Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

The coalition supports the International Monetary Agreements Amendment Bill 2009. The bill proposes amendments to the IMA Act to simplify the way Australia implements amendments to the articles of agreement of the IMF and the World Bank. It will make the amendments to the articles of agreement automatic and, some would say, more effective, in that it will not add to the legislative timetable in the future. There are no direct financial implications for Australia and it does not in any way alter the government’s domestic legal powers. The coalition supports the IMF, and the World Bank for that matter.

The IMF’s goal is to ensure the stability of the international monetary and financial system. That is particularly important at this juncture. Australia joined the IMF, I think, back in 1947. The IMF and the IBRD, the International Bank for Reconstruction and Development, were the two organisations conceived during the United Nations Monetary and Financial Conference, known as the Brenton Woods conference, which was held in New Hampshire in the United States in July 1944. The IMF and the bank agreement came into force in December 1945, the end of World War II, and both organisations continue today, although obviously the role is quite different. The IMF was set up to manage a system of fixed exchange rates that essentially prevailed until the 1970s and was seen as necessary after World War II and obviously, before that, due to the lingering impact of the Great Depression.

What happens is that, from time to time, the agreements will change and all the paid-up members of the IMF must accept the proposed changes. The current proposed changes require a piece of legislation in this place. In my maiden speech I committed to parliamentary democracy, so it does grate a little that the coalition would be in a position where it is supporting legislation that empowers international agreements to automatically flow through to Australia. It is something that I am uncomfortable with and I would hope the government is uncomfortable with as well. In no way would we want to diminish the role of this place in determining the appropriate level of scrutiny necessary for new international agreements or amendments to existing agreements.

As the Parliamentary Library identified in its very handy note, the bill will reduce the parliamentary scrutiny of proposed amendments. Unless Australia monitors the amendments, it may not, as it currently stands, meet its international agreement and that is why it requires legislation here. The fact that there will be less parliamentary scrutiny of any amendments to the IMA Act is of concern. I would suggest that there is a way forward for the government, and hopefully further scrutiny in the other place, and that is to look at ways to provide constant updates to legislation as changes go through in the various agreements that underpin the International Monetary Fund and the IBRD.

By way of background, the IMF’s main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises and works with its member countries to promote growth and, I would hope, alleviate poverty. It has three main tools at its disposal to carry out its mandate. The first is surveillance, which has actually been very useful throughout the recent global financial crisis. Having said that, the IMF always seem to be playing catch-up, but that is not unusual, one would suggest, in a world where there are rapidly changing economies as a result of the global financial crisis that rely heavily on the contribution of domestic treasuries. Obviously not all departments of finance, as they are usually known globally, or treasuries are of the same quality as that of Australia, even though from time to time we might have differences with the Treasury—after all it is an arm of the government, as Dr Ken Henry correctly identified. So surveillance is a very important tool.

The second one is technical assistance, which plays a very significant role as well, and that includes training. I know that has been a large contributor to improvements in financial reporting and accountability in many Third World countries. The third area of activity is in relation to lending. The IMF often indicates a willingness to provide funding support where there is a breakdown. Thankfully, from time to time, the IMF is not required to contribute.

One of the most endearing features of the IMF is that the voting power of members is closely linked to the amount they contribute to the global economy. The voting power of individual countries is closely linked to that as well. Quota largely determines a member’s voting power in IMF decisions, and further reform is flagged to improve that. Look at the case of the United States, the world’s largest economy. The United States had well over 16 per cent of the votes and Palau has 0.01 per cent of the votes, and that is appropriate. There is a direct link: the amount of financing a member can obtain is based on the quota. If it is seen as a lender of last resort, which is not really the case, but if the IMF is seen to be undertaking initiatives which are going to prop up the economic stability of a country or a region then it is vitally important to have funding mechanisms closely linked to the size of the economy.

Without going into any further details of the bill, and the second reading speaker went into quite a few of those details, the coalition reiterates that we support the bill. We believe that it is a piece of administration that has common sense in this current environment where there seems to be a lot of legislation going through this place without any appropriate scrutiny. Given that we are affected by any changes in the IMF automatically, the only encouragement I would give to the Treasurer and the government is to ask them to consider amendments that would allow the agreements to be constantly updated even though the parliament is not changing the legislation.

John Murphy (Lowe, Australian Labor Party) Share this | Link to this | Hansard source

I rise this evening to speak in support of the International Monetary Agreements Amendment Bill 2009. The International Monetary Agreements Act was enacted to ‘approve of Australia becoming a member of the International Monetary Fund and the International Bank for Reconstruction and Development’. The objective of this bill is to simplify the process for Australia to accept agreed amendments to the articles of agreement of the IMF and the World Bank. In recent times the number of amendments to the International Monetary Fund articles of agreement, or fund agreement, and the World Bank articles of agreement, or bank agreement, have been agreed by members of the IMF and the World Bank. As you know, Mr Deputy Speaker, those amendments were supported by the Treasurer, the Hon. Wayne Swan, in his role as governor for Australia of the IMF and the World Bank.

