Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Hansard source

I rise to speak on the International Monetary Agreements Amendment Bill 2013. This bill amends the International Monetary Agreements Act 1947 to provide a standing appropriation and authority to borrow for payments to meet drawings made by the International Monetary Fund under a bilateral agreement entered into by Australia and the IMF on 13 October 2012. The loan agreement will come into force following royal assent to the bill. The loan agreement will provide for Australia to lend to the IMF, up to the equivalent of special drawing rights, $4.61 billion, or approximately A$6.8 billion. The bilateral loan shall have a term of two years, extendable by the IMF for up to two additional one-year periods for a maximum total term of four years.

Australia has had a long association with the IMF. It has been a member since 1947, two years after the IMF came into formal existence in 1945. The coalition fully understands that the IMF advances Australia's interest by supporting stability in the global economy. It does this in four ways. First, it promotes international monetary cooperation. Second, it promotes exchange-rate stability and orderly exchange arrangements. Third, it fosters economic growth and employment. Fourth, it provides temporary financial assistance to members, thereby helping to ease balance-of-payments adjustment.

Australia has two current lines of credit with the IMF. The first is its usual quota contribution. This was doubled following a decision by IMF governors in December 2010. The quota commitment increased from just over A$4 billion to A$8 billion in the 2011-12 financial year. The second is the New Arrangements to Borrow. This is a contingent liability of the government to be drawn down on request of the IMF.

Last year the government introduced a bill which made three amendments to Australia's credit arrangements with the IMF. The coalition supported these changes. That bill made three changes. First, it reduced Australia's contingent liability under the New Arrangements to Borrow line of credit by $3.2 billion. However, that reduction was conditional on the doubling of Australia's primary quota from A$4.1 billion to A$8.8 billion. Second, it increased the maximum maturity of the IMF drawings under the NAB from five years to 10 years. Third, it reduced the New Arrangements to Borrow for a period of five years commencing 17 November 2012.

The loan agreement under the bill currently before the House is in addition to the existing facilities. It can only be used by the IMF if the existing quota and New Arrangements to Borrow are insufficient to support its lending to borrowing member countries. The Treasurer announced this new $7 billion commitment in April 2012. It was part of global efforts to enhance the financial backstop against further international volatility.

The proposed agreement is Australia's contribution towards a broad round of global commitments announced at the June 2012 G20 leaders' summit in Los Cabos, Mexico, to temporarily increase the IMF's resources by more than US$450 billion during a period of heightened global financial risks. Other countries who have pledged commitments to date include the United Kingdom, China, France, Germany, Japan, Russia and Indonesia.

This additional funding facility for the IMF emerged out of the chaos of late 2011, when it looked as if additional financial support would be required to bail out a failing Europe. At that time there was a great deal of fear that the market disquiet about Ireland, Greece and Portugal would spread to other countries in the eurozone. The IMF wanted to be sure it had the resources to handle any crisis.

The trouble was that some of the largest economies had misgivings about providing additional support. The UK Chancellor of the Exchequer said at the time that the UK was prepared to consider additional funds to the IMF, where the funds were used to increase the resources that the IMF makes available to all the countries of the world. But the UK was not prepared to see IMF resources reserved for use only by the eurozone. It was not prepared to contribute to the IMF for the IMF to contribute to the eurozone bailout fund, and the UK made it clear it would not directly contribute money to the eurozone bailout fund.

Elsewhere, the US Deputy National Security Adviser for Strategic Communications, Ben Rhodes, said there were no plans for the United States to provide additional resources to the IMF. China, at the time, tentatively agreed to participate in the European bailout fund but made it clear that such support would come with some fairly hefty strings attached. The first would be that other countries contribute. The second would be the provision of strong guarantees on the safety of the investment. The third might be a request to Europe to stop criticising China's currency policy.

The coalition has always supported the role of the IMF in assisting troubled countries back to financial health and has supported the provision of Australia's share of IMF funds. However, at the time this new facility was first suggested there was debate about the appropriateness of Australia in effect providing support to developed countries who should have had the resources to get their own houses in order. There was also concern that Australia would need to provide any moneys drawn through increasing its own borrowings at a time when the budget was in deep deficit and borrowings were already rising to record highs. The government did not heed these concerns and rushed headlong into promising support, with no consultation with the opposition or the parliament or the Australian people.

The coalition believes it is important that Australian funds be used by the IMF only as part of its standard arrangements for assisting countries. That would involve the extension of loans to be repaid with interest, only in conjunction with strict plans for returning the countries to financial health. It would not be appropriate for any Australian funds to be put at risk or for funds to be provided without strict performance benchmarks and repayment schedules in place.

I note that if the additional funds were to be used for specific support for Europe the Australian government has imposed no conditions on the use to which the IMF can put these funds. This is an unfortunate position that we have been put in, when we find that the government, despite record levels of increases in Australia's debt, have taken this decision without consultation with the parliament, the opposition or with the Australian people. There is a simple lesson that must be learned from the current financial stresses in much of the Western world: if debt is the problem the more debt is not the answer.

The coalition understands this. It is not clear that the government does. The coalition will not oppose this bill; however, we want to place on the record that the government needs to exercise greater caution and prudence before loading Australian taxpayers with further debt to financially support some of the richest countries on the planet.

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