Andrew Robb (Goldstein, Liberal Party, Minister for Trade and Investment) Share this | Hansard source

I rise to sum up the government's case for the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. The government is firmly committed to reducing red tape. This bill achieves that goal. Amendments to the Export Finance and Insurance Corporation Act benefit small and medium sized businesses while at the same time reducing business compliance costs by $1 billion per annum. The Export Finance and Insurance Corporation, Efic, helps ensure Australian small and medium sized businesses have access to the finance they need to grow their business overseas. As has been stated before, the goal of this bill is to increase Efic's capacity to finance small and medium sized businesses seeking to capitalise on global trade opportunities. These global trade opportunities benefit all and they are about to get a whole lot bigger with the commencement of free trade agreements with Korea, Japan and now China covering over 50 per cent of all exports from Australia.

Efic plays an important role in supplementing the provision of credit for exporters and we are repositioning it to best support exporters into the future. Efic has played a very strong role over many decades and is the one financial body in Australia that has expertise in assessing the risk in small and developing nations in our region. It often provides important opportunities for exporters to get those opportunities when they would not get finance from other financial institutions. They fill the gap. They fill the financial gap that exists for these sorts of lending, especially to small and medium businesses.

This builds on our restoration of $200 million in capital to Efic in the recent budget, reversing Labor's shameful act of economic vandalism when it ripped out a $200 million special dividend in 2013 and caused Efic to be placed into a position where they were not able to meet the prudential requirements that they had placed on themselves in order to act in a responsible manner. This was a highly irresponsible act and it gives the lie to a number of the contributions that we have heard from those opposite during this debate.

Efic is currently only able to provide direct lending for the export of capital goods—items used in the production of other goods—but cannot directly lend for the export of goods themselves. For instance, this means that presently, as other speakers have noted, Efic can provide direct lending for the export of cows but not for the export of milk. Efic can provide direct lending for the export of bull semen, a capital good, but not a steer that is destined to be a hamburger. This is an oversight from the outset of Efic, which makes no sense and has had quite a costly consequence over time. This means that 95 per cent of goods exported from Australia are currently denied direct lending support from Efic, as only five per cent of Australian goods are capital goods.

To implement this measure in this bill we are simply removing one word—that is, 'capital'—from the definition of an eligible export transaction in the Efic Act. If you like, it is one very small step for Efic but one giant leap for our SME exporters. By allowing direct lending arrangements, exporters of non-capital goods will no longer need to go through a two-step process of first obtaining a guarantee from Efic and then finding a bank willing to lend against that guarantee. These outdated arrangements double the due diligence processing time for export credits and require two sets of documentation and legal fees. Through these changes, these duplicated processes will go—a reduction, a serious reduction, in red tape and costs. Business will no longer need to pay a bank a fee of up to three per cent simply to have the bank accept a AAA-rated Efic guarantee. These changes will save businesses time and money.

We are also ensuring these changes do not bring Efic into direct competition with private sector financiers, by applying competitive neutrality principles. To achieve this, the bill provides for Efic to pay a debt neutrality charge and a tax-equivalent payment. This measure ensures competitive neutrality and reflects the recommendation on competitive neutrality in the 2012 Productivity Commission report on Australia's export credit arrangements. As stated, this bill expands Efic's powers to allow direct lending for export transactions involving all goods, not just capital goods, and provides for competitive neutrality principles to apply to Efic's operations. It is an important part of our efforts to reduce red tape. The bill helps to ensure that Australian small- and medium-sized businesses have access to the finance they need to grow their businesses overseas, which in turn supports job growth. It fits with our overarching theme of displacing big government from centre stage and replacing it with robust growth of the private sector.

I thank all of those on both sides of the House who have contributed to this debate, and I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

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