These amendments include an increase in the number of basic votes allocated to each member of the IMF and World Bank; provisions for a second alternate executive director for large constituencies at the IMF; and an expansion in the IMF’s investment authority. The first two amendments are designed to improve the level of participation of low-income economies in both the IMF and the World Bank and therefore ensure that these institutions are more representative of these economies. Equally important are the amendments to expand the IMF’s investment authority, which will form part of a new income model to provide the fund with a more robust, stable and sustainable income base.

This bill is designed to ensure that any amendments to the respective articles of agreement of the IMF and the World Bank, including the three to which I have just referred, enter into force without the need for further legislative changes. As the fund and bank articles of agreement form schedules to the International Monetary Agreements Act, an IMA Amendment Bill is required to reflect amendments to the fund and bank agreements. As a result of this bill, separate amendments will no longer be required. This simplification will be achieved by amending the International Monetary Agreements Act to alter the definition of ‘fund agreement’ and the definition of ‘bank agreement’ to include any amendments of the relevant articles of agreement that enter into force for Australia. Indeed, given the current G20 reform agenda, which includes calls for reform of the IMF and World Bank, further amendments to both institutions are likely to occur in the future—both in the short term and long term.

Concerns have been expressed that this bill will weaken parliamentary scrutiny of proposed amendments to the agreements. However, as the agreements are effectively international treaties, any amendments will still be tabled in the parliament and considered by the Joint Standing Committee on Treaties.

Australia, as you know, Mr Deputy Speaker, has had a proud history as a member of the IMF and the World Bank since we first joined in 1947. In light of the current global financial crisis, it is reasonable to assume that we will play an increasingly active role to ensure that the financial market meltdown is not repeated. That is why I am of the view that our membership of the IMF and World Bank is more important now than it has ever been since we became a member in 1947.

The IMF and the World Bank have a critical role to play in the restoration of international economic stability. In April this year, the G20 summit in London ordered key measures to restore stability to global financial markets. These measures included a trebling of IMF financing to $750 billion. The IMF will also sell billions of dollars worth of gold reserves to help poor countries which have been significantly affected by the current economic crisis. Moreover, a new $100 billion credit line will be established for low-income countries through multi-country development banks. These measures are only the beginning of a broader global effort to restore stability to the international economy. Of course, they are not the be-all and end-all when it comes to tackling the economic crisis. That is why Australia must continue to play an important role as a member of the IMF and World Bank, and the Rudd government certainly acknowledges this fact.

Given the seriousness of the global financial crisis, we need to be in a position to respond quickly to changes introduced by both the IMF and the World Bank. For instance, further amendments may very well be needed to address the toxic debts which continue to plague financial markets and pose a risk to a global economic recovery. In fact, a recent editorial in the Australian Financial Review raised this very issue, stating:

The toxic debts on bank balance sheets remain to be dealt with. This will impair recovery … there can be no sustainable recovery without healthy lenders … the International Monetary Fund estimates there is $3 trillion of bad assets still sitting on bank balance sheets.

I, too, share the concerns conveyed in this editorial. Toxic assets are largely responsible for the instability which led to the global recession and we cannot adequately resolve this crisis unless they are completely removed from the market. Any delay in the implementation of measures to clean out toxic assets will simply add more uncertainty to our fragile markets.

The success of the government’s economic package was largely due to the swiftness of our response. Had we followed the advice of the then shadow Treasurer and done nothing, I highly doubt that we would be experiencing the positive levels of economic growth that we have achieved in the past two quarters. The national account figures released last week vindicate the Treasurer’s speedy response to the global economic crisis. The logic of swift action must be applied to measures proposed by the IMF and the World Bank to address the global financial crisis.

The importance of quickly enacting amendments to the IMF articles of agreement was exemplified at the G20 summit earlier this year. A key outcome of this summit was the $250 billion allocated to special drawing rights, SDRs, to supplement IMF members’ foreign exchange reserves and provide liquidity to the global economic system. However, nations which joined the IMF after 1981—which account for more than one-fifth of IMF members—have never received SDRs. In order to ensure that the SDRs would be allocated to these nations, the G20 summit called for the urgent ratification of what is known as the ‘fourth amendment’, which would allow members to participate in the SDR system on an equitable basis. Whilst the fourth amendment was first proposed over 10 years ago, it was not implemented until earlier this year because it needed to be passed through the parliaments of a number of IMF members, such as the United States. This is the kind of unnecessary delay that the bill we are debating here this evening aims to stop.

