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.

The International Monetary Agreements Act 1947 (IMA Act) currently enables the Treasurer to lend money or enter into a currency swap with a country in support of an International Monetary Fund (IMF) program.

These arrangements were put in place by the former government in 1998, through the IMA Amendment Act 1998, with the purpose to establish a framework for the provision of financial assistance by Australia in support of IMF programs.

The purpose of this bill is to extend the current arrangements to include support for World Bank and Asian Development Bank (ADB) programs.

This will also allow Australia to enter into a standby loan agreement with Indonesia, as announced by the Prime Minister on 10 December 2008.

The Indonesian government has approached the World Bank, the ADB, as well as Australia and Japan, to seek assistance with its budget financing.

The global financial crisis is impacting on all countries, right around the world, and it is having a very significant impact on many emerging economies.

Australia’s standby loan, which will form part of a World Bank led package, is a support mechanism in case private capital markets become too costly or effectively closed to Indonesia in 2009 or 2010.

The World Bank has worked closely with Indonesia and other development partners as well as liaised with the IMF throughout the preparation of the loan arrangement.

The standby loan would only be drawn upon if certain triggers and criteria are met.

The loan, if activated, will be paid back in full at an appropriate rate of interest.

There is no certainty that Indonesia will need to draw down on the loan.

However, it is in Australia’s national interest to be able to assist should the situation deteriorate.

If drawn on, the loan would be used to help support Indonesia’s budget and, in doing so, support economic growth and stability in Indonesia.

Continued growth in emerging and developing economies is important for global recovery and therefore recovery in the Australian economy.

Australia has had a substantial direct trade and investment relationship with Indonesia, and ensuring Indonesia’s continued economic growth and stability will benefit Australian exporters and jobs.

Supporting stability and economic recovery, particularly in our region, is an issue on which there is an established history of bipartisanship.

When the former government introduced the 1998 IMA Amendment Bill, it noted that:

The government’s decisions to provide support reflect the importance of economic and political stability in the region for Australia and the Australian economy.

It is important that governments are able to act swiftly in such circumstances to help mobilise international support to deal with a crisis and to provide commitments on our own participation.

Consistent with the 1998 IMA Amendment Bill, this bill will allow Australia to continue to play its part in international cooperation efforts when necessary to safeguard and promote Australian national interests.

In extending current provisions in the IMA Act to World Bank and ADB programs, this bill also extends the same important conditions currently contained in the IMA Act that currently apply to IMF programs.

There must be a request for assistance by the World Bank or ADB for Australia’s assistance.

The agreement must also allow Australia to require repayment if the World Bank or ADB program is suspended or prematurely terminated.

This is to ensure that assistance is provided only where a World Bank or ADB program is in place and continues to be adhered to by the recipient country.

The Treasurer must be satisfied that other countries or international organisations will also be providing support to the recipient country as part of the World Bank or ADB program.

This is to ensure that Australia’s assistance under the bill is part of a multilateral effort.

Consistent with the IMA Act, the bill provides for the Treasurer to release publicly and table in each house of parliament a national interest statement relating to an agreement entered into under the bill.

Statements will include a description of the nature and terms of an agreement and set out why it is in the national interest, having regard, in particular, to foreign policy, trade and economic interests.

This bill ensures that Australia will be able to contribute to World Bank and ADB financial assistance programs, and the provisions I have just outlined will ensure that this assistance is only offered when it is in Australia’s national interest.

Further details of the bill are contained in the explanatory memorandum. I commend the bill to the House.

Debate (on motion by Mr Billson) adjourned.