Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I am pleased to support this bill, the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2004. I believe this legislative reform being debated here today provides a wonderful opportunity for the Australian economy to tap into the wonderful growth that is occurring in the provision of financial services particularly in the Asian region, as much of the South-East Asian economy in particular begins to develop and more and more members of that economy move from situations of poverty into urban environments, into higher paying jobs and incomes and, of course, into financial services.

Financial services is Australia's largest income provider in terms of industries. It is one of our largest employers and it is a growing area of our economy. It represents a wonderful opportunity for Australia to be involved in exporting some of that expertise and further integrated with the Asian economy when it comes to the provision of financial services. That is why Labor supports the establishment of a retail corporate bond market in Australia. The establishment of a deep and liquid retail corporate bond market in this country was a key priority of the former Labor government. That is why we are pleased to support this reform.

It is actually a reform that was initiated by the previous, Labor government through the then minister, David Bradbury, and the Treasurer, Wayne Swan. Unfortunately, the provision was introduced into the parliament, but the last parliament ran out and the bill lapsed. I am pleased to see that this government is now proceeding with this reform and has Labor's full support.

In December 2010, as part of its competitive and sustainable banking system initiative, the former Labor government signalled that it would be introducing changes to facilitate the development of a deeper and more liquid corporate bond market in Australia. These changes included launching the trading of Commonwealth government securities on financial markets accessible to retail investors and reducing the regulatory burden associated with issuing corporate bonds to retail investors, including streamlining disclosure requirements and prospectus liability regulations.

Labor had introduced the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, but, as I mentioned earlier, that bill lapsed. Schedule 1 of that bill is virtually identical to the bill that we are debating today. The key difference is that Labor's bill introduced a term of a bind that could be no more than 10 years. This bill changes that period to no more than 15 years. A well-performing and efficient retail corporate bond market will provide alternate sources of funding for Australian companies and increase competitive pressures on lending rates to Australian businesses. This bond market is a significant source of funds for many Australian financial and non-financial corporations. Correspondingly, this financing activity provides investment opportunities for Australians and non-residents.

The Johnson report, entitled Australia as a financial centre: building on our strengths, examined the lack of liquidity and diversity in Australia's corporate bond market. It discussed why the lack of liquidity was a significant weakness in the overall assessment of Australia's financial system. At the retail level it was considered that one action the government could take to overcome this weakness was to introduce regulatory changes that could assist with the development of the market. The bill before the House does that. It seeks to reduce the regulatory burden on issuers of corporate bonds while, at the same time, ensuring that appropriate standards of consumer protection are maintained.

The bill follows the passage of the former Labor government's legislation to facilitate retail trading of Commonwealth government securities in 2012. Having an active retail CGS is an important step in establishing a wider retail corporate bonds market by providing a visible pricing benchmark for retail investors in corporate bonds. This bill delivers on Labor's former commitment to reduce regulatory burdens and barriers for offerers of corporate bonds to retail investors. The bill contains three major elements which do that. Currently, the issuance of a corporate bond to retail investors requires the provision of a full prospectus. Under the changes in this bill, the issuance of certain corporate bonds to retail investors will require the provision of a two-part, simple corporate bond prospectus. Secondly, currently simple retail corporate bonds, like other bonds, can be traded directly, but they are not able to be traded as depository interests. Under this bill, simple corporate bonds will be able to be traded as simple corporate retail bonds depository interests. And, finally, currently directors and proposed directors of a body making an offer have a liability for any misstatement in or omission from the disclosure document, whether or not that director was involved in a contravention of subsection 728(1) of the act. This bill changes that so that directors and proposed directors of a body making an offer have liability for any mismanagement in or omission of the disclosure document only where they are involved in that contravention. That is making it much more specific and is relaxing some of the controls that were in place before, to ensure that there is much more encouragement for corporations to be involved in the issuance of bonds and hopefully improve the liquidity of the market.

The measures in this bill are another major initiative of the previous Labor government. It is evidence that we were delivering on our long-term commitment to encourage the development of a deep and liquid corporate bond market in Australia. The measures provide companies with another source of fundraising and a signal that it is their time to contribute to the development of Australia's corporate bond market. It provides a wonderful opportunity for Australia to be involved in growth in financial services in the Asia-Pacific region and for Australia to be a key player, a key financial hub, in the provision of our services that will ultimately grow jobs and our economy in Australia. And with that, Labor and I commend this bill.

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