It is also important to highlight some of the measures currently being discussed by the World Bank to address the global financial crisis. Since the 1990s the World Bank has shifted its focus to supporting development and poverty reduction programs in developing economies—and rightly so. For example, the World Bank has called for developed countries to provide money to developing economies that cannot afford bailouts and cannot finance deficits. This includes the establishment of a global vulnerability fund which aims to help support development agencies such as aid agencies, United Nations agencies and non-government organisations. The growth of developing economies in past years was instrumental to the strong global economic performance that preceded the downturn of recent years. Sustainable growth in these economies will also drive the world’s economic recovery in the years to come, and for this reason is essential that we continue to support the World Bank’s efforts to provide economic development in developing countries.

In conclusion, this bill greatly simplifies the process of accepting amendments to the articles of agreement of both the IMF and the World Bank, with further amendments likely to be proposed in order to remove toxic assets from the market and prevent another financial market meltdown. It is important that we can respond promptly to any changes introduced by either body. Against that background, I commend this bill to the House.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

As explained by the member for Lowe, the International Monetary Agreements Amendment Bill 2009 is fairly routine legislation, but it is worth recording in my speech some items from the explanatory memorandum. We are advised that the purpose of this bill is to amend the International Monetary Agreements Act 1947 to alter the definition of the International Monetary Fund articles of agreement, known as the fund agreement, and the definition of World Bank articles of agreement, known as the bank agreement, to include any amendments of the relevant articles of agreement that enter into force for Australia without the need for further legislative changes when these amendments are made.

That is a fairly significant move nevertheless because the parliament is virtually authorising executive government to carry out matters related to this area without, one might say, further consultation. Nevertheless, we are assured that, within this area also, the agreements which are schedules to the act constitute international treaties for Australia and as such, irrespective of the requirement for legislation, any amendments to the treaties will still require tabling in parliament for consideration by the Joint Standing Committee on Treaties. This committee operates quite well and it will in fact probably be sufficient to maintain some oversight of the executive in this regard.

Nevertheless, because this matter deals with the International Monetary Fund and the World Bank and considering the fact that the government virtually used statements from the IMF as absolute justification for things such as their stimulus package and that it is an established and public fact that the IMF continues to campaign for countries such as Australia to borrow and spend money for this purpose, it is of interest that the IMF’s interest is not in Australia; its interest is that, by Australia borrowing and spending money, it might just get the world over its problems. I know that is not hugely significant, but it is significant and questions must be levelled at the intentions of the IMF being so supportive of what the Australian government is doing in circumstances where it is questionable that such stimulus expenditure of borrowed money is in the long-term interests of Australians.

It is an absolute fact that the distribution of $900 cheques totalling, I think, some $24 billion, as urged by the IMF, has resulted in expenditure and some savings, but the expenditure was typically directed in two directions. Because of the nature and marketing of consumer goods in Australia it was primarily directed at imported goods. The IMF would say, ‘Three cheers for that; you are buying imported goods from other countries and helping them out in their circumstances as they relate to the global financial crisis.’ China was, no doubt, a major recipient, with flat-screen televisions and products of that nature. So was the Indonesian tourist industry, as people discovered that 900 bucks got them a round trip to Bali, with a few days to spend there. So, there again, Australia obviously did its best for the international community. I am not sure that future generations will thank the government for the debts incurred and the interest that will accumulate in the early years before there are in fact any repayment possibilities whatsoever.

I have left out the other important bodies, the Westfield Group and others, which are very supportive. They are property developers, big investors in shopping centres and, for that, we are extremely grateful. But they have always shown their support for the Labor Party when one reads the list of donors to their efforts during the election campaign. Without their close association with property developers the New South Wales Labor Party would have no idea what to do. All those who have been loyal have been rewarded by that initiative but, even with the building initiatives, one can only wonder how come young people are attending schools in a new covered assembly area, or a new gymnasium, when there was insufficient money to meet the entire demand for science and library facilities?

I have a very proactive school in my electorate, Albany Grammar School. They have gone in the last, I think, 10 years from nothing to about 600 students, demonstrating how Australian parents are determined to spend money, which they sometimes have great difficulty in acquiring, to give their kids a good education. They wanted one of these science facilities; they were able to employ teachers with the qualifications to teach science, but they missed out.

Today we heard the Minister for Education explaining, ‘We are sorry; we were only going to have 500 science and language centres.’ I do not know how that figure was arrived at, but the 500 did not include Albany. The reality is that that need is not being met in that particular community, with a population of some 30,000 people, with a surrounding catchment area of probably three times that number. So too bad for those kids, notwithstanding that the teaching resource was available. In terms of my support for their application for funding, I wrote to the minister drawing that to her attention.

Notably, the BER, the Building the Education Revolution, is all about building; it is not about teachers. Of course, that is a serious problem. It is nice to have some flash classrooms but, of course, if you have nobody who can teach the kids within that facility then it is of little assistance. Notably, there has been a massive increase in costs due to this program, the BER, recommended by the IMF—just to make sure I stick to the subject. The minister was at pains to try to defend it again, but the reality is that the simple act of constructing school buildings has engendered massive cost increases.

