Kate Chaney (Curtin, Independent) Share this | Hansard source

I rise to speak on the Export Finance and Insurance Corporation Amendment (Strategic Reserve) Bill introduced today. This bill reflects the seriousness of the moment that we're in. Escalating conflict in the Middle East is once again placing strain on supply chains and driving sharp price spikes in materials vital to Australia's economy—most immediately, fuel.

As I understand it, this bill was originally conceived to establish a strategic reserve for critical minerals. But, in response to the unfolding international crisis, the government has hastily redrafted it, expanding the scope of Export Finance Australia's powers so that it can enter into and support transactions to shore up fuel and other strategic supplies. When supply chains are under stress and prices are spiking, Australians expect the government to act. For that reason, I will support this bill to enable the government to respond quickly to the current crisis. But this bill also asks parliament to place a great deal of trust in the executive, trust in the breadth of the powers being granted, trust in a new and expanded role for EFA and trust that taxpayers will be adequately protected when public money is used to underwrite private risk, and it's those issues that I want to focus on today. But, first, let's look at what the bill actually does.

The bill gives EFA new tools to address supply chain disruption affecting strategic materials. That includes fuel, critical minerals and any other materials, goods or things determined to be vulnerable to supply disruptions. Under these amendments, EFA may insure or indemnify importers, provide guarantees, make loans or enter into other arrangements designed to encourage additional supplies of strategic materials into Australia. In the case of fuel, while the government has been clear that it does not intend to pay upfront for fuel purchases, public funds will underwrite the risk faced by importers when buying at today's or tomorrow's extraordinary prices. The rationale is straightforward. Importers are concerned that, if they purchase fuel now at very high prices and the conflict driving those prices ends suddenly, they may be left with significant losses when shipments arrive, potentially eight weeks later. Given the uncertainties surrounding geopolitical developments in the Middle East, fuel importers are understandably reluctant to carry that risk. The concern is that this could reduce willingness to purchase additional supply when Australia needs it most. This bill seeks to remove that disincentive so that fuel continues to flow.

Fuel security matters to Australians. Our freight and agricultural sectors run on diesel, and households rely on petrol to get to work, to school and to essential services. But our reliance on these fuels also makes us vulnerable. Every global shock, every geopolitical flare-up, every supply chain disruption hits us hard, and that vulnerability is in itself a compelling argument for accelerating decarbonisation. The faster we transition to cleaner, more resilient energy systems, the less exposed we'll be to the volatility of global oil markets.

The appropriation bills introduced concurrently today underline the scale of the challenge. The government is setting aside $2 billion over the next three months to respond to fuel security pressures—an extraordinary sum of money. The way this will work is that this taxpayer money will only need to be spent if prices drop and fuel importers are making a loss. Then taxpayers will foot the bill for the gap between what fuel importers thought they could sell the fuel for and what they can actually sell it for.

I have some concerns about how broad the powers in this bill are. This bill does more than respond to the immediate crisis. It grants EFA expansive and ongoing powers to contract on behalf of the Australian government and commit public funds not just for fuel but for critical minerals and any other materials, goods or things that are vulnerable to supply chain disruptions. These powers can be activated whenever a minister determines it's in the national interest to do so. That's a very broad test. The strategic material definition is effectively unlimited in scope. It means the strategic reserve powers could be extended to almost any traded good at ministerial discretion, including in circumstances where the assessment of a supply disruption may be highly subjective. I understand why broad powers are required at this time of uncertainty. We're hearing alarming forecasts of all the industries that could be affected by the conflict in the Middle East. There is a level of trust involved in times of crisis, and I'm prepared to extend that trust. But I urge the government to make good on it by using these powers carefully, proportionately and transparently.

This bill also makes significant changes to EFA's mandate. EFA's core mandate has traditionally been export focused. Underwriting import transactions across a broad range of goods marks a substantial departure from that mandate. Yet we have limited clarity about how these new functions will be integrated into EFA's existing governance structures or what additional expertise and oversight arrangements will be required to manage this risk appropriately.

The appropriation bills introduced today impose a $2 billion ceiling on actions that government can take over the next three months to respond to fuel security challenges, but we don't have certainty as to the proposed scale of the Commonwealth's total exposure under this bill in relation to fuel imports. I acknowledge that these are extraordinary times, and I welcome the fact that further legislation will be needed if the government seeks to go beyond this $2 billion ceiling.

One major concern I have about these new powers is that we may end up with one-sided contracts. For example, if an importer pays $3 a litre for a fuel shipment expecting to sell it for $3.10, I understand that the government could be on the hook if the importer can only sell it for $2.90 because the worst of the price pressure is over by the time it gets here. But, if the importer actually sells it for $3.20, above the expected price, because the war goes on, will the importer reap the full benefit of the upside, or will that benefit be shared with the taxpayer? Today I asked the government about this. The government said the powers would be structured in a way that would allow sharing in the upside, and it would be up to the EFA to determine contractual terms. I strongly encourage the EFA to treat upside sharing as a core negotiating objective to ensure that we're not giving out free insurance. If the worst happens and prices keep going up, some of that increase should be returned to the taxpayer. Of course, fuel importers won't want to sign contracts covering this possibility if they can help it, but urgency should not be used as an excuse to agree to one-sided contracts that are bad for taxpayers. How protected taxpayers are will depend on the contract negotiating skills of EFA staff. In order to maintain public trust in this power, it will be important to ensure that there is transparency about the contracts that are being signed on behalf of taxpayers and whether they address potential upsides as well as potential downsides.

In the time available, I've not been able to investigate how this sits with our international trade obligations. The strategic reserve may raise a WTO direct subsidy question, but I suspect we will not be the only country putting in place these types of measures in the current context.

These are broad and effectively permanent powers. They span fuel security, critical minerals, supply chain resilience, national security and the broader Future Made in Australia agenda. Yet the next statutory review of the act will not be tabled until after 31 December 2029. That's a very long time to wait for a comprehensive assessment of how these powers are being used and whether they remain appropriate.

So my support today comes with clear expectations. We need robust safeguards to ensure public money is used responsibly and to ensure that, in exchange for providing this insurance, taxpayers benefit from any upside should the worst happen and prices continue to rise. We need transparency around the criteria relied on in activating these powers and how taxpayers are protected in contracts. We need confidence that parliamentary oversight will be meaningful, not symbolic, and we need assurance that any ongoing use of the strategic reserve will not distort markets in ways that undermine our international obligations or disadvantage Australian businesses. Australians deserve fuel security. They also deserve accountability when government assumes financial risks on their behalf. This bill moves us towards the first goal; it's our job to ensure it does not compromise the second.

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