations to the IMF or World Bank; rather, they are reforms aimed at improving the legitimacy of both institutions and the financial position of the IMF. The amendments in this bill will enact any amendments to the fund agreement and bank agreements for Australia, including those recently agreed, upon their entry into force. These include amendments to increase the number of basic votes allocated to each member of the IMF and World Bank, provide for a second alternative executive director for large constituencies at the IMF and expand the investment authority of the fund. The broad objective of the first two sets of amendments is to enhance the voice and participation of low-income countries in the two institutions and thus enhance the institutions’ legitimacy and effectiveness. The amendments to expand the IMF’s investment authority form part of a new income model for the fund to provide it with a more robust, stable and sustainable income base.

Let us go over the reasons for this bill again. To implement the recently agreed reforms of the IMF and World Bank requires amendments to both institutions’ articles of amendment. As the fund and bank articles of agreement form schedules to the International Monetary Agreements Act 1947, separate IMA amendment acts have been required to reflect any amendments to the fund and bank agreements in the IMF Act. However, the legislative process is, as I have already said, usually a largely administrative task, as all proposed amendments go through rigorous approval processes both at the institution and within Australia. The Treasurer is Australia’s governor of the IMF and World Bank and is required to vote on any proposed amendments to the articles of agreement of either institution. The agreements constitute international treaties for Australia and, as such, any amendments to the treaties will require tabling in the parliament. This bill proposes to simplify the process for Australia to accept agreed amendments to the articles of agreement of the IMF and the World Bank without the need for further legislative amendments.

Given the current G20 reform agenda, which includes calls for reform of the IMF and the World Bank, it is likely that further amendments to the fund and bank agreements will occur in the near future. This bill will allow Australia to adopt recently agreed reforms at the fund and bank, as well as any future reforms which require amendments to either institution’s articles of agreement, in an efficient and timely manner. We saw that in the recent crisis there was a need for this country to act decisively and quickly. Part of the reform process in this bill today is to make sure that the agreements that are reached at the G20 can also be put in place quickly and efficiently. Given the recent world financial events of unprecedented scale, any improvement in efficiency in the way in which we deal with important institutions such as the World Bank and International Monetary Fund is most welcome. Improvements in efficiency include simplifying processes, and that is precisely what this bill does. I commend this bill to the House.

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