The Leader of the House, Mr Albanese, stood up as acting minister for the Minister for Education, when she was absent in Israel, and attacked the school principal, who had publicly said that she did not like the quote that was being accepted to build, as it turned out, two classrooms and two storerooms in her school, because she had had a quote of $150,000 which was, apparently, much less than the actual cost. I might add that a later quote was for a larger building. But the one referred to by the Leader of the House was this particular quote. He said it was for only $120,000 and then listed all the things that were left out, trying to belittle the applicant. He mentioned the actual tenderer, the building company. It is national. In fact, it has an agency here in Canberra and it makes transportable buildings. Transportable buildings have been the only solution to a two-year time frame from government decision to completion, whereby most of these buildings can be provided to schools. So I rang the tenderer. He said, ‘$120,000 is right, but we had options in there for another $18,000, some of which the minister said had not been included.’ That took the price to approximately $150,000. That is exactly what the school principal mentioned.

But Minister Albanese went well beyond that. He listed things like furniture, site works and the connection of electricity and sewerage. Interestingly, the original quote included no requirement for toilets, handbasins and sewerage. But when he had finished, he added up the cost of this delivery and it totalled $350,000. When I approached the builder, who gets no work in New South Wales, and who runs, as I said, a highly recognised business—he is not some fly-by-night—he could not get any quotes. Do you know why? Because the New South Wales government had two identified suppliers to initially build a small number of additional schools that were going to be needed under the budget arrangements of the New South Wales government.

When the flood of cash came along under the BER, did they go back to tender? Did they open the field up to the best competition available in New South Wales? No. They just told these two companies they could share the business. What a bonanza for them: ‘Write your own cheque.’ They had no capacity whatsoever to do it, so they got steel bases built in Victoria—a great help to the New South Wales industry, or the ‘tradies’ as the minister calls them. Those steel bases were then transported, by truck, to Queensland where the classrooms, the roof, the lighting and whatever else were put on, and then they were trucked back into New South Wales. And you wonder why they are so expensive! In that process, a particular well-established builder, with evidence on his website of classrooms of very good standard, could not get anything. That is what we are confronted with.

It is all right for the minister to get up here and say, as she did today, ‘I challenge you to tell me we should not have spent money on 30 schools in your electorate, Mr Backbencher.’ That was not the criticism. The criticism was that there was enough money to do twice as much. On the figures that I went through on this particular example, and it is all in Hansard, I could not get past $178,000, and I am a frustrated builder of many years. I know what things cost. I made a proper inquiry. I went to the IKEA website to cost the furniture, and that would be at retail when, I would imagine the New South Wales education department could get it for much less. That is the point I make. If that is the standard of estimates that were being delivered to this government by the New South Wales education department, there is a real issue therein.

I was interested in some of the other remarks made by the member for Lowe. He talked about toxic assets and toxic debts, which the IMF wants to tackle. Those were the result of the horrendous growth of the derivatives industry. In the end, one could argue that they were virtually trading in fresh air. I do not know if anybody else listens to NewsRadio or the BBC at night-time; I do frequently, and there has been almost a play put together about the crash of Lehman Brothers. It is a drama, and all the interviews and everything that happened in all of that are well worth listening to. But here were all these major banking concerns all running around betting with one another—and I know a bit about horseracing; I have a couple of horses in work at the moment—and they were betting in a way that no punter on a racecourse would even consider. They were putting down in their books that they had all these assets—’toxic debt’, to use the words of the member for Lowe—all derivative based. Everybody was betting that they could find someone more stupid than themselves, and they were blowing up assets that virtually did not exist and always looking for a new deal.

Why do I raise that specifically and why do I quote the member for Lowe? It is because we have got one of those in this parliament at the moment. It is called an emissions trading scheme. It is a process by which people are going to bet on fresh air. I guess that one day they will be told, ‘We did it because the IMF said.’ It is going to give renewed respectability to the hedge funds and the screen jockeys, because they can argue that they have gone back into this punting regime to save the planet. How do you save the planet by allowing a totally unrelated group—their only relationship to energy consumption is their computer and the light overhead—to make profits from the scheme? And who has to pay? BlueScope Steel obviously has to use carbon and burn carbon to make steel, and so they have to go to the marketplace to buy the right to pollute—and of course we are told by the Treasury modelling, ‘You don’t have to buy the certificates in Australia if they get too dear. Buy them from China.’ China will have plenty, because they are building 20 nuclear power stations, which will give them credits under Kyoto to sell to Australia.

We have already got a problem with steel manufacturing. I read in the media today that all of the specifications for steel profiles that will be used in Gorgon and some of these other manufacturers are not consistent with the profiles manufactured in Australia. It is a sort of reverse non-tariff barrier. Again, maybe it does not matter, because if an ETS is delivered upon BlueScope Steel, then they must pay. And when they pay, the cost of those certificates could be grossly exaggerated or increased, because the hedge funds are in there playing with one another and using the weight of huge volumes of finance to escalate the cost. In other words, while the member for Lowe and, no doubt, the minister who introduced this bill—what is he: the governor of IMF Australia or something like that—were talking up resolving the $3 trillion of debt that the member for Lowe quoted from some acceptable publication, the IMF were talking about making sure that this never happens again. Increased regulation over the banking sector and the finance sector: I agree with that. Australia had it, which is one of the reasons that our financial institutions are not as badly off.

