Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

On 5 December 2008, the Prime Minister and I announced the establishment of a special purpose vehicle (SPV) with the support of leading Australian banks, to provide liquidity to eligible car dealers who had been left without wholesale floor plan financing as a result of the departure of GE Money Motor Solutions and GMAC from the Australian market following the onset of the global financial crisis.

The SPV—otherwise known as ‘OzCar’—was legally established as a trust on 2 January 2009.

Under the agreements negotiated with the four major Australian banks, that is, the ANZ, Commonwealth Bank of Australia, the National Australia Bank and Westpac, the four major banks will provide liquidity to OzCar through the purchase of AAA rated OzCar securities.

Most of these OzCar securities will require a Commonwealth guarantee so that they qualify as AAA rated securities thereby allowing the four major banks to purchase them.

Having raised funds through the sale of securities, OzCar will make available funding for 12 months to those dealers who need it and to those who qualify.

It is very pleasing that since the 5 December announcement that most of the former GE and GMAC dealerships have managed to secure alternative wholesale floor plan financing, primarily through remaining lenders.

This and the commendable commitment by both GE and GMAC to wind down their loan books in an orderly manner have meant that it has not yet been necessary for the OzCar SPV to issue securities and lend funds.

There is no doubt that the establishment of the OzCar facility so quickly after GE and GMAC announced their planned exit from the Australian market provided a critical boost to confidence when it was needed most.

This and the work of Treasury and Credit Suisse with GE and GMAC resulted in a much better outcome than otherwise would have been the case if we had just sat back and done nothing.

As a result of the success of this initiative, the financing task now confronting us is much less than initial expectations.

Last December, it was expected that OzCar would need to finance around $2 billion worth of loans.

This has come down to around $850 million. The final figure will probably be less.

It will soon be necessary to activate the OzCar facility given the exit plans of GMAC and GE.

As the Treasurer announced yesterday, the government has decided to make the OzCar facility available to Ford Credit for the next 12 months so that Ford Credit’s network of almost 200 Ford dealers can continue to access wholesale floor plan finance.

This decision has been necessary in light of the immense pressures the global financial crisis has placed on Ford Credit’s ability to continue to raise the liquidity it needs to support the Ford dealer network and, through that network, the manufacturing operations of Ford Australia.

In order to allow for the activation of the OzCar facility, this bill seeks to enact a standing appropriation to support the Commonwealth guarantee that will apply to around $550 million of the securities issued by the OzCar facility.

The major banks will need the certainty of a Commonwealth guarantee with legislative backing before they will purchase the necessary volume of OzCar securities.

This bill is therefore very important in providing the legislative base for the OzCar SPV facility.

The OzCar SPV is a complex trust facility. To ensure transparency and accountability, the Treasury has established the relevant trust deeds and published them and supporting material on the Treasury website—www.treasury.gov.au.

Treasury has also entered into a contractual arrangement with Credit Suisse and the OzCar program manager, and a range of service providers, on the operation and administration of the OzCar SPV facility.

Treasury will be providing the government with regular reports on the operation and performance of the OzCar facility and will prepare quarterly reports on the operation of the SPV that will be made available to the parliament.

These reports will identify the overall amount of securities issued; the proportion of securities covered by the Commonwealth guarantee and the overall financial performance of the OzCar SPV.

The OzCar SPV is designed to wind down by 30 June 2010. The standing appropriation that this bill puts in place will then come to an end.

There is no doubt that the next 12 months will be very challenging for the Australian car industry.

It is critically important that initiatives such as the OzCar facility are put in place not only to provide material support—but also to help provide confidence at a time when such confidence is so badly needed.

I urge the House to support what to date has been a highly successful initiative—and which should become even more important in the weeks and months ahead.

I commend the bill to the House.

Debate (on motion by Mr Coulton) adjourned.