We saw what happened with the price of oil; it went through the roof. Yet, when the financial crisis arrived and these people had no more money to play with, the price dropped to one-third. It was not all supply and demand; there was a component of that but not much. It was all about the way they had forced the price up, and we have a debate going on in this parliament that the same thing should apply. I do not know how you explain that to the IMF. They tell us to have economic stimulus, and I have mentioned how that works. They tell us that we, the G20, have to get together and prevent that ever happening again. Yet this government is trying to deliver a new system which the screen jockeys and hedge funds can play with to the expense of Australia. There is no excuse for that.

I have said on other occasions: why have a scheme whereby you license people either with free certificates or at cost to pollute? How does that reduce pollution in Australia? Why let the hedge funds play with that when a simple investment of the $1.7 billion that was handed over the other day could have put high-voltage DC transmission between the Pilbara and the Western Australian network and opened the opportunity to reduce emissions by hundreds of thousands of tonnes that are exerted pumping gas down a pipeline?

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the International Monetary Agreements Amendment Bill 2009. I have to make some comments in relation to the contribution made by the member for O’Connor. It was interesting to hear his summation that, in some sense, part of the International Monetary Fund’s purpose is to support the Labor government of Australia. I do not think anyone has actually made that submission in this place before. I am sure that we are all very happy about that, but I somehow doubt whether that is in fact the case, and of course it is not. The fact is that the International Monetary Fund is made up of representatives from around the world. Just because there is consistent economic advice from those countries, which conflicts with the member for O’Connor’s views, he raises some sort of magical conspiracy theory that their purpose is to support a Labor government.

The member for O’Connor’s contribution continued to be interesting and highlighted the problem that the coalition have in terms of the economic crisis. They simply do not get what the problem is and what the solution is. He made complaints about the money in terms of the cash payments and said that they were going overseas. He said that they were providing money for China and Indonesia, which were the two examples that the member for O’Connor raised. Quite simply, you only need to look at the affect that the cash payments had on retail sales and the direct affect they had on employment, particularly in the retail sector, to understand in the short term how important those cash payments were to make sure that, in an industry very vulnerable to downturns, people continued to be employed. I know that because on the Central Coast retail is the biggest employer of labour and without those cash payments the unemployment figures would have been much, much more.

The member for O’Connor was incredibly confused in relation to the infrastructure spending, particularly on schools. He seemed to be, first of all, arguing that we should not have been spending money on schools and should not have been spending infrastructure money making our schools better. But he then spent the second half of his speech complaining about a particular school where we should have spent money but were not. So it was a highly confused contribution. On one hand he said we were spending too much money on schools, and on the other he said that there were schools that we should be spending money on. Quite clearly the member for O’Connor would prefer the position where he decides which schools money is spent on. I suppose it is kind of reminiscent of some of the problems with the Regional Partnerships programs when there was not a proper process to decide where money was spent. So it is little wonder that the member for O’Connor made those sorts of comments.

The proposed bill will simplify the process for Australia to accept amendments to the International Monetary Fund and World Bank agreements while retaining policy and parliamentary scrutiny. At a time when there is a world financial crisis we know just how important the role of the international community is in tackling and making sure that measures are put in place. No matter what Australia puts in place to cushion the blow from the international financial crisis, it still feels the effects. The whole world feels the effects of Lehman Brothers and the whole world feels the effects of what came out of the subprime market in the United States. That is why, increasingly, the world economy and the global institutions are going to play a much more important role than they did when they were first brought about in the late forties and early fifties.

The purpose of this bill is to amend the International Monetary Agreements Act, to alter the definition of the International Monetary Fund articles of agreement, the fund agreement, and the definition of the World Bank articles of agreement, the bank agreement, so that they include any amendments of the relevant articles of agreement that enter into force for Australia without the need for further legislative amendment when these amendments are made. These are both very important organisations, and I want to spend a little bit of time talking about them and the importance that they play.

Looking at the International Monetary Fund and what it does, the IMF’s main responsibilities are: promoting international monetary cooperation; facilitating the expansion and balanced growth of international trade; promoting exchange stability; assisting in the establishment of a multilateral system of payments; and making resources available with adequate safeguards to members experiencing balance of payments difficulties. The IMF is responsible for promoting the stability of the international monetary and financial system. Its job is to promote economic stability, help prevent crises, and help resolve them when they occur, thereby promoting growth and alleviating poverty. Its three main activities: surveillance, lending, and technical assistance, are intended to meet these goals.

The IMF works to promote global growth and economic stability, and thereby prevent economic crises, by encouraging countries to adopt sound economic policies. This process is known as surveillance. Surveillance comprises multilateral surveillance, under which the IMF assesses global and regional developments and publishes the World economic outlook and the Global financial stability report, and bilateral surveillance, which is the regular dialogue and policy advice that the IMF offers to its members. Usually, once a year, the IMF conducts an in-depth appraisal of each member country’s economic situation and policies, and advises on desirable policy adjustments. The overwhelming majority of countries opt for transparency and agree to publish IMF documents pertaining to their economies.

The IMF’s technical assistance and training help member countries strength their capacity to design and implement effective policies. Technical assistance is offered in several areas, including tax policy and administration, expenditure management, monetary and exchange rate policies, banking and financial system supervision and regulation, legislative frameworks, and statistics.

In the event that member countries experience crises, the IMF’s resources may be tapped to help finance balance of payments needs. Financial assistance is available to give member countries the breathing room they need to correct balance of payments problems. A policy program supported by IMF financing is designed by the national authorities in close cooperation with the IMF, and continued financial support is conditional on effective implementation of this program. To help support countries during the global economic crisis, the IMF is strengthening its lending capacity and has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries’ varying strengths and circumstances.

At the 2 April 2009 G20 summit, world leaders pledged to support growth in emerging markets and developing countries by boosting the IMF’s lending resources to $750 billion. IMF lending aims to give countries breathing room to implement adjustment policies and reforms that will restore conditions for strong and sustainable growth, employment and social investment. These policies will vary depending upon the country’s circumstances, including the causes of the problems. For instance, a country facing a sudden drop in the price of a key export may simply need financial assistance to tide it over until prices recover and to help ease the pain of an otherwise sudden and sharp adjustment.

So, as you can see, the IMF is a very important organisation in the world’s financial affairs. And any statement or advice from the IMF is never taken lightly. Only at the end of last week the managing director of the IMF conveyed his thoughts about the situation in light of the global financial crisis. While those opposite continue to flounder for any policies as to what they might do in response to the world financial situation, the IMF is very clear about the effects of decisive action taken by governments, including this government, to that financial crisis. The IMF head, Mr Dominique Strauss-Kahn, in delivering the 2009 Bundesbank Lecture in Berlin, said stimulus measures adopted to combat the global crisis should be withdrawn only when the economic recovery has taken hold and unemployment is set to decline. And while Mr Strauss-Kahn acknowledged that the global economy appears to be emerging from the worst financial and economic crisis in the postwar period, he also emphasised that the recovery will be sluggish and that a jobless recovery remains a risk.

Given the fragility of the recovery, the IMF managing director warned that ‘policymakers should err on the side of caution as they decide when to exit their crisis policy response policies’. But we continue to see from those opposite the call to wind back the stimulus package. However, that should not come as a surprise to anyone in this House—they voted against it in the first place. They did not support the stimulus package. They did not support the strong and decisive action that this government took to shield the Australian economy—action that has been supported by the IMF. And what we see now from the opposition leader and the opposition is again another example of poor judgment. Now they are saying that we should wind back the stimulus package before it has had the full chance to impact and shield this economy. We only have to go back to the words of Mr Strauss-Kahn, where he says in terms of his view and the view of the IMF that these measures should be withdrawn only when economic recovery has taken hold and unemployment is set to decline. Unfortunately, that is not the situation we are in in Australia at this stage.

The World Bank, which is also subject to this bill, also plays a significant role around the world, especially in developing countries. The World Bank is a vital source of financial and technical assistance to developing countries around the world. Despite its name, the institution is not a bank in the common sense of the word. It is made up of two unique development institutions owned by 186 member countries—the International Bank for Reconstruction and Development and the International Development Association. Each institution plays a different but collaborative role to advance the vision of an inclusive and sustainable globalisation. The IBRD focuses on middle-income and creditworthy-poor countries, while the IDA focuses on the poorest countries in the world. Together they provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes, including investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. So it is clear to see why Australia’s involvement with the World Bank is absolutely important.

The World Bank’s work in more than 100 countries is challenging but its main objective is simple: to help reduce poverty. Over the past 20 years the proportion of people living in poverty in the developing world fell by half—from 40 per cent to 21 per cent. In the past few decades, life expectancy in developing countries has increased by 20 years, the number of children dying before the age of five has been reduced by half and adult illiteracy has also been halved to 25 per cent. But over a billion people still struggle to survive on a dollar a day. The World Bank is working with the help of countries like Australia to improve those people’s lives through the bank’s support for social services like health, nutrition, and education as well as for infrastructure and policies to improve governance and fight corruption.

One might ask what relationship there is between talking about the World Bank or the International Monetary Fund and discussing projects that are keeping Australians in jobs. We have seen in just nine or so months projects in Australia which have been completed and many, many more under our Building the Education Revolution and nation-building programs well underway. These programs, which are part of the Rudd government’s economic stimulus plan, have saved thousands of Australian jobs.

In my electorate of Dobell on the beautiful Central Coast of NSW I have been visiting some of the schools which are benefiting from the government’s economic stimulus package. The principal of one of those, Berkeley Vale Public School, told me that never in his teaching career had he dreamed of having such facilities as the infrastructure that is being provided under the Rudd government’s plan. As well as that, he was very pleased to note that the people working on his school were locals coming from the economy on the Central Coast. Berkeley Vale Public School will soon be replacing stuffy and cramped demountables with better-designed, roomier, permanent buildings to offer much better teaching and learning spaces. The school is also acquiring new high-tech interactive whiteboards which will open up a whole new world of education for the students and teachers. You can see that Australia’s stimulus measures have been and are continuing to provide the results we need, and the advice from such global institutions as the IMF is that the stimulus measures should not be withdrawn until the economic recovery has taken hold.

I go back to the bill and what it means. The International Monetary Agreements Act 1947 established Australia’s membership in the International Monetary Fund and the International Bank for Reconstruction and Development and made provisions which allow Australia to meet obligations that may arise by virtue of our membership in these institutions. The funded bank articles of the agreement respectively form schedule 1 and schedule 2 of the IMA Act. The purpose of this bill is to amend the IMA Act to alter the definition of ‘fund agreement’ and the definition of ‘bank agreement’ to include any amendments of the relevant articles of agreement that enter into force for Australia without the need for further legislative amendment when these amendments are made at the fund and bank. The proposed bill will simplify the process for Australia to accept amendments to the fund and bank agreements that have recently been agreed to by members as well as any future amendments, while retaining policy and parliamentary scrutiny.

Currently, an IMA amendment act is required to change the IMA Act to reflect amendments to the fund and bank agreements. However, this legislative process is largely an administrative task. The Treasurer, as Australia’s governor of the IMF and World Bank, is required to vote on any proposed changes to the articles of agreement of either institution. The agreements constitute international treaties for Australia and, as such, irrespective of the requirements for legislation, any amendments to the treaties will still require tabling in the parliament and consideration by the Joint Standing Committee on Treaties. Amendments to the fund and bank agreements have recently been approved by the boards of governors of the IMF and World Bank. These amendments introduce no substantive changes to Australia’s obligations to the IMF or World Bank; rather, they are reforms aimed at improving the legitimacy of both institutions and the financial position of the IMF. The amendments in this bill will enact any amendments to the fund agreement and bank agreements for Australia, including those recently agreed, upon their entry into force. These include amendments to increase the number of basic votes allocated to each member of the IMF and World Bank, provide for a second alternative executive director for large constituencies at the IMF and expand the investment authority of the fund. The broad objective of the first two sets of amendments is to enhance the voice and participation of low-income countries in the two institutions and thus enhance the institutions’ legitimacy and effectiveness. The amendments to expand the IMF’s investment authority form part of a new income model for the fund to provide it with a more robust, stable and sustainable income base.

Let us go over the reasons for this bill again. To implement the recently agreed reforms of the IMF and World Bank requires amendments to both institutions’ articles of amendment. As the fund and bank articles of agreement form schedules to the International Monetary Agreements Act 1947, separate IMA amendment acts have been required to reflect any amendments to the fund and bank agreements in the IMF Act. However, the legislative process is, as I have already said, usually a largely administrative task, as all proposed amendments go through rigorous approval processes both at the institution and within Australia. The Treasurer is Australia’s governor of the IMF and World Bank and is required to vote on any proposed amendments to the articles of agreement of either institution. The agreements constitute international treaties for Australia and, as such, any amendments to the treaties will require tabling in the parliament. This bill proposes to simplify the process for Australia to accept agreed amendments to the articles of agreement of the IMF and the World Bank without the need for further legislative amendments.

Given the current G20 reform agenda, which includes calls for reform of the IMF and the World Bank, it is likely that further amendments to the fund and bank agreements will occur in the near future. This bill will allow Australia to adopt recently agreed reforms at the fund and bank, as well as any future reforms which require amendments to either institution’s articles of agreement, in an efficient and timely manner. We saw that in the recent crisis there was a need for this country to act decisively and quickly. Part of the reform process in this bill today is to make sure that the agreements that are reached at the G20 can also be put in place quickly and efficiently. Given the recent world financial events of unprecedented scale, any improvement in efficiency in the way in which we deal with important institutions such as the World Bank and International Monetary Fund is most welcome. Improvements in efficiency include simplifying processes, and that is precisely what this bill does. I commend this bill to the House.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

The International Monetary Agreements Amendment Bill 2009 is a very practical bill and builds on the fact that Australia has been a good international citizen for a very long time. Certainly, we have been part of the international monetary system since 1947. The purpose of this bill, as the Minister for Financial Services, Superannuation and Corporate Law pointed out, is to simply the process for our nation accepting amendments to the articles of agreement of the International Monetary Fund and the International Bank for Reconstruction and Development, known generally as the World Bank. We have been members of these two organisations, as I said, since the passage of the International Monetary Agreements Act 1947. The minister pointed out in his second reading speech that the articles of agreement of the fund and bank are schedules to the act. There are certain processes with respect to the international treaties which underline these organisations which require there be support of a certain percentage—85 per cent of total voting power and three-fifths of all members of the IMF—before there can be a change or amendment to the provisions. As has been indicated by other speakers, the Treasurer, as Australia’s governor in the IMF and the World Bank, must vote on any proposed amendments to the arrangements.

The bill before the House is partly to recognise the fact that there have been certain amendments made recently and the government and Australia in fact voted in favour of those amendments. But under the provisions which have existed since 1947 it has been necessary, every time there is an amendment of the international arrangements, for there to be legislation passed through the parliament. While I imagine one could argue that that provides for debate in relation to the amendments, the reality is that those amendments will become law and effective and binding on us if the required percentages vote in favour of the changes. So I suppose one could say that this legislation is designed to recognise the fact that we ought not to have independent and separate legislation every time an amendment is moved internationally with respect to the IMF and the World Bank.

Australia’s internal processes will still have to be followed. There will still be parliamentary scrutiny, there will be a tabling in the parliament and presumably the treaties procedures will be followed with respect to any proposed amendments. At the present time, given the legislative demand on the time of the parliament by any government, there are at times delays in introducing legislation to recognise the fact that amendments have been made. But this legislation, once passed, will mean that it will not be necessary every time there is an amendment to come back before the parliament to seek the approval of both houses.

The agreements constitute international treaties for Australia and, as I indicated, irrespective of the requirement for legislation any amendments to the treaties will still require tabling in parliament and consideration by the Joint Standing Committee on Treaties. So in a sense this legislation is practical legislation. It updates the act, which dates from 1947. It still keeps in place the safeguards that make sure that we as a country are very careful about treaties the government enters into. I am very pleased to be able to commend the bill to the House and I expect that it will enjoy a speedy passage.

Chris Bowen (Prospect, Australian Labor Party, Minister for Financial Services, Superannuation and Corporate Law) Share this | Link to this | Hansard source

in reply—I thank the honourable members who have contributed to this debate. The purpose of the International Monetary Agreements Amendment Bill 2009 is to simplify the process for Australia to accept agreed amendments to the articles of agreement for the International Monetary Fund and the International Bank for Reconstruction and Development. The International Monetary Agreements Act 1947—the IMA Act—established Australia’s membership of the IMF and the World Bank. The articles of agreement of the fund and the bank are schedules to the act. The purpose of this bill is to alter the definition of the IMF articles of agreement, the fund agreement, and the definition of the World Bank articles of agreement, the bank agreement, to include any amendments to the relevant articles of agreement that enter into force for Australia without the need for further legislative changes. Importantly, similar provisions are commonly used in Australian legislation to allow updates to international treaties to which Australia is a party.

Currently, an IMA amendment act is required to reflect any amendments to the fund and bank agreements. However, this legislative process is largely an administrative task, as all the proposed amendments are required to go through rigorous approval processes at both the institutions and within Australia. The Treasurer, as Australia’s governor of the IMF and World Bank, is required to vote on any proposed amendments to the articles of agreement of either institution. For the amendment to enter into force, three-fifths of all members of the IMF or the World Bank, having 85 per cent of the total voting power, must accept the amendment. If accepted, the amendment enters into force for all IMF or World Bank members, whether or not a particular member has accepted it.

The agreements constitute international treaties for Australia and, as such, irrespective of the requirement for legislation, any amendments to the treaties will still require tabling in parliament and consideration by the Joint Standing Committee on Treaties. A national interest analysis was tabled in parliament on 16 June 2009, outlining these proposed amendments for scrutiny by the Joint Standing Committee on Treaties.

This bill will allow Australia to accept a number of governance reforms which Australia has recently approved and which have been approved by the IMF and World Bank boards of governors when they enter into force for all members, including Australia, without the need for further legislative processes. Specifically, these amendments aim to enhance the voice and participation of developing countries in these two institutions and support a new income model for the fund aimed at providing it with a more robust, stable and sustainable income base into the future. As governor for Australia of the IMF and World Bank, the Treasurer voted in favour of each of these proposed amendments. Australia has a significant interest in seeing these reforms implemented, as they will enhance the effectiveness and legitimacy of both institutions and support the robust, stable and sustainable financial position of the fund into the future.

This amendment will also deliver for Australia on the commitment of the G20 leaders at their meeting on 2 April to implement the April 2008 IMF quota and voice reforms and the 2009 World Bank voice and participation reforms. Given the current G20 reform agenda, which includes calls for reform of the IMF and World Bank, it is likely that further amendments to the fund and bank agreements will occur in the future. This bill will allow for Australia to adopt the recently agreed reforms, as well as any future reforms which require amendments to either institution’s articles of agreement, in an efficient and timely manner while maintaining policy and parliamentary oversight. I commend the bill to the House.

Question agreed to.

Bill read